Chapter 7
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
How is the early majority section of consumers different from the late majority section
Although the early majority is confident in their ability to master a new technology, the late majority is not.
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 choices.
guard the company against disruptive innovation by protecting the low end of the market
External R&D can create significant value.
Which of the following statements is true of firms pursuing a closed innovation?
Firms in the closed innovation model are extremely protective of their intellectual property
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 statements is true of a disruptive innovation
It invades the market from the bottom up, by first capturing the low end
Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community?
The company was no longer able to generate adequate growth through closed 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 attempt to lower cost
Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?
Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
Process innovation is more important than product innovation during the growth stage because
a standard, in terms of engineering features and design choices, has been set across the industry
A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called
absorptive capacity
Which of the following best illustrates a process innovation as opposed to product innovation?
an automobile company using computer-aided design in its production
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in
architectural innovation
A(n) _____ leverages new technologies to attack existing markets.
disruptive innovation
As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. 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 smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate?
disruptive innovation
Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes
disruptive innovation
At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent?
early majority
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
The leading producer of gardening tools, YourGarden Inc, has achieved great success because they produce high-quality tools that are not too expensive. Even so, another company that produces lower-quality tools at the same price has also achieved some success, but not as much as YourGarden. Also, in general, the price of gardening tools has declined because of economies of scale and learning. In addition, YourGarden has added complementary assets, such as gardening instruction. Considering all of these factors, the gardening tool industry is most likely in the
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
Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the
increasing supply and mobility of skilled workers
SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?
incremental innovation
NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its
network effects
Incumbent firms favor incremental innovation over radical innovation because
radical innovation will disturb the existing power distribution within the firms.
When a firm pursues a harvest strategy, it
reduces investments in product support.
The key objective for firms during the growth phase is to
stake out a strong strategic position not easily imitated by rivals.
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
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?
architectural innovation
As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) 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 OSP'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