Test Bank For Strategic Management of Technological Innovation 7th Edition By Melissa Schilling Chap by StudyGuide

Test Bank For Strategic Management of Technological Innovation 7th Edition By Melissa Schilling Chapter 1-13 Answer are at the End of Each Chapter Chapter 1

Student name:__________ 1) Explain the impact of computer-aided design and flexible manufacturing technologies on firms.

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Explain how the globalization of markets affects the importance of innovation.

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3) What are some of the negative impacts on society because of technological innovation? How would you respond to critics of technological innovation who cite these negative impacts?

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4) Why is it important for a company to have a well-defined process to strategically manage its new product development process?

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5) Explain how an understanding of the innovation funnel might influence a company's view of research and development. How can a firm's new development process maximize the likelihood of projects being both technically and commercially successful?

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Which of the following is an advantage of flexible manufacturing technologies? 6) ______

A) They have made shorter production runs economical. B) They have increased the importance of production economies of scale. C) They have eliminated the need for differentiation from competitors. D) They have reduced the importance of technological innovation in industries.

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As a result of the rapid pace of innovation 7) ______

A) product life cycles have become shorter. B) product development cycles have become significantly longer. C) market segmentation has reduced. D) product obsolescence has slowed down.

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8) Mark is the CFO of a company that manufactures air conditioners and refrigerators. The management wants to diversify its list of product offerings and therefore has asked the board of members and senior management to suggest a project plan. One of their suggestions was to manufacture smart televisions. Mark believes that if the company invests in this new project plan, it will not be able to make sustainable profits for long. Which of the following statements supports Mark's argument? 8) ______

A) Market segmentation is minimal for the consumer electronics market. B) The rate of product obsolescence is the lowest for televisions when compared with other consumer electronics and large home appliances. C) The time between the television's introduction in the market and its replacement with a next-generation television is 12 to 24 months. D) The product life cycle for televisions in the market is extremely long, about 10 to 12 years.

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9) Virtual Incorporated, a manufacturing company, has recently entered the cell phone industry. This industry is characterized by rapid technological innovations. Which of the following is most likely to be true of Virtual Incorporated? 9) ______

A) The life cycle of its cell phones will be long. B) It will face rapid product obsolescence. C) It will face low market segmentation in the cell phone industry. D) It will have a lower need for product differentiation.

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10) The ________blank of an economy is its total annual output as measured by its final purchase price. 10) ______

A) balance of payment B) gross domestic product C) cash reserve ratio D) net national income

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11)

Which of the following is true of technological innovations? 11) ______

A) Technological innovations help increase a country's gross domestic product. B) Technological innovations decrease the amount of output achievable from a given quantity of labor and capital. C) Technological innovations slow down product obsolescence and lengthen product development cycles. D) Technological innovations increase production costs and reduce product differentiation.

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12) If a country's GDP stands at $4,867 billion, the country's ________blank will be worth $4,867 billion. 12) ______

A) total annual output B) investment in technological innovation C) savings with the World Bank D) negative variance in budget

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13)

The Solow Residual refers to the 13) ______

A) obsolete products left in a market because of accelerated product life cycles. B) less-developed nations of the world being left behind because of their obsolete technology. C) increased amount of output achievable from a given quantity of labor and capital because of technological innovation. D) process of dumping goods in developing and underdeveloped countries at a price lower than the home-market price.

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14) ________blank refer to the costs (or benefits) of technological innovations that are borne by individuals other than those responsible for creating them. 14) ______

A) Externalities B) Increasing returns C) Complementors D) Incubators

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15) Alex Richards is the owner of a pesticide manufacturing company. He is aware of the risks that the residents of a nearby community will face because of the liquid pollutants released from the manufacturing unit. In order to counter the risks, he decides to invest in a plan that will create a positive externality. Which of the following plans should Alex invest in to accomplish his mission? 15) ______

A) setting up a shopping complex near the community B) setting up a water treatment plant in the vicinity C) setting up a couple more pesticide manufacturing companies in the vicinity D) setting up a basketball court for the children who reside in the community

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16) Kroters Incorporated, a detergent manufacturing company, has built a new manufacturing plant on the outskirts of Woodsville. Since a majority of the population of Woodsville depend on agriculture for their livelihood, the management of Kroters decides to invest in a project that will most likely create a positive externality for the community members. Which of the following project plans is likely to help achieve positive externality? 16) ______

A) a plan that increases the detergents' life cycle based on consumer demand B) a plan that involves setting up an organic farm near Woodsville C) a plan that follows the Solow Residual D) a plan that reduces the rate of product obsolescence for Woodsville residents

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17) Silk Work Incorporated, a manufacturer of silk garments, is planning to replace hand weaving with some modern machines that run on fuel. Which of the following consequences of this measure can be categorized as a negative externality? 17) ______

A) increased amount of output achievable from the given quantity of labor B) increase in the quality of the silk garments C) increased pollution as a result of the new technology D) increased need for investment to finance the modernization

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18) If a business builds a park in a community, it will create a(n) ________blank for the community members. 18) ______

A) social cost B) positive externality C) opportunity cost D) negative variance

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19)

Which of the following statements is true of externalities? 19) ______

A) All externalities are negative in nature and seldom affect the communities surrounding the area where the business is based. B) Externalities are solely borne by individuals responsible for creating them. C) Negative externalities are completely eradicated by technological innovations. D) Externalities can be in the form of benefits reaped by individuals other than those who created them.

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20)

Electronic waste results from the disposal of technological goods. This is an example of 20) ______

A) the Solow Residual. B) a negative externality. C) a negative variance. D) the innovation funnel.

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21) According to researchers in a large-scale survey administered by the Product Development and Management Association (PDMA), in 2012, which of the following categories of project development took the least amount of time to develop a new product from initial concept to market introduction? 21) ______

A) "radical" projects B) "more innovative" projects C) "disruptive" projects D) "incremental" projects

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22) Jordan, the CEO of Early Bird Corporation, believes that it is important to focus on the quantity of new product ideas generated rather than the quality of ideas generated. He encourages everyone in the company to come up with product ideas, and those that seem feasible are further developed. According to him, it takes several raw ideas to develop one successful new product. Jordan's views reflect the concept of 22) ______

A) innovation adolescence. B) innovation diffusion. C) the innovation butterfly. D) the innovation funnel.

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23) Which of the following is essential for a firm's new product development process to help maximize the likelihood of projects being both technically and commercially successful? 23) ______

A) an in-depth understanding of the dynamics of innovation B) a generic innovation strategy that focuses on the generation of ideas rather than implementation C) rapid product obsolescence D) greater market segmentation

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24) Unicorn Medicines Incorporated, a pharmaceutical company based in the United States, has its research and development units spread across the globe. Lately, these research and development units have not been receiving adequate financial support. Which of the following is most likely to cause such a situation? 24) ______

A) Technical innovation leads to lower market segmentation and slower product obsolescence. B) Most innovative ideas do not become successful new products. C) The product development cycle in the pharmaceutical industry is short. D) The cost associated with pharmaceutical research and development is low.

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25) Walter is the new director of R&D at Good Health Incorporated, a pharmaceutical company. Which of the following statements by Walter would indicate that he believes in the concept of the innovation funnel? 25) ______

A) "Innovation is a freewheeling process that is unconstrained by rules and plans." B) "While there are many potential new product ideas going in the wide end, very few make it through the development process." C) "I believe that Good Health should limit new idea generation to save time and other resources." D) "I believe that Good Health should allow all new ideas generated in the company to make it to the development process."

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26) Firms across industries depend on products developed within the past five years for more than one-third of their sales and profits. 26) ______

⊚ ⊚

true false

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27)

Investing in process innovation helps firms lower their costs. 27) ______ ⊚ ⊚

true false

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28) Flexible manufacturing technologies have made longer production runs economical and have increased the importance of production economies of scale. 28) ______ ⊚ ⊚

true false

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29)

Globalization of markets has reduced the importance of innovation. 29) ______

⊚ ⊚

true false

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30) Innovation and new technologies have led to longer product life cycles and slower product obsolescence. 30) ______ ⊚ ⊚

true false

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31) Technological innovation decreases the amount of output achievable from a given quantity of labor and capital. 31) ______ ⊚ ⊚

true false

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32)

Gross domestic product seldom relates to the amount of goods consumers can purchase. 32) ______

⊚ ⊚

true false

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33)

Technological innovation results in complete eradication of negative externalities. 33) ______ ⊚ ⊚

true false

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34) If a pharmaceutical company discharges untreated chemical waste into the local water bodies of a community, it will impose a negative externality on the community members. 34) ______ ⊚ ⊚

true false

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35) A firm's organizational structure and control systems seldom have an influence on the generation of innovative ideas. 35) ______

⊚ ⊚

true false

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36)

Most innovative ideas do not become successful new products. 36) ______ ⊚ ⊚

true false

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37) The majority of effort and money invested in technological innovation comes from nonindustrial firms. 37) ______ ⊚ ⊚

true false

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38) The innovation process is often conceived of as a funnel because most potential new product ideas make it through the development process. 38) ______

⊚ ⊚

true false

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39) According to the concept of innovation funnel, the number of successful products launched will be greater than the number of raw ideas generated. 39) ______ ⊚ ⊚

true false

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40) Studies have consistently found that successful innovators employ well-defined strategies for innovation and management processes. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 1 1)Computer-aided design and computer-aided manufacturing have made it easier and faster for firms to design and produce new products, while flexible manufacturing technologies have made shorter production runs economical and have reduced the importance of production economies of scale. These technologies help firms develop and produce more product variants that closely meet the needs of narrowly defined customer groups, thus achieving differentiation from competitors. 2)The increasing importance of innovation is due in part to the globalization of markets. Foreign competition has put pressure on firms to continuously innovate in order to produce differentiated products and services. Introducing new products helps firms protect their margins, while investing in process innovation helps firms lower their costs. 3)Production technologies may create pollution that is harmful to the surrounding communities; agricultural and fishing technologies can result in erosion, elimination of natural habitats, and depletion of ocean stocks; medical technologies can result in unanticipated consequences such as antibiotic-resistant strains of bacteria or moral dilemmas regarding the use of genetic modification. However, technology is, in its purest essence, knowledge—knowledge to solve our problems and pursue our goals. Technological innovation is thus the creation of new knowledge that is applied to practical problems. Sometimes this knowledge is applied to problems hastily, without full consideration of the consequences and alternatives, but overall it will probably serve us better to have more knowledge than less. Students' answers will vary.

4)In the frenetic race to innovate, many firms charge headlong into new product development without clear strategies or well-developed processes for choosing and managing projects. Such firms often initiate more projects than they can effectively support, choose projects that are a poor fit with the firm's resources and objectives, and suffer long development cycles and high project failure rates as a consequence. While innovation is popularly depicted as a freewheeling process that is unconstrained by rules and plans, study after study has revealed that successful innovators have clearly defined innovation strategies and management processes. Improving a firm's innovation success rate requires a well-crafted strategy. A firm's innovation projects should align with its resources and objectives, leveraging its core competencies and helping it achieve its strategic intent. A firm's organizational structure and control systems should encourage the generation of innovative ideas while also ensuring efficient implementation. A firm's new product development process should maximize the likelihood of projects being both technically and commercially successful. To achieve these things, a firm needs (a) an in-depth understanding of the dynamics of innovation, (b) a well-crafted innovation strategy, and (c) welldesigned processes for implementing the innovation strategy.

