Deck 7: Strategy and Technology

Question 1

Fortunately,technical standards always exist in the public domain so that any company can use them.

Answer 1

False

Question 2

By exploiting a positive feedback loop,Dolby Laboratories,became the standard for sound quality.

Answer 2

True

Question 3

One important advantage of being a first mover is that it guarantees success.

Answer 3

False

Question 4

A set of related technical standards that specify the common set of features or design characteristics of a product is called a dominant design.

Question 5

Interestingly,technical standards create benefits primarily for those firms that do not adhere to them.

Question 6

Battles to set and control technical standards in a market are referred to as product positioning.

Question 7

Digital music downloads have high marginal costs.

Question 8

Ownership of an industry standard that is protected from imitation by patents and copyrights is a weak organizational resource.

Question 9

Switching costs are the costs that consumers must bear to switch from a product based on one technological standard to a product based on another.

Question 10

A razor-and-blade strategy refers to lowering a company's cost structure.

Question 11

A possible strategy for winning a format war is for a company to make sure that,in addition to the product itself,there is an adequate supply of complements.

Question 12

Marginal costs in high-technology industries tend to stay very low as production rises.

Question 13

When a company is trying to win a format war it should license its format for a low fee rather than a high fee.

Question 14

Aggressive marketing is a key factor in jump-starting demand to get potential early adopters to bear the switching costs associated with adopting a new innovation.

Question 15

The layout of the keys on a computer keyboard is an example of a technical standard.

Question 16

When two or more companies are competing with each other to get their technology adopted as a standard in an industry,and when network effects and positive feedback loops are important,the company that wins the format war will be the one whose strategy best exploits positive feedback loops.

Question 17

Companies that are locked out of a market are those in which consumers are unwilling to bear the switching costs required for them to abandon the established standard and adopt the new one.

Question 18

It can be argued that Microsoft's near monopoly of PC operating systems helped raise the level of industry profitability.

Question 19

Microsoft Word,the word-processing software,is so easy to use and has so many useful features that no other software can compete with it.Therefore,Microsoft Word can be described as a killer application.

Question 20

Digitalization has made it more difficult to protect some intellectual property rights.

Question 21

When an industry's products rely on a common set of features,these features are called a

A) dominant design.
B) format war.
C) first mover.
D) public domain.
E) high-tech industry.

Question 22

Even if they are constrained by a lack of capital,research shows that new entrants should avoid partnering with a larger company and go it alone.

Question 23

When automobiles first became available to the public,it was difficult for buyers to find products such as tires,gasoline,and light bulbs for their cars.Early automobile owners

A) faced a first-mover disadvantage.
B) lacked complementary products.
C) were locked out of the market.
D) lost the format war.
E) were too innovative.

Question 24

When standards are part of the public domain,they can be used

A) only by companies in a particular industry.
B) only by federal contractors.
C) by paying a fee to the Federal Communications Commission (FCC).
D) freely by any company.
E) once without payment of a fee.

Question 25

All of the followingconsidered high-technology industries except:

A) Computers
B) Telecommunications
C) Consumer electronics
D) Pharmaceuticals
E) Retail clothing

Question 26

In high-technology industries,the underlying scientific knowledge companies use is

A) increasing slowly.
B) advancing rapidly.
C) steadily decreasing.
D) tripling every quarter.
E) becoming stagnant.

Question 27

An industry is considered to be high technology,or high tech,when

A) its products are electronic or electrical.
B) the firms in the industry own intellectual property.
C) its products are computers or are related to computers.
D) the firms are innovative.
E) the underlying scientific knowledge that companies in the industry use is advancing rapidly.

Question 28

The works of Shakespeare and Beethoven and the English language are all examples of standards within the public domain.

Question 29

Microsoft released its latest operating system,Windows Vista,and intended it to replace earlier versions of Windows.Buyers of Vista had to learn how to use the features of the new software; thus,buyers were facing

A) a first-mover disadvantage.
B) outmoded technology.
C) a positive feedback loop.
D) a format war.
E) switching costs.

Question 30

Antibody Solutions is an American company that specializes in cell bank storage and finding and producing antibodies for bacterial and viral infections.Antibody Solutions would not be considered a high-tech company since it is not in the computer industry which is considered high-tech.

Question 31

One strategy for success in high-tech industries is to keep prices low and thus increase sales volume.

