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Theory of Strategic Management International Edition 10th Edition by Gareth Jones – Test Bank

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Theory of Strategic Management International Edition 10th Edition by Gareth Jones – Test Bank

Chapter 7—Strategy and Technology

TRUE/FALSE

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

ANS: F PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Knowledge

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

ANS: T PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Knowledge

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

ANS: F PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Creation of Value KEY: Knowledge

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

ANS: T PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Information Technologies KEY: Knowledge

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

ANS: T PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Creation of Value KEY: Knowledge

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

ANS: F PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Comprehension

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

ANS: F PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Strategy KEY: Comprehension

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

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. Digital music downloads have high marginal costs.

ANS: F PTS: 1 DIF: Easy

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Easy

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Reflective Thinking | Information Technologies

KEY: Application

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

ANS: F PTS: 1 DIF: Easy

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Knowledge

  1. 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.

ANS: T PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Knowledge

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

ANS: T PTS: 1 DIF: Easy

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Technology | Legal Responsibilities

KEY: Knowledge

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

ANS: F PTS: 1 DIF: Easy

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Analytic | Strategy

KEY: Knowledge

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

ANS: T PTS: 1 DIF: Difficult

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Comprehension

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

ANS: T PTS: 1 DIF: Moderate

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Technology | Creation of Value

KEY: Comprehension

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

ANS: T PTS: 1 DIF: Difficult

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Reflective Thinking | Strategy

KEY: Application

  1. 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.

ANS: T PTS: 1 DIF: Easy

OBJ: 4 – Explain the nature of technological paradigm shifts and their implications for enterprise strategy NAT: AACSB Technology | Information Technologies

KEY: Knowledge

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

ANS: F PTS: 1 DIF: Moderate

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Analytic | Creation of Value

KEY: Knowledge

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

ANS: T PTS: 1 DIF: Moderate

OBJ: 3 – Explain the cost structure of many high-technology firms, and articulate the strategic implications of this structure NAT: AACSB Technology | Strategy

KEY: Knowledge

  1. 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.

ANS: F PTS: 1 DIF: Moderate

OBJ: 4 – Explain the nature of technological paradigm shifts and their implications for enterprise strategy NAT: AACSB Analytic | Strategy KEY: Knowledge

  1. 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.

ANS: F PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Information Technologies KEY: Application

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

ANS: T PTS: 1 DIF: Difficult

OBJ: AACSB Reflective Thinking | Legal Responsibilities

NAT: 1 – Understand the tendency toward standardization in many high-technology markets

KEY: Application

MULTIPLE CHOICE

  1. 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.

ANS: B PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Knowledge

  1. All of the followingconsidered high-technology industries except:

a.

Computers

b.

Telecommunications

c.

Consumer electronics

d.

Pharmaceuticals

e.

Retail clothing

ANS: E PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Comprehension

  1. 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.

ANS: B PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Knowledge

  1. 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

ANS: E PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Information Technologies KEY: Application

  1. 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.

ANS: D PTS: 1 DIF: Easy

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Legal Responsibilities KEY: Knowledge

  1. 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.

ANS: E PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Information Technologies KEY: Knowledge

  1. 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.

ANS: A PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Creation of Value KEY: Knowledge

  1. 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.

ANS: A PTS: 1 DIF: Difficult

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Information Technologies KEY: Application

  1. 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

ANS: E PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Creation of Value KEY: Comprehension

  1. 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.

ANS: D PTS: 1 DIF: Difficult

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Legal Responsibilities KEY: Application

  1. 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.

ANS: E PTS: 1 DIF: Difficult

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Reflective Thinking | Information Technologies KEY: Application

  1. 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.

ANS: B PTS: 1 DIF: Difficult

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Reflective Thinking | Strategy KEY: Application

  1. 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.

ANS: A PTS: 1 DIF: Difficult

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Reflective Thinking | Strategy KEY: Application

  1. 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.

ANS: C PTS: 1 DIF: Difficult

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Comprehension

  1. 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.

ANS: E PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Comprehension

  1. What percentage of the world’s PCs adhere to the Wintel standard?

a.

95%

b.

50%

c.

20%

d.

75%

e.

5%

ANS: A PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Technology | Creation of Value KEY: Knowledge

  1. 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.

ANS: B PTS: 1 DIF: Moderate

OBJ: 1 – Understand the tendency toward standardization in many high-technology markets

NAT: AACSB Analytic | Environmental Influence KEY: Knowledge

  1. 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.

ANS: A PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Comprehension

  1. 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.

ANS: A PTS: 1 DIF: Easy

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Technology | Information Technologies

KEY: Knowledge

  1. The razor-and-blade strategy was pioneered by

a.

Procter & Gamble.

b.

Sony.

c.

Toyota.

d.

Ford.

e.

Gillette.

ANS: E PTS: 1 DIF: Moderate

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Analytic | Strategy KEY: Knowledge

  1. 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.

ANS: C PTS: 1 DIF: Difficult

OBJ: 2 – Describe the strategies that firms can use to establish their technology as the standard in a market NAT: AACSB Reflective Thinking | Strategy KEY: Application

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