Deck 7: Strategy and Technology

Question 1

In many high-tech industries, the fixed costs of developing a product are very high, but the costs of producing one extra unit of the product are very low.

Answer 1

True

Question 2

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 technological standard.

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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 7

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 8

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

Question 9

It is important for a company to make sure that, in addition to the product itself, there is an adequate supply of complements to win a format war.

Question 10

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

Question 11

Microsoft's near monopoly substantially reduces the risks facing the makers of complementary products and the costs of those products.

Question 12

Antibody Solutions is a company that specializes in cell-bank storage, and producing antibodies for bacterial and viral infections.It is not considered a high-tech company since it is not technically in the computer or software industry, which is typically considered high-tech.

Question 13

Network effects arise in industries where the size ofthe"network" of complementary products is a primary determinant of demand for an industry's product.

Question 14

A technical standard helps to guarantee compatibility between products and their complements.

Question 15

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 16

Technical standards are often set by cooperation among businesses, without government help.

Question 17

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 18

Digital music downloads have high marginal costs.

Question 19

Technical standards do not play any role in product differentiation.

Question 20

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 21

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

Question 22

Consumers will bear the costs of switching technologies if:

A)the benefits of adopting the new technology outweigh the costs of switching.
B)switching costs are substantial.
C)the new products are packaged attractively.
D)there is a lack of complementary products.
E)the new technology is advertised subtly.

Question 23

Format wars, in the context of high-technology industries, refer to:

A)battles to control the source of differentiation, and thus the value that the differentiation can create for the customer.
B)the confusion among customers that arises as a result of several choices of formats for PCs and other gadgets.
C)the price-based battles in the network of complementary products, which is a primary determinant of the demand for an industry's product.
D)conflicts within an organization about which format to adopt for their products.
E)price-based battles among companies producing similar products.

Question 24

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

Question 25

With reference to high-technology industries, which of the following statements is true about technical standards?

A)They emerge because there are economic benefits associated with them.
B)They cause compatibility problems between products and their complements.
C)They can create a lot of confusion in the minds of consumers.
D)They often result in higher production costs.
E)They increase the risks associated with supplying complementary products.

Question 26

With reference to high-technology industries, which of the following is an example of a technical standard?

A)The prices of complementary products
B)The medium of advertising used for technology products
C)The color of gadgets produced
D)The layout of keys on a keyboard
E)The number of manufacturing units per industry

Question 27

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

Question 28

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

Question 29

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

Question 30

Which of the following statements is true about establishing technical standards?

A)Companies in an industry cannot lobby the government to mandate an industry standard.
B)Technical standards are often set by cooperation among businesses, without government help.
C)Companies cannot adopt technical standards that are in the public domain.
D)Market demand is not taken into consideration when it comes to establishing technical standards.
E)The strategy and business model a company has developed for promoting its technological standard holds little importance when it comes to establishing standards.

Question 31

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

Question 32

Technical standards in high-technology industries are:

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

Question 33

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.
D)freely by any company.
E)only once without payment of a fee.

Question 34

There is a set of fixed specifications for turbine blades for jet engines.The specifications include the material that needs to be used to manufacture the blades and also the specific dimensions that they need to have; the same specifications are used by all manufacturers.In this scenario, the specifications for jet blades can be referred to as:

A)format wars.
B)technical standards.
C)technological paradigm shifts.
D)first movers
E)razor and blade strategies.

Question 35

refers to a common set of features in a computer or other machines.

A)Paradigm shift
B)First mover
C)Public domain
D)Technical standard
E)Dominant design

Question 36

With reference to technical standards, a dominant design refers to:

A)a set of design standards that are extremely complicated to adhere to.
B)a network of complementary products as a primary determinant of the demand for an industry's product.
C)a common set of features or design characteristics.
D)a product design that requires extremely high production costs.
E)a product design that requires extensive advertising.

Question 37

Which of the following statements is true of technology in industries?