5)If a company truly understands the innovation funnel concept, it will see the innovation process as a funnel, with many potential new product ideas going in the wide end, but very few making it through the development process. The company can then encourage its R&D department as well as the rest of the company to come up with and submit new ideas. It can also develop ways of evaluating large numbers of ideas and set up screening criteria that would help the firm decide which ideas to consider. A firm's new product development process can maximize the likelihood of projects being both technically and commercially successful by achieving the following: (a) an in-depth understanding of the dynamics of innovation, (b) a well-crafted innovation strategy, and (c) welldesigned processes for implementing the innovation strategy. 6) A 7) A 8) C 9) B 10) B 11) A 12) A 13) C 14) A 15) B 16) B 17) C 18) B 19) D 20) B 21) D 22) D

23) A 24) B 25) B 26) TRUE 27) TRUE 28) FALSE 29) FALSE 30) FALSE 31) FALSE 32) FALSE 33) FALSE 34) TRUE 35) FALSE 36) TRUE 37) FALSE 38) FALSE 39) FALSE 40) TRUE

Student name:__________ 1) What are the most important intellectual abilities for creative thinking? What is the impact of knowledge on creativity?

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Explain the terms "basic research" and "applied research."

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3) In the context of government-funded research, explain the term "science parks." What are their advantages?

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What are some of the downsides to geographical clustering?

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5) Explain the concept of technology spillovers. What are the factors affecting the likelihood of technological spillovers?

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________blank is the personality trait most often associated with creativity. 6) ______

A) Conscientiousness B) Agreeableness C) Openness to experience D) Extraversion

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Which of the following statements is true of primary process thinking? 7) ______

A) It has a highly structured nature. B) It is believed to occur when an individual is highly focused on looking for solutions. C) It limits an individual's capacity for creativity. D) It is likely to result in combining ideas that are usually unrelated.

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8) Erison Group, an advertising company, wants to hire a creative head. Who among the following would be best suited for this position? 8) ______

A) an individual who completely adheres to the existing logic and paradigms and has extensive knowledge of the field B) an individual who has low tolerance for ambiguity and avoids taking risks C) an individual who has a moderate degree of knowledge of the field but is intrinsically motivated D) an individual who prefers to look at problems in conventional ways

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9) Meghan, an R&D scientist at a reputed medical equipment manufacturing firm, realized that most studies indicate that individuals are not able to detect any variations in their blood pressure, blood glucose levels, heartbeat, and pace of breathing as they do not monitor these aspects on a regular basis. These variations lead to further complications in most individuals. Therefore, to reduce this occurrence, she invented a device, which also functioned like a watch that could monitor the aforementioned health aspects in an individual throughout the day. The device would alert the individual using it if any of these aspects were above or below normal. Meghan’s device was an instant success with several countries placing orders for the device. Which of the following characteristics of most successful inventors did Meghan exhibit in this scenario? 9) ______

A) She had specialized in a single field rather than several fields simultaneously. B) She was curious and more interested in the solution rather than the problem. C) She blindly accepted the assumptions made in previous works in the same field. D) She sought a global solution rather than a local solution.

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10)

Who among the following is a user innovator? 10) ______

A) Samuel has invented a detachable bicycle, which he plans to sell to a reputed bicycle manufacturing firm in order to make profit. B) Sandra, an engineer, has developed a device that helps track the location of her teenage daughter's car. C) Jessica, an ace designer for a clothing brand, has been asked to work on a dyeing technique that changes fabric color according to the room temperature. D) Ivan, a scientist at a reputed pharmaceutical company, has developed an antiinflammatory drug for the company to commercialize.

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11) Which of the following is the correct sequence of steps for the science-push approach to research and development? 11) ______

A) Customers express an unmet need, the R&D team develops the product to meet that need, the product is manufactured, and finally the marketing team promotes the product. B) Scientific discovery leads to an invention, the engineering team designs the product, it is then manufactured, and finally the marketing team promotes it. C) The marketing team discovers a need, R&D comes up with the product concept that is refined by the engineering team, the manufacturing team then produces it, and finally the product is sold. D) The manufacturing team sees a way to improve a product, the engineering team redesigns it, and finally the marketing team creates awareness about the improved product.

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12) Breaking Ventures Incorporated realized that most parents are worried about their teenage children going out on their own. Based on this information, the company developed a device that could be fixed into teenagers' cell phones through which parents could keep track of their children's location. This is referred to as the ________blank to research and development. 12) ______

A) demand-pull approach B) supply-push approach C) science-push approach D) research-pull approach

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13)

The demand-pull approach to research and development refers to innovation that 13) ______

A) focuses on developing products that are expected to increase demand in a particular market segment. B) begins by examining the outcomes of the firm's basic research and the potential commercial applications that may be constructed from those outcomes. C) focuses on developing products that are expected to decrease the demand for their substitute products. D) originates as a response to the specific problems or suggestions of customers.

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14) Organizations that manufacture products such as light bulbs for lamps or chargers for electrical vehicles are called ________blank. 14) ______

A) moderators B) lead users C) complementors D) incubators

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15) ________blank is the ability of an organization to recognize, assimilate, and utilize new knowledge. 15) ______

A) Cognitive dissonance B) Absorptive capacity C) Organizational obsolescence D) Built-in obsolescence

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16) The president of Mountain Home University has been asked by the board members to set up a separate unit to facilitate the commercialization of technology developed by research students at the university. Such a unit is typically called a ________blank. 16) ______

A) strategic business unit B) commercialization office C) technology transfer office D) science park

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17)

Which of the following statements is true of the Bayh-Dole Act of 1980? 17) ______

A) It made university technology transfer activities illegal and unethical. B) It allowed universities to collect royalties on inventions funded with taxpayer dollars. C) It restricted the provision of patents for inventions developed at universities. D) It made investments in research and technology mandatory for public companies.

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18)

Which of the following statements is true of science parks? 18) ______

A) Because of the vast distance between university laboratories and other research centers, science parks seldom provide ready access to scientific expertise. B) The formation of science parks typically leads to traffic congestion, inordinately high housing costs, and higher concentrations of pollution in the area. C) Even though science parks are known to assist new start-ups, they strongly prohibit collaboration activities between firms. D) Science parks often give rise to technology clusters that have long-lasting and selfreinforcing advantages.

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19) Institutions designed to nurture the development of new businesses that might otherwise lack access to adequate funding or advice are called ________blank. 19) ______

A) complementors B) research collaboration offices C) incubators D) technology clusters

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20) Which of the following is true of interfirm collaborative research and development networks? 20) ______

A) Collaborative research networks are not important or viable in high-technology sectors. B) Interfirm networks can enable firms to achieve much more than they could achieve individually. C) The flow of information and other resources through a network is independent of the network's size. D) Information diffusion is fairly slow and limited in collaborative research networks with dense structures and many paths for information to travel.

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21) ________blank are regional groups of firms that have a connection to a common technology and may engage in buyer, supplier, and complementor relationships, as well as research collaboration. 21) ______

A) Technology transfer offices B) Technology incubators C) Strategic business units D) Technology clusters

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22)

Which of the following statements is true of geographical clustering? 22) ______

A) The proximity of many competitors serving a local market leads to competition that increases their pricing power in their relationships with both buyers and suppliers. B) Close proximity of firms eliminates the likelihood of a firm's competitors gaining access to the firm's proprietary knowledge. C) Clustering invariably leads to lower concentrations of pollution and inordinately low housing costs. D) Proximate firms have an advantage in sharing information that can lead to greater innovation productivity.

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23) The benefits firms reap by locating in close geographical proximity to each other are known collectively as ________blank. 23) ______

A) agglomeration economies B) incubator economies C) virtual economies D) shadow economies

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24) ________blank is a positive externality from R&D resulting from the spread of knowledge across organizational or regional boundaries. 24) ______

A) Technological discombobulation B) Technological determinism C) Technological spillover D) Technological dissonance

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25) A variety of rice created by Biocrop Incorporated through recombinant DNA technology was found to be rich in both carbohydrates and proteins. After the success of this rice variety, recombinant DNA technology was implemented by less-developed countries to increase the nutrient levels of fruits, pulses, and greens in order to feed their malnourished children. This is an example of ________blank. 25) ______

A) technological dissonance B) technological spillover C) technological retardation D) technological determinism

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26) If an individual knows a field too well, it can stifle his or her ability to come up with solutions that require an alternative perspective. 26) ______ ⊚ ⊚

true false

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27) An organization's overall creativity level is a simple aggregate of the creativity of the individuals it employs. 27) ______ ⊚ ⊚

true false

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28) Sometimes, monetary rewards undermine creativity by encouraging employees to focus on extrinsic rather than intrinsic motivation. 28) ______

⊚ ⊚

true false

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29) Research targeted at increasing knowledge for a specific application or need is called basic research. 29) ______ ⊚ ⊚

true false

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30) The terms "research" and "development" represent different kinds of investment in innovation-related activities. 30) ______ ⊚ ⊚

true false

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31) The science-push approach to research and development argued that innovation was driven by the perceived demand of potential users. 31) ______

⊚ ⊚

true false

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32) Firms often form alliances with competitors to jointly work on an innovation project or to exchange information in pursuit of innovation. 32) ______ ⊚ ⊚

true false

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33) Typically the intellectual property policies of a university embrace both patentable and unpatentable innovations, and the university retains sole discretion over the rights to commercialize the innovation. 33) ______ ⊚ ⊚

true false

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34) Incubators are regional districts, typically set up by government, to foster R&D collaboration between government, universities, and private firms.

34) ______ ⊚ ⊚

true false

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35) Empirical evidence suggests that external sources of information are more likely to be substitutes for rather than complements to in-house research and development. 35) ______ ⊚ ⊚

true false

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36) Work can be described as novel even if it is simply the next logical step in a series of known solutions. 36) ______ ⊚ ⊚

true false

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37)

Collaborative research is prohibited in high-technology sectors.

37) ______ ⊚ ⊚

true false

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38) Proximity and interaction can directly influence firms' ability and willingness to exchange knowledge. 38) ______ ⊚ ⊚

true false

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39) Knowledge that is explicit requires more frequent and close interaction to be meaningfully exchanged than knowledge that is tacit. 39) ______ ⊚ ⊚

true false

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40) The degree to which innovative activities are geographically clustered is independent of the national differences in the way technology development is funded or protected. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 2 1)An individual's creative ability is a function of his or her intellectual abilities, knowledge, personality, motivation, and environment. The most important intellectual abilities for creative thinking include intelligence, memory, the ability to look at problems in unconventional ways, the ability to analyze which ideas are worth pursuing and which are not, and the ability to articulate those ideas to others and convince others that the ideas are worthwhile. The impact of knowledge on creativity is somewhat double-edged. If an individual has too little knowledge of a field, he or she is unlikely to understand it well enough to contribute meaningfully to it. On the other hand, if an individual knows a field too well, that person can become trapped in the existing logic and paradigms, preventing him or her from coming up with solutions that require an alternative perspective. Thus, an individual with only a moderate degree of knowledge of a field might be able to produce more creative solutions than an individual with extensive knowledge of the field. 2)Basic research is effort directed at increasing understanding of a topic or field without a specific immediate commercial application in mind. This research advances scientific knowledge, which may (or may not) turn out to have long-run commercial implications. Applied research is directed at increasing understanding of a topic to meet a specific need. In industry, this research typically has specific commercial objectives.

