Deck 8: Industry Evolution and Strategic Change

Question 1

The industry life cycle follows different phases from the product life cycle.

Answer 1

False

Question 2

For aircraft manufacturers,the jet engine was a threat since it was a "competence destroying" innovation.

Answer 2

False

Question 3

During an industry's introductory and growth phases,most companies in an industry are likely to experience negative free cash flows.

Answer 3

True

Question 4

During the introduction phase of the industry life cycle,different technologies and design configurations compete for market acceptance.

Question 5

With the onset of the maturity,industries often experience a "shake-out" period.

Question 6

According to Charles Darwin it is the strongest of a species that survive.

Question 7

The emergence of a dominant product design tends to coincide with a shift from process innovation to product innovation

Question 8

The firm which sets the dominant product design goes on to be the most profitable firm in the industry.

Question 9

Firms that develop high levels of capability tend to find change easy because they are also able to develop new capabilities.

Question 10

A major incentive for introducing a dominant design is to exploit the intellectual property that is embodied within it.

Question 11

The field of organizational ecology (a.k.a.organizational demography)proposes that a key factor encouraging the entry of new firms during an industry's early phases of development is the increasing legitimacy of the industry.

Question 12

When an industry coalesces around a common product design,innovation typically shifts from radical to incremental.

Question 13

Ford's assembly-line,mass production system and Toyota's system of lean production were the two process innovations that transformed the manufacture of automobiles during the 20^th century.

Question 14

Long-term change within most industries is achieved through the birth and death of companies rather than through adaptation by existing companies.

Question 15

"Punctuated equilibrium" refers to the tendency for organizations to follow a gradual process of transition from one equilibrium to another

Question 16

Organizations tend to prefer exploitation of existing knowledge over exploration for new opportunities.

Question 17

The establishment of a dominant design marks an industry's transition from the growth phase to the maturity phase.

Question 18

The establishment of a dominant design in an industry requires convergence around a common technical standard.

Question 19

Over time,industry life cycles have become increasingly compressed.

Question 20

The main drivers of industry evolution are growth of demand and the production and diffusion of knowledge.

Question 21

IBM's decision in the late 1970s to establish its new personal computer division in Florida,rather than close to its headquarters in New York is an example of "contextual ambidexterity."

Question 22

A technical standard tends to emerge in an industry if:

A)Economies of scale are present
B)The industry has converged around a dominant design
C)The industry is subject to economies of learning
D)Network effects exist

Question 23

Which statement best described the extent to which different industries conform to the same life cycle pattern?

A)The duration of the life cycle varies from industry to industry
B)The same stages exist whatever the industry
C)All industries have experienced a shortening of the stages of their life cycle
D)Different go through a renewal of their fife cycle at different stages of their development

Question 24

The transition from the introduction to growth phase of the industry life cycle features:

A)Increasing product differentiation
B)Declining innovation
C)Offshoring of production
D)Product innovation giving way to process innovation

Question 25

A dominant design is best described as:

A)A technical standard
B)The product design chosen by the leading firm in an industry
C)A common product architecture
D)The culmination of the process of commodification that accompanies industry evolution

Question 26

If a firm focuses closely on meeting the needs of its customers,it is unlikely to be blindsided by disruptive innovation.

Question 27

The duration of the industry life cycle:

A)Typically extends over a century or more
B)Is determined by the longevity of the firms within the industry
C)Has become compressed as the pace of technological change has accelerated
D)Depends upon the ability the industry to sustain innovation

Question 28

Firm entry rates tend to be highest during the growth stage of an industry life cycle because:

A)Shortage of production capacity keeps margins attractive.
B)The propensity for entrepreneurs and venture capitalists to imitate one another.
C)Growing legitimacy of the industry attracts resources to the industry.
D)Both (a)and (c).

Question 29

The different stages of the industry life cycles are defined primarily on the basis of:

A)The rate of growth of industry sales
B)The characteristics of competition within the industry
C)The pace of innovation within the industry
D)None of the above

Question 30

The characteristic profile of an industry life cycle has an 'S' shaped curve because:

A)It is modeled on the Product Life Cycle,which is also 'S' shaped.
B)It is generated by a quadratic function.
C)It reflects the changing pace at which technology is diffused.
D)It is the result of changes in rates of growth of market demand.

Question 31

Which of the following developments is not a typical feature of the transition from the "introductory" to the "growth" phase of the industry life cycle?

A)The emergence of a dominant design
B)The shift from product to process innovation
C)The shift of production from mature to emerging countries
D)Rapid market penetration

Question 32

"Shakeout"-a period when many firms exit from an industry following a period of intense competition-characterizes an industry's transition from:

A)Introduction to growth stage.
B)From growth to maturity.
C)From maturity to decline.
D)From product innovation to process innovation.

Question 33

Industries change mainly as a result of:

A)Government policies.
B)The death of existing firms and the birth of new firms.
C)Continuous adaptation by a constant population of firms.
D)Changing customer preferences.

Question 34

Steve Jobs' insistence that Apple's development teams commit to "insanely products" that combined seemingly-impossible performance attributes is an example of how "stretch goals" can combat organizational inertia.

