MGMT425 Chapter 7

How was Wikipedia able to outperform both Encyclopedia Britannica and Microsoft Encarta?

A. By lowering its network effects

B. By launching an electronic encyclopedia that included a variety of entries

C. By leveraging first-mover advantages

D. By allowing any person, expert or novice, to generate and edit content

D. By allowing any person, expert or novice, to generate and edit content
Which of the following is a drawback of Wikipedia’s business model?

A. The company’s superior differentiated appeal is highly correlated to its cost.

B. The user-generated content may be unreliable and unauthoritative.

C. The company relies on the wisdom of the experts rather than the public.

D. The chances of falling in the competitive chasm, between the early adopters and early majority, are high.

B. The user-generated content may be unreliable and unauthoritative.
The typical four-step innovation process begins with:

A. the modification and recombination of an existing product or process.

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

C. the commercialization of an invention by entrepreneurs.

D. a competitor’s attempt to imitate an innovation.

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

B. promissory note

C. franchise

D. royalty

A. patent
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 _____.

A. promissory bill

B. patent

C. franchise

D. royalty
In the given

B. patent
In the U.S., the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application.

A. 20 years

B. 25 months

C. 15 months

D. 25 years

A. 20 years
_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

A. Direct imitation

B. Mass customization

C. Innovation

D. Headhunting

C. Innovation
As a research scholar, Richard 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. Richard can be best described as a(n) _____.

A. entrepreneur

B. category captain

C. franchisor

D. early adopter

A. entrepreneur
An intrapreneur is described as a person who:

A. restricts changes within an organization.

B. innovates within existing companies.

C. introduces new products or services by starting his or her own ventures.

D. invests funds in the ideas of another person in the same organization.

D. invests funds in the ideas of another person in the same organization.
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):

A. venture capitalist.

B. category captain.

C. intrapreneur.

D. early adopter.
Innovators like

C. intrapreneur.
Which of the following statements is NOT true about innovation?

A. Innovation as a competitive weapon can simultaneously create and destroy value.

B. Successful innovation allows a firm to extract temporary monopoly profits.

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

D. Process innovations are made possible through advances such as the Internet.

C. Innovation has to be high-tech in order to be a potent competitive weapon.
How has Apple been able to sustain its competitive advantage in the smartphone industry?

A. By reducing its network effects

B. By targeting its new products and services toward laggards

C. By driving the price for the end user to zero

D. By regularly introducing incremental improvements in its products

D. By regularly introducing incremental improvements in its products
Which of the following is a competitive benefit experienced by the first mover firm in an industry?

A. The first mover will be able to achieve a less steeper learning curve.

B. The first mover will be able to reduce the switching costs.

C. The first mover will not have to patent its products or technology.

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

D. The first mover will be able to reduce costs through economies of scale.
The four-step innovation process ends with:

A. idea generation.

B. invention.

C. idea testing.

D. imitation.

D. imitation.
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

B. Social benefits

C. Network externalities

D. Fringe benefits

A. First-mover advantages
Which of the following statements accurately describes social entrepreneurs?

A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns.

B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues.

C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production.

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

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm’s performance.
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 non-profit 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?

A. Headhunter

B. Category captain

C. Social entrepreneur

D. Trade creditor

C. Social entrepreneur
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):

A. firm that uses closed innovation.
B. entrepreneur who commercialized invention into an innovation.
C. business that entered the industry during its maturity stage.
D. exception to the long tail business model.

B. entrepreneur who commercialized invention into an innovation.
The market for 3D televisions is in the introduction stage of the industry life cycle. What does this imply?

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

B. The number of buyers in the market is high.

C. The prices of 3D televisions will be lowest during this stage.

D. The barriers to entry are low in the industry.

A. There are only a few competitors in the 3D television market.
The strategic objective of a first mover during the introduction stage of the industry life cycle is to:

A. pursue a harvest strategy.

B. survive by drawing on deep pockets.

C. achieve market acceptance.

D. lower entry barriers.

A. pursue a harvest strategy.
FindFriend 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, FindFriend app’s value has increased primarily due to its _____.

