Chapter 7
Which of the following businesses is most susceptible to negative network effects?
Rite Pics is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos.
Which of the following scenarios best exemplifies a platform business?
Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.
Platform business models are not organized as traditional linear pipeline business models
True
Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms?
Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage?
a few large publishers
Which of the following businesses is most likely to disrupt an existing industry?
Black Rock developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time.
Product innovation is more strategically important than process innovation while a firm is in the growth stage of the industry life cycle
False
Jerry is the owner of all Hinges Inc. and has recently modified his firm's strategic objective based on a shit in his industry. Jerry is responding to a(n) ___ life cycle.
Industry
Which of the following is a feature of the maturity stage of the industry life cycle?
The market reaches its maximum size.
The strategic objective of a first mover during the introduction stage of the industry life cycle is to
achieve market acceptance
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
architectural innovation
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it
cleaned as well as other cleaners and used organic ingredients.
Digital photography replacing film photography is an example of which type of innovation?
disruptive
A disruptive innovation leverages ___ technologies, while architectural innovations are based on ___ technologies.
new; existing
The key objective for firms during the growth phase is to
stake out a strong strategic position not easily limitated by rivals
Which of the following is a feature of the shakeout phase of the industry life cycle?
Competitive intensity within the industry increases.
Social entrepreneurs forego the pursuit of profits to achieve social and environmental goals.
False
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
20 years
Pipeline businesses are typically better than platform businesses at incorporating user feedback and taking advantage of network effects.
False
On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?
Each stage of the industry life cycle is dominated by a different customer group.
Which of the following is not true about the decline stage of an industry life cycle?
Firms that consolidate by purchasing their rivals will find themselves at a disadvantage.
Which of the following is not an advantage when it comes to "first-mover advantages"?
First movers must educate potential customers about the product.
Jimmy can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit?
He will prefer to buy from well-established brands rather than unknown new ventures.
Which of the following is a competitive benefit experienced by the first-mover firm in an industry?
The first mover will be able to reduce costs through economies of scale.
Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?
Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.
Which of the following is a feature of the growth stage of the industry life cycle?
The consumer demand increases.
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in
architectural innovations
The customers entering the market in the growth stage are primarily
early adopters
A factor favoring the success of disruptive innovation is that
incumbent firms are slow to change
A new product often has a high price when it is launched because of a
large investment in designing a product while producing small quantities.
The pace of innovation has slowed in the 21st century
False
What is an invention?
the transformation of an idea into a new product or process
Network effects always lead to 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
In the context of industrial growth, which of the following statements is true of standards?
As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choice.
Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?
There is more strategic variety in the growth stage when compared to the introduction stage.
When does a firm fall into the large competitive chasm between early adopters and early majority?
When it fails to successfully launch a mass-market version of its product
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
enter into the market in large numbers, creating a herding effect.
In a radical innovation, a firm targets A. existing markets by using new technologies. B. new markets by using existing technologies. C. new markets by using new technologies. D. existing markets by using existing technologies.
new markets by using new technologies.
Incumbent firms prefer to focus on incremental innovations which reinforce their established organizational structure and power distribution and avoid radical innovation that could disrupt their existing power distribution. This is known as
organizational inertia
A firm's resistance to changes in the status quo is referred to as
organizational intertia
Susan wants to create a networking site that would connect local artists to homeowners who are looking for unique and original art. She knows that network effects will play a big role in her success and doesn't want to build her business using a linear value chain. Susan would best be served by employing a(n
platform business model
The typical four-step innovation process begins with
the presentation of an idea as findings derived from basic research.
Innovation and strategic entrepreneurship can only occur within new businesses
False
Innovation that targets new markets with existing technologies is known as disruptive innovation
False
Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?
The framework does not explain everything about changes in industries.
To be successful and to survive the shakeout stage of the industry life cycle, a firm should
gain economies of scale
Generally, as the level of ___ innovation declines, the level of ___ innovation increases.
product; process
Peloton Interactive 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 Peloton Interactive a competitive advantage?
Implement process innovations that lower per-unit costs.
Which of the following most accurately describes a difference between incremental innovation and radical innovation?
Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.
Which of the following scenarios would be characteristic of an entrepreneur?
John implemented a new and more efficient way to produce pottery.
Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?
Unlike technology enthusiasts, early adopters demand is fueled more by intuition and vision rather than technology concerns.
