Deck 7: Business Strategy: Innovation and Strategic Entrepreneurship

Question 1

It is strategically wise for an established firm to solicit feedback only from existing customers since they are loyal to the firm.

Answer 1

False
Explanation: It can hurt incumbents to listen only to their existing customers because it leaves them vulnerable to disruptive innovations.

Question 2

Paradigm shifts lead to new technological industry standards.

Answer 2

True
Explanation: When a paradigm shift occurs, a new technology revolutionizes an existing industry and eventually establishes itself as the new standard.

Question 3

Radical innovation can occur when an existing firm recombines its existing knowledge base with a new stream of knowledge for new markets.

Answer 3

True
Explanation: Radical innovation can be derived from the recombination of a firm's existing knowledge base with a new stream of knowledge targeting new markets.

Question 4

The vast majority of innovations come from radical breakthroughs.

Question 5

Wikipedia's "open source" approach to competitive advantage will be sustainable as long as:

A) The market isn't saturated with book-based encyclopedias.
B) Another firm doesn't introduce a CD-based encyclopedia.
C) People are willing to volunteer to contribute content.
D) All of these.

Question 6

Reverse innovation occurs when a rival reengineers one of the firm's product offerings.

Question 7

The word processor brought more perceived value to the market and replaced the typewriter as the industry standard.Later,the word processor industry was undone by the computer industry which created even more value.This is an example of:

A) The "ups and downs" of an economic cycle.
B) A shortened industry life cycle.
C) The positive and negative aspects of creative destruction.
D) The effects of diversification.

Question 8

When Procter & Gamble releases a new type of detergent,an innovation has occurred.

Question 9

Hypercompetition has made it more difficult for a firm to sustain a competitive advantage.

Question 10

As a general rule,only 20 percent of product offerings in a given product category make up 80 percent of total sales.

Question 11

In order for a firm to perform well in each stage of an industry life cycle,it should consistently use the same competencies.

Question 12

In general,product innovation is more strategically important than process innovation while a firm is in the growth stage of the industry life cycle.

Question 13

When a new product,process,or idea is introduced into the market,it has been:

A) Extracted.
B) Commercialized.
C) Invented.
D) Executed.

Question 14

As noted in ChapterCase 7,the success of Wikipedia is attributed to all of the following EXCEPT:

A) Leveraging innovations enabled by the Internet.
B) Utilizing crowdsourcing.
C) Ignoring the "long tail."
D) Maintaining a reputation for accuracy.

Question 15

The Wright Brothers creating the airplane is a(n)______________; Boeing commercializing the airplane is a(n)_____________.

A) Breakthrough; invention
B) Invention; innovation
C) Innovation; invention
D) Product; process

Question 16

Inventing is the same thing as innovating.

Question 17

As noted in ChapterCase 7,Microsoft destroyed about half the value created by Encyclopedia Britannica by introducing the Encarta CD in 1993.In turn,the online Wikipedia destroyed Encarta's business,which was shut down in 2009.This is an example of how discontinuities can impact the sustainability of a firm.

Question 18

When a disruptive innovation is first introduced to the market,it is generally inferior in performance relative to what currently exists.

Question 19

A firm can protect itself from hypercompetition by NOT imitating its rivals.

Question 20

It is impossible to predict when a new innovation will actually lead to updated technological standards.

Question 21

Which of the following is NOT an example of an industry standard or dominant design?

A) Blu-ray media storage
B) Barcode scanners
C) Wintel operating systems
D) The Dvorak (DSK) keyboard

Question 22

A core competency which is capital-intensive but critical for a firm creating and launching a new innovation is:

A) Process improvement.
B) Research and Development (R&D).
C) Supply-chain management.
D) Customer relation management.

Question 23

The type of customers vital to a firm introducing a new innovation are the _________,who are willing to pay higher prices and like to tinker with new products.

A) Late adopters
B) Early adopters
C) Early laggards
D) Late majority

Question 24

When management modifies strategic objectives based on which stage an industry is in they are responding to a(n):

A) Industry life cycle.
B) Growth life cycle.
C) Economic life cycle.
D) Entrepreneurial life cycle.

Question 25

Which of the following is NOT an important aspect of innovation?

