Exam 7: Strategy and Technology

A common set of features or design characteristics of a product is called a dominant design.

When a company is trying to win a format war, it should license its format for a low fee rather than a high fee.

It is important for a company to make sure that, in addition to the product itself, there is an adequate supply of complements to win a format war.

To win a format war, a company should:

Marginal costs in high-technology industries tend to stay very low as production rises.

First movers and late movers that are large companies are able to develop complementary assets at the same rate to quickly develop a presence in the new industry.

Which of the following pieces of advice would you give to a firm that wants to exploit network effects?

Cellular phone service providers often sell the phone itself at a very low price and then charge a relatively high fee for usage. This illustrates:

Ownership of an industry standard that is protected from imitation by patents and copyrights is a weak organizational resource.

Identify the three factors that influence the innovation strategies used to exploit the advantages of first-movers. When is the best time to use each of these strategies?

What are technical standards, why are they important, and how are they established?

Which of the following is NOT a basic strategy for a first mover?

Technological paradigm shifts occur when new technologies revolutionize the structure of the industry, dramatically alter the nature of competition, and require companies to adopt new strategies to survive.

The increase in sales of a certain type of cell phone due to the availability and increase in demand of a specific game application only designed for that cell phone is an example of indirect or "cross-side" network effects.

Aggressive marketing is a key factor in jump-starting demand to get potential early adopters to bear the switching costs associated with adopting an innovation.

Companies promoting alternative standards can be locked out of the market when consumers are unwilling to bear the switching costs required to abandon the established standard and adopt the new standard.

The difference in comparative costs between a conventional producer and a high-tech producer is that they have to understand the law of diminishing returns.

When comparing two companies, a conventional company facing diminishing returns and a high-tech company with low marginal costs, if both companies sell the same quantity at the same price, the conventional company will make more profit because it has lower average costs than the high-tech company.

One strategy for success in high-tech industries is to keep prices low to increase sales volume.

Which of the following is true of first movers?