Ch 7: Practice test : Strategy: Innovation
Four options during the decline stage
(1) consilidationo (2) maintenance (3) exit (4) Harvest - reducers investment in product support and only allocated min of human and other
29) A new product often has a high price when it is launched because of a A) large investment in designing a product while producing small quantities. B) large investment in marketing a product while producing small quantities. C) large investment in designing a product while producing large quantities. D) large investment in marketing a product while producing large quantities.
A
53) Which of the following customer segments as described in the chasm framework make up the mass market? A) the early and late majority together B) the early adopters alone C) the technology enthusiasts and laggards together D) the technology enthusiasts alone
A
76) A factor favoring the success of disruptive innovation is that A) incumbent firms are slow to change. B) new entrants have highly formal organizational structures and processes. C) the low end of the market is highly guarded. D) incumbent firms focus on radical innovation rather than incremental innovation.
A
84) GoodGear is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow GoodGear to fine-tune its offerings to better meet the needs of its consumers? A) allowing users to provide feedback to producers on the style and fit of clothing B) conducting anonymous phone surveys about consumers' fashion preferences C) hiring an outside consultant to evaluate the offerings of GoodGear's producers D) studying the financial records of various fashion design companies to determine trends
A
80) Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
A Firms can innovate by leveraging existing technologies into new markets.
13) What is an invention? A) the transformation of an idea into a new product or process B) a unique idea that has not been thought of before C) the transformation of an idea into a successful product D) a unique idea that has been patented
A.
15) In the United States, the time period for the right to exclude others from the use of a patented technology is ________ from the filing date of a patent application. A) 20 years B) 25 months C) 15 months D) 25 years
A.
16) As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.
A.
24) Which of the following scenarios would be characteristic of an entrepreneur? A) Rachel implemented a new and more efficient way to produce pottery. B) Mary imitated a new, more efficient method of producing pottery. C) Alissa scaled back the production of pottery because it wasn't cost effective. D) Ursula used a proven marketing method to advertise her pottery.
A.
49) Although Mountaintop Electronics still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Mountaintop Electronics adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
A. In pursuing a harvest strategy, the firm reduces investments in product support and allocates only a minimum of human and other resources.
38) Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? A) There is more strategic variety in the growth stage when compared to the introduction stage. B) The number of competitors is more in the introduction stage than the growth stage. C) The market size for a new product or service is larger in the introduction stage when compared to the growth stage. D) While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.
A. market demand is robust in growth stage and more competitors have entered the market
47) Which of the conditions prevail when an industry is at the end of its life cycle? A) The level of process innovation reaches its maximum as firms attempt to lower cost. B) The industry structure is perfectly competitive with a large number of buyers and sellers. C) The strategic objectives of businesses will involve gaining market acceptance. D) The market reaches its maximum size at this stage.
A. maximum as first attempt to lower cost as much as possible
60) Ira can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit? A) He will be confident in her ability to master any new technology. B) He will prefer to buy from well-established brands rather than unknown new ventures. C) He will not rely on endorsements by the early majority or early adopters. D) He will buy beta versions of new products and technology.
B
78) General Electric (GE) disrupted itself in the healthcare industry by A) replacing the top levels of the executive hierarchy. B) introducing inexpensive and smaller diagnostic devices in developing countries. C) saturating the global market with multiple diagnostic devices. D) targeting the comparatively less price-sensitive sections of the market.
B
11) Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A) Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C) Netflix moved from online streaming to online DVD rentals via the Internet. D) Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.
B.
12) The typical four-step innovation process begins with A) the modification and recombination of an existing product or process. B) the presentation of an idea as findings derived from basic research. C) the commercialization of an invention by entrepreneurs. D) a competitor's attempt to imitate an innovation.
B.
33) The leading producer of cell phone backup batteries, Jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Jumpstart. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Jumpstart has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the A) introduction stage. B) growth stage. C) shakeout stage.
B.
34) In the context of industrial growth, which of the following statements is true of standards? A) Standards emerge exclusively from bottom-up through competition in the marketplace. B) As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C) Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D) After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.
B.
35) In which of the following stages of the industry life cycle is a standard first established? A) maturity stage B) growth stage C) shakeout stage D) introduction stage
B.
39) The key objective for firms during the growth phase is to A) invest as many resources as possible in product innovations. B) stake out a strong strategic position not easily imitated by rivals. C) pursue a harvest strategy. D) reduce their network effects.