A) Useful
B) Novel
C) Implemented
D) Tangible

Question 26

After an industry has established a dominant design and the industry is in the growth stage,the basis of competition turns to:

A) "Price skimming" the market.
B) Reducing processes and procedures.
C) How to better produce a product or deliver a service.
D) How to diversify the firm.

Question 27

A(n)____________ is the dominant design established during the growth stage of an industry life cycle once the market comes to agreement about the prevailing set of engineering features and design choices.

A) Compliment
B) Trial design
C) Prototype
D) Standard

Question 28

Six Sigma,lean manufacturing,and genetic engineering are examples of ___________ that deliver new ways to produce or deliver existing products or services.

A) Procedural changes
B) Process innovations
C) Entrenched standards
D) Trial innovations

Question 29

Intel and Apple are innovators who entered the market during the introduction stage of an industry life cycle.All of the following are characteristics of this stage EXCEPT:

A) Differentiation is the basis of competition.
B) Network effects increase the value of the offering.
C) Keeping costs low is the main objective.
D) Achieving market acceptance is critical.

Question 30

As noted in Strategy Highlight 7.1,_______________ has created part of the growth of the Apple iPhone due to the apps that are available to users.These apps increase the value of the iPhone and thus more people want to own an iPhone with apps.

A) Ignoring the role of complements
B) Apple's low-cost strategy
C) The leveraging of network effects
D) The targeting of "laggards"

Question 31

Generally,as the level of _________ innovation declines,the level of _________ innovation increases.

A) Product; process
B) Process; procedural
C) Incremental; drastic
D) Efficient; inefficient

Question 32

Each of the following are important reasons to understand the strategic implications of an industry life cycle EXCEPT:

A) Each stage attracts different customer groups with unique needs.
B) The firm should copy the industry leader in each distinct stage.
C) Different competencies are required in each stage that must be created if not existent.
D) The firm needs to know when changes in demand require changes in strategy.

Question 33

As evidenced by the European Union determining that GSM should be the industry standard for cell phones,dominant designs can be driven by top-down decisions made by:

A) Consumer agencies.
B) Government bodies.
C) Local activists.
D) Cultural groups.

Question 34

During the growth phase of an industry life cycle,demand is strong and:

A) Both inefficient and efficient firms thrive.
B) A firm should "harvest" its products.
C) Only a cost leadership strategy should be pursued.
D) Market demand starts to decrease.

Question 35

Although there are "first-mover advantages" when it comes to bringing a new innovation to the market,there are also disadvantages.Which of the following is NOT one of these disadvantages?

A) The firm builds a reputation as an innovator.
B) Potential customers must be educated about the product.
C) Distribution channels must be found.
D) Complementary assets need to be located.

Question 36

The group of customers referred to as the ___________ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage.

A) Laggards
B) Experimenters
C) Early majority
D) Innovators

Question 37

Innovation used as a sustained competitive weapon must be:

A) Radical and low cost.
B) Architectural and high cost.
C) Short-term and efficient.
D) Continuous and commercialized.

Question 38

Each of the following are a distinct phase in an industry life cycle EXCEPT:

A) Growth
B) Introduction
C) Plateau
D) Maturity

Question 39

After the Internet was introduced,its value increased exponentially as the number of users increased.This is the positive effect of a(n):

A) Adopter force.
B) Network effect.
C) User effect.
D) Internet force.

Question 40

When a firm successfully commercializes a new product or service,it is able to extract temporary ______________ but must continue to innovate to sustain competitive advantage(s).

A) Monopoly profits
B) Industry acknowledgements
C) Lower costs of capital
D) Competitive parity

Question 41

The vast majority of innovations in an industry are ____________ because they build on a firm's existing knowledge base and reinforce the existing organizational structure and network relationships.

A) Incremental
B) Radical
C) Relational
D) Moderate

Question 42

___________ makes the process of "creative destruction" happen by replacing existing goods,services,and processes with newly created ones.

A) Engagement
B) Entrepreneurship
C) Venturing
D) Speculation

Question 43

The four best strategic choices available to management during the decline stage of an industry include all of the following EXCEPT:

A) Exit the industry.
B) Consolidate by buying rivals.
C) Persist by increasing investments in the product.
D) Harvest by reducing investments and maximizing cash flow.