A. learning curve effects

B. economies of scale

C. economies of scope

D. network effects

D. network effects
Which of the following has been a primary reason for increases in the Apple iPhone’s installed base?

A. The decision to enter into the smartphone market during the maturity stage

B. The cost-leadership strategy pursued by Apple

C. The availability of apps that led to network effects

D. The decision to target laggards, the most profitable customer segment

D. The decision to target laggards, the most profitable customer segment
In the context of industrial growth, which of the following statements is true of standards?

A. Standards emerge exclusively from bottom-up through competition in the marketplace.

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.

C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers.

D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

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

A. Maturity stage

B. Growth stage

C. Shakeout stage

D. Introduction stage

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

A. The consumer demand increases.

B. The prices of goods begin to rise.

C. The basis of competition moves away from process innovation.

D. The number of competitors decreases.

A. The consumer demand increases.
Which of the following best illustrates a process innovation as opposed to product innovation?

A. A consumer electronics company developing a new generation of tablet computers

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

C. A consumer electronics company launching 3D televisions

D. An automobile company commercializing electric cars
Process innovations are new ways to produce existing products

B. An automobile company using computer-aided design in its production
Process innovation is more important than product innovation during the growth stage because:

A. companies produce very few products during the growth stage, often just prototypes or beta versions.

B. technological and commercial uncertainties about a new product still exist during this stage.

C. it is more crucial to adopt the integration strategy during this stage.

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

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

A. The industry for cell phones with holographic keyboards will face greater competition than the tablet industry.

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

C. While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits.

D. The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.

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 statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

A. There is more strategic variety in the growth stage when compared to the introduction stage.

B. The number of competitors is more in the introduction stage than the growth stage.

C. The market size for a new product or service is larger in the introduction stage when compared to the growth stage.

D. While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.

A. There is more strategic variety in the growth stage when compared to the introduction stage.
The key objective for firms during the growth phase is to:

A. invest as many resources as possible in product innovations.

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

C. pursue a harvest strategy.

D. reduce their network effects.

B. stake out a strong strategic position not easily imitated by rivals.
Which of the following is a feature of the shakeout phase of the industry life cycle?

A. There is rapid industry growth during this stage.

B. Market demand in this stage primarily consists of first-time adopters.

C. Competitive intensity within the industry increases.

D. The mode of competition shifts from price to non-price in this stage.

C. Competitive intensity within the industry increases.
To be successful and to survive the shakeout stage of the industry life cycle, a firm should:

A. charge higher prices than its competitors.

B. focus on product innovation rather than process innovation.

C. gain economies of scale.

D. shift from price to non-price competition.

C. gain economies of scale.
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?

A. Growth stage

B. Introduction stage

C. Shakeout stage

D. Decline stage

C. Shakeout stage
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?

A. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based.

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.

C. The electric car industry will move to the maturity stage, whereas the industry for MP3 players will enter the growth stage next.

D. The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.

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

A. move toward product innovations and away from process innovations.

B. survive by drawing on “deep pockets.”

C. achieve market acceptance.

D. reduce the barriers to entry in the industry.

B. survive by drawing on “deep pockets.”
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

A. The barriers to entry increase during this stage.

B. The firms in the industry yield the highest profits during this phase.

C. Rivalry among competitors decreases in this stage.

D. The weaker firms are forced out of the industry in this stage.

D. The weaker firms are forced out of the industry in this stage.
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?

A. Growth stage

B. Introduction stage

C. Maturity stage

D. Decline stage

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

A. The competitive intensity within the industry is at its peak.

B. The market reaches its maximum size.

C. The industry structure is more monopolistically competitive.

D. The focus on product innovation is higher than that on process innovation.

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

A. The type of buyers at this stage will be early adopters.

B. The mode of competition at this stage will be based on non-price factors.

C. The market growth is positive or high at this stage.

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

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

A. Competitive intensity will be higher in the domestic airline industry than the pet clothing industry.

B. The pet clothing industry is ahead of the domestic airline industry in the industry life cycle.

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

D. The mode of competition will be price-based in the pet clothing industry and will be non-price based in the domestic airline industry.

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

B. The industry structure is perfectly competitive with a large number of buyers and sellers.

C. The strategic objectives of businesses will involve gaining market acceptance.

D. The market reaches its maximum size at this stage.

A. The level of process innovation reaches its maximum as firms attempt to lower cost.
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?