3)Science parks refer to regional districts, typically set up by government, to foster R&amp;D collaboration between government, universities, and private firms. These parks create fertile hotbeds for new start-ups and a focal point for the collaboration activities of established firms. Their proximity to university labora-tories and other research centers ensures ready access to scientific expertise. Such centers also help university researchers implement their scientific discoveries in commercial applications. Such parks often give rise to technology clusters that have long-lasting and self-reinforcing advantages. 4)There are some downsides to geographical clustering. First, the proximity of many competitors serving a local market can lead to competition that reduces their pricing power in their relationships with both buyers and suppliers. Second, close proximity of firms may increase the likelihood of a firm's competitors gaining access to the firm's proprietary knowledge. Third, clustering can potentially lead to traffic congestion, inordinately high housing costs, and higher concentrations of pollution. 5)Technological spillovers occur when the benefits from the research activities of one firm (or nation or other entity) spill over to other firms (or nations or other entities). Spillovers are thus a positive externality of research and development. Whether R&amp;D benefits will spill over is partially a function of the strength of protection mechanisms such as patents, copyrights, and trade secrets. Since the strength of protection mechanisms varies significantly across industries and countries, the likelihood of spillovers varies also. The likelihood of spillovers is also a function of the nature of the underlying knowledge base and the mobility of the labor pool. 6) C 7) D 8) C

9) D 10) B 11) B 12) A 13) D 14) C 15) B 16) C 17) B 18) D 19) C 20) B 21) D 22) D 23) A 24) C 25) B 26) TRUE 27) FALSE 28) TRUE 29) FALSE 30) TRUE 31) FALSE 32) TRUE 33) TRUE 34) FALSE 35) FALSE 36) FALSE 37) FALSE 38) TRUE

39) FALSE 40) FALSE Student name:__________ 1)

Briefly explain the different types of innovation.

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2) How can s-curves be used as prescriptive tools? What would be the limitations of this approach?

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3) What are the factors that determine whether switching to a new technology will benefit a firm?

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Explain what Schumpeter meant by the term "creative destruction."

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5) Briefly define Everett M. Rogers's five adopter categories and explain how a marketer might use this knowledge.

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The path a technology takes through its lifetime is termed its ________blank. 6) ______

A) technology map B) technology trajectory C) technology cluster D) technology transfer

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7) A bicycle manufacturing company developed a new type of inventory management system. This inventory system improved the productivity of its manufacturing unit and the quality of its bicycles. In this scenario, the development of a new type of inventory management system is an example of ________blank innovation. 7) ______

A) virtual B) archaic C) product D) process

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Which of the following statements is true of the different types of innovations? 8) ______

A) Process innovations are more visible than product innovations. B) An innovation that was once considered radical may eventually be considered incremental as the knowledge base underlying the innovation becomes more common. C) An innovation is considered a component innovation if it significantly affects the overall configuration of the system of which it is a component. D) An architectural innovation is also called a modular innovation.

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9) A radical innovation differs from an incremental innovation in that it refers to an innovation that 9) ______

A) makes a relatively minor change from existing processes. B) is very new and different from prior solutions. C) seldom affects the overall configuration of the system. D) is typically competence enhancing as it builds on the firm's existing knowledge base.

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10)

Which of the following statements is true of a component innovation? 10) ______

A) A component innovation does not significantly affect the overall configuration of a system. B) A component innovation is also called an architectural innovation. C) For a firm to initiate a component innovation, knowledge about the whole system is necessary. D) A component innovation has more far-reaching and complex influences on industry competitors and technology users than an architectural innovation.

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11) Nick works at a digital appliances manufacturing company. Recently, he invented an adapter for televisions, which when connected would reduce the electricity consumption by half. This adapter worked with the earlier television models that the company manufactured, so the company was able to sell this product to their existing customers and to all their new customers. This is an example of a(n) ________blank innovation. 11) ______

A) radical B) discontinuous C) architectural D) component

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12)

Which of the following statements is true of s-curves in technological improvement? 12) ______

A) They are obtained by plotting the cumulative number of adopters of the technology against time. B) They typically show that technology goes through initial accelerated improvement, accelerated improvement, and diminishing improvement. C) S-curves in technology diffusion and s-curves in technology performance are fundamentally the same processes. D) The s-curves flatten when the cost of each marginal improvement increases and diminishing returns to effort begin to set in.

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13) In the context of s-curves in technological improvement, plotting performance against time will result in the same characteristic curve as plotting performance against effort only if 13) ______

A) speed, a function of performance, is relatively constant over time. B) effort is relatively constant over time. C) power, a function of performance, is relatively inconsistent over time. D) effort varies over time.

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14) Computer hardware has developed over the years with recent devices providing better and higher storage capacities. From the use of floppy disks, in the early days, for storing information, to the current use of CDs, portable hard disks, and pen drives, information storage capacities have improved with the invention of each new device. These days, floppy disks are seldom used and most of the latest computers do not include floppy drives. Which of the following types of technology is being described in the scenario? 14) ______

A) complementary B) component C) discontinuous D) incremental

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15) When the first personal computers were introduced, Bill started using a spreadsheet program to maintain his accounts. Bill discovered that this new method of maintaining his accounts caused his work to become much slower and that if he typed in the wrong data, it led to more mistakes. This scenario illustrates that 15) ______

A) effort invested in an existing technology reaps higher returns than effort invested in a new technology. B) effort invested in an incumbent technology is much higher than effort invested in a new technology. C) technological discontinuity may initially have lower performance than the incumbent technology. D) component innovations are more effective than architectural innovations.

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16)

S-curves in technology diffusion are obtained by plotting the 16) ______

A) capacity of a technology against time. B) cumulative number of adopters of a technology against time. C) performance speed of a technology against effort. D) performance power of a technology against effort.

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17)

Which of the following statements is true of technology diffusion? 17) ______

A) S-curves in technology diffusion are obtained by plotting performance against time. B) Technology diffusion is much faster than information diffusion. C) A drop in the price of a new technology can accelerate technology diffusion. D) Adoption is initially fast when a new technology is introduced to the market.

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18) The CEO of a pharmaceutical company asked his consultant if it was a good idea to implement the s-curve model to predict when a technology would reach its limits. The consultant identified a limitation in the use of the model. Which of the following is most likely the limitation identified by the consultant? 18) ______

A) Firms cannot influence the shape of the s-curve through their developmental activities. B) Unexpected changes in the market can alter the shape of a technology's s-curve. C) S-curve models cannot be applied in the pharmaceutical industry. D) S-curve models are outdated and unrealistic.

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19) Susan recently broke her smartphone, which she had been using for three years. Since repairing the phone would cost more than buying a new one, her friend suggests that she check out a couple of the latest smartphones in the market. Although she comes across some new models that are well-known for their durability, Susan is skeptical because she believes all the latest models are delicate and need to be handled with care. She is concerned that the new phone will break as well. Based on the information provided in the scenario, which of the following statements is true of Susan? 19) ______

A) Since Susan bases her decisions primarily upon past experiences rather than influence from the social network, she can be classified as an early adopter. B) Since Susan feels that the product will certainly not fail based on her previous use of a similar product, she can be classified as a laggard. C) Since Susan has reservations about the product's durability, she can be classified as a laggard. D) Since Susan possesses almost no opinion leadership, she can be classified as an early adopter.

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20) A marketing research company categorized Jane as an early adopter. Which of the following would be true of Jane in this context? 20) ______

A) She does not adopt an innovation until she experiences peer pressure. B) She is well integrated into her social system. C) She has a skeptical attitude toward new ideas. D) She has a low potential for opinion leadership.

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21) Iris is quite skeptical about new innovations and is most likely to adopt something new only after experiencing peer pressure. However, she is not so risk averse that she will wait until all uncertainty of a new technology has been resolved; she is willing to accept a little uncertainty if her peers already use the product. Which of the following adopter categories does Iris belong to? 21) ______

A) early adopters B) innovators C) late majority D) laggards

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22) Nigel belongs to a wealthy family. He has always enjoyed trying out new gadgets and devices that are launched in the market. Since he is financially well-off, he likes to experiment with expensive products and is comfortable with the risks and uncertainties associated with these products. Based on this description, Nigel most likely belongs to the group of ________blank. 22) ______

A) early majority B) early adopters C) innovators D) laggards

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23)

Which of the following is true of dominant design? 23) ______

A) It usually mimics the form of the original discontinuity. B) It is often at the forefront of cutting-edge technology. C) It destabilizes the architecture of the technology, making it difficult for firms to focus on improving incremental innovations. D) It tends to put together a combination of features in the way that most effectively achieves the demands of the market majority.

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24)

According to Anderson and Tushman, in the era of incremental change, firms 24) ______

A) attempt to achieve lower market segmentation by offering different models and price points. B) undergo a period of turbulence and uncertainty. C) focus on efficiency and market penetration. D) focus on altering the architecture rather than improving components.

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25) Alpha Information Incorporated is a firm that manufactures desktop computers and wireless network hardware components. The company is spending heavily on R&D to experiment with new designs for wireless networks instead of trying to refine how well they make their current wireless network hardware components. The firm is going through a period of ambiguity and anxiety. Alpha Information Incorporated is in the 25) ______

A) dominant design phase. B) era of incremental change. C) era of ferment. D) specific phase.

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26) Technology trajectories are most often used to represent the technology's rate of performance improvement or its rate of adoption in the marketplace. 26) ______ ⊚ ⊚

true false

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27) Product innovations are more important than process innovations to organizations because they are less visible than process innovations. 27) ______ ⊚ ⊚

true false

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28)

Process innovations are often more visible than product innovations. 28) ______ ⊚ ⊚

true false

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29) An innovation can be competence enhancing for one firm, while competence destroying for another. 29) ______ ⊚ ⊚

true false

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30)

A modular innovation significantly affects the overall configuration of a system. 30) ______ ⊚ ⊚

true false

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31) For a firm to adopt a component innovation, it requires architectural knowledge about the way components link and integrates to form a whole system. 31) ______ ⊚ ⊚

true false

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32) S-curves in technology performance and s-curves in technology diffusion are fundamentally different processes. 32) ______ ⊚ ⊚

true false

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33) When a technology's performance is plotted against the amount of effort and money invested in it, it typically shows slow initial improvement, accelerated improvement, and diminishing improvement. 33) ______

⊚ ⊚

true false

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34) In the context of s-curves in technological improvement, performance improvement in the early stages of a technology is rapid, irrespective of how well the fundamentals of the technology are understood. 34) ______ ⊚ ⊚

true false

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35) A technology diffusion curve is s-shaped because adoption is initially fast when a new technology is introduced to the market. 35) ______ ⊚ ⊚

true false

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36)

Technology diffusion and information diffusion take the same amount of time. 36) ______

⊚ ⊚

true false

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37) S-curves of technology diffusion are in part a function of the s-curves in technology improvement. 37) ______ ⊚ ⊚

true false

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38)

Firms cannot influence the shape of the s-curve through their development activities. 38) ______ ⊚ ⊚

true false

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39) It is possible for a firm that follows an s-curve model too closely to end up switching technologies later than it should. 39) ______

⊚ ⊚

true false

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40) According to Utterback and Abernathy, the technology phase in which firms experiment with variations of form and features of a product or service based on new technology to assess the market response is known as the specific phase. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 3 1)There are eight types of innovation—product, process, radical, incremental, competence-enhancing, competence-destroying, component, and architectural. 1.A product innovation is embodied in the outputs of an organization— its goods or services. 2.A process innovation is an innovation in the way an organization conducts its business, such as in the techniques of producing or marketing goods or services. 3.A radical innovation is very new and different from prior solutions. 4.An incremental innovation involves making relatively minor changes from (or adjustments to) existing practices. 5.A competence-enhancing innovation builds on existing knowledge and skills. 6.A competence-destroying innovation renders existing knowledge and skills obsolete. 7.A component (or modular) innovation is an innovation to one or more components that does not significantly affect the overall configuration of the system. 8.An architectural innovation is an innovation that changes the overall design of a system or the way its components interact with each other.