A)Technology in industries is accounting for only a minimal share of economic activity.
B)Technology in industries is revolutionizing aspects of the product even in those not typically considered high- tech.
C)High-technology industries do not require to adhere to technical standards to achieve product differentiation.
D)The lack of complementary products does not affect the success of a high-technology industry.
E)High-technology industries are usually not faced with the challenge of developing business models to achieve a competitive advantage like low-technology industries.

Question 38

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

Question 39

Network effects arise in an industry where:

A)the size of the network of complementary products is a primary determinant of demand for an industry's product.
B)a large network of companies in an industry use the same business model and strategies.
C)a company is able to adhere to the same technical standards across its network of outlets.
D)companies network together and lobby for establishing certain technical standards.
E)companies that are not in favor of a technical standard network together.

Question 40

Switching costs, in the context of technology industries, refer to the costs that:

A)industries have to incur in order to adhere to technical standards.
B)companies have to incur to switch from one business model to another.
C)customers need to bear to abandon an established standard and adopt a new standard.
D)industries need to bear in order to abandon old technology and get license for a new technology.
E)companies need to bear to create product differentiation when they are locked inside an industry.

Question 41

Which of the following statements is true about marginal costs in high-technology industries?

A)They are invariably higher than fixed costs.
B)They are the costs that customers need to bear in order to adopt a new technology.
C)They include the costs of packaging and product distribution.
D)They are extremely high in software-making companies.
E)They do not exist if the product is sold by a sales force directly to end-users.

Question 42

Aggressive marketing in the context of format wars:

A)deters early adopters.
B)helps a company jump-start demand.
C)results in lower emphasis on killer applications.
D)does not encompass point-of-sales promotion techniques.
E)usually triggers a negative feedback loop.

Question 43

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

Question 44

are applications or uses of a new technology or product that are so compelling that customers adopt them in droves, curbing the demand for competing formats.

A)Killer applications
B)Razor and blade applications
C)Technical standards
D)Network effects
E)Concurrency control applications

Question 45

Which of the following is a disadvantage of first movers?

A)They cannot establish significant brand loyalty due to high costs.
B)They cannot create switching costs for their customers, thus making it difficult to enter the market.
C)They decrease sales volume compared to their rivals, and thus operate at a loss.
D)They run the risk of building the wrong resources and capabilities.
E)They do not have the power to exploit network effects and positive feedback loops.

Question 46

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

A)getting the federal goverrnnent to intercede.
B)making network effects work in their favor and against their competitors.
C)avoiding aggressive marketing and advertising strategies.
D)curbing the supply of complementary products.
E)charging high license fees.

Question 47

Which of the following is NOT true of high-technology industries?

A)First movers cannot create switching costs for their customers.
B)First movers have higher pioneering costs than later entrants.
C)Later entrants can avoid the mistakes made by first movers.
D)First movers that create a revolutionary product are in a monopoly position.
E)First movers run the risk of building the wrong resources and capabilities.

Question 48

An adequate supply of complements to a product results in:

A)more customers opting for the product.
B)higher switching costs.
C)a significant decrease in the sales of the product.
D)a significant decrease in customer demand for the product.
E)the company failing to win a format war.

Question 49

Venus Corp.a high-technology, gadget-making company has introduced a gaming console with attractive features. Even though the console is priced modestly and has better features than the existing ones, it has failed as many customers are apprehensive about buying it.In order to create demand, Venus Corp.should:

A)price the console extremely high.
B)create its own set of technical standards.
C)ensure that there are adequate complementary products.
D)use minirnalistic and subtle advertising and marketing strategies.
E)avoid licensing the format to other companies.

Question 50

When 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)lower the barriers for imitation.
D)sell the technology outright to another finn.
E)wait until competitors develop an alternative product.

Question 51

In order to work towards winning a format war, a company should:

A)refrain from aggressive marketing and advertising.
B)ensure that there is a limited supply of complementary products.
C)develop its own killer applications.
D)keep the prices high even if the customer demand is extremely low.
E)refrain from cooperating with competitiors under any circumstances.

