QUIZ D

maturity stage of the industry life cycle

the product has reached full potential, profit margins are narrower, and producers are forced to compete on price to a greater extent.

Industry Life Cycle

the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry

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.

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Influence costs

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?

It is building new core competencies to protect and extend its current market position.

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?

KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

second mover strategy

Observing the innovations of first movers and then improving on them to gain advantage in the marketplace

first-mover advantage

Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

Restructuring

Which of the following is a feature of the maturity stage of the industry life cycle?

The market reaches its maximum size.

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.

_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use.

Specialized assets

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases.

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.

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?

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

Which of the following statements is true of laggards?

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

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

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.

principal-agent problem

a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him

Which of the following firms is most prone to experiencing a diversification discount?

a company that pursues unrelated diversification

taper integration

a firm internally produces less than half of its own requirements and buys the rest from outside suppliers

disruptive innovation

an innovation that leverages new technologies to attack existing markets from the bottom up

Vehmo Inc. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car. In this scenario, Vehmo is primarily

building new core competencies to protect and extend current market position.

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.

conglomerate

When Japanese carmakers attacked 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

Digital photography replacing film photography would be an example of a(n)

disruptive innovation.

The customers entering the market in the growth stage are primarily

early adopters.

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 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

In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs

hold a small market share in a low-growth market

Innovation Process

idea, invention, innovation, imitation

Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing.

industry

A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n)

intrapreneur

If a strategic business unit is recognized as a cash cow, it is advisable in

invest into the business to hold its current position.

Hitoro Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

licensing

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

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

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

pursue a harvest strategy.

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix.

question marks

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using

related-constrained diversification.

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions?

relative market share and speed of market growth

When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will

sell its products in several different regional, national, and international markets.

Intrapreneur

someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization's resources to try to realize it

The key objective for firms during the growth phase is to

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

Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of

taper integration.

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

Laggards

the last adopters, who distrust new products

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