2)Managers can use the s-curve model as a tool for predicting when a technology will reach its limits and as a prescriptive guide for whether and when the firm should move to a new, more radical technology. Firms can use data on the investment and performance of their own technologies, or data on the overall industry investment in a technology and the average performance achieved by multiple producers. Managers could then use these curves to assess whether a technology appears to be approaching its limits or to identify new technologies that might be emerging on s-curves that will intersect the firm's technology s-curve. Managers could then switch s-curves by acquiring or developing the new technology. However, there are many limitations to using s-curves. First, it is rare that the true limits of a technology are known in advance, and there is often considerable disagreement among firms about what a technology's limits will be. Second, the shape of a technology's s-curve is not set in stone. Unexpected changes in the market, component technologies, or complementary technologies can shorten or extend the life cycle of a technology. Furthermore, firms can influence the shape of the s-curve through their development activities. For example, firms can sometimes stretch the s-curve through implementing new development approaches or revamping the architecture design of the technology. 3)Whether switching to a new technology will benefit a firm depends on a number of factors, including (a) the advantages offered by the new technology, (b) the new technology's fit with the firm's current abilities (and thus the amount of effort that would be required to switch, and the time it would take to develop new competencies), (c) the new technology's fit with the firm's position in complementary resources (e.g., a firm may lack key complementary resources, or may earn a significant portion of its revenues from selling products compatible with the incumbent technology), and (d) the expected rate of diffusion of the new technology.

4)The s-curve model suggests that technological change is cyclical. Each new s-curve ushers in an initial period of turbulence, followed by rapid improvement, then diminishing returns, and ultimately is displaced by a new technological discontinuity. The emergence of a new technological discontinuity can overturn the existing competitive structure of an industry, creating new leaders and new losers. Schumpeter called this process creative destruction and argued that it was the key driver of progress in a capitalist society. 5)The first category consists of innovators who are most likely to try a new product. They can afford to take a chance financially but are not always well integrated into society. Next are the early adopters. They are the second group to adopt a new technology and are respected by others for their assessments of the new technology and have the greatest potential for opinion leadership. The early majority comes next in adoptions. The members of this group are not opinion leaders although they do interact frequently with their peers. The late majority is more skeptical and will only adopt the product after pressure from their peers. The laggards are the last to adopt an innovation and they are highly skeptical. Their decisions are based on past experiences, and they must feel certain that a new innovation will not fail before adopting it. A marketer would probably want to appeal primarily to the early adopters since they have great influence over others and can prompt the mass market (early and late majority) to purchase the product. The innovators do not have this impact and are probably more responsive to the technologies' key features than marketing efforts. 6) B 7) D 8) B 9) B 10) A

11) D 12) D 13) B 14) C 15) C 16) B 17) C 18) B 19) C 20) B 21) C 22) C 23) D 24) C 25) C 26) TRUE 27) FALSE 28) FALSE 29) TRUE 30) FALSE 31) FALSE 32) TRUE 33) TRUE 34) FALSE 35) FALSE 36) FALSE 37) TRUE 38) FALSE 39) TRUE 40) FALSE

Student name:__________ 1)

Explain how the more a technology is adopted, the better it becomes.

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2) What is absorptive capacity? Why do firms that fall behind the technology frontier find it difficult to catch up?

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3) How is a dominant design likely to influence the nature of the technological discontinuity that will eventually replace it?

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What is vaporware? What are its advantages?

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Define platform ecosystems. When will platforms be more desirable in a market?

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6) Neon Electronics Incorporated is an electronics manufacturing company. It has adopted a dominant design for its television audio speakers. Which of the following statements is most likely to be true in this scenario? 6) ______

A) Neon Electronics will have to invest heavily in R&D to come up with new designs for the audio speakers. B) Neon Electronics will face decreasing returns to its adoption of the dominant design. C) Neon Electronics will have increased opportunities to develop complementary assets. D) The design adopted by Neon Electronics will be unpopular among most of the other manufacturers.

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The more a technology is adopted, ________blank. 7) ______

A) the less valuable it becomes on account of market saturation B) the more susceptible it becomes to decreasing returns of adoption C) the greater are the opportunities for development of complementary assets D) the less possibilities for improvements are there in the technology and its applications

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Which of the following statements is true of learning effects? 8) ______

A) There are substantial differences in the rates at which organizations learn. B) The learning rate is impervious to organizational factors such as firm strategy. C) As a technology is adopted, further development and refinement of the technology reduce. D) The cost of producing a unit rises as the number of units produced increases.

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9) Clear Vision Incorporated has been the market leader for vision care products such as eyeglasses and lenses for several years. It has also recently developed the use of laser technology to correct eye defects. The firm's experience in experimenting with the development of various technology over the years has allowed it to successfully recognize the value of new information, which it uses to develop new technologies ahead of its competitors. The phenomenon exemplified in this scenario is called ________blank. 9) ______

A) absorptive capacity B) disintermediation C) pure integration D) pure modularity

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10) A firm that develops new technologies ahead of others often tries a number of unsuccessful techniques before finding a solution that works well. This experimentation 10) ______

A) lowers the firm's ability to recognize the value of new information. B) lowers the firm's ability to develop and enhance technologies. C) makes it difficult for the firm to develop related technologies. D) enables the firm to find related solutions and alternatives that work well.

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11) As firms develop complementary technologies to improve the productivity or ease of utilization of a core technology, the core technology 11) ______

A) becomes more attractive to other firms. B) loses its credibility in the market. C) loses its dominant design position in the industry. D) experiences a decrease in its installed base.

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12) Money Club and Money Ball are online platforms that allow their members to get in touch with people from various businesses. They also facilitate business contracts between their members. Money Club has 6,000 members, whereas Money Ball has 3,500 members. This indicates that 12) ______

A) Money Club has a larger installed base than Money Ball. B) Money Club has a lower positive consumption externality than Money Ball. C) Money Ball provides more complementary goods than Money Club. D) Money Ball does not use a dominant design.

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13) Arica Software Incorporated is trying to estimate the installed base for its software. It is trying to assess the number of 13) ______

A) substitutes available for its software. B) developers working on its software. C) areas in which its software can be applied. D) users of its software.

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14) The value of an electronic reader is related to the availability of books, journals, magazines, etc. in a format that can be read by the electronic reader. For an electronic reader, these are ________blank goods. 14) ______

A) complementary B) substitute C) Giffen D) intermediate

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15) Increasing returns to adoption imply that technology trajectories are characterized by ________blank, meaning that relatively small historical events may have a great impact on the final outcome. 15) ______

A) the ratchet effect B) the funnel effect C) corrugated anomalies D) path dependency

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16)

Which of the following statements is true of a dominant design? 16) ______

A) It is not possible to have legally induced adherence to a dominant design. B) When a firm's technology is locked in as the dominant design of a market, it earns low rewards. C) A firm that supports a technology that is chosen as the dominant design is in a poor position to shape the evolution of the industry. D) A firm may find itself locked out of the market if it is unable to adopt the dominant design.

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17) Earth Love Electronics Incorporated has developed a lawn mower that runs on solar power. The lawn mowers are available in all local supermarkets and home appliances stores. Customers can also check out videos and product details and then order a lawn mower on the company's home page. According to the Buyer Utility Map, which of the following primary new value propositions is being offered by the company? 17) ______

A) risk utility in the supplements stage B) convenience utility in the purchase stage C) convenience utility in the disposal stage D) risk utility in the maintenance stage

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18) TechSense, an electronics manufacturing firm, allows its customers to resell old TechSense products at its retail outlets. The firm reuses the metal, wires, and plastic—extracted from the old products—in its new products. This way the company has been able to take waste management to a whole new level. According to the Buyer Utility Map, the firm is applying environmental friendliness utility lever in the ________blank stage of the buyer experience cycle. 18) ______

A) supplements B) purchase C) use D) disposal

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19) The U.S. Postal Service now offers a "Click-N-Ship" online service where users can buy and print shipping labels online. According to the Buyer Utility Map, the U.S. Postal Service is offering the ________blank utility lever during the ________blank stage of the buyer experience cycle. 19) ______

A) risk; use B) fun and image; maintenance C) convenience; purchase D) environmental friendliness; disposal

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20) A new technology is most likely to be successful in displacing an existing technology when 20) ______

A) its installed base is significantly less than that of the existing technology. B) the new technology competes only on the value of its stand-alone utility. C) it eclipses the combined value of the existing technology's stand-alone utility, its installed base, and its complementary goods. D) the new technology's perceived and anticipated components of value are lower than its actual components of value.

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21) Oswen Technologies Incorporated, a software development firm, conducted a market survey to determine its expected installed base for a product they had not released yet. The results of the survey indicated that the company would need to expand its expected installed base in order to drive adoptions once the product was released. To do this, the company began advertising the product prior to its launch in the market. This tactic is termed ________blank. 21) ______

A) shovelware B) vaporware C) bloatware D) greyware

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22) Future Electronics Incorporated's body scanning machine has been adopted by majority of the health-care market. As a result, the company demands a high price from its customers, which mainly include hospitals. The company has not been investing much on innovation and its product variety is low. The cost borne by the users in this case is referred to as ________blank. 22) ______

A) marginal cost B) social cost C) monopoly cost D) deferred cost

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23)

Which of the following statements is true of a monopoly cost curve? 23) ______

A) A monopoly cost to market share curve is more s-shaped than a network externality returns to market share curve. B) The steepness of a monopoly cost curve is largely a function of a firm's discretionary behavior. C) It is not possible for a network externality returns curve to cross a monopoly cost curve. D) A firm choosing to exploit its monopoly power is flattening its monopoly cost curve.

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24) In which of the following instances do platforms become more desirable than a tightly integrated product in a market? 24) ______

A) when customers are similar and want the standard choices that a single firm can provide B) when third-party options are uniform and low quality C) when compatibility with third-party products can be made seamless without integration D) when the platform sponsor decides to share control over quality and the overall product architecture with all the third-party vendors

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25) The degree to which a system's components can be separated and recombined is called ________blank. 25) ______

A) durability B) path dependency C) absorptive capacity D) modularity

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26) Increasing returns to adoption means that the more a technology is adopted, the more valuable it becomes. 26) ______ ⊚ ⊚

true false

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27) The learning curve indicates that the more units a company produces of an item, the more each unit will cost. 27) ______ ⊚ ⊚

true false

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28) In an industry where government regulation imposes a single standard for a technology design, the design of that standard necessarily dominates the other technology options available to the industry. 28) ______

⊚ ⊚

true false

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29) At the aggregate level, the more firms that are using a given technology and refin-ing it, the more absorptive capacity that is being generated related to that technology, making development of that technology less effective and efficient. 29) ______ ⊚ ⊚

true false

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30) In a market characterized by network externalities, the benefit from using a good decreases with an increase in the number of other users of the same good. 30) ______ ⊚ ⊚

true false

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31)

Network externalities seldom arise in markets that do not have physical networks. 31) ______

⊚ ⊚

true false

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32) Products that have a large installed base are likely to attract more developers of complementary goods. 32) ______ ⊚ ⊚

true false

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33)

A legally induced adherence to a dominant design is not possible. 33) ______ ⊚ ⊚

true false

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34)

The influence of a dominant design can extend beyond its own technology cycle. 34) ______

⊚ ⊚

true false

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35) In industries characterized by network externalities, the value of a technological innovation to users will be a function only of its stand-alone benefits and cost. 35) ______ ⊚ ⊚

true false

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36) Since perceived or expected installed base may drive subsequent adoptions, a large perceived or expected installed base can lead to a large actual installed base. 36) ______ ⊚ ⊚

true false

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37) When an industry has network externalities, the value of a good to a user is more likely to go up linearly rather than increase in an s-shape. 37) ______

⊚ ⊚

true false

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38) Network externality returns refer to the value customers reap as a larger portion of the market adopts the same good. 38) ______ ⊚ ⊚

true false

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39) Modularity becomes less valuable in a product system when there are diverse technological options available to be recombined and heterogeneous customer preferences. 39) ______ ⊚ ⊚

true false

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40) A platform ecosystem is characterized by relationships that are more independent than arms-length market contracts. 40) ______

⊚ ⊚

true false

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Answer Key Test name: chapter 4 1)Ample empirical evidence shows that the more a technology is used, the more it is developed and the more effective and efficient it becomes. As a technology is adopted, it generates sales revenues that can be reinvested in further developing and refining the technology. Furthermore, as firms accumulate experience with the technology, they find ways to use the technology more productively, including developing an organizational context that improves the implementation of the technology. Thus, the more a technology is adopted, the better it should become.

