Deck 11: Industry Evolution and Strategic Change

Question 1

To what extent is an industry life cycle pattern applicable to industries in general?

Answer 1

The industry life cycle is a general model applicable to all industries.
However, the application of such a model may vary depending on several factors.
First, the duration of the four stages varies depending on the industry. For example, life cycles last longer for heavy and infrastructure industries than for consumer goods.
Second, the nature of the industry impacts its life cycle. Some industries may never enter a decline stage, because they provide customers with basic necessities, whereas others may experience a rejuvenation stage (such as the motorcycle industry, and the TV manufacturing industry).
Finally, geography entails different patterns of life cycle because the level of economic development of a country influences the cycle of that industry.
Overall, the applicability of this model must be modulated regarding different variables, but does not eliminate its value for understanding the evolution of an industry.

Question 2

How do industries supplying basic necessities evolve with regard to the industry life cycle?

A)They do not and cannot decline
B)They decline at a very slow rate
C)They do not exhibit any particular specificity
D)They are evolving at a faster rate than more sophisticated product industries

Answer 2

A

Question 3

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

A)Remains relatively stable
B)Decreases significantly, then tends to stabilise
C)Decreases significantly, and continues to do so
D)Decreases or increases, depending on the industry

Answer 3

B

Question 4

The evolution of the television industry illustrates:

A)The level of returns that an industry may generate
B)The phenomenon of consolidation
C)Multiple revivals, based on radical new products
D)The maturity stage in the industry life cycle

Question 5

How can firms avoid falling into the "competency trap"?

Question 6

In an industry populated with few players, is it possible for one player to trigger a radical change that may shift the entire industry position within its life cycle?

Question 7

Does each industry have a different life cycle?

Question 8

Do all industries conform to the same life cycle patterns?

A)The duration of the life cycle varies from industry to industry
B)The same stages exist, whatever the industry
C)The stages have tended to become shorter.
D)All of the above

Question 9

How are industry structure, competition, and key success factors related to the industry life cycle?

Question 10

Which event marks a critical juncture in an industry's evolution?

A)The achievement of a concentration ratio of 50%
B)The emergence of a dominant design
C)The emergence of an oligopoly
D)Reaching the inflexion point beyond which economies of scope and scale are stable

Question 11

Why can we affirm that demand growth and the production and diffusion of knowledge are the two fundamental drivers of the evolution of an industry?

Question 12

When a technological change takes place in an industry, why do firms react differently?

Question 13

With maturity, the level of concentration of most industries:

A)Remains relatively stable
B)Decreases significantly
C)Increases significantly
D)May decrease or increase.

Question 14

In the automotive industry, a lot of innovations emerged between 1890 and 1912. Thereafter, a dominant design emerged. How can we tell?

A)There was a notable increase in the number of rivals and the intensity of competition
B)There was rapid growth
C)There was a gradual elimination of alternative fundamental designs
D)There was an increase in the size of the average European car, and a decrease in the size of the average American car

Question 15

How does the use of scenario analysis at Shell improve its strategic management?

Question 16

Personal computers, credit cards, securities broking, and internet access are examples of:

A)A shift of these industries towards more technological sophistication
B)A phenomenon of integration and convergence among these industries
C)Young industries which have evolved rapidly to reach maturity and commoditized products.
D)Relatively new industries that have gained a dominant status

Question 17

"Organizational ecology" refers to:

A)The analysis of the extent to which a firm's corporate governance is environment-friendly
B)A theoretical field that analyzes the evolution of the population of firms in an industry
C)The study of the birth and death processes of firms
D)Answers b and c

Question 18

What is scenario analysis?

Question 19

The evolution of industry structure and competition over the life cycle:

A)Does not necessitate any specific analysis
B)Is normal
C)Causes firms to adapt their strategies as time progresses.
D)Influences the probability of success for a firm

Question 20

A "proprietary technical standard" implies that:

A)The standard is owned by the community, as a "public good"
B)One firm owns this standard, generally embodied in patents or copyrights
C)No one owns the standard
D)The technical standard is specific to the industry.

Question 21

Scenario analysis is usually used to deal with:

A)What a firm might do in the long-term future
B)The uncertainty and consequences of radically different possible futures
C)How flexibly managers should think in coping with uncertain futures
D)A, B and C

Question 22

To facilitate decentralized organizational change, managers should:

A)Ensure financial resources are available.
B)Take control of the internal and external communication related to change
C)Identify the leaders, champions, and implementers of change within the firm
D)Identify, understand and manage the conditions that foster and extend organizational change

Question 23

Radical top-down organizational change:

A)Is usually only successfully implemented if the workforce is convinced that a crisis looms
B)Often should be implemented in advance of a crisis occurring
C)Is typically only undertaken following declining performance.
D)All of the above

Question 24

With maturity, price competition is:

A)Attenuated by a global leveling out of costs
B)Fueled by a larger number of players in the industry
C)The same as that of the other industry life cycle stages
D)Stimulated by product standardization and excess capacity