Adaptive Biotechnologies 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?
architectural innovations
The demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently?
decline stage
Bright PAD 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 Bright PAD tablet improved rapidly, thereby improving its recharge frequency. This example describes ________ innovation.
disruptive
A(n) ________ leverages new technologies to attack existing markets.
disruptive innovation
When Japanese carmakers entered the existing U.S. automobile market by first offering small fuel- efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in
disruptive innovation
BellRing Brands is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should BellRing Brands's managers prepare for next?
increased competition from imitators
The vast majority of innovations in an industry are ___, because they build on a firm's existing knowledge base on reinforce the existing organizational structure and network relationships.
incremental
Fulcrum Feet 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?
incremental innovation
Monopar Therapeutics at McKesson implemented an open-innovation model, which greatly benefitted the company. In the light of this information, we can conclude that Monopar Therapeutics is a(n)
intrapreneur
Which of the following lists the stages of the industry life cycle in the correct order?
introduction, growth, shakeout, maturity, and decline
While the personal computer industry is flooded and growing with laptops and tablets, Javier recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Javier best represent?
laggards
After the creation of social networking websites were introduced, their value increased exponentially as the number of users increased. This is the positive effect of a(n)
network effect
When Monopar Therapeutics released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of Monopar Therapeutics' intellectual property rights. Thus, the drug is protected by a
patent
Facebook has become one of the largest media companies in the world, valued at nearly 50 billion in 2019, but hasn't produced a single piece of content. Facebook is an example of a
platform business
The leading producer of cell phone backup batteries, Progyny, 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 Progyny. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Progyny has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the
growth
In which of the following stages of the industry life cycle is a standard first established?
growth stage
Intel's Celeron chip and Atom chip are initiatives to
guard the company against disruptive innovation by protecting the low end of the market.
Although Dynatrace Holdings 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 Dynatrace Holdings adopted in this scenario?
harvest strategy
In the decline stage, which of the following strategies involves a reduction of investments in product support? A. exit strategy B. harvest strategy C. maintain strategy D. consolidate strategy
harvest strategy
The four-step innovation process ends with A. idea generation. B. invention. C. idea testing. D. imitation.
imitation
The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to obtain a patent.
False
Lauren is the CEO of TimeEx Inc. and is competing in an industry that is shifting due to disruptive innovation. Which of the following strategies should she consider to most appropriately respond to this disruptive innovation?
Lauren should guard against the disruptive innovation by protecting the low end of the market.
Which of the following below is not considered an advantage of utilizing a platform business model
Platforms push firms to constantly engage in radical innovation in order to produce goods and services for the market.
Feran is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Feran credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Feran do to exemplify the social entrepreneurship model?
Provide free weekly catered meals for the homeless.
n 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?
The industry for electric cars will focus more on product innovation, whereas int he MP3 player industry, the focus will be on process innovation.
Which of the conditions prevail when an industry is at the end of its life cycle?
The level of process innovation reaches its maximum as firms attempts to lower cost.
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?
The weaker firms are forced out of the industry in this stage.
Which of the following statements is true of the early majority section of consumers?
They weigh the benefits and costs carefully when adopting a new product.
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
Process innovation typically overtakes product innovation in importance during the shakeout stage of the industry life cycle
True
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?
While the domestic airline industry is mostly free from excess capacity, the internet enabled appliance industry will have new entrants.
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?
While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation.
Which of the following business models in the landscaping industry is likely to scale most efficiently?
a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required
Revolve Group is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow Revolve Group to fine-tune its offerings to better meet the needs of its consumers?
allowing users to provide feedback to producers on the style and fit of clothing
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
by regularly introducing incremental improvements in its products
When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, InMode Ltd., 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 InMode Ltd. adopted in this scenario?
consolidation strategy
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.
continues to support marketing efforts even if the demand for the product is declining.
The type of customers vital to a firm introducing a new innovation are the _________, who are willing to pay higher prices and like to tinker with new products.
early adopters
At the time when Laura decided to purchase a tablet computer, the product had just become accessible to the mass market. She did not purchase the tablet until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Laura best represent?
early majority
The group of customers referred to as the ___ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage.
early majority
Afya Limited 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 Afya Limited emphasize in its product marketing to ensure it successfully crosses the chasm into the maturity stage?
ease of use
As a research scholar, Linda 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. Linda can be best described as a(n)
entrepreneur
As the inventor of hypertension medication, BioNTech SE Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of BioNTech SE's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?
first-mover advantages
Incumbent firms favor incremental innovation over radical innovation because
radical innovation will disturb the existing power distribution within the firms
Karat Packaging 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?
shakeout stage
Susan is the founder of the restaurant chain Right and Fresh. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Susan's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Susan?
social entrepreneur
When a firm uses the tools and concepts learned from strategic management in order to achieve competitive advantage by pursuing innovation, it is said to be engaging in
strategic entrepreneurship
Which of the following customer segments as described in the chasm framework make up the mass market?
the early and late majority together