Question 44

When an existing firm uses the tools and concepts learned from strategic management in order to pursue innovation,it is said to be engaging in:

A) Strategic entrepreneurship.
B) Strategic invention.
C) A strategic venture.
D) A short-term strategy.

Question 45

Which of the following is NOT true about the decline stage of an industry life cycle?

A) Inefficient firms exit the industry.
B) "Laggards" are the last consumer segment to enter the market.
C) Firms that consolidate and buy their rivals are typically at a disadvantage.
D) There is generally excess industry capacity.

Question 46

Entrepreneurs generally produce which type of innovation?

A) Radical
B) Speculative
C) Reverse
D) Incremental

Question 47

When engaging in strategic entrepreneurship an existing firm is often able to:

A) Introduce radical innovations into the market.
B) Exploit new or existing opportunities through innovation.
C) Ignore its known core competencies.
D) Keep costs low.

Question 48

The ZIP drive for data storage is an example of a(n)___________ innovation that began as a low-cost solution to an existing problem.

A) Disruptive
B) Technical
C) Radical
D) Advanced

Question 49

Entrepreneurial opportunities exist because of all of the following EXCEPT:

A) At a certain point, technology and processes reach their limit.
B) The market has unmet needs.
C) The firm does not believe in risk-taking.
D) A new invention can be commercialized.

Question 50

The X-ray is an example of a(n)___________ innovation.

A) Radical
B) Incremental
C) Drastic
D) Fundamental

Question 51

During the later part of the growth stage,many firms turn to ____________ to bring more customers into the market.

A) Lower prices
B) Diversification
C) Imitation
D) Radical innovation

Question 52

The process of __________ turns an invention into an innovation.

A) Integration
B) Commercialization
C) Diversification
D) Exploitation

Question 53

IBM still offers typewriters even though it does not invest much in future innovations of its typewriter line.Instead,it has chosen a _________ strategy to maximize cash flow from the remaining demand for typewriters.

A) Harvest
B) Divest
C) Exit
D) Consolidate

Question 54

The commercialization of new ideas and inventions often does all of the following EXCEPT:

A) Creates value for society.
B) Protects older industries.
C) Disrupts an industry.
D) Creates employment opportunities.

Question 55

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month,he set out to use the Internet as a new distribution channel and created Amazon,which is now the world's largest online retailer.This is clearly an example of:

A) A firm with a strong core competency in R&D.
B) An entrepreneur who transformed invention into an innovation.
C) An entrepreneur who tried to harvest the remaining demand on the Internet.
D) Someone who focused on the "short head" of the Internet.

Question 56

Which of the following strategies do firms typically employ as competitive intensity increases and the market matures?

A) Turning to radical innovation in order to introduce a new product
B) Employing manufacturing and process engineering capabilities to drive costs down
C) Charging high prices in order to capture as much revenue as possible
D) Adding additional features to the offering to increase perceived value

Question 57

During the _______ stage of an industry life cycle,market demand is at a minimum and competitive intensity increases.

A) Introduction
B) Innovative
C) Maturity
D) Disruptive

Question 58

The agents who create change in an industry by introducing new ideas and products are:

A) Executives.
B) Speculators.
C) Entrepreneurs.
D) Investors.

Question 59

When a firm steadily improves its offerings by building on its knowledge base,it is engaging in:

A) Architectural entrepreneurship.
B) Incremental innovation.
C) Disruptive entrepreneurship.
D) Radical innovation.

Question 60

Entrepreneurs do all of the following EXCEPT:

A) Undertake economic risk.
B) Act as change agents.
C) Decrease value for society.
D) Innovate in products and processes.

Question 61

Under the "long tail" phenomenon,the short head represents:

A) The smallest segment of the market.
B) Where customer demand levels off.
C) The maturity stage of the industry life cycle.
D) The largest segment of the market.

Question 62

Gillette introducing updated versions of its razor is an example of which type of innovation?

A) Essential
B) Disruptive
C) Radical
D) Incremental

Question 63

Understanding how the "80-20" rule can be applied to the disruptive force of the Internet allows a firm to do all of the following EXCEPT:

A) "Sell less of more" to customers with heterogeneous tastes.
B) Target the remaining 20 percent of potential sales.
C) Leverage the Internet to reduce transaction costs.
D) Charge 20 percent more for online purchases.