A. Growth stage

B. Maturity stage

C. Decline stage

D. Commercialization stage

C. Decline stage
When a firm pursues a harvest strategy, it:

A. exits the industry by bankruptcy or liquidation.

B. invests significant resources in product innovations.

C. buys out its rivals to strengthen its strategic position.

D. reduces investments in product support.

D. reduces investments in product support.
Though Wave 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 Wave Electronics adopted in this scenario?

A. Harvest strategy

B. Maintain strategy

C. Consolidation strategy

D. Differentiation strategy

A. Harvest strategy
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?

A. Harvest strategy

B. Maintain strategy

C. Consolidated strategy

D. Differentiation strategy

C. Consolidated strategy
When a firm pursues a maintain strategy, it:

A. exits a declining industry to maintain the goodwill of its overall brand name.

B. reduces investments in product support and allocates only a minimum of human and other resources.

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

D. chooses to consolidate the industry by buying rival firms, those who plan to exit.

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

A. While firms in the e-book reader industry will focus on pursuing a harvest strategy, firms in the landline telephone industry will focus on product innovations.

B. The e-book reader industry is at a more advanced stage than the landline industry of the industry life cycle.

C. While firms in the e-book reader industry will attract customers categorized under late majority, firms in the landline telephone industry will attract the early majority customers.

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

D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.
While the industry for 3D 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?

A. The market size for 3D televisions is extremely large, while the market size for CRT televisions is moderate.

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

C. The focus in the 3D television industry will be on cost-leadership, whereas in the CRT television industry, the focus will be on differentiation.

D. While the strategic objective of the CRT television industry will be achieving market acceptance, the strategic objective of the 3D television industry will be pursuing a harvest strategy.

B. While product innovation will be at its maximum for the 3D television industry, process innovation will be more crucial for the CRT television industry.
On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

A. The number and size of competitors remain constant throughout the industry life cycle.

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

C. Industries tend to follow an unpredictable industry life cycle.

D. The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle.

B. Each stage of the industry life cycle is dominated by a different customer group.
Which of the following customer segments as described in the chasm framework make up the mass market?

A. The early and late majority together

B. The early adopters alone

C. The technology enthusiasts and laggards together

D. The technology enthusiasts alone

A. The early and late majority together
Which of the following statements is true of technology enthusiasts?

A. They make up the largest market segment.

B. They are the customer segment in the maturity stage of the industry lifecycle.

C. They are highly price conscious buyers.

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

D. They enjoy using beta versions of products and providing feedback to companies.
The customers entering the market in the growth stage are primarily _____.

A. technology enthusiasts

B. laggards

C. early adopters

D. late majority

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

A. While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts.

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

C. While early adopters make up the smallest market segment, technology enthusiasts make up the mass market.

D. Firms need to communicate products’ potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.

B. Unlike technology enthusiasts, early adopters’ demand is fueled more by intuition and vision rather than technology concerns.
Which of the following statements is true of the early majority section of consumers?

A. They come into the market during the introduction stage.

B. They are unaware that many hyped new product introductions will fade away.

C. They weigh the benefits and costs carefully when adopting a new product.

D. They make up the smallest market segment.

C. They weigh the benefits and costs carefully when adopting a new product.
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:

A. are driven by technology concerns rather than the practicality of a new product.

B. influence the purchase decisions of early adopters.

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

D. have the highest purchasing power when compared to the other customer segments.

C. enter into the market in large numbers, creating a herding effect.
When does a firm fall into the large competitive chasm between early adopters and early majority?

A. When it cannot attract technological enthusiasts to try the beta versions of its products

B. When it creates strong network effects during the growth stage

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

D. When the early majority create herding effects for its products

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

A. Laggards

B. Technology enthusiasts

C. Early adopters

D. Early majority

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

A. She will be confident in her ability to master any new technology.

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

C. She will not rely on endorsements by the early majority or early adopters.

D. She will buy beta versions of new products and technology.

B. She will prefer to buy from well-established brands rather than unknown new ventures.
How is the early majority section of consumers different from the late majority section?