2)A firm's investment in prior learning can accelerate its rate of future learning by building the firm's absorptive capacity. Absorptive capacity refers to the phenomenon whereby as firms accumulate knowledge, they also increase their future ability to assimilate information. A firm's prior related experience shapes its ability to recognize the value of new information and to utilize that information effectively. For example, in developing a new technology, a firm will often try a number of unsuccessful configurations or techniques before finding a solution that works well. This experimentation builds a base of knowledge in the firm about how key components behave, what alternatives are more likely to be successful than others, what types of projects the firm is most successful at, and so on. This knowledge base enables the firm to more rapidly assess the value of related new materials, technologies, and methods. The effects of absorptive capacity suggest that firms that develop new technologies ahead of others may have an advantage in staying ahead. Firms that forgo investment in technology development may find it very difficult or expensive to develop technology in a subsequent period. This explains, in part, why firms that fall behind the technology frontier find it so difficult to catch up. 3)The influence of a dominant design can extend beyond its own technology cycle. As the dominant design is adopted and refined, it influences the knowledge that is accumulated by producers and customers, and it shapes the problem-solving techniques used in the industry. Firms will tend to use and build on their existing knowledge base rather than enter unfamiliar areas. This can result in a very "sticky" technological paradigm that directs future technological inquiry in the area. Thus, a dominant design is likely to influence the nature of the technological discontinuity that will eventually replace it.

4)Vaporware refers to products that are not actually on the market and may not even exist but are advertised by many software vendors. By building the impression among customers that a product is ubiquitous, firms can prompt rapid adoption of the product when it actually is available. Vaporware may also buy a firm valuable time in bringing its product to market. If other vendors beat the firm to market and the firm fears that customers may select a dominant design before its offering is introduced, it can use vaporware to attempt to persuade customers to delay purchase until the firm's product is available. 5)Platform ecosystem refers to a system of mutually dependent entities mediated by a stable core. Platforms will be more valuable than a tightly integrated product when (a) customers are diverse and want more choices than a single firm can provide, (b) when third-party options are diverse and high quality, (c) when compatibility with third-party products can be made seamless without integration, and/or (d) when the platform sponsor is powerful enough that it can retain control over quality and the overall product architecture without producing the complements itself. Looking at it from the other direction, platforms will be more valuable than a purely modular system when (a) complements are nonroutine purchases with uncertainty, (b) when some integration between the platform and its complements provides performance advantages, and/or (c) when important components of the ecosystem require subsidization (e.g., the market is unlikely to provide all the complements the end customer needs at adequate quality or value). 6) C 7) C 8) A 9) A 10) D 11) A

12) A 13) D 14) A 15) D 16) D 17) B 18) D 19) C 20) C 21) B 22) C 23) B 24) C 25) D 26) TRUE 27) FALSE 28) TRUE 29) FALSE 30) FALSE 31) FALSE 32) TRUE 33) FALSE 34) TRUE 35) FALSE 36) TRUE 37) FALSE 38) TRUE 39) FALSE 40) FALSE

Student name:__________ 1) Why were other keyboards that claimed to be more efficient not able to replace the QWERTY keyboard? Explain how this illustrates the need to consider switching costs when introducing new technologies.

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2) Loren has invented a product that detects water leakages caused by broken pipes and sends out an alarm similar to a smoke alarm. However, Loren doesn't have sufficient finances to invest in this new product. Therefore, he borrows money from his friends to enter the market and begins to experience some success. The product is not patentable because it is too similar to other existing technologies. Major corporations have seen his success and have now entered the market with competing products. What will be the probable destiny of Loren's company?

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3) SmartShoe Incorporated is the market leader in the gliding shoe market and enjoys an excellent reputation. It is the pioneer of this new market and currently holds 40 percent market share. Now, SmartShoe wants to introduce a new range of orthopedic shoes. Discuss how its reputation might affect the new product's acceptance among distributors and consumers.

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How do enabling technologies influence a firm's entry into the market?

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5) What assumptions underlie the use of timing of entry strategies into the market for new products?

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6) The first entrants to sell in a new product or service category are referred to as ________blank. 6) ______

A) pioneers B) early leaders C) early followers D) laggards

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7) Doven Incorporated pioneered software development in the 1970s and introduced its range of office tools well ahead of its competitors. According to the classification scheme of entrants, Doven would be classified as a(n) ________blank. 7) ______

A) first mover B) early follower C) early leader D) laggard

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8) Magnitude Incorporated was the first company to introduce a video gaming console in the market. However, consumers were uncertain about the product, and its high costs discouraged consumers from purchasing it. Eventually, Magnitude withdrew the product from the market. A few years later, Mantel Corporation and Adventura Incorporated came up with their respective gaming consoles and successfully established their products. In this scenario, Mantel and Adventura would be considered ________blank. 8) ______

A) pioneers B) early followers C) laggards D) late movers

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9) Marine Systems was the first company to develop an inventory management software specifically for hotels and restaurants. Soon after Marine Systems launched its product, Unicorn Systems developed a similar software. The software developed by Unicorn Systems outperformed the one developed by Marine Systems, and it eventually became the market leader. In this scenario, Unicorn Systems is an example of a(n) ________blank. 9) ______

A) first pioneer B) late mover C) early follower D) eccentric laggard

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10) If aspects that customers have come to expect in a technology are difficult for competitors to imitate, being the technology leader will 10) ______

A) result in an inability to preemptively capture scarce assets. B) yield sustained monopoly rents. C) result in lower bargaining power over suppliers. D) mean negligible research and development costs.

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11) Alpen Incorporated is a manufacturing firm that holds the patent for a new food processor that is considerably safer and more efficient than the others available in the market. Being the only firm that manufactures this product, Alpen charges a very high price for it. Based on the information provided in the scenario, which of the following statements is most likely to be true? 11) ______

A) As Alpen is the technology leader in the food processor manufacturing sector, the firm will yield sustained monopoly rents. B) Since Alpen has developed and invested in the new invention, which is the food processor, the firm will have no other option but to invest in new complementary goods if it wants to sell its products. C) Alpen will lose business and ultimately fail because of incumbent inertia. D) Since there are several food processor manufacturing firms in the market, Alpen will lose to its existing competitors and will seldom be able to make any profits.

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12) Jupiter Incorporated, a software firm, is starting to face competition from the new entrant in its market, Coral Incorporated Jupiter wants to prevent its existing customers from switching to Coral's newly developed software. Which of the following measures should Jupiter adopt to achieve its objective? 12) ______

A) ensuring that customers find its software simpler and more convenient to use than that of Coral's B) keeping the initial cost of its software higher than that of Coral's C) keeping the prices of the complements required for its software higher than those set by Coral D) ensuring that fewer complementary products are available for its products than those for the products of Coral

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13) Which of the following statements is true of first movers in comparison with early followers and late entrants? 13) ______

A) The cost of developing necessary production processes and complementary goods is lower for first movers. B) First movers are in a better position to exploit buyer switching costs and also to reap increasing returns advantages. C) First movers, being incumbents, have greater ability than later entrants to respond to changes in the industry environment and adopt newer production processes. D) First movers fail to capture scarce resources such as key locations, government permits, access to distribution channels, and relationships with suppliers.

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14) The tendency of existing firms to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers is known as ________blank. 14) ______

A) monopolization B) path dependency C) incumbent inertia D) technology trajectory

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15) Fashion Fair Corporation, the first mover in the "all-year discount" stores market, lost its market share to a late entrant, Brand Fair Incorporated Brand Fair operates online discount stores, which is cost-efficient when compared to investing in a brick-and-mortar store. Fashion Fair has been unable to replicate the online store business model because of its existing contracts with suppliers and heavy investment in retail stores. This ultimately leads to the failure of the business. Which of the following can be attributed to Fashion Fair's failure? 15) ______

A) incumbent inertia B) use of tacit resources C) free-rider effect D) presence of low exit barriers

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16) When Fun Bun Incorporated, an international fast-food chain, set up operations in China, it had to teach farmers how to grow a particular variety of potatoes, and bakers had to be taught how to make hamburger buns. This is an example of 16) ______

A) corporate social responsibility. B) an undeveloped supply channel. C) incumbent inertia. D) monopoly rents.

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17)

Which of the following is an advantage of being a late entrant into a market? 17) ______

A) Late entrants are the first to capture scarce resources. B) Late entrants often do not have to invest in exploratory research. C) Late entrants often are most likely to capitalize on monopoly rents. D) Late entrants are unaffected by switching costs.

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18) Component technologies that are necessary for the performance or desirability of a given innovation are referred to as _____. 18) ______

A) architectural technologies B) diffused technologies C) primary technologies D) enabling technologies

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19) Pioneer Athletics Incorporated wants to provide better landing mats for gymnasts. It therefore asks its foam suppliers to use a new innovative process to manufacture higher quality, durable foam in its mats. This new process used to develop the foam represents a(n) ________blank for Pioneer Athletics. 19) ______

A) network externality B) preemption rent C) enabling technology D) incumbent rent

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20)

Which of the following statements is true of a firm entering a market too early? 20) ______

A) Distribution channels required for the firm's products will be well established prior to its entry. B) Enabling technologies and complements available to the firm will be immature. C) The firm's competitors would have already captured controlling shares of the market. D) The firm will not be able to reap the advantages of monopoly rent.

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21)

Which of the following statements is true of customer preferences? 21) ______

A) The importance of technological features to customers stays constant over time. B) Customers can differ from producers in their understanding of a new technology. C) All pioneers of new-to-the-world technologies face customer uncertainty. D) Other things being equal, more customer uncertainty favors earlier timing of entry.

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22) Zach has invented a device, which when plugged to household appliances, such as televisions, vacuum cleaners, sound systems, and mixer grinders, will operate them using solar power. The device also works as a battery and converts solar power into energy that can be used during the night. This device needs to be plugged into a port in the household appliances. Since not all appliances have this feature, Zach is of the opinion that he should delay his entry into the market. Which of the following statements supports Zach's decision? 22) ______

A) The product works without the need for complementary goods. Hence, the more he delays his entry into the market, the better the competition is for his product. B) The entry barriers are low for this product in the market and hence it makes sense for Zach to delay his entry. C) Less mature enabling technologies may favor waiting for enabling technologies to be further developed. D) Since all pioneers face customer uncertainty, it is wise for Zach to delay his entry into the market as much as possible.

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23) In which of the following circumstances can a firm confidently enter the market at any time? 23) ______

A) when the enabling technologies are less mature B) when the product requires new complementary goods C) when there is high customer uncertainty D) when the product to be manufactured and sold is inimitable

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24)

Which of the following is a reason attributed to the failure of start-up firms? 24) ______

A) New innovations typically tend to be adopted very slowly at first. B) Decisions such as producing inimitable goods pressurize start-up firms to enter the market early in order to avoid competition. C) All innovations by start-up firms require new complementary goods. D) All start-up firms will have to wait a considerable amount of time for the enabling technologies to develop.