Question 52

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

A)Charge heavy license fee for new technology.
B)Refrain from using technical standards.
C)Create incentives for other firms to develop complementary products.
D)Do not use aggressive marketing strategies for killer applications.
E)Increase switching costs.

Question 53

Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable. The company is advertising aggressively and wishes to create demand for its new range of laptops.To attract customers, the company has priced the laptops attractively.However, in order to make profits, the company has priced the batteries required for the laptops extremely high.Which of the following is illustrated in this scenario?

A)downsizing strategy.
B)harvest strategy.
C)razor and blade strategy.
D)divestment strategy.
E)switching costs.

Question 54

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

A)Developing killer applications
B)Developing complementary products
C)Joining forces with other companies to develop new technologies
D)Aggressively marketing to jump-start demand
E)Charging extremely high license fee for the technology

Question 55

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 56

Which of the following is an advantage offrrst movers?

A)They are not prone to mistakes.
B)They bear lower pioneering costs than later entrants do.
C)They only invest in the latest technology.
D)They do not run the risk of building the wrong resources as they are highly customer-focused.
E)They have an opportunity to exploit network effects and positive feedback loops.

Question 57

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)Increase height of imitation barriers

Question 58

Cooperating with competitors:

A)reduces competition in the market.
B)creates confusion among customers and often lead them to delay their purchases.
C)helps lower the entry barriers of the industry, thus allowing new entrants to bring in their own formats.
D)curbs network effects by discouraging complementary products.
E)results in the creation of several new formats, thus intensifying format wars.

Question 59

Mathernatica 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.Mathernatica 1.0 can be described as a(n) application.

A)dominant
B)analogous
C)hardware
D)strategic
E)killer

Question 60

Marginal cost refers to the costs of:

A)switching to a new technology.
B)adhering to technical standards.
C)producing one extra unit of product.
D)product promotions.
E)licensing new technology.

Question 61

An advantage of being a first mover is that:

A)the pioneering costs are minimal.
B)there are well-defmed distribution channels.
C)there is no risk of building the wrong resources.
D)the focus is always on the mass market.
E)there is an opportunity to increase sales volume ahead of rivals.

Question 62

Which of the following statements is true about technological paradigm shifts?

A)They often do not change the nature of competition in an industry.
B)They occur when government regulations restrict the use of certain technologies.
C)They have the potential to threaten the survival of established industries.
D)They can often be handled by established companies without adopting new strategies.
E)They strongly deter new entrants.

Question 63

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 64

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 65

Which of the following statements is true about new entrants in the context of a technological paradigm shift?

A)New entrant often face the risks of product cannibalization.
B)Pressures to continue the existing out-of-date business model hamstring new entrants.
C)New entrants do not need to worry about their established customer base.
D)It is difficult for new entrants to focus all their energies on the opportunities offered by the new disruptive technology.
E)New entrants are not constrained by lack of capital.

Question 66

Technological disruption:

A)is typically a temporary phase lasting a few months.
B)occurs when the manufacturing plants of a company fail.
C)mostly affects the new entrants.
D)compels firms to adopt new business models.
E)is a problem primarily in embryonic industries.

Question 67

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)Separating out the disruptive technology and creating an autonomous operating division solely for this new technology
D)Asking customers if they are interested in the new technology
E)Understanding that a disruptive technology will require a radically different value chain with a different cost structure

Question 68

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 69

Which of the following is true offrrst movers?

A)The first mover cannot be able to establish brand loyalty.
B)The first mover has no opportunity to exploit network effects and positive feedback loops.
C)The first mover cannot create switching costs for its customers to deter rivals.
D)The frrst mover that creates a revolutionary product is in a monopoly position.
E)Being a frrst mover guarantees instant success.

Question 70

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

Question 71

In case of emergence of a disruptive technology, established companies should:

A)avoid investing in newly emerging technologies that may ultimately become disruptive technologies.
B)ask customers "Are you interested in this new technology?"
C)acquire newly emerging companies that are pioneering potentially disruptive technologies.
D)reduce costs on research and development activities.
E)avoid commercializing new technologies.

Question 72

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 73

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