MGMT 434 Final Exam Ch. 7

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?

B. The company was no longer able to generate adequate growth through closed innovation.

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?

B. The framework does not explain everything about changes in industries.

In which of the following stages of the industry life cycle is a standard first established?

B. growth stage

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its

B. open innovation model.

When TrueHeal Pharma Inc. 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 TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a

B. patent.

Incumbent firms favor incremental innovation over radical innovation because

B. radical innovation will disturb the existing power distribution within the firms.

The typical four-step innovation process begins with

B. the presentation of an idea as findings derived from basic research.

What is strategic entrepreneurship?

B. the pursuit of an innovation that uses concepts from strategic management

Which of the following is a feature of the shakeout phase of the industry life cycle?

C. Competitive intensity within the industry increases.

Steps of the Innovation Process

1. The innovation process begins with an idea. The idea is often presented in terms of abstract concepts or as findings derived from basic research. 2. In a next step, invention describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones. 3. Innovation concerns the commercialization of an invention by entrepreneurs. 4. The innovation process ends with imitation. If an innovation is successful in the marketplace, competitors will attempt to imitate it.

Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on?

A. Combining the best of internal and external R&D will more likely lead to a competitive advantage.

A factor favoring the success of disruptive innovation is that

A. incumbent firms are slow to change.

Which of the following lists the stages of the industry life cycle in the correct order?

A. introduction, growth, shakeout, maturity, and decline

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

A. patent

The strategic objective of a first mover during the introduction stage of the industry life cycle is to

A. pursue a harvest strategy.

Which of the following customer segments as described in the chasm framework make up the mass market?

A. the early and late majority together

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm?

C. The firm will buy others' intellectual property whenever it advances its own business model.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data?

C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants.

A firm's resistance to changes in the status quo is referred to as

C. organizational inertia.

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage?

C. a few large publishers

A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called

C. absorptive capacity.

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in

C. architectural innovations.

Dollar Shave Club is an ecommerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market.

C. business model innovation

When a firm pursues a maintain strategy, it

C. continues to support marketing efforts even if the demand for the product is declining.

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

C. enter into the market in large numbers, creating a herding effect.

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?

C. maturity stage

First movers often have several competitive benefits including

C. network effects.

In a radical innovation, a firm targets

C. new markets by using new technologies.

When does a firm fall into the large competitive chasm between early adopters and early majority?

C. when it fails to successfully launch a mass-market version of its product

Which of the following is an example of social entrepreneurship?

D. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

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?

D. disruptive innovation The scenario best illustrates a disruptive innovation. The dynamic process of disruptive innovation begins when a firm, frequently a start-up, introduces a new product based on a new technology to meet existing customer needs. It invades an existing market from the bottom up

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

D. disruptive innovation.

The four-step innovation process ends with

D. imitation.

When a firm pursues a harvest strategy, it

D. reduces investments in product support.

The market for 3-D televisions is in the introduction stage of the industry life cycle. What does this imply?

A. There are only a few competitors in the 3-D television market.

Which of the following scenarios would typically happen in a firm that uses open innovation?

A. a meeting with professors at a university to get ideas for product

In the context of industrial growth, which of the following statements is true of standards?

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.

Which of the following most accurately describes a difference between incremental innovation and radical innovation?

C. 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?

A. Rachel implemented a new and more efficient way to produce pottery.

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.

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.

A(n) _____ leverages new technologies to attack existing markets.

A. disruptive 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?

A. first-mover advantages

Which of the following statements accurately brings out the difference between closed innovation and open innovation?

B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.

Which of the following statements is true of firms pursuing a closed innovation?

B. Firms in the closed innovation model are extremely protective of their intellectual property.

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?

B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit?

B. She will prefer to buy from well-established brands rather than unknown new ventures.

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?

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.

Which of the following statements is true of laggards?

B. They tend to enter the market frequently during the decline stage.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?

B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

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?

B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation.

Which of the following best illustrates a process innovation as opposed to product innovation?

B. an automobile company using computer-aided design in its production

Which of the following would be the result of product innovation?

B. an inexpensive, high-quality refrigerator

The crossing-the-chasm framework states that _____ need to be adjusted for each customer segment.

B. business strategies

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)

B. entrepreneur who commercialized invention into an innovation.

In the decline stage, which of the following strategies involves a reduction of investments in product support?

B. harvest strategy

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?

B. incremental innovation

The key objective for firms during the growth phase is to

B. stake out a strong strategic position not easily imitated by rivals.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

D. The first mover will be able to reduce costs through economies of scale.

_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

C. Innovation

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, 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 Momento Films adopted in this scenario?

C. consolidated strategy

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost-leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in?

C. shakeout stage

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?

C. social entrepreneur

Which of the following is an open innovation principle?

D. External R&D can create significant value. "External R&D can create significant value." is an open innovation principle.

Which of the following statements is true of a disruptive innovation?

D. It invades the market from the bottom up, by first capturing the low end.

Which of the following statements accurately describes social entrepreneurs?

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage?

D. The industry structure is an oligopoly with only a few large firms.

Which of the following statements is true of technology enthusiasts?

D. They enjoy using beta versions of products and providing feedback to companies.

Process innovation is more important than product innovation during the growth stage because

D. a standard, in terms of engineering features and design choices, has been set across the industry.

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?

D. architectural innovation

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the

D. closed innovation to open innovation.

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the

D. increasing supply and mobility of skilled workers.

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

D. network effects.

What is an invention?

the transformation of an idea into a new product or process