Deck 8: Strategy Issues in Industries and Life Cycle Stages

Question 1

It can be seen in the opening vignette for the chapter that the introduction of MP3 players has caused a decline in the sales of CDs but has had few other effects.

Answer 1

False

Question 2

The stages of the industry life cycle are introduction, growth, maturity, and decline or renewal.

Answer 2

True

Question 3

Value creation in the introduction stage of the industry life cycle occurs internally through product design and externally by building upstream and downstream relationships.

Answer 3

True

Question 4

Standardization is an industry condition in which companies tend to adopt identical manufacturing processes because of intense rivalry.

Question 5

In the maturity stage of the industry life cycle companies shift value creation activities toward identifying cost efficiencies.

Question 6

As an alternative to decline, the renewal of an entire industry depends solely on its ability to shift to complementary products or services.

Question 7

Products or services that come bundled with another product at no extra charge--such as a trial size sample of a consumer product--are called complements.

Question 8

The passage of industries through the life cycle stages has become significantly faster for all industries in the past two or three decades.

Question 9

The success of a focused differentiation strategy in a consolidated industry in part depends upon the existence of mobility barriers.

Question 10

Fragmented industries behave much more like perfectly competitive markets than other types of industries and, therefore, there are few opportunities to earn superior profits.

Question 11

The consolidation of an industry that occurs when many small competitors are combined into a larger company is called an industry roll-up.

Question 12

The organizational life cycle has the same stages as the industry life cycle.

Question 13

Founders of a company in the conception stage of the organizational life cycle face the tasks of having a product or service that works, developing a market entry strategy, and obtaining financial capital.

Question 14

In the commercialization stage of the organizational life cycle the company must develop a prototype product or service.

Question 15

In the growth stage of the organizational life cycle flaws in the systems and processes developed by the business are exposed.

Question 16

As revenue growth slows in the maturity stage of the organizational life cycle, profitability growth depends on innovation and creating routines that allow employees to work without direction.

Question 17

First mover advantages can be classified as stemming from either timing or size.

Question 18

Microsoft's approach to selling the Xbox 360 illustrates the first mover advantage that comes from creating an installed base and the existence of buyer switching costs.

Question 19

Fast-growth organizations often find themselves challenged to implement the right kind of organizational structure to support their strategic approaches.

Question 20

An options approach to organizational renewal relies on the incentives provided by awarding stock options to managers at different levels of the firm.

Question 21

One of the reasons that companies expand internationally is to avoid strict environmental regulations in their home countries.

Question 22

A global strategy should be used when there is high pressure for value chain efficiency and value is created upstream, closer to manufacturing or supply activities.

Question 23

A transnational international strategy is appropriate when value is added downstream, near the customer or use, and efficiencies attained through scale and scope are competitively important.

Question 24

We can see from the opening vignette for the chapter that the introduction of the MP3 player has had which of the following effects?

A) CD sales have declined dramatically since their peak in 2000.
B) At least one major music retailer has gone bankrupt and been liquidated.
C) Music labels such as Warner and EMI find it more difficult to support musicians.
D) All of the above have been associated with the introduction of the MP3 player.

Question 25

Industries evolve through life cycle stages because

A) firms develop new knowledge about how to create value.
B) demand for the industry's products and services grows.
C) companies constantly enter and leave the industry.
D) Both A and B above are fundamental determinants of industry evolution.

Question 26

Which of the following is not one of the industry life cycle stages?

A) introduction
B) growth
C) shakeout
D) maturity

Question 27

The sustainable competitive advantage that is sought by the first company to enter a new industry or industry segment is called ________.

A) returns to novelty
B) a first-mover advantage
C) returns to innovative entry
D) the barrier to fast followers

Question 28

Innovation results in a wide variety of products or services in the introduction stage of the industry life cycle because

A) early entrants are trying to figure out which bundle of characteristics customers prefer.
B) economic theory tells us that customers always receive the greatest utility from the highest number of product choices possible.
C) venture capitalists have funded companies with a variety of business models.
D) None of the above explains why innovation results in a wide variety of products or services.

Question 29

Value creation in the growth stage of the industry life cycle is typically accomplished by

A) achieving scale to serve a broad swath of customers or markets.
B) continuing to add features to products in an effort to discover customer preferences.
C) strict attention to costs so that rivals do not become the leaders in this area.
D) tinkering with the organization's capital structure so that it is rationalized.

Question 30

The recent battle between the high definition (HD) video standards offered by Toshiba (HD-DVD) and Sony (Blu-ray) was won by Sony. This is an example of ________ that will allow the HD video industry to grow more quickly.