Question 32

Matsushita licensed its VHS technology to rivals,while Sony kept its Beta technology proprietary.This action allowed Matsushita to

A) win the format war.
B) enter into an alliance with Sony.
C) earn marginally lower profits than Sony.
D) enjoy a laggard advantage.
E) bear switching costs better than Sony.

Question 33

The law of diminishing returns states that marginal costs fall as a company tries to expand output.

Question 34

Recently,the U.S.Food and Drug Administration began to require more descriptive labeling of food products.This is an example of standards developed

A) in the public domain.
B) with a dominant design.
C) through industry cooperation.
D) by government mandate.
E) through market demand.

Question 35

In the 1870s,Christopher Sholes invented the layout of keys on a typewriter keyboard,sometimes called the QWERTY layout.This invention is a(n)

A) technical standard.
B) fast-mover advantage.
C) complementary product.
D) outmoded technology.
E) high-tech industry.

Question 36

Technological paradigm shifts occur when new technologies come along that revolutionize the structure of the industry,dramatically alter the nature of competition,and require companies to adopt new strategies to survive.

Question 37

Technical standards in high-technology industries are

A) specifications developed by each producing company for its own products.
B) specifications that all producers adhere to when making a product or product component.
C) product specifications imposed by the federal government.
D) expressions of product features desired by consumers.
E) general guidelines proposed by industry leaders.

Question 38

Which of the following is an example of a technical standard?

A) Typewriter keyboard
B) Dimensions of containers used to ship goods on trucks, railcars, and ships
C) The Universal Serial Bus (USB)
D) Communication between a PC and the Internet via a modem (TCP/IP)
E) All of these

Question 39

Which of the following economic benefits result from the use of standards?

A) Compatibility
B) Reduction in confusion
C) Reduction in production costs
D) Reduction of risk in supplying complementary products
E) All of these

Question 40

An example of an important complementary asset is a state-of-the-art manufacturing facility.

Question 41

The various strategies that companies should adopt to win format wars revolve around

A) getting the federal government to intercede.
B) making network effects work in their favor and against their competitors.
C) effective use of advertising.
D) driving competitors out of business.
E) joint ventures.

Question 42

Killer applications are applications or uses of a new technology or product that

A) are so compelling they persuade customers to adopt or use the new technology in droves.
B) drive consumers to the products or technology of another company.
C) repulse new customers.
D) kill demand for the product or technology.
E) backfire on the company producing them.

Question 43

A technological paradigm shift is most likely to occur in which stage of the industry life cycle?

A) Embryonic
B) Growth
C) Shakeout
D) Maturity
E) Decline

Question 44

Which of the following strategies should a company not adopt if it wants to win a format war?

A) License their technology to competitors.
B) Develop complementary products.
C) Enter into a joint venture to ensure compatibility.
D) Aggressively market to jump-start demand.
E) Price the product high to recover steep upfront costs.

Question 45

Which of the following is not a basic strategy for a first mover?

A) Develop and market the innovation itself
B) Develop and market the innovation jointly with other companies through a strategic alliance or joint venture
C) License the innovation to others
D) Discourage development of complementary assets
E) All of these choices

Question 46

What advice would you give to a firm that wants to exploit network effects?

A) Price your products high in the early stages of the market's development.
B) Be a first mover and thus establish the technical standard.
C) Create incentives for other firms to develop complementary products.
D) Develop more killer applications than do competitors.
E) Ask customers to bear the switching costs.

Question 47

If a first mover does not have complementary assets,barriers to imitation are high,and there are several capable competitors,the first mover should

A) license the innovation to others.
B) enter into a joint venture to protect the product.
C) produce the product itself.
D) sell the technology outright to another firm.
E) wait until competitors develop an alternative product.

Question 48

Consider a cost curve,with production volume on the horizontal axis and marginal costs on the vertical axis.What shape would the marginal cost curve most resemble in a high-tech industry?

A) Upward at a 45-degree angle
B) U-shape
C) Straight and vertical
D) J-shape
E) Straight and flat

Question 49

The razor-and-blade strategy was pioneered by

A) Procter & Gamble.
B) Sony.
C) Toyota.
D) Ford.
E) Gillette.

Question 50

An adequate supply of complements to a product helps ensure that consumers

A) will buy the company's product.
B) will experiment with the products of other companies.
C) will buy the complements to use with the products of other companies.
D) all of these choices.
E) none of these choices.