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25) ________blank processes require multiple stages of a new product development process to occur simultaneously. 25) ______

A) Incumbent development B) Parallel development C) Monopoly development D) Slow-cycle development

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26)

Early leaders are firms that are the first to enter a market. 26) ______ ⊚ ⊚

true false

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27)

Early followers enter the market only after a product begins to penetrate the mass market. 27) ______ ⊚ ⊚

true false

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28)

The initial cost of a good itself can be a switching cost. 28) ______ ⊚ ⊚

true false

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29) Firms that enter the market early can preemptively capture scarce resources such as key locations, government permits, patents, access to distribution channels, and rela-tionships with suppliers. 29) ______ ⊚ ⊚

true false

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30) A first mover can build brand loyalty before competitors enter the market even if the features of a technology are imitable. 30) ______ ⊚ ⊚

true false

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31) Late entrants typically bear the bulk of the research and development expenses for their product or service technologies. 31) ______ ⊚ ⊚

true false

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32)

Other things being equal, less customer uncertainty favors earlier timing of entry. 32) ______ ⊚ ⊚

true false

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33)

A firm's capital resources can give it some influence on the shape of the adoption curve. 33) ______ ⊚ ⊚

true false

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34) Regardless of whether a late entrant has significant resources, it will be unable to take market shares away from earlier movers. 34) ______ ⊚ ⊚

true false

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35) All innovations require complementary goods, and none of them can utilize existing complementary goods. 35) ______ ⊚ ⊚

true false

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36) In industries that have increasing returns to adoption due to network externalities, allowing competitors to get a head start in building an installed base is the safest strategy. 36) ______

⊚ ⊚

true false

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37)

Many start-up firms fail because new innovations tend to be adopted very slowly at first. 37) ______ ⊚ ⊚

true false

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38) Other things being equal, an entrant with a strong reputation can attract adoptions earlier than entrants without strong reputations. 38) ______ ⊚ ⊚

true false

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39) A firm intending to refine an earlier entrant's technology should avoid fast-cycle development processes. 39) ______

⊚ ⊚

true false

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40) A disadvantage of using parallel development processes is that it greatly lengthens the new product development time. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 5 1)The QWERTY keyboard was initially introduced to slow down typing and prevent key jamming on mechanical keyboards. Since so many people had already learned to use this keyboard, they were unwilling to learn how to type on other keyboards even though key jamming was no longer an issue. This illustrates that if buyers face high switching costs, the firm that captures customers early may be able to keep those customers even if technologies with a superior value proposition are introduced later. 2)Since Loren does not have significant resources and the returns will probably be slow, he may not last very long in this new industry. His lack of funds means that he will have very little to invest in product enhancements, while his competitors would be able to improve the product. For example, one company might attach a dialing system to the alarm that notifies a neighbor, a plumber, or the police department in case the owner is not at home. The larger companies can outspend Loren in advertising as well. 3)SmartShoe's excellent reputation will give the new product high credibility and will increase the likelihood of its acceptance into the market. The fact that it has such a strong track record will increase the likelihood that it will be able to line up distributors to carry its new range of orthopedic shoes. Consumers are also more likely to trust this entry because of satisfaction with past products of the company. All of this will mean earlier adoption of the product than any other company could expect.

4)Many innovations rely on crucial enabling technologies to ensure their performance. A high-definition television set is of little value if networks are incapable of broadcasting in high definition; cellular phones or portable stereos would have little value if small and longlasting batteries were unavailable. A devel-oper must identify which enabling technologies will affect the performance of the new innovation and assess the degree to which those technologies are mature enough (or will be mature enough) to deliver the desired performance. More mature enabling technologies allow earlier entry; less mature enabling technologies may favor waiting for enabling technologies to be further developed. 5)It is assumed that timing of entry is a matter of choice for the firm. However, implicit in this assumption is a corollary assumption that the firm is capable of producing the technology at any point in the time horizon under consideration. For this to be true, the firm must possess the core capabilities required to produce the technology to consumer expectations, or be able to develop them quickly. Also, to be able to take advantage of timing strategies for entry, the firm must have a fast-cycle development process in place and the financial resources to develop, produce, and market the product. 6) A 7) A 8) B 9) C 10) B 11) A 12) A 13) B 14) C 15) A

16) B 17) B 18) D 19) C 20) B 21) B 22) C 23) D 24) A 25) B 26) FALSE 27) FALSE 28) TRUE 29) TRUE 30) TRUE 31) FALSE 32) TRUE 33) TRUE 34) FALSE 35) FALSE 36) FALSE 37) TRUE 38) TRUE 39) FALSE 40) FALSE Student name:__________ 1) Explain the influences on the threat of potential entrants into a market according to Michael Porter's five-force model.

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2) What properties must resources have to be a potential source of sustainable competitive advantage?

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3) Differentiate between strategic stakeholder analysis and normative stakeholder analysis and describe the factors that are typically considered during the first step of a stakeholder analysis.

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4) What are core competencies? Explain the disadvantages of rewarding and promoting the development of core competencies.

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5) What is the danger of not having a strategic intent? In your answer, assume your company operates a hospital in a city with a population of 30,000 people, located about 50 miles away from a large city.

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Which of the following statements is true of Michael Porter's five-force model?

6) ______

A) It states that the attractiveness of an industry is unaffected by the industry's degree of rivalry. B) It fails to acknowledge the role of substitutes for customers. C) It is often used in practice to assess a specific firm's external environment. D) It states that oligopolistic industries are less competitive if firms choose to engage in price wars.

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7) Mr. Crunchy Incorporated is a firm experiencing severe losses. However, with a large initial investment in manufacturing equipment and infrastructure, the firm is finding it difficult to abandon the industry. According to Michael Porter's five-force model, the company is facing a(n) ________blank. 7) ______

A) vertical integration B) exit barrier C) horizontal integration D) substitute threat

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8) According to Michael Porter's five-force model, if suppliers of a particular good are very abundant,

8) ______

A) their bargaining power will be less. B) their level of differentiation will be very high. C) their level of vertical integration in the industry will be high. D) their annual employee turnover rates will be less.

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9) Ceramic Customs Corporation required a specific type of ceramic to make its tiles. Since there was only one supplier for that particular ceramic, the firm was forced to source all of its supplies from it. The firm tried negotiating the price of the material but failed to get any reduction on the cost. This was because 9) ______

A) the supplier had more bargaining power than the firm. B) the supply was unlimited. C) the supply exceeded the demand. D) the industry had barriers to entry.

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10) According to Michael Porter's five-force model, if a buyer can threaten to backward vertically integrate, it will 10) ______

A) decrease the buyer's bargaining power. B) increase the buyer's bargaining power. C) increase the supplier's bargaining power. D) lower the threat of entry into the industry.

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11) Factors that make it difficult or expensive to change suppliers or buyers are referred to as ________blank. 11) ______

A) transactional costs B) monopoly costs C) marginal costs D) switching costs

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12) Perfecto Espresso Corporation is a chain of coffee shops in the United States. Earlier it used to source its coffee from several coffee suppliers. However, recently it started its own coffee plantation to supply its coffee shops. This is an example of 12) ______

A) forward vertical integration. B) backward vertical integration. C) horizontal integration. D) substitution.

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13) Allure Fabrics Corporation supplies cotton, linen, and silk fabrics to various designer wear boutiques in and around Florida. The firm has recently launched a boutique in Florida under its own brand name to sell women's fashion apparel. Allure Fabrics is practicing 13) ______

A) forward vertical integration. B) backward vertical integration. C) horizontal integration. D) substitution.

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14) Scripts & Scrolls Corporation supplies printing paper to select publishing houses. When its customers asked for a discount in the cost of supplies, the company had to oblige fearing that the customers might withdraw pending contracts. This shows the increased 14) ______

A) bargaining power of buyers. B) bargaining power of suppliers. C) threat of substitutes. D) vertical integration of buyers.

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15) Ample Espresso Corporation is a coffeehouse located across from Tian's Kitchen, a restaurant. According to Michael Porter's five-force model, the services and products provided by both are most accurately classified as ________blank. 15) ______

A) complements B) competitors C) substitutes D) intermediates

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16) The Corner Shop Corporation is a leading supermarket chain in Chicago. According to Michael Porter's model of a value chain, which of the following activities of the firm is a primary activity? 16) ______

A) a training session for the floor attendants at The Corner Shop outlets B) an advertising campaign for a new The Corner Shop outlet C) the accounting function at The Corner Shop outlets D) the hiring of lawyers to ensure that the firm adheres to labor laws

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17)

Which of the following statements is true of Michael Porter's model of a value chain? 17) ______

A) Procurement includes activities such as the acquisition of inputs. B) Outbound logistics include activities such as informing buyers about products and services to induce the purchase. C) Marketing includes activities involved in the transformation of inputs into outputs. D) Inbound logistics include activities such as recruiting, hiring, training, and compensating personnel.

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18)

Which of the following would be an example of a tacit resource? 18) ______

A) an oddsmaker who works for a large casino in Las Vegas and is correct 95 percent of the time B) hand-woven fabrics made by local shops C) a chipset manufacturing machine bought by an electronics company D) a distiller used to make malt liquor

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19)

A resource can be extremely difficult to imitate if 19) ______

A) it can be readily codified in written form. B) it is not path dependent. C) it arises through the complex interaction of multiple people. D) it is clear how the resource gives rise to value.

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20)

Socially complex resources are 20) ______

A) resources or activities that emerge through the interaction of multiple individuals. B) resources that cannot be defined in terms of a numerical value. C) resources that require public sanction in order to be utilized for profit-making purposes. D) resources that are shared by different parties, thereby making them easily imitable.

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21)

Which of the following statements is true of core competencies? 21) ______

A) A firm's core competency refers to a single ability. B) A firm's core competency is more than just a core technology. C) An individual business unit has only one core competency. D) A firm's core competency is usually easy to imitate.

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22) Piezo Tech Solutions supplies hospitals with software to track insurance claims. As insurance regulations and policies are always changing, the firm's software needs to have the ability to be agile and responsive to change. In other words, the software needs 22) ______

A) dynamic capabilities. B) tacit resources. C) rigid competencies. D) to be path dependent.

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23) When Faslow Medical Center in Exeter County changed its name to Faslow Hospital, it also unveiled a plan to build a medical tower that would double its physical facilities by 100 percent within the next 10 years. It also announced that its goal was to not only serve Exeter County but also serve the entire region including the five contiguous counties. This is most accurately an expression of 23) ______

A) vertical integration. B) strategic intent. C) monopoly rent. D) supplier bargaining power.

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24)

Which of the following is a feature of the blue ocean strategy? 24) ______

A) In this strategy, the competition occurs in existing market spaces. B) Under this strategy, existing demand is exploited. C) The focus of the strategy is to make the value-cost trade-off. D) The strategy lays emphasis on making the competition irrelevant.