A. While the early majority makes up the mass market, the late majority is the smallest market segment.

B. The late majority enters the market in the decline stage, whereas the early majority enters the market during the maturity stage.

C. Although the early majority is confident in their ability to master a new technology, the late majority is not.

D. While the late majority prefers buying from unknown new ventures, the early majority relies only on well-established brands.

C. Although the early majority is confident in their ability to master a new technology, the late majority is not.
Which of the following statements is true of laggards?

A. They make up the largest customer segment for any business.

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

C. They do not like waiting too long for new technology to release.

D. They are customers who adopt a new product even if it is not necessary.

B. They tend to enter the market frequently during the decline stage.
While the personal computer industry is flooded and growing with laptops and tablets, John 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 John best represent?

A. Early adopters

B. Category captains

C. Laggards

D. Early majority

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

A. The framework believes that the life cycle of industries is unpredictable.

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

C. The framework is based on the tenet that industries can be rejuvenated even in the declining stage.

D. The framework believes that the number and size of competitors remain constant throughout the life cycle.

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

A. Radical innovation

B. Incremental innovation

C. Architectural innovation

D. Disruptive innovation

B. Incremental innovation
In a radical innovation, a firm targets:

A. existing markets by using new technologies.

B. new markets by using existing technologies.

C. new markets by using new technologies.

D. existing markets by using existing technologies.

C. new markets by using new technologies
A firm’s resistance to changes in the status quo is referred to as _____.

A. organizational parity

B. organizational liquidity

C. organizational inertia

D. organizational efficacy

C. organizational inertia
Incumbent firms favor incremental innovation over radical innovation because:

A. their business decisions are independent of the other parties in their innovation ecosystem.

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

C. incumbent firms do not have formal organizational structures and processes like the way new entrants do.

D. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage.

B. radical innovation will disturb the existing power distribution within the firms.
Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

A. Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially.

B. New entrants are embedded in an innovation ecosystem, while incumbent firms are not.

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

D. Incumbent firms do not have the advantages of network effects that new entrants have.

C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in _____.

A. incremental innovations

B. radical innovations

C. architectural innovations

D. disruptive innovations

C. architectural innovations
ModelLife 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?

A. Disruptive innovation

B. Incremental innovation

C. Radical innovation

D. Architectural innovation

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

A. disruptive innovation

B. incremental innovation

C. radical innovation

D. architectural innovation

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

A. It begins as a low-cost solution to a new problem.

B. It initially performs better than the existing technology.

C. It involves leveraging existing technologies in new markets.

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

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

A. The cable news industry was in the maturity stage of the industry life cycle.

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

C. It failed to cross the large competitive chasm between the early adopters and early majority.

D. Its business model relied heavily on crowdsourcing for its user-generated content.

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

A. Radical innovation

B. Incremental innovation

C. Architectural innovation

D. Disruptive innovation

D. Disruptive innovation
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 _____.

A. regressive innovation

B. radical innovation

C. disruptive innovation

D. architectural innovation

C. disruptive innovation
Digital photography replacing film photography would be an example of a(n) _____.

A. regressive innovation

B. radical innovation

C. architectural innovation

D. disruptive innovation

D. disruptive innovation
Which of the following is true of a disruptive innovation?

A. It targets existing markets.

B. It initially provides high-cost solutions to existing problems.

C. It introduces a radical idea and creates a new industry.

D. It attacks the market through a top-down process.

A. It targets existing markets.
A factor favoring the success of disruptive innovation is that:

A. incumbent firms are slow to change.
B. new entrants have highly formal organizational structures and processes.
C. the low end of the market is highly guarded.
D. incumbent firms focus on radical innovation rather than incremental innovation.

