Chapter 7

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.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

B. Each stage of the industry life cycle is dominated by a different customer group.

General Electric (GE) disrupted itself in the healthcare industry by

introducing inexpensive and smaller diagnostic devices in developing countries.

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

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

Which of the following statements is not true about innovation?

Innovation has to be high-tech in order to be a potent competitive weapon

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 scenarios would be characteristic of an entrepreneur?

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

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

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

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.

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

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

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 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.

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

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

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

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this?

The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

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

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

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

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.

Which of the following statements is true of technology enthusiasts?

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

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.

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.

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

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

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario?

While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry.

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?

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

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

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

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.

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

an automobile company using computer-aided design in its production

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

an inexpensive, high quality refrigerator

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.

How was Netflix able to outperform both Hulu and Amazon?

by focusing its resources on producing high-quality content for content streaming

How has Apple been able to sustain its competitive advantage in the smartphone industry?

by regularly introducing incremental improvements in its products

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.

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

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?

consolidated strategy

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently?

decline stage

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

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n)

entrepreneur

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 TechnoWare Electronics Inc. still sells its VCR 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 TechnoWare Electronics adopted in this scenario?

harvest strategy

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

A factor favoring the success of disruptive innovation is that

incumbent firms are slow to change.

While the personal computer industry is flooded and growing with laptops and tablets, Ivan 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 Ivan best represent?

laggards

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.

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?

maturity stage

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

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

patent

Incumbent firms favor incremental innovation over radical innovation because

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

EasyOpen Inc. has entered a stage in which the demand for their innovative electric can openers has declined. Now most customers are buying replacement parts or buying their second can opener from the firm. What stage in the industry life cycle does this scenario describe?

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?

social entrepreneur

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to

survive by drawing on "deep pockets"

Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process.

two

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

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry?

B. The second movers imitated CNN's incremental innovation to continuously improve their offering.

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

introduction, growth, shakeout, maturity, and decline

By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to

invade the healthcare market from the bottom up.