MIS Chapter 8

1. A firm can spend no money and time, yet expect to enhance its offerings, by: a. allowing other firms to contribute to its platform. b. going public through an initial public stock offering. c. outsourcing critical processes to third parties. d. adopting an envelopment strategy. e. preannouncing a forthcoming product to lower sales of current offerings.

A

1. A market dominated by a small number of powerful sellers is known as a(n) _____ . a. oligopoly b. pure play c. short tail d. blue ocean e. greenfield

A

1. Cisco purchased Pure Digital, maker of the Flip video recorder, but ended up shutting the unit down a little over two years later. The reason for Cisco's failure was: a. Envelopment. Smartphone manufacturers and music players began to offer video recording features, enveloping the benefit provided by Pure's gear in their offerings. b. Network effects. Late-arriving Cisco could not compete against the dominance of existing, incompatible standards created by early-moving incumbents. c. The Osbour Effect. Cisco preannounced a product and no one wanted its current offerings. d. Staying power. Consumers weren't convinced a small firm like Cisco could win in the market.

A

1. Large firms often find new markets attractive, but might not have products ready for delivery. What strategy do such firms use to get potential adopters to delay their purchasing decisions? a. Preannounce forthcoming efforts b. Make their new products compatible with the leading standard c. Spread costs across increasing units of production or in serving multiple customers d. Give away products for half of a two-sided market to seed the market e. Leverage customers of their other products to promote a new product a; Moderate

A

1. Nokia is a cell phone brand that offers digital cameras as part of its cell phone products. It is now in direct competition with camera brands such as Canon and Sony, and has become the world's largest seller of cameras. This is an example of: a. envelopment. b. product customization. c. market diversity. d. product development. e. market innovation.

A

1. Uber and PayPal used similar strategies when trying to jumpstart network effects that were vital in creating their dominance. What did each do? a) Leveraged viral customer promotions by giving incentives to consumers who helped recruit friends to the servcie. b) Operated in "Blue Ocean" that, to this day, remains free of competitors c) Preannoucned their products, discouraging rivals from entering with competing offerings d) Created services that were backward-compatible with rivals, reducing switching costs for anyone interested inleaving incumbents for their services.

A

1. Which of the following terms is used as an alternative to switching costs? a. Lock-in b. Complementary benefits c. Exchange benefits d. Straddling costs e. Network impedance

A

1. Adobe gives away the Acrobat Reader to build a market for the sale of software that creates Acrobat files. This is an example of: a. one market attempting to conquer a new market by making it a subset, component, or feature of its primary offering. b. firms giving away products for half of a two-sided market to seed the market. c. markets, once considered distinctly separate, beginning to offer similar features and capabilities. d. firms taking advantage of complementary products developed for a prior generation of technology. e. firms spreading costs across increasing units of production or in serving multiple customers.

B

1. Customers who owned Nintendo's 8-bit video game console were unable to play the same games on the firm's new 16-bit Super Nintendo system. There was little incentive for existing Nintendo fans to stick with the firm. In this case, Nintendo's new offering suffered from a lack of: a. switching costs. b. backward compatibility. c. staying power. d. effective pricing. e. network effects.

B

1. The video game console market offers important lessons for the strategist. The video game console market is a network market in which Sony's PlayStation 2 (PS2) dominated over Microsoft's Xbox offering. This has been possible due to: a. the low pricing of Xbox which eroded users' confidence in the product. b. game developers favoring PS2 for its larger user base obtained because the PS2 was launched months before the Xbox. c. the presence of several cheap, rival imitations which ate into Xbox's market share. d. PS2's technical superiority over the Xbox. e. the straddling strategy adopted by Microsoft to expand in both video game and DVD player markets.

B

1. Which of the following products or services is not subject to network effects? a. Banking services b. Snack chip manufacturing c. Video game consoles d. Social networks e. Cell phone services

B

1. Which statement best describes the relationship between network effects and innovation? a. Network effects decrease innovation within a standard but increase the number of innovative offerings that compete against a strongly established standard. b. Network effects increase innovation within a standard but decrease the number of innovative offerings that compete against a strongly established standard. c. More often than not, network effects foster innovation d. More often than not, network effects limit innovation

B

1. Apple, which controls over 75 percent of digital music sales, was able to dictate song pricing for years, despite the tremendous protests of the record labels. This implies that: a. despite the presence of network effects, the music industry is not dominated by any single leader. b. the presence of multiple new entrants forces leading firms to drop prices of their offerings. c. firms with strong market dominance can enjoy substantial bargaining power over partners. d. a dominant market share does not necessarily translate to greater profitability for a firm. e. there were cross-side network effects between the various music labels.

C

1. While Sony and Microsoft focused on the graphics and raw processing power favored by hard-core male gamers, Nintendo chose to develop a machine to appeal to families, women, and age groups that normally shunned violent games. The strategy adopted by Nintendo in this example is the _____ strategy. a. straddling b. customer engagement c. Blue Ocean d. mass customization e. convergence

C

1. _____ are products or services that add additional value to the primary product or service that makes up a network. a. Quantum efforts b. Substitute components c. Complementary benefits d. Orthogonal gains e. Standby additions

C

1. _____ is said to occur when one market attempts to conquer a new market by making it a subset, component, or feature of its primary offering. a. Acquisition b. Greenfield investment c. Envelopment d. Market leapfrogging e. Monopolization

C

1. _____ occur(s) when increasing number of users lower the value of a product or service. a. Network internalities b. Market inflexibility c. Congestion effects d. Backward incompatibility e. Convergence

C

1. A market is said to be _____ if it derives most of its value from a single class of users. a. a pure play b. a long tail c. core competent d. one-sided e. convergent

D

1. Staying power refers to the: a. relative abilities of parties in a situation to exert influence over each other. b. energy demands required to run a product or service. c. ability of a firm to produce a good or service at a lower opportunity cost than a rival. d. long-term viability of a product or service. e. ability to take advantage of complementary products developed for a prior generation of technology.