B.
45) Which of the following is a feature of the maturity stage of the industry life cycle? A) The competitive intensity within the industry is at its peak. B) The market reaches its maximum size. C) The industry structure is more monopolistically competitive. D) The focus on product innovation is higher than that on process innovation.
B.
40) Which of the following is a feature of the shakeout phase of the industry life cycle? A) There is rapid industry growth during this stage. B) Market demand in this stage primarily consists of first-time adopters. C) Competitive intensity within the industry increases. D) The mode of competition shifts from price to non-price in this stage.
C
41) To be successful and to survive the shakeout stage of the industry life cycle, a firm should A) charge higher prices than its competitors. B) focus on product innovation rather than process innovation. C) gain economies of scale. D) shift from price to non-price competition.
C
54) The customers entering the market in the growth stage are primarily A) technology enthusiasts. B) laggards. C) early adopters. D) late majority.
C
17) A. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) A) venture capitalist. B) category captain. C) intrapreneur. D) early adopter.
C.
46) While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. B) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. D) The mode of competition will be price-based in the internet-enabled appliance industry and will be non-price-based in the domestic airline industry.
C.
50) When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, Magnet Inc., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Magnet adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
C.
30) CordKing Electronics has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? A) growth stage B) maturity stage C) shakeout stage D) decline stageC
C. CordKing Electronics has entered the maturity stage. Demand was largely satisfied in the prior shakeout stage. Demand now consists of replacement or repeat purchases
Pipeline businesses are typically better than platform businesses at incorporating user feedback and taking advantage of network effects.
FAlse
51) When a firm pursues a maintain strategy, it A) exits a declining industry to maintain the goodwill of its overall brand name. B) reduces investments in product support and allocates only a minimum of human and other resources. C) continues to support marketing efforts even if the demand for the product is declining. D) chooses to consolidate the industry by buying rival firms, those who plan to exit.
C. : If a firm has been following a maintain strategy, it will continue to support marketing efforts at a given level despite the fact that the industry has been declining.
84) GoodGear is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow GoodGear to fine-tune its offerings to better meet the needs of its consumers? A) allowing users to provide feedback to producers on the style and fit of clothing B) conducting anonymous phone surveys about consumers' fashion preferences C) hiring an outside consultant to evaluate the offerings of GoodGear's producers D) studying the financial records of various fashion design companies to determine trends
D
61) Marble Inc. is a new firm that entered the smartwatch industry during the growth stage of the industry life cycle. It managed to become one of the top-three smartwatch manufacturers during the shakeout stage due to its low-cost structure. What features should Marble emphasize in its product marketing to ensure it successfully crosses the chasm into the maturity stage? A) advanced capabilities B) the company's outsider status C) sleek and trendy design D) ease of useD
D : The customer segment associated with the maturity stage of the industry life cycle is known as the late majority.
18) How has Apple been able to sustain its competitive advantage in the smartphone industry? A) by reducing its network effects B) by targeting its new products and services toward laggards C) by driving the price for the end user to zero D) by regularly introducing incremental improvements in its products
D.
19) Which of the following is a competitive benefit experienced by the first mover firm in an industry? A) The first mover will be able to achieve a less steep learning curve. B) The first mover will be able to reduce the switching costs. C) The first mover will not have to patent its products or technology. D) The first mover will be able to reduce costs through economies of scale.
D.
20) The four-step innovation process ends with A) idea generation. B) invention. C) idea testing. D) imitation.
D.
43) Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? A) The barriers to entry increase during this stage. B) The firms in the industry yield the highest profits during this phase. C) Rivalry among competitors decreases in this stage. D) The weaker firms are forced out of the industry in this stage.
D.
85) Which of the following businesses is most susceptible to negative network effects? A) Moonglow Shoes produces a line of lightweight running shoes that are endorsed by an Olympic gold medalist. B) Clover Technologies produces computer processing chips and sells them to a variety of manufacturers for use in smartphones and other devices. C) Green Tools manufactures solar powered gardening implements and sells them online. D) Pics Match is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos.
D.
Innovation that targets new markets with existing technologies is known as disruptive innovation.
