Exam 8: Understanding Network Effects: Strategies for Competing in a Platform-Centric, Winner-Take-All World

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?

Free

(Multiple Choice)

4.8/5

(37)

Question 1

Correct Answer:

Verified

What are "network effects"? Define the term and briefly explain the relevance they hold in an economic context.

Free

(Essay)

4.8/5

(36)

Question 2

Correct Answer:

Verified

Network effects are sometimes referred to as "Metcalfe's Law" or "network externalities." In this context, a network refers to a common user base that is able to communicate and share with one another. When network effects are present, the value of a product or service increases as the number of users grows. Network effects are the most important reasons why users pick one product or service over another. They are among the most powerful strategic resources that can be created by technology-based innovation. Many category-dominating organizations and technologies owe their success to network effects, including Microsoft, Apple, NASDAQ, eBay, Facebook, and Visa. Network effects are also behind the establishment of most standards, including Blu-ray DVD, Wi-fi, and Bluetooth.

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

Free

(True/False)

4.9/5

(29)

Question 3

Correct Answer:

Verified

True

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

(True/False)

4.8/5

(29)

Question 4

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/False)

4.7/5

(37)

Question 5

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:

(Multiple Choice)

4.8/5

(39)

Question 6

Are the markets for mobile payments one-sided or two-sided? Describe why you chose your answer.

(Essay)

4.9/5

(34)

Question 7

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

(True/False)

4.9/5

(28)

Question 8

A firm can spend no money and time, yet expect to enhance its offerings, by:

(Multiple Choice)

4.8/5

(36)

Question 9

Uber and PayPal used similar strategies when trying to jumpstart network effects that were vital in creating their dominance. What did each do?

(Multiple Choice)

4.9/5

(31)

Question 10

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.

(True/False)

4.9/5

(36)

Question 11

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

(True/False)

4.9/5

(32)

Question 12

A market is said to be _____ if it derives most of its value from a single class of users.

(Multiple Choice)

4.9/5

(30)

Question 13

_____ are products or services that add additional value to the primary product or service that makes up a network.

(Multiple Choice)

4.8/5

(35)

Question 14

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.

(True/False)

4.9/5

(32)

Question 15

A market dominated by a small number of powerful sellers is known as a(n) _____ .

(Multiple Choice)

4.8/5

(32)

Question 16

If a firm's claim in the blue ocean is based on easily _____ resources (like technology features), then holding off rivals will be tougher.

(Short Answer)

4.9/5

(40)

Question 17

A firm is said to have suffered from the _____ when it preannounces a forthcoming product or service, and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item.

(Short Answer)

4.8/5

(32)

Question 18

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:

(Multiple Choice)

4.8/5

(34)

Question 19

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/False)

4.8/5

(39)

Question 20

Showing 1 - 20 of 69

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?

What are "network effects"? Define the term and briefly explain the relevance they hold in an economic context.

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

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

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

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:

Are the markets for mobile payments one-sided or two-sided? Describe why you chose your answer.

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

A firm can spend no money and time, yet expect to enhance its offerings, by:

Uber and PayPal used similar strategies when trying to jumpstart network effects that were vital in creating their dominance. What did each do?

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.

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

A market is said to be _____ if it derives most of its value from a single class of users.

_____ are products or services that add additional value to the primary product or service that makes up a network.

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.

A market dominated by a small number of powerful sellers is known as a(n) _____ .

If a firm's claim in the blue ocean is based on easily _____ resources (like technology features), then holding off rivals will be tougher.

A firm is said to have suffered from the _____ when it preannounces a forthcoming product or service, and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item.

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:

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.

Setting the Stage: Technology and the Modern Enterprise

Strategy and Technology: Concepts and Frameworks for Understanding What Separates Winners From Losers

Zara: Fast Fashion From Savvy Systems

Netflix in Two Acts: the Making of an E-Commerce Giant and the Uncertain Future of Atoms to Bits

Moores Law and More: Fast, Cheap Computing and What This Means for the Manager

Disruptive Technologies: Understanding the Giant Killers and Considerations for Avoiding Extinction

Amazoncom: an Empire Stretching From Cardboard Box to Kindle to Cloud

Social Media, Peer Production, and Web 2.0

The Sharing Economy, Collaborative Consumption, and Creating More Efficient Markets Through Technology

Facebook: Building a Business From the Social Graph

Rent the Runway: Entrepreneurs Expanding an Industry by Blending Tech With Fashion, John Gallaugher - Information Systems: a Managers Guide to Harnessing Technology, Version 40

Understanding Software: a Primer for Managers

Software in Flux: Partly Cloudy and Sometimes Free

The Data Asset: Databases, Business Intelligence, Analytics, Big Data, and Competitive Advantage

A Managers Guide to the Internet and Telecommunications

Information Security: Barbarians at the Gateway and Just About Everywhere Else

Google in Three Parts: Search, Online Advertising, and Beyond

Filters