Deck 7: Strategy and Technology

Question 1

In the past,format wars have been relatively common in the consumer electronics industry.

Answer 1

True

Question 2

Microsoft Word 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 is a killer application.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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 6

Dolby Laboratories' exploited a positive feedback loop in becoming the standard for sound quality.

Question 7

Technical standards create benefits primarily for those firms that do not adhere to them.

Question 8

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

Question 9

At the moment,Motorola appears to have the advantage in format for the next generation of TV and DVD players.

Question 10

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 11

Digital music downloads have high marginal costs.

Question 12

High-technology industries are those in which the underlying scientific knowledge that companies in the industry use is advancing rapidly.

Question 13

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

Question 14

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 15

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

Question 16

Consumers chose Microsoft Windows operating system as the technical standard through their many purchases of that software.

Question 17

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 18

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 19

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

Question 20

Technical standards always exist in the public domain so that any company can use them.

Question 21

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

Question 22

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

Question 23

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 24

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

Question 25

Which of the following has been thought of as a high-technology industry?

A)Computers
B)Telecommunications
C)Consumer electronics
D)Pharmaceuticals
E)All of these choices

Question 26

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

Question 27

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 28

When a standard exists in the public domain,

A)the standard was created from outside the mainstream of the industry.
B)consumers selectively chose that standard.
C)the government chose the standard that would best serve the public's interests.
D)the standard may be used by any company.
E)the standard was developed in an open and cooperative fashion.

Question 29

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 choices

Question 30

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 31

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

Question 32

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

Question 33

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 34

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 35

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 36

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

Question 37

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 choices

Question 38

Makers of complementary products will begin large-scale production when

A)the first mover introduces a new product.
B)the dominant design is changing.
C)consumer demand reaches the plateau of maturity.
D)the technical standard is firmly established.
E)industry participants begin to purchase from suppliers.

Question 39

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)first-mover advantage.
C)complementary product.
D)outmoded technology.
E)high-tech industry.

Question 40

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 41

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 42

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 43

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 44

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 45

The razor-and-blade strategy was pioneered by

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

Question 46

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 47

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 higher profits than Sony.
D)enjoy a first-mover advantage.
E)bear switching costs better than Sony.

Question 48

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

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

Question 49

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 50

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 51

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 52

In 2001,Intel spent $7.5 billion to upgrade its facilities so it could produce the Pentium 4 semiconductor chip.Each chip cost $130 to make and sold for $200 each.What is the marginal cost of a Pentium 4 chip?

A)$70
B)$130
C)$200
D)$7.5 billion divided by the number of chips produced
E)$7.5 billion

Question 53

When it comes to developing a business model and strategies that will lead to competitive advantage and superior profitability,high-technology companies

A)often face similar situations.
B)often face different situations.
C)are extremely unique in the situations they face.
D)cannot be compared in terms of the situations they face.
E)commonly face overwhelming situations.

Question 54

Aggressive marketing to jump-start demand for a product often involves

A)substantial upfront marketing.
B)point-of-sale promotion techniques.
C)low introductory prices.
D)use of free sampling.
E)all of these choices.

Question 55

Intellectual property refers to

A)the product of a manufacturing activity.
B)a narrow range of intellectual pursuits.
C)the product of any intellectual and creative effort.
D)any idea produced for profit.
E)nonfinancial ideas and concepts.

Question 56

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

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

Question 57

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 58

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 59

Which of the following is not intellectual property?

A)A song written down as sheet music
B)A Tom Clancy novel
C)A computer software package
D)A patented invention
E)A new organizational structure

Question 60

Digitalization refers to

A)the increasing use of the Internet in corporations.
B)a firm's database of client information.
C)manufacturing with the aid of robotics.
D)turning intellectual property into digital form.
E)the use of encryption software to protect intellectual property.

Question 61

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

Question 62

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 63

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 64

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 65

Licensing a format to other enterprises is often used by a company so that the company can

A)earn substantial license fees without having to manufacture products.
B)create a monopoly.
C)produce products that can be based on the licensed format.
D)all of these choices.
E)none of these choices.

Question 66

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 67

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 68

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 69

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 70

If a first mover has complementary assets,barriers to imitation are high,and capable competitors are few,the first mover should

A)license the innovation to others.
B)develop and market the innovation jointly with other companies through a strategic alliance or joint venture.
C)develop and market the innovation itself.
D)sell the technology outright to another firm.
E)wait until competitors develop an alternative product.

Question 71

Which of the following are major sources of first-mover advantages?

A)An opportunity to exploit network effects
B)The ability to establish significant brand loyalty
C)The ability to ramp up sales volume before rivals can
D)The ability to accumulate valuable knowledge of consumer needs
E)All of these choices

Question 72

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 73

Which of the following actions will not help protect intellectual property rights?

A)Suing copyright violators in court
B)Threatening to sue potential violators
C)Digitalizing creative output
D)Encrypting creative output
E)Enforcing patent and copyright laws

Question 74

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 75

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 76

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 77

Which of the following factors is a disadvantage of being a first mover?

A)First movers have to bear pioneering costs.
B)First movers are prone to make mistakes.
C)First movers run the risk of building the wrong resources and capabilities.
D)First movers may invest in inferior or obsolete technology.
E)All of these choices.

Question 78

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 79

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 80

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.