Question 64

The use of new materials with a new knowledge base to target new markets is a:

A) Groundbreaking innovation.
B) Trail innovation.
C) Radical innovation.
D) Modern innovation.

Question 65

__________ occur when transactions are not likely to take place because it is difficult to bring niche buyers and niche sellers together.

A) Blended markets
B) Wide markets
C) Thin markets
D) Diluted markets

Question 66

According to the text,which event played a role in the innovator CNN losing its leadership position in the 24-hour cable news industry?

A) The downturn in the economy impacting media firms
B) "Second movers" using incremental innovation to continuously improve their offering
C) Not investing enough resources into R&D and satellite technology
D) Becoming too diversified and losing strategic focus

Question 67

A disruptive innovation leverages _______ technologies,while architectural innovations are based on ________ technologies.

A) Existing; new
B) Essential; drastic
C) New; existing
D) Drastic; essential

Question 68

When Japanese carmakers attacked the existing U.S.automobile market by offering low-cost,fuel-efficient cars based on new technology,they were engaging in ___________ innovation.

A) Distinctive
B) Radical
C) Disruptive
D) Stealth

Question 69

The main intention of a firm engaging in architectural innovation is to:

A) Utilize new technology to create a new industry.
B) Utilize existing technology to steadily improve existing products.
C) Utilize existing technology to reconfigure products and create new markets.
D) Utilize new technology to disrupt the market with existing products.

Question 70

GE disrupted itself by:

A) Replacing the top levels of the executive hierarchy.
B) Using the needs of developing countries to replace older and more expensive products with newer and more adaptive ones.
C) Saturating the global market by having too many products in each market.
D) Losing strategic focus and not protecting its market share in health care technology.

Question 71

Disruptive innovations such as the $200 netbook computer do all of the following EXCEPT:

A) Target existing markets.
B) Incorporate new technology.
C) Introduce a radical idea and create a new industry.
D) Attack the market from the "bottom up."

Question 72

The disruptive force of the Internet provides opportunities due to the ____________ phenomenon,which allows for customer and product niches to come together online.

A) Proportion tail
B) Long tail
C) Incremental market
D) Bottom-up

Question 73

Digital photography replacing film photography is an example of which type of innovation?

A) Disruptive
B) Incremental
C) Progressive
D) Alternative

Question 74

Which of the following is most successfully innovating to overcome the problem of "thin markets"?

A) Macy's
B) eBay
C) Gillette
D) Walmart

Question 75

A positive implication of the disruptive force of the Internet for a firm is:

A) That there is almost a limitless low-cost shelf-life for product offerings.
B) That the digitization of products leads to market confusion.
C) That target markets can no longer be segmented.
D) That "going digital" makes a firm's product easier to imitate.

Question 76

The disruptive innovation of the Internet and the "long tail" phenomenon in the retail industry would be in which category for a SWOT matrix for Barnes & Noble?

A) Risks
B) Weaknesses
C) Threats
D) Opportunities

Question 77

Strategic initiatives that a firm can use to counter disruptive innovations in the industry include all of the following EXCEPT:

A) Improve the product or service value perception by increasing prices.
B) Stay "ahead of curve" by incremental innovation.
C) Protect the low end of the market by introducing low-end innovations.
D) Use the needs of emerging markets to reverse innovate.

Question 78

When the Japanese company Canon was able to redesign the copier and take market share away from Xerox,it was using which type of innovation?

A) Architectural
B) Groundbreaking
C) Radical
D) Intentional

Question 79

A disruptive innovator attacks from the "bottom up" because of all of the following EXCEPT:

A) Incumbent firms often fail to defend the low end of the market.
B) The industry is generally in the maturity stage by the time a disruptive innovation is introduced.
C) The gaps in quality at the time of introduction necessitate lower prices.
D) Competing in the low end gives a firm time to gain market expertise.

Question 80

According to Strategy Highlight 7.4,GE's success with portable ultrasound devices is attributed to which type of innovation?

A) Reverse
B) Backward
C) Internal
D) Diversified