A. incumbent firms are slow to change.
Intel’s Celeron chip and Atom chip are initiatives to:

A. introduce a new product in a new market to extend its leadership.

B. guard the company against disruptive innovation by protecting the low end of the market.

C. stall its own disruption strategies and wait for its rivals to introduce disruptive forces.

D. target that section of the market that is not particularly price sensitive.

B. guard the company against disruptive innovation by protecting the low end of the market.
General Electric (GE) disrupted itself in the healthcare industry by:

A. replacing the top levels of the executive hierarchy.

B. introducing inexpensive and smaller diagnostic devices in developing countries.

C. saturating the global market with multiple diagnostic devices.

D. targeting the comparatively less price-sensitive sections of the market.

B. introducing inexpensive and smaller diagnostic devices in developing countries.
By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to:

A. cater to the healthcare needs of the developed countries over developing countries.

B. invade the healthcare market from the bottom up.

C. leverage existing technologies to attack new markets.

D. find a market for high-end, high-price diagnostic devices.

B. invade the healthcare market from the bottom up.
Which of the following is stated by the long tail phenomenon?

A. When production is increased by 80 percent, the decrease in cost is close to 20 percent due to economies of scale.

B. To gain a competitive advantage, it is necessary for a business to internalize 80 percent of its R&D, and outsource the remaining 20 percent.

C. For an incumbent firm, 80 percent of its revenue comes from existing customers, and new customers account for the remaining 20 percent.

D. Almost 80 percent of sales in a given product category come from only 20 percent of the offerings in that category.

D. Almost 80 percent of sales in a given product category come from only 20 percent of the offerings in that category.
In the context of the long tail phenomenon, what does the short head represent?

A. It represents products that appeal to the largest segment of the market with homogenous tastes.

B. It represents products that are manufactured from minimal input resources.

C. It represents products that contribute only 20 percent to a firm’s total revenue.

D. It represents products that online retailers offer in order to increase their product portfolio and not their revenues.

A. It represents products that appeal to the largest segment of the market with homogenous tastes.
_____ is a situation in which transactions are likely not to take place because there are only a few buyers and sellers who have difficulty finding each other.

A. Diseconomies of scale

B. Resource ambiguity

C. Thin markets

D. Buyer resistance

C. Thin markets
The _____ business model is best described as one in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices.

A. razor-razor-blade

B. freemium

C. pay-as-you-go

D. long tail

D. long tail
How has the long tail business model affected eBay as an online retailer?

A. It has increased the cost of the virtual shelf space.

B. It has allowed eBay to offer limited product selections to its customers.

C. It has helped overcome the problem of thin markets, at no cost to the buyer.

D. It has made eBay highly dependent on products found in the short head to generate revenues.

C. It has helped overcome the problem of thin markets, at no cost to the buyer.
Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the:

A. decreasing capability of external suppliers and vendors.

B. lack of reliability on venture capital.

C. increasing need to internally control research and development.

D. increasing supply and mobility of skilled workers.

D. increasing supply and mobility of skilled workers.
Which of the following statements is true of firms pursuing a closed innovation?

A. Firms following the closed innovation model are less likely to be prone to the not-invented-here syndrome.

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

C. Firms in the closed innovation model focus on building a more effective business model to commercialize R&D, rather than focusing on being first to market.

D. Firms following the closed innovation model will find activities such as spin-out ventures or strategic alliances crucial to commercialize their internally developed R&D.

B. Firms in the closed innovation model are extremely protective of their intellectual property.
Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm?

A. The firm will suffer from the not-invented-here syndrome.

B. The firm is less likely to commercialize researches from other firms.

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

D. The firm will equate R&D with a high likelihood of benefitting from first-mover advantages.

C. The firm will buy others’ intellectual property whenever it advances its own business model.
Which of the following statements accurately brings out the difference between closed innovation and open innovation?

A. Firms following the open innovation model are much more likely to be prone to the not-invented-here syndrome than firms pursuing a closed innovation model.

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

C. Firms following the open innovation model are more protective about their intellectual property than firms pursuing a closed innovation model.

D. While open innovation means introducing new technologies to new markets, closed innovation refers to introducing new technologies to existing markets.

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 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.

B. Almost 40 percent of sales comes from 80 percent of product selection found in the short head.

C. The low end of a market is highly vulnerable to competitive attacks.

D. Since the best people, the smartest people in the industry work for P&G, the best discoveries must be invented at P&G.

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

A. economies of scope.

B. open innovation model.

C. razor-razor-blade business model.

D. experience-curve effects.

B. open innovation model.
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?

A. The company wanted to focus on process innovation rather than product innovation.

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

C. The company wanted to carefully protect its intellectual property.

D. The supply and mobility of unskilled workers within the industry had increased drastically.

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