Question 25

Different theories of organizational routines, institutional theory, or limited search, try to explain:

A)The ease with which a firm can change itself
B)Barriers to change or organizational inertia
C)The probability of success of change
D)All of the above

Question 26

The starting point for managing change is:

A)For managers to recognize the sources of inertia or barriers to change
B)That managers do not let their own agenda supersede the firm's overall interest
C)To possess enough resources to implement change
D)That managers exhibit enough courage and will to change

Question 27

Some firms create new organizational units instead of modifying the existing structure, because:

A)Existing structures are often locked into existing routines
B)There is not enough time to transform existing structures
C)These firms want a fresh start
D)These firms do not plan; they manage change reactively

Question 28

A firm can simultaneously pursue dual strategies:

A)This goes against all the theory on strategy
B)It can, so long as it maintains separate organizations to pursue each strategy
C)This is impossible
D)This is only possible in large multinational firms.

Question 29

With the growth stage, which challenge becomes critical for most firms?

A)Price decrease
B)Innovation
C)Rapid expansion
D)Quest for efficiency

Question 30

With maturity, production often shifts to developing countries, because:

A)That's where the growth market now is
B)The production processes have been standardised
C)Local labor costs are lower
D)All of the above

Question 31

A punctuated equilibrium is:

A)A situation of equilibrium between rivals where no competitive attack or reaction is implemented
B)A long period of organizational stability during which the environment changes, eventually forcing radical organizational change
C)A strategic positioning corresponding to maintaining the status quo
D)A situation of propensity for firms to imitate one another to gain legitimacy

Question 32

With maturity in an industry, which challenge becomes critical for a firm?

A)To adapt its internal organization to the new requirements of this stage
B)To decrease average cost per unit, at least in line with competitors
C)To be able to prepare its shift to another industry or to launch a new line of products in the same industry
D)To adapt its strategy to the constraints described in the industry life cycle

Question 33

Firms that create new products or services are often not the ones that successfully market them. The reason is that:

A)The capabilities needed for invention are different and even conflict with those required for commercialization
B)There is a connection between the stage of the industry life cycle and the age of firm
C)Large companies steal their ideas.
D)The innovators have shifted their strategic orientations to different products or services

Question 34

In the Conformity theory favored by institutional sociologists, a barrier to change is:

A)The regulation from the state
B)The bargaining power of suppliers and customers
C)The power of strong institutions such as banks
D)The propensity of firms to imitate one another to gain legitimacy

Question 35

The fact that some firms such as BASF, Exxon, and General Electric have been leaders in their industries for almost a century, indicates that:

A)Some firms have built the capability to adapt themselves to change in their environment time after time
B)Economies of scale are the most powerful drivers of performance
C)Size is the key predictor for success
D)A firm's age is the critical variable for profitability

Question 36

The life cycle of an industry with an international market typically involves:

A)A decrease in Western firms' competitiveness
B)An increase in globalization due to competition
C)The international migration of production at some stage
D)The international migration of R&D

Question 37

Capabilities based on routines, developed through repetition can lead to:

A)Failure
B)Success
C)"Competency traps", or inflexibility
D)None of the above

Question 38

An organizational routine is:

A)A pattern of coordinated activity, and a basis for organizational capabilities
B)A set of low level operational tasks in a firm
C)The resource needed to create a new capability
D)A new capability after it has been integrated in the organization

Question 39

Disruptive technologies are:

A)Innovations that threaten existing industry leaders and generally offer potentially superior performance at lower price than existing products
B)Innovations that radically change the product or service
C)Innovations that overcome existing barriers to entry in the industry
D)Quite normal in an industry's life

Question 40

Which of the following elements function as limitations for organizational change?

A)The quest for satisfactory rather than optimal performance
B)Managers limiting the scope of options they are able or willing to consider
C)Preference for exploitation rather than exploration
D)All of the above

Question 41

The value of the scenario analysis lies in:

A)The results of the analysis
B)The process of managers being involved in the analysis
C)The practical implications of the results
D)Its low cost

Question 42

Change in an industry is the result of:

A)The forces of technology, consumer preferences, and economic growth
B)A combination of external forces and the incumbents' competitive strategies
C)Dynamic forces described by the Porter five forces model of competition
D)Economic and psychological factors that no one really understands

Question 43

As the industry life cycle progresses:

A)Foreign competition is more likely
B)Technological innovation declines
C)Strategic innovation becomes more important
D)Product innovation gives way to process innovation

Question 44

The greatest challenge for a firm, related to change is:

A)To achieve sufficient adaptation to change
B)Surviving the crisis
C)Being the first to implement new managerial tools
D)All of the above

Question 45

In order to successfully deal with change a firm should:

A)Understand and predict change
B)Understand, predict, and manage change
C)Understand, attempt to predict and manage the forces for change, and be sufficiently adaptable
D)Predict and manage change

Question 46

A dominant design is:

A)A technical standard that the most powerful player of the industry imposes
B)A de facto standard that proves to also be the best technical solution for the industry
C)A common product format determined by market preference over time through competition
D)The convergence towards a product that reconciles several similar industry products

Question 47

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

A)It's modeled on the Product Life Cycle, which is also 'S' shaped
B)An S-shaped decreasing curve isn't correct
C)It seemed like a good curve to the person who invented the theory
D)Both academic and empirical evidence suggests that it is a reasonable model of reality

Question 48

The industry life cycle:

A)Exists on a different scale of time than the product life cycle
B)Follows exactly the main product life cycle
C)Is the same duration as the product life cycle
D)May never enter a Decline phase, in some cases

Question 49

The different stages of the industry life cycles are characterized by:

A)The evolution of the industry growth rate over time
B)The evolution of the competition in the industry
C)The evolution of a firm's market share
D)None of the above

Question 50

"Network effects" are a force favoring:

A)Every firm to adhere to the same managerial fads and fashions
B)Every customer to choose the same product
C)Most customers to choose the same generic product design
D)Every firm to choose the same financial standards and rules

Question 51

Radical change can be:

A)A disaster for all firms in heavy industries where change is generally very slow
B)Necessary for survival
C)A disaster
D)Both a and b

Question 52

The industry life cycle is:

A)A marketing concept
B)Allied to the product life cycle concept
C)A description of different attributes of an industry over time
D)Answers b and c

Question 53

An industry's evolution is driven by the following factors:

A)Growth of demand and the creation and diffusion of knowledge
B)Demand growth and diffusion of price knowledge
C)Knowledge production and diffusion
D)Emergence of technical standards and production of knowledge

Question 54

Are the concepts of "technical standard" and "dominant design" basically the same thing?

A)No, they are not
B)Yes, they are
C)A dominant design may or may not embody a technical standard, and vice versa
D)Answers a and c

Question 55

Regarding the concept of industry life cycle:

A)It's essential to consider the extent to which industries follow a common development pattern
B)It dies when the oldest company dies.
C)The life cycle of incumbent firms tends to be much shorter than the industry life cycle
D)It's necessary to strategically innovate

Question 56

The growth stage of an industry life cycle is easiest for most firms to survive through because:

A)There's often too little production capacity during this stage, so price competition is low
B)Large firms have not yet been attracted into the industry
C)Economies of scale are the same for everyone
D)Shareholders are not yet dissatisfied with growth prospects

Question 57

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

Question 58

Some technical standards are more likely to emerge when:

A)Economies of scale exist
B)An experience curve exists
C)A stakeholder integration effect exists
D)Network effects, or a need for interaction or interoperability exist.

Question 59

Change, for a firm, is sometimes:

A)Massive and unpredictable
B)Slow and incremental
C)Fairly predictable
D)A,B and C above

Question 60

The industry life cycle has four phases:

A)Introductory, maturity, growth, and death
B)Introduction, growth, maturity, and decline
C)Emergence, take-off, adulthood, and decline
D)Emergence, growth, plateau, and decline

Question 61

"De novo" entrants are start-ups, whereas "de alio" entrants are firms coming usually from related industries

Question 62

One reason for the proliferation of firms during the growth phase is that strong growth is more conducive to making a profit, and more forgiving of inefficient management.

Question 63

Resistance to organizational change is an unavoidable trait of humans working together

Question 64

Over time, industry life cycles are tending to become shorter.

Question 65

A soundly managed firm that is trying to understand, predict, and manage change, needs to be large enough to influence the industry structure.

Question 66

One difference between the Product Life Cycle and the Industry Life Cycle is that some industries do not have a "decline" phase

Question 67

Standardization of products during the growth and early maturity stages of an industry life cycle encourages firms to risk large capital investments in production capacity.

Question 68

Key success factors through the industry life cycle indicate that nearly all firms in the industry start up in the introductory phase of the industry.

Question 69

The industry life cycle is of the same format as the Product Life Cycle, but of much greater duration.

Question 70

There are a number of different theories of organizational inertia. None of them tells the whole story, whilst equally none of them are incorrect.

Question 71

Scenarios are plausible alternative futures. Their value lies not so much in the choice of plausible futures, but the flexibility gained by the process of considering what to do about them.

Question 72

Two main factors drive industry evolution: demand growth and the production and diffusion of knowledge

Question 73

The onset of industry maturity, product standardization and "shakeout" can also be the appropriate time for a "no frills" player to do well in the market

Question 74

The firm which sets the dominant product design always emerges as the most dominant firm in the industry

Question 75

For many firms, the most profitable time to be involved in an industry is the growth phase.

Question 76

Sometimes, massive and unpredictable changes occur in one industry or another

Question 77

During the introduction phase of the industry life cycle, one product design tends to dominate

Question 78

The main drivers for change in industries are technological, political / legal, economic and market demand.

Question 79

A shift from radical to incremental product innovation often takes place when an industry coalesces around a common product design