Question 51

Consumers will bear the costs of switching technologies when

A) the benefits of adopting the new technology outweigh the costs of switching.
B) switching costs are substantial.
C) switching costs are reimbursed by makers of a product.
D) all of these choices.
E) none of these choices.

Question 52

Cellular phone service providers often sell the phone itself at very low prices and then charge a relatively high fee for usage.This illustrates

A) first-mover strategy.
B) competitive cooperation.
C) the razor-and-blade strategy.
D) competitive positioning.
E) format licensing.

Question 53

Often,the industry standard is selected competitively by

A) market supply.
B) market demand.
C) government contracts.
D) all of these choices.
E) none of these choices.

Question 54

What percentage of the world's PCs adhere to the Wintel standard?

A) 95%
B) 50%
C) 20%
D) 75%
E) 5%

Question 55

Which of the following is not one of the benefits that first movers enjoy?

A) Earlier benefits from economies of scale
B) Ability to create customer switching costs
C) First to obtain brand loyalty
D) Ability to accumulate knowledge about the market
E) Lower pioneering costs

Question 56

Marginal cost refers to the cost of

A) switching to a new technology.
B) buying stock with loaned funds.
C) producing one extra unit of product.
D) realizing a profit.
E) motivating other firms to produce complements.

Question 57

If a first mover does not have complementary assets,barriers to imitation are low,and there are many capable competitors,the first mover should

A) license the innovation to others.
B) enter into a joint venture to protect the product.
C) produce the product itself.
D) sell the technology outright to another firm.
E) wait until competitors develop an alternative product.

Question 58

Which of the following is not a true statement?

A) First movers are the first to recover the costs of a new technology.
B) First movers have higher pioneering costs than do later entrants.
C) Later entrants can avoid the mistakes of first movers.
D) Later entrants have lower pioneering costs than do first movers.
E) First movers are more likely to make mistakes than are later entrants.

Question 59

Which of the following is not a disadvantage to being a first mover?

A) Significant pioneering costs
B) Tendency to make mistakes
C) Risk of building the wrong resources and capabilities
D) Accumulation of market knowledge
E) Possibility of investing in inferior or obsolete technology

Question 60

Aggressive marketing to jump-start demand for a product often involves all of these except:

A) substantial upfront marketing.
B) point-of-sale promotion techniques.
C) high introductory prices.
D) use of free sampling.
E) all of these are utilized in aggressive marketing to jump-start demand for a product.

Question 61

There are guidelines for turbine blades for jet engines.These guidelines define the exact material and performance requirements of these engines and can be referred to as

A) format wars.
B) technical standards.
C) a technological paradigm shift.
D) a first-mover advantage.
E) razor and blade strategy.

Question 62

Mathematica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer.It still sets the standard for symbolic math and visualization on Windows,Mac,Linux,and Unix.Mathematica 1.0 can be described as a(n)_____ application.

A) obsolete
B) high-tech
C) hardware
D) strategic
E) killer

Question 63

Write as if you were an outside management consultant and advise a firm attempting to win a format war with a powerful and capable competitor.Give several options.

Question 64

Describe the advantages and disadvantages of being a first mover or a follower in a high-tech industry.In your opinion,which strategy is preferable,and why?

Question 65

Cell phone technology is replacing traditional wired phone technology.This is an example of a(n)

A) first-mover advantage.
B) technological paradigm shift.
C) format war.
D) complementary product.
E) embryonic industry.

Question 66

Technological disruption

A) typically happens slowly.
B) is usually begun by the industry leaders.
C) affects mostly small niche markets.
D) causes firms to adopt a new business model.
E) is a problem primarily in embryonic industries.

Question 67

Give an example of an industry that has recently undergone a technological paradigm shift.What impact did the shift have on established companies? On new entrants to the industry?

Question 68

Which of the following will not help an established company in addressing the potential challenge of a disruptive technology?

A) Access to knowledge about how disruptive technologies can revolutionize markets
B) Investing in newly emerging technologies that may ultimately become disruptive technologies
C) Anticipating and planning for how disruptive technology will change business
D) Distinctive competencies in the current business model
E) Understanding that a disruptive technology will require a radically different value chain with a different cost structure

Question 69

What are technical standards,why are they important,and how are they established?