D

1. Viral promotion involves: a. offering rebates and incentives to customers for adopting a product or service. b. paying celebrities to use a product visibly to lure customers into unwittingly buying the product. c. emphasizing customer retention and satisfaction, rather than a dominant focus on sales transactions. d. leveraging a firm's customers to promote a product or service. e. sending a pre-written set of messages to customers or prospects over time.

D

1. Which of the following factors represents one of the sources of value derived from network effects? a. Congestion b. Price transparency c. Information symmetry d. Staying power e. Complementary costs

D

1. Which of the following is an example of a measure taken by a firm to encourage the development of complementary goods? a. Adobe giving away the Acrobat Reader for free b. Microsoft bundling new products into Windows, Internet Explorer browser, and other offerings c. The Twitter Fail Whale d. Apple offering a regular conference and online materials for its software developers, and an online app store where they can sell their products. e. Nintendo's Wii games targeted at families, women, and older age groups

D

1. Windows OS, the iPhone, the Wii, and Facebook's application programming interfaces allow for the development and integration of complementary goods by third parties. Based on this evidence, all these products or services are said to be _____. a. pure plays b. coopetitors c. adaptors d. platforms e. venture capitalists

D

1. Worldwide auction leader eBay started operations in Japan just five months after Yahoo! launched its Japanese auction service. But eBay was never able to mount a credible threat and ended up pulling out of the market. This example shows that: a. online auction markets are characterized by constant shifts in market dominance. b. market dominance in the global marketplace translates to an equivalent position in national markets. c. national markets tend to be influenced by factors that are not necessarily localized. d. it's imperative to move first in markets influenced by network effects. e. firms should always subsidize initial adoption of their products and make them cheaper than their competitor's products.

D

1. You are at a packed stadium for the big game and you want to upload a photo of your team's touchdown using Instagram. Your mobile phone shows five bars of service, but you still can't access the Internet. This is likely an example of ______. a) The Osborne Effect b) Envelopment c) Network effects d) Congestion effects

D

1. Metcalfe's Law is also known as: a. systemic events. b. cluster effects. c. group impressions. d. herd instincts. e. network externalities.

E

1. Microsoft's Live Maps and Virtual Earth 3D was a late entrant to the Internet mapping game. Users had already put in countless hours building resources that meshed with Google Maps and Google Earth. However, by adopting the same keyhole markup language (KML) standard used by Google, any work done by users for Google in KML could be used by Microsoft. What strategy of Microsoft has allowed it to catch up with Google? a. Making a new market a subset of its main offering b. Taking advantage of complementary products developed for a prior generation of technology c. Entering an uncontested, low-profit market instead of competing in saturated, high-profit markets d. Exchanging technical expertise in one area with another firm to effectively suit resource capabilities e. Making a new product compatible with the leading standard

E

1. Two distinctly separate markets are said to undergo convergence when they: a. are dominated by a small group of powerful sellers. b. derive most of their value from two distinct categories of participants. c. offer products and services designed to target a specific industry. d. are characterized by many buyers, but a single, dominant seller. e. begin to offer similar features and capabilities.

E

1. A Blue Ocean strategy often works best when combined with operational effectiveness.

False

1. Almost all networks derive most of their value from a single class of users.

False

1. Cross-side benefits arise due to interaction among members of a single class of participant.

False

1. Envelopment is a management strategy where a dominant firm acquires all the layers in its value chain to increase profitability.

False

1. Firms that constantly innovate do so to develop open standards for competitors to become compatible.

False

1. High switching costs serve to weaken the value of network effects as a value asset.

False

1. In a market influenced by network effects, the winning product or service is often determined by its technical superiority, with technically strong newcommers able to unseat the dominant incumbents.

False

1. In the absence of network effects, the value of a product or service increases as the number of users grows.

False

1. In the context of network effects, the term "network" refers to either wired or wireless systems that connect computing components.

False

1. Startup firms that find new markets attractive but do not yet have products ready for delivery preannounce efforts causing potential adaptors to delay a purchasing decision until the new effort rolls out.

False

The natural state of a market where network effects are present is for there to be intense competition between several rivals that come to an equalibrium where their respective market shares are roughly identical.

False

1. An instant-messaging standard is an example of a one-sided market.

True

1. Congestion effects often result when a key resource becomes increasingly scarce with the arrivals of more and more users.

True

1. Every product or service subject to network effects fosters some kind of exchange.

True

1. Many firms attempt to enhance their network effects by creating a platform for the development of third-party products and services that enhance the primary offering.

True

1. Mobile software developers often find iOS more attractive than the Android operating system, because Android runs on many more types devices than iOS and the Android operating system is fragmented into differnet versions, each combination of which needs to be tested.

True

1. Moving first plays a significant role in markets influenced by network effects.

True

1. Network effects do not influence all consumer products or services.

True

1. Regional anti-trust authorities may consider product bundling by dominant firms to be anticompetitive.

True

1. Staying power is important for consumers of technology products because investment over time usually greatly exceeds the initial price paid for a product or service

True

1. The higher the value of a user's overall investment, the more they are likely to consider the staying power of any offering before choosing to adopt it.

True