False: innovation that sarges new markets with existing technologies = achritectural innovation
shakeout stage
Demand was largely satisfied in the prior growth stage. Given the large market size achieved from the growth stage, any additional market demand in the next stage is limited. Demand now consists of replacement or repeat purchases only. - limited market demand in turn increases competitive intensity
Innovation process
Four Is (idea, invention, innovation, imitation)
Crossing-the chasm
Only companies that recognize these differences and are able to apply the appropriate competencies at each stage of the industry life cycle will have a chance to transition successfully from stage to stage.
27) The strategic objective of a first mover during the introduction stage of the industry life cycle is to A) pursue a harvest strategy. B) survive by drawing on deep pockets. C) achieve market acceptance. D) lower entry barriers.
The strategic objective during the introductory stage is to achieve market acceptance and seed future growth. A.
) According to the crossing-the-chasm framework, the biggest chasm between customer segments is between early adopters and the mass market made up of the early majority and the late majority.
True
For ideas and inventions to be innovative, they must first be commercialized.
True
77) Intel's Celeron chip and Atom chip are initiatives to A) introduce a new product in a new market to extend its leadership. B) guard the company against disruptive innovation by protecting the low end of the market. C) stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D) target that section of the market that is not particularly price sensitive.
b
64) Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
b.
67) Incumbent firms favor incremental innovation over radical innovation because A) their business decisions are independent of the other parties in their innovation ecosystem. B) radical innovation will disturb the existing power distribution within the firms. C) incumbent firms do not have formal organizational structures and processes like the way new entrants do. D) incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage
b.
56) Which of the following statements is true of the early majority section of consumers? A) They come into the market during the introduction stage. B) They are unaware that many hyped new product introductions will fade away. C) They weigh the benefits and costs carefully when adopting a new product. D) They make up the smallest market segment.
c
57) It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they A) are driven by technology concerns rather than the practicality of a new product. B) influence the purchase decisions of early adopters. C) enter into the market in large numbers, creating a herding effect. D) have the highest purchasing power when compared to the other customer segments
c
66) A firm's resistance to changes in the status quo is referred to as A) organizational parity. B) organizational liquidity. C) organizational inertia. D) organizational efficacy.
c
69) When firms innovate by leveraging existing technologies into new markets, they are said to be involved in A) incremental innovations. B) radical innovations. C) architectural innovations. D) disruptive innovations.
c
72) As a start-up company, DigiWrist entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
d
81) Sunshine Technologies introduced a tablet that could run completely on solar energy and was less expensive than competitors' tablets. On the downside, it required more frequent charging than the competition's tablets. However, the technology of the Sunshine tablet improved rapidly, thereby improving its recharge frequency. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
d To be a disruptive force, however, this new product or technology has to have additional characteristics:
70) DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation
d.
83) Which of the following business models in the landscaping industry is likely to scale most efficiently? A) a company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by the customer B) a company that deploys a team of both skilled and unskilled landscapers to each customer's location regardless of their needs C) a company that charges the same hourly rate for landscaping services no matter what the situation requires D) a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required
d. Platform businesses leveraging digital technology can grow much faster—that is, they scale efficiently
first-mover advantage
economies of scale and experience and learning curves
Innovation and strategic entrepreneurship can only occur within a new business
false
Network effects always lead to a virtuous cycle in which an increasing number of customers improves the quality of a product or service, thereby attracting more customers and continuing the cycle.
false
The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to obtain a patent.
false
he pace of innovation has slowed in the 21st century.
false
Process innovation typically overtakes product innovation in importance during the shakeout stage of industry life cycle
true
44) Potomac Industries is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion, and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Potomac a competitive advantage? A) Implement process innovations that lower per-unit costs. B) Introduce product innovations that differentiate Potomac televisions from the competition. C) Imitate the features of the highest-selling television on the market. D) Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson.
> The winners in this increasingly competitive environment are often firms that stake out a strong position as cost leaders.
36) Which of the following is a feature of the growth stage of the industry life cycle? A) The consumer demand increases. B) The prices of goods begin to rise. C) The basis of competition moves away from process innovation. D) The number of competitors decreases.
A.
42) In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? A) The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. B) The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. C) The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. D) The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.
B.
While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A) The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C) While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D) The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.
B.
32) Assume that the market for print book publishing has entered the maturity stage. Which of the following would mostlikely exist during this stage? A) a few start-up publishers B) many small to midsized publishers C) a few large publishers D) one large publisher
c.