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25) Which of the following can be classified as an internal perspective and its defining measure under the balanced scorecard approach? 25) ______

A) having a goal such as meeting shareholders' expectations and its defining measure such as return on capital B) having a goal such as improving the inventory management system and its defining measure such as inventory costs C) having a goal such as accelerating and improving new product development and its defining measure such as the average length of the new product development cycle D) having a goal such as improving customer satisfaction and its defining measure such as customer satisfaction surveys

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26) Noah owns a firm that sells furniture at an affordable cost. As most of the products he sells need to be assembled by the customer, he is able to sell them at prices lower than most competitors. His marketing strategy focuses on providing lower prices for good-quality products. He has also marketed the fact that assembling the products is very easy if the customer follows the instructions and demos given on the firm's website. Considering that most of the customers used to buy furniture from out of town at higher prices, Noah's self-assembled furniture business has become quite successful in his town and he has managed to create and capture this demand in an uncontested market space. Which of the following strategies was used by Noah in his business? 26) ______

A) red ocean strategy B) blue ocean strategy C) SWOT analysis D) PEST analysis

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27) Formulating a technological innovation strategy first requires an accurate appraisal of where the firm currently is. 27) ______ ⊚ ⊚

true false

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28) In general, the more firms competing that are of comparable size, the more competitive the industry will be. 28) ______ ⊚ ⊚

true false

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29) When demand is increasing, there is less revenue to go around and firms will experience more competitive pressure. 29) ______ ⊚ ⊚

true false

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30)

Low exit barriers intensify rivalry by making firms reluctant to abandon the industry. 30) ______ ⊚ ⊚

true false

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31) According to Michael Porter's five-force model, the threat of potential entrants is influenced by the height of entry barriers. 31) ______ ⊚ ⊚

true false

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32) According to Michael Porter's five-force model, the degree to which a firm relies on one or a few suppliers will influence its ability to negotiate good terms. 32) ______ ⊚ ⊚

true false

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33) Oligopolistic industries are industries in which there is no competition because a single company dominates the market. 33) ______ ⊚ ⊚

true false

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34)

Ammunition can be considered a complement for firearms. 34) ______ ⊚ ⊚

true false

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35) A strategic stakeholder analysis emphasizes the stakeholder management issues a firm ought to attend to due to their ethical or moral implications. 35) ______ ⊚ ⊚

true false

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36) According to Michael Porter's model of a value chain, firm infrastructure is a primary activity of the value chain. 36) ______ ⊚ ⊚

true false

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37)

Tacit resources are easily imitable. 37) ______ ⊚ ⊚

true false

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38) Dynamic capabilities allow firms to rapidly adapt to emerging markets or major technological discontinuities. 38) ______ ⊚ ⊚

true false

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39) A firm's emphasis on a scientific discipline that is central to its core competency can make the firm less attractive to individuals from other disciplines. 39) ______ ⊚ ⊚

true false

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40) According to Prahalad and Hamel's model, it is possible for a firm to develop core competencies to a set of abilities that enable it to quickly reconfigure its organizational structure and routines in response to new opportunities. 40) ______ ⊚ ⊚

true false

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41) Red ocean strategies involve aligning the entire system of a firm's activities with its strategic choice of differentiation or low cost. 41) ______ ⊚ ⊚

true false

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42) The balanced scorecard is a measurement system that encourages the firm to consider its goals from multiple perspectives (financial, customer, business process, and innovation and learning), and establish measures that correspond to each of those perspectives. 42) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 6 1)According to Michael Porter's five-force model, the threat of potential entrants is influenced by both the degree to which the industry is likely to attract new entrants (i.e., is it profitable, growing, or otherwise alluring?) and the height of entry barriers. Entry barriers can include such factors as large start-up costs, brand loyalty, difficulty in gaining access to suppliers or distributors, government regulation, threat of retaliation by existing competitors, and many others. While profitability and growth may attract new entrants, entry barriers will deter them. 2)To be a potential source of sustainable competitive advantage, resources must be rare, valuable, durable, and inimitable. Resources that are rare and valuable may yield a competitive advantage, but that advantage will not be sustainable if the firm is incapable of keeping the resources, or if other firms are capable of imitating them. If a firm lacks the capital to reinvest in its brand image, it will erode. Furthermore, many valuable resources are quickly imitated by other firms. Technological advances are reverse-engineered, skillful marketing campaigns are copied, innovative human resource practices are adopted by imitators, and so on. Some resources, however, are not readily imitable.

3)Whereas strategic stakeholder analysis emphasizes the stakeholder management issues that are likely to impact the firm’s financial performance, a normative stakeholder analysis emphasizes the stakeholder management issues the firm ought to attend to due to their ethical or moral implications. The first step of stakeholder analysis usually involves identifying any parties that may be impacted by the firm’s behavior. After identifying each party, the firm identifies the stakeholder’s interests, the resources they contribute to the organization, the claims they are likely to make on the organization, and which claims will be most important from the firm’s perspective. 4)A company's core competencies are typically considered to be those that differentiate it strategically. A core competency is more than just a core technology. A core competency arises from a firm's ability to combine and harmonize multiple primary abilities in which the firm excels into a few key building blocks of specialized expertise. The disadvantage of rewarding and promoting the development of core competencies is that the organizational culture may reward employees who are most closely connected to core competencies with higher status and better access to other organizational resources. While these systems and norms can prove beneficial in reinforcing and leveraging the firm's existing core competencies, they can also inhibit the development of new core competencies. Firms that have well-developed knowledge sets along a particular trajectory may find it very hard to assimilate or utilize knowledge that appears unrelated to that trajectory, potentially limiting the firm's flexibility. Students' answers may vary.

5)Without a strategic intent, the hospital will fail to recognize future market needs and will only try to maintain its current market position. The hospital can easily become focused on markets it has served in the past because of a lack of forward-looking orientation. Most likely, hospitals from the larger city will try to become more regional in nature by opening satellite centers in the county where the local hospital is located. They will also adopt the latest medical technology. Local physicians may start sending patients to the other, larger hospitals as the hospital will not be able to provide the best medical treatment to its patients. Employees will complain about having out-of-date technology and of losing patients to larger hospitals. This lower morale will adversely affect turnover. The local community will probably also become disgruntled. Students' answers may vary. 6) C 7) B 8) A 9) A 10) B 11) D 12) B 13) A 14) A 15) C 16) B 17) A 18) A 19) C 20) A 21) B 22) A

23) B 24) D 25) B 26) B 27) TRUE 28) TRUE 29) FALSE 30) FALSE 31) TRUE 32) TRUE 33) FALSE 34) TRUE 35) FALSE 36) FALSE 37) FALSE 38) TRUE 39) TRUE 40) TRUE 41) TRUE 42) TRUE Student name:__________ 1) Why do technology start-ups face a much higher cost of capital than larger competitors? Discuss the sources from which new technology start-ups can obtain external financing.

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2) What is the internal rate of return of a project? How is it calculated? What are the drawbacks of using this method?

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3) Explain how the real options method uses stock options. Are there any drawbacks to this method?

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4) Dayton Regional Medical Center has decided to build a new wing for its outpatient services. Dayton wants to know which services are important to its patients in this new wing. Do they prefer large waiting rooms for family members or small rooms adjacent to recovery rooms? Do they prefer patient advocates to keep them informed, or would nurses be better? What technique would be appropriate to come up with the weights and trade-offs for these types of services? Explain why you consider the technique to be most appropriate.

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5) General Sys Incorporated has gathered data to evaluate the attractiveness of a potential project. It knows the cash flows expected under different scenarios. It has conducted a focus group that ranks various product attributes, and it has the ranking of various marketing techniques provided by a consulting company. What method should General Sys use to evaluate this project? Why is this method the best one to use?

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6) ________blank refers to the allocation of a finite quantity of resources over different possible uses. 6) ______

A) Systematic enrollment B) Translational funding C) Organizational appropriation D) Capital rationing

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7) Mark is a wealthy private financier who funds projects without utilizing a venture capital limited partnership structure. He typically provides funds for start-up projects that are $1 million or less. There have been instances in the past where Mark lost a huge share of money in some projects, but he also received high returns on some other projects. He is aware of the risks, but that does not stop him from funding start-ups. Which of the following would best describe Mark? 7) ______

A) He is a market leader. B) He is a laggard. C) He is an angel investor. D) He is a broker.

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Which of the following statements is true of angel investors? 8) ______

A) They are usually listed in public directories. B) They typically fund projects that are $50 million or more. C) They are often wealthy individuals who have been very successful in business. D) They avoid funding start-ups because of the high risks involved in these businesses.

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9) Which of the following is true of quantitative methods of analyzing new projects, particularly in rapidly changing environments? 9) ______

A) They enable managers to use rigorous statistical comparisons of projects. B) Their accuracy is unquestionable. C) Discounted cash flow methods are the least commonly used quantitative methods. D) They are particularly accurate in highly uncertain or rapidly changing environments.

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10) The discounted cash inflows of a project minus the discounted cash outflows is referred to as the ________blank of the project. 10) ______

A) internal rate of return B) net present value C) real option D) screening value

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11) What is the net present value (NPV) of a project if the present value of cash inflow is $10,000 and the present value of cash outflows is $5,000? 11) ______

A) $2,000 B) $5,000 C) $10,000 D) $15,000

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12) Given the assumptions made in calculating its costs and cash inflows, if the net present value of a project is greater than zero, then the 12) ______

A) project cannot be carried out as the cash outflow is too high. B) present value of cash outflows is higher than the present value of cash inflow. C) project will require five years to break even. D) project generates wealth.

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13) In the context of a research and development (R&D) program, which of the following can be considered the exercise price? 13) ______

A) the cost of the R&D program B) the cost of future investment required to capitalize on the R&D program C) the returns to the R&D investment D) the returns to the R&D investment minus the cost of the R&D program

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14) If a firm has the option of investing in R&D, the cost of commercializing a new technology that is developed can be considered the 14) ______

A) exercise price. B) price of a call option. C) benefit of exercising the option. D) the value of the option.

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15)

Which of the following is true of using the real options approach to evaluate a project? 15) ______

A) Some evidence suggests that it results in technology investment decisions that are better than those produced by the cash flow analysis approach. B) It is mostly used liberally because technology investment scenarios often correspond to the same capital market assumptions upon which the approach is based. C) It is cheap to use in case of a firm undertaking solo new product development. D) According to research, it is valuable only when there is no uncertainty in technology trajectories.

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16) Which of the following is a disadvantage of using internal rate of return for assessing a project? 16) ______

A) It fails to take into account the time value of money and risk. B) It cannot be calculated by trial and error. C) It discriminates heavily against long-term and risky projects. D) It fails to provide concrete financial estimates.

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17) In the context of qualitative methods for choosing projects, screening questions are used mainly to 17) ______

A) increase the rate of employee attrition. B) structure the discussion about project details like potential costs and benefits. C) increase employee turnover rates. D) choose the best consulting firm to analyze a potential project.

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18) NewDigger Incorporated makes backhoes for digging ditches and trenches. It has developed an environmental-friendly liquid that, when poured on the ground, reduces the time and labor required to dig trenches of various depths, depending on how much is applied. The firm has recently started using this product commercially. This would most probably be considered a(n) ________blank project for NewDigger. 18) ______

A) derivative B) platform C) breakthrough D) additive

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19) TechToTeach Company has developed and sold a product that can be used by students to take faster notes in a classroom as the teacher speaks. The device automatically records the teacher's voice and converts it into a text format. This new technology has been widely accepted by various universities and has been appreciated by students, thus increasing the company's inflow. This technology can be most accurately described as a(n) ________blank project by TechToTeach. 19) ______

A) advanced R&D B) platform C) breakthrough D) derivative

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20) Coolers Incorporated, a house appliances manufacturer, has upgraded its technology by making all its appliances work on voice sensors instead of remote controls or manual operations. Though the technology is new, Coolers has decided to introduce the product in the market at the same rates as its earlier technology so that its usual customers can purchase these products. This project is a(n) ________blank for Coolers Incorporated. 20) ______

A) platform project B) derivative project C) breakthrough project D) start-up project

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21) A firm that invests heavily in derivative projects that may be immediately commercialized with little risk 21) ______

A) will have greater long-term strategic momentum. B) will be on the leading edge of technology. C) will likely be unable to compete when the market shifts to a newer technology. D) will have poor returns on its R&D investment in the short run.

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22) In the ________blank method, in order to establish scales of customer preferences, individuals in a group are each given a stack of cards with an object or idea on each card. 22) ______

A) derivative B) conceptual C) DEA D) Q-sort

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23) Jack took part in a survey in which he was asked to rank the importance of certain features of the smart television he had recently purchased. The result was then used by the surveying firm to assess the different attributes of the ranking. This survey would most accurately be termed a ________blank. 23) ______

A) cognitive analysis B) transactional analysis C) program analysis D) conjoint analysis

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24) Fabmark Consultancy was asked by a client to evaluate the attractiveness of a potential project to develop a new product line. The data provided by the client included cash flow estimates (in dollars), ranking of marketability by the sales force, and ranking of different product attributes from a potential customer focus group. Which of the following methods would allow Fabmark Consultancy to combine this information and analyze it? 24) ______

A) Q-sort B) data envelopment analysis C) attribute ranking D) breakeven analysis

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25)

Which of the following statements is true of conjoint analysis? 25) ______

A) It is a simple method for ranking objects or ideas on a number of different dimensions. B) It is used by managers to compare their desired balance of projects with their actual balance of projects. C) It requires the creation of a hypothetical efficiency frontier. D) It is most commonly used to assess the relative importance to customers of different product attributes.