Question 35

The steam engine was a disruptive innovation for the builders of ocean-going sailing ships because steam ships were initially slower and less reliable than sailing ships.

Question 36

The main forces driving industry evolution are:

A)Technology and demand.
B)Technology and globalization.
C)The quest for cost and differentiation advantage.
D)Government policies and global financial flows.

Question 37

Multiple scenario analysis is an approach to forecasting that relied heavily upon applying advanced statistical analysis to "big data."

Question 38

Dynamic capabilities are "higher order" capabilities that orchestrate change among operational capabilities.

Question 39

Organizational ambidexterity refers to the ability of a single organization to perform multiple capabilities

Question 40

Organizations are like people: their essential characteristics-including their capabilities-are formed in their early stages of development.

Question 41

When an industry is subject to technological change,the ability of new entrants to displace incumbent firms will be increased if:

A)The technological change represents an architectural innovation rather than component innovation.
B)The technological change is competence enhancing rather than competence destroying.
C)Incumbent firms are insufficiently attentive to the industry's largest customers.
D)Incumbent firms are geographically dispersed.

Question 42

The problem for companies which reject conventional management principles and adopt radically new management systems and organizational forms is that:

A)Lack of legitimacy hurts their stock market valuations.
B)Employees tend to be conservative and prefer the security of traditional modes of management.
C)Most attempts at radical transformation fail.
D)Innovations in management conflict with prevailing systems of financial reporting and human resource management.

Question 43

With the onset of the maturity stage,the number of firms in most industries:

A)Remains stable
B)Decreases significantly,then stabilizes
C)Rises
D)Rises sharply until shake-out is triggered

Question 44

Organizational structure needs to take account of the capabilities that a company possesses (or wishes to develop)because:

A)The managers who are responsible for a capability need to be the heads of organizational units
B)Coordination among the people engaged in performing the capability is facilitated if they are located within the same organizational unit
C)The lack of a separate organizational unit will make it more difficult for organizational learning to be retained
D)The managers which head different organizational capabilities need to have clear lines of reporting

Question 45

Which of the following is not a source of organizational inertia?

A)The tendency for organizations to limit themselves to local search
B)Organizational routines
C)Complementarities between the different activities of a firm
D)The hierarchical structure of organizational capabilities where dynamic capabilities reside at a higher level than operational capabilities

Question 46

IBM,3M,and General Electric are companies that demonstrate,over periods of several decades,the capacity to adapt to multiple changes in their external environment.These companies are characterized by:

A)Dynamic,entrepreneurial CEOs
B)Corporate cultures that value and celebrate risk taking
C)Business processes that sense and seize opportunities
D)Embracing diversity

Question 47

The reluctance of shipping companies to switch from sail to steam propulsion can be attributed to the fact that:

A)The owners of shipping company were resistant to new technology
B)For several decades after the introduction of steam ships,sailing ships were faster,cheaper,and more reliable
C)Complementary resources such as engineers and coaling stations were scarce
D)Shipping company owners were over the environmental impact of coal burning ships

Question 48

When a company places its new businesses or new products into separate organizational units from its established business activities,this is an example of:

A)Contextual ambidexterity
B)Structural ambidexterity
C)Both contextual and structural ambidexterity
D)Effective change management

Question 49

The main reason why a firm's distinctive capabilities reflect the conditions that the firm faced during the early years of its development is because:

A)Most managers adhere to the old adage: "If it ain't broke,don't fix it"
B)Capabilities that develop early become embedded in a firm's organizational culture
C)Exploitation tends to dominate exploration
D)Managers' bounded rationality

Question 50

The field of "organizational ecology" studies:

A)Companies' contributions to environmental sustainability.
B)Changes in the evolution of the population of firms in an industry.
C)The process of competition between different types of firm.
D)Management practices that promote the evolutionary adaptation of firms.

Question 51

An organizational routine is:

A)A stable,repeatable,pattern of coordinated activity among organizational members
B)A lower-level,operational capability,as opposed to a dynamic capability which tends not to be routinized
C)The resource needed to create a new capability
D)A new capability after it has been institutionalized within an organization

Question 52

The capabilities of "craft enterprises" are based upon the tacit knowledge of skilled employees.The capabilities of "industrial enterprises" are based upon systematized knowledge located within processes.The key advantage of industrial enterprises over craft enterprises is that:

A)They can replicate their capabilities at low cost in multiple locations.
B)They are less vulnerable to shortages of skilled workers.
C)They can standardize their offerings.
D)They can automate their production.

Question 53

According to institutional sociologists,the propensity for organizations to adopt similar structures ("institutional isomorphism")is primarily a result of

A)Common key success factors within an industry.
B)Bounded rationality.
C)The complementarity among different managerial practices within firms' "activity systems".
D)The propensity of firms to imitate one another in order to gain legitimacy.

Question 54

The term "competency trap",refers to:

A)The hubris that affects the senior managers of successful firms.
B)The tendency for firms with competitive advantage based in one industry to fail when they diversify into a new industry.
C)The tendency for capabilities based on highly developed organizational routines to be a source of inflexibility.
D)The tendency for managers to be reluctant to change the strategies that brought them their initial success.