A) market power
B) standardization
C) a first-mover advantage
D) the resolution of a conflict between competing economic logics

Question 31

Industries mature when demand begins to slow down. Often this is because the market is ________, meaning there are few new customers to bring into the industry .

A) soft
B) volatile
C) saturated
D) standardized

Question 32

________ is an industry condition in which a standard set of features and benefits is required for any serious competitor, and in which the materials needed to provide those features and benefits are readily available from a variety of suppliers.

A) Developmental stability
B) Product consistency
C) Supplier stability
D) Commoditization

Question 33

Value creation in the mature stage of the industry life cycle is largely focused internally on

A) price reductions.
B) reorganization.
C) cost efficiency.
D) reducing employee turnover.

Question 34

As sales fall in the decline stage of the industry life cycle firms typically

A) lower prices to maintain market share.
B) shed assets and cut costs.
C) file for bankruptcy to be able to reorganize more easily.
D) invest greater amounts in research and development to begin the process of renewal.

Question 35

As an alternative to decline an industry may be able renew itself. This can be accomplished by

A) reconfiguring the industry value chain.
B) acquiring the firms producing the products or services that have caused the industry's decline and closing them.
C) continuing to market the benefits of the industry's existing products so that interest in them is refreshed.
D) lowering the barriers to entry, thereby causing firms with new ideas to enter the industry.

Question 36

Products or services that have a relationship with and can affect the value of a company's own products or services are known as

A) substitutes.
B) complements.
C) counterparts.
D) value enhancers.

Question 37

In an industry that is consolidated a strategic approach that is likely to be successful is a(n) ________ strategy, such as that used by Saks Fifth Avenue.

A) integrated low-cost/differentiation
B) retrenchment
C) focused differentiation
D) turnaround

Question 38

In a fragmented industry it may be desirable to initiate a(n) ________, where many small competitors are combined into a larger company.

A) industrial trust
B) interlocking structure
C) concentration process
D) industry roll-up.

Question 39

Which of the following is not one of the stages in the organizational life cycle?

A) conception
B) decline
C) commercialization
D) growth

Question 40

The dominant problems in the conception stage of the organizational life cycle include innovation efforts, strategy design, and

A) raising capital.
B) identifying activities to outsource.
C) formalizing the organizational structure.
D) physically locating the business.

Question 41

The challenges inherent in the commercialization stage of the organizational life cycle include

A) consistent production or service delivery at a larger scale.
B) the development of administrative reporting and control systems.
C) hiring the right people to staff the growing business.
D) All of the above are challenges in the commercialization stage.

Question 42

Two kinds of advantages that can accrue to those who are first movers into an industry or market are timing advantages and ________ advantages.

A) monopoly
B) mobility
C) size
D) pricing

Question 43

Sources of timing advantages that first movers may enjoy include an installed base and its associated buyer switching costs, early building of a reputation, preemption by locking out competitors from locations or supply sources, and

A) being able to conduct more accurate market research.
B) founding a trade association.
C) setting a standard.
D) creating ties to regulatory agencies.

Question 44

Which of the following is a potential disadvantage that results from being a first mover?

A) pioneering costs
B) technology uncertainty
C) demand uncertainty
D) All of the above are potential disadvantages that result from being a first mover.

Question 45

During a period of fast growth a company may experience a loss of "culture." This possibility can be forestalled by

A) regular off-site outings.
B) participating in culture-building training seminars.
C) ensuring consistency with the original vision, mission, and strategy.
D) limiting the rate at which new employees are added so that each new hire has the time to become acculturated.

Question 46

Which of the following is not a motive for expanding internationally?

A) new geographic revenue opportunities
B) avoiding environmental regulations
C) spreading risk
D) achieving location advantages

Question 47

The choice of a particular international strategy is driven by two factors, one of which is the source of value creation and the other is

A) the pressure for value chain efficiency.
B) the ease of exporting the firm's products.
C) the availability of alliance partners in other countries.
D) the similarity in national culture to that of the firm's home country.

Question 48

A company in an industry where there is little pressure for efficiency and where variations in country markets is significant would choose a ________ international strategy

A) global
B) transnational
C) centralized single country
D) multidomestic

Question 49

What are the stages of industry evolution? Briefly describe each in terms of revenue growth and value creation activities.

Question 50

How should a firm compete in a fragmented industry? In a consolidated industry?

Question 51

What kinds of value creating activities are appropriate in each stage of the organizational life cycle?

Question 52

Do first movers always achieve a sustainable industry position? What are the sources of a first-mover advantage?

Question 53

What are the motives for a company to expand internationally? What different strategies can it use?