Deck 7: The Competitive Environment

Question 1

In contrast to the 'old economy' the 'digital economy' is driven by

A) Economies of scale and scope
B) Network externalities
C) Network paradoxes
D) Government regulation

Answer 1

Network externalities

Question 2

What is the key economic difference between the old economy and the digital economy?

Answer 2

In the old economy the first law of economics applies (value comes from rarity) i.e. firms attempt to create entry barriers to stop other firms entering the market. In the new economy, value comes from plenty i.e. the more something is demanded, the more it will be demanded.

Question 3

What is a pure network good?

Answer 3

A pure network good is a an entity which has little value on its own - i.e. it needs to be part of a network in order to have value. For example, a train station is a pure network good because it has little value unless it is connected to the railway network. A laptop computer is not a pure network good because it has some value without being connected to a network such as the internet. In strategic terms, the value of a pure network good increases as the installed base increases.

Question 4

What is the 'Dunbar number' and why might it limit the growth of Facebook?

Question 5

Why is co-evolution a good thing from the point of view of the digital economy?

Question 6

Briefly describe the ways that technology standards can come about.

Question 7

Over the last few decades the telecommunications industry has seen a shift from

A) Concentrated to fragmented ownership of telecommunications networks
B) Fragmented to concentrated ownership of telecommunications networks
C) Oligopolies to monopolies
D) An increase in single firm ownership of telecommunications networks

Question 8

Wikipedia is an example of

A) A many-to-many network
B) A one-way network
C) An e-market place
D) A supplier-supplier network

Question 9

If we apply the theory of 'the Dunbar number' to Facebook, how many friends should we limit ourselves to?

A) 15
B) 150
C) 30
D) 300

Question 10

A fundamental law of economics is that value comes from scarcity, whereas in the digital economy, value comes from

A) uniqueness
B) differentiation
C) plenty
D) rarity

Question 11

In the 1980s IBM PCs became the industry standard whereas Apple PCs remained a niche product. What is another name for the instance when IBM started to gain market share rapidly?

A) The long tail
B) The tipping point
C) The conversion point
D) The standards race

Question 12

A peer-to-peer network is one where the number of suppliers would never equal the number of users.

Question 13

Which of the following is not a peer-to-peer network

A) Wikipedia
B) e-Bay
C) Facebook
D) Google

Question 14

Google is subject to 'network externalities'

Question 15

In the 'digital economy' issues such as economies of scale and economies of scope are no longer relevant.

Question 16

If a network company attracts new customers, there is more incentive for further customers to join, which enables the firm to lower prices which attracts new customers (and so on) ......What is happening here?

A) A perfect market is forming
B) A negative feedback loop
C) A positive feedback loop
D) A monopoly is forming

Question 17

Which of the following industries is an example of a 'pure network'?

A) The automobile industry
B) A sporting event such as a football match
C) The washing machine industry
D) A mobile phone system

Question 18

Networked industries where the flows between nodes are intangible are called

A) Information highways
B) Virtual networks
C) Weak networks
D) Portals

Question 19

The internet has seen a shift from content generation predominantly being in the hands of large organizations to a new paradigm called__________'.

Question 20

Which of the following statements describes 'Moores Law'?

A) Every 18 months, processing power triples while costs half
B) Every 18 months, processing power doubles while costs half
C) Every 18 months, processing power triples while costs double
D) Every 18 months, processing power doubles while costs hold constant

Question 21

In order for a British person to be able to withdraw Euros from in ATM machine in France, the ATM must operate to an agreed _______

Question 22

The technology standard that ends up being adopted in a particular industry is always the most superior technology.

Question 23

One of the implications of the digital economy is that there is a higher degree of interconnectivity between players in a digital supply network. The pressure for individual players to conform to technology standards has made them more replaceable. DiMaggio and Powel (1983) define this problem as

A) isomorphism
B) heterogeneity
C) homogeneity
D) androgenous

Question 24

A network is a set of connections between _________

Question 25

In a railway system, if new trains are introduced to the system and they run on the same tracks as before, this is an example of which kind of infrastructure change

A) A modular innovation
B) An architectural innovation
C) A sub-network innovation
D) A standards innovation

Question 26

In consumer markets the 'Autarky' value can be defined as the

A) augmented value
B) perceived value
C) external value
D) core value

Question 27

Microsoft achieved domination with its PC operating system through ______________ because switching costs for users were very high.

Question 28

For competing in the digital economy, which of the following generic, strategic rules should be followed

A) Marketing should be aimed towards convincing consumers to adopt the technology
B) Open standards should be adopted
C) Protection of intellectual property is crucial
D) Valuable products such as web browsers should be given away

Question 29

Compared to the 'old economy' competing in the 'new economy' is riskier