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26) The accuracy of estimates in quantitative methods is questionable because the quality of the comparison ultimately depends upon the quality of the original estimates. 26) ______ ⊚ ⊚

true false

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27)

In real options, the assets that underlie the value of the option are financial resources. 27) ______ ⊚ ⊚

true false

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28) According to the net present value method of discounted cash flow analysis, the time required to break even on a project using discounted cash flows is known as period of return. 28) ______ ⊚ ⊚

true false

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29) Both net present value and internal rate of return techniques provide concrete financial estimates that facilitate strategic planning and trade-off decisions. 29) ______ ⊚ ⊚

true false

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30) Standard discounted cash flow analysis has the potential to severely undervalue a development project's contribution to a firm. 30) ______ ⊚ ⊚

true false

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31) Calculating the internal rate of return of a project typically must be done by trial and error. 31) ______ ⊚ ⊚

true false

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32) From a real options perspective, the value of a call stock option is zero as long as the price of the stock is more than the exercise price. 32) ______ ⊚ ⊚

true false

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33) Options are valuable when there is uncertainty, and because technology trajectories are uncertain, an options approach may be useful. 33) ______ ⊚ ⊚

true false

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34) While the value of a stock is independent of the call holder's behavior, the value of an R&D investment is not independent of the investor's behavior. 34) ______ ⊚ ⊚

true false

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35)

The investor is an active driver of the value of an investment. 35) ______ ⊚ ⊚

true false

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36) Breakthrough projects typically offer fundamental improvements in the cost, quality, and performance of a technology over preceding generations. 36) ______ ⊚ ⊚

true false

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37) A derivative project is designed to serve a core group of consumers, whereas platform projects represent modifications of the basic platform design to appeal to different niches within that core group. 37) ______

⊚ ⊚

true false

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38) Conjoint analysis enables a subjective assessment of a complex decision to be decomposed into quantitative scores of the relative importance of different criteria. 38) ______ ⊚ ⊚

true false

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39)

Data envelopment analysis (DEA) utilizes linear programming. 39) ______ ⊚ ⊚

true false

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40) The drawback to data envelopment analysis (DEA) is that it does not allow comparisons of projects using multiple kinds of measures. 40) ______

⊚ ⊚

true false

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Answer Key Test name: chapter 7 1)While large firms can fund innovation projects internally, new technology start-ups must often obtain external financing. This can sometimes be daunting. Because technology start-ups often have both an unproven technology and an unproven business concept (and sometimes an unproven management team), they typically face a much higher cost of capital than larger competitors, and their options for obtaining capital can be very limited.In the first few stages of start-up and growth, entrepreneurs may have to turn to friends, family, and personal debt. Start-ups might also be able to obtain some initial funding through government agencies. If the idea and the management team seem promising enough, the entrepreneur can tap "angel investors" and venture capitalists as sources of both funds and mentoring. Angel investors are private investors who fund projects without utilizing a venture capital limited partnership structure. For projects that require more than $1 million, entrepreneurs often turn to venture capital, either from independent venture capital firms or corporate venture capital sources. The support of a venture capitalist provides a number of valuable benefits including credibility among other investors (and thus better access to capital) and mentoring.

2)The internal rate of return (IRR) of a project is the discount rate that makes the net present value of the investment zero. Managers can compare this rate of return to their required return to decide if the investment should be made. Calculating the IRR of a project typically must be done by trial and error, substituting progressively higher interest rates into the net present value (NPV) equation until the NPV is driven down to zero. Calculators and computers can perform this trial and error. This measure should be used cautiously, however; if cash flows arrive in varying amounts per period, there can be multiple rates of return, and typical calculators or computer programs will often simply report the first IRR that is found.

3)To understand real options, it is first useful to consider the financial model upon which they are based—stock options. In "real options," the assets underlying the value of the option are nonfinancial resources. An investor who makes an initial investment in basic R&D or breakthrough technologies is, it is argued, buying a real call option to implement that technology later should it prove to be valuable. With respect to research and development: 1.The cost of the R&D program can be considered the price of a call option. 2.The cost of future investment required to capitalize on the R&D program (such as the cost of commercializing a new technology that is developed) can be considered the exercise price. 3.The returns to the R&D investment are analogous to the value of a stock purchased with a call option. One drawback is the fact that technology investment scenarios often do not conform to the same capital market assumptions upon which the approach is based. Furthermore, while the value of a stock is independent of the call holder's behavior (that is, the call holder can simply wait and observe whether the value of the stock rises or falls), the value of an R&D investment is not independent of the investor's behavior. 4)A conjoint analysis technique would be the best choice for this analysis. Conjoint analysis can estimate the specific value of features of the outpatient center. As a part of the analysis, pricing for these services can also be determined. Multiple regression can be used to assess the degree to which each service influences the overall rating, resulting in the assignment of specific weights to individual criteria for different configurations of the outpatient center. Although Dayton Regional Medical Center cannot please everyone, it can come up with the "best" configuration for its patient base.

5)General Sys should use data envelopment analysis (DEA) to conduct its evaluation. This method allows analysis of multiple criteria that have different kinds of measurement units. In this case, measurement units include dollars (cash flows) and rankings (focus group and consulting company). DEA uses linear programming to combine these different measures to create a hypothetical efficiency frontier that represents the best performance on each measure. These values can then be used to compare this project with other projects. 6) D 7) C 8) C 9) A 10) B 11) B 12) D 13) B 14) A 15) A 16) C 17) B 18) C 19) C 20) A 21) C 22) D 23) D 24) B 25) D 26) TRUE 27) FALSE

28) FALSE 29) TRUE 30) TRUE 31) TRUE 32) FALSE 33) TRUE 34) TRUE 35) TRUE 36) FALSE 37) FALSE 38) TRUE 39) TRUE 40) FALSE Student name:__________ 1) Explain some of the reasons for which a firm might choose to engage in solo development. What are some of the advantages of solo development?

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2) What are the advantages and disadvantages of collaborating for research and product development?

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3) Why do licensing agreements impose restrictions on the licensee? How does licensing enable a firm to opt for a steady stream of royalties rather than risk losing the dominant position of its technology?

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What are collective research organizations? What are their important features?

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How can firms evaluate potential partners?

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6) Greyer Corporation has developed a special drug that kills cancer cells. While the scientists at Greyer have the knowledge, they are short on equipment, money, and marketing know-how. In this situation, the most appropriate step for Greyer would be to 6) ______

A) give up the idea of selling the drug altogether. B) find a partner to collaborate with to sell the drug. C) forge forward and develop the drug on its own. D) come up with a completely new drug.

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When technology is progressing rapidly, firms are more likely to 7) ______

A) commit themselves to fixed assets that will rapidly become obsolete. B) avoid forming alliances for projects that are risky and complex. C) use linkages with other specialized firms to access resources they do not possess. D) avoid becoming more narrowly specialized.

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Which of the following is an advantage of collaborating on development projects? 8) ______

A) It increases the in-house development time for the projects. B) It increases a product's cycle time. C) It allows firms to grow their knowledge bases rapidly. D) It causes firms to commit to assets that will rapidly become obsolete.

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9) Which of the following is a feature of a joint venture that differentiates it from other forms of alliances? 9) ______

A) It usually does not result in the creation of a new business entity. B) It increases asset commitment to products that will become rapidly obsolete. C) It increases cycle time of a technology. D) It involves a significant equity stake by the partners.

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10) Allured Architecture Incorporated collaborated with Maze & Matiz Corporation to form a new architecture firm called AllureAmaze Incorporated Both the firms had a significant equity stake in the new entity. This collaboration would most accurately be termed a(n) ________blank. 10) ______

A) licensing project B) joint venture C) outsourcing maneuver D) contract alliance

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11) Combining the capabilities and other resources of partner firms but not necessarily transferring those resources between the partners is referred to as ________blank. 11) ______

A) capability transfer B) capability complementation C) resource modification D) disintermediation

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12) Easymake Corporation developed a new Web design software to build Web pages for its clients. However, Easymake soon realized it could make more money by selling this software to those who wish to quickly build Web pages to sell their products. Which of the following would be the most appropriate strategy for Easymake? 12) ______

A) It should not sell the Web design software as it will give rise to competition on the Internet. B) It should become a licensor of the new Web design software. C) It should become a licensee of the new Web design software. D) It should make the Web design software available to users as open-source software.

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13) Greyer Corporation manufactures surgical instruments. Systems Medico Incorporated enters into a contractual arrangement with Greyer that allows it to use Greyer manufacturing methods and management structure to produce and sell surgical instruments. Systems Medico must pay a yearly fee to Greyer for the use of its manufacturing processes. In this scenario, Systems Medico is the ________blank. 13) ______

A) licensor B) contract manufacturer C) licensee D) intrapreneur

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14) Allured Cosmetics Corporation enters into a contractual agreement with Pure Cosmetics Incorporated, a manufacturing firm in the West Coast. According to the contract, Pure Cosmetics can use the manufacturing processes of Allured Cosmetics to produce cosmetics in return for a specific fee. Pure Cosmetics is bound to use the manufacturing process only to make complementary products for the cosmetics manufactured by Allured Cosmetics. This collaborative arrangement is classified as ________blank. 14) ______

A) licensing B) outsourcing C) a joint venture D) capability complementation

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15)

Which of the following statements is true of contract manufacturing? 15) ______

A) It requires companies to increase its labor force to meet the scale of market demand. B) It requires firms to meet the scale of market demand by committing to long-term capital investments. C) It enables a firm to tap the greater economies of scale. D) It decreases organizational responsiveness to the environment.

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16) Alumplus Aluminum Company has come up with a new type of metal. However, producing it would take up 75 percent of its manufacturing capacity and would hinder its ability to continue producing its other products. Alumplus Aluminum hires LM Group of Manufacturers to manufacture the new type of metal. This collaborative arrangement is most likely to be classified as ________blank. 16) ______

A) outsourcing B) disintermediation C) capability complementation D) solo internal development

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17)

Which of the following statements is true of outsourcing? 17) ______

A) It involves significantly low amounts of transaction costs. B) It is the most viable option for companies seeking to avoid becoming hollow. C) It is the best way for a company to develop in-house manufacturing capabilities. D) It carries a risk of proprietary technology being expropriated by the contract manufacturer.

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18) The R&D team of Zelda Technozone Incorporated has developed a prototype for a twoseater car that runs primarily on solar energy. Since the firm usually manufactures household appliances, the management acknowledges that it does not have the required competencies to manufacture this car on a large scale. It decides to access another firm's manufacturing competencies. Which of the following collaborative arrangements is most appropriate in this scenario? 18) ______

A) licensing in B) joint venture C) licensing out D) franchising

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19) ________blank offers a fast way for a firm to extend the reach of its technology that is nearly free and offers the potential for royalties. 19) ______

A) Licensing out a technology B) Forming a joint venture C) Solo internal development D) Vertical integration

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20)

Which of the following statements is true of a collective research organization? 20) ______

A) It does not help firms to leverage their competencies. B) It is a short-term commitment. C) It is an effort to rapidly access capabilities or technology. D) It allows a firm to share the cost and risk of basic research.

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21)

Which of the following statements is true of resource fit? 21) ______

A) It refers to the degree to which partners have compatible objectives and styles. B) It excludes resources that are supplementary. C) It seldom enables partners to achieve economies of scale by pooling of supplementary resources. D) It encourages collaborations based on the combination of complementary resources to access resources a firm does not possess.

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22) ________blank refers to the degree to which partners have compatible objectives and styles. 22) ______

A) Resource fit B) Strategic fit C) Capability complementation D) Contractual fit

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23) _____ are legally binding contractual arrangements to ensure that partners are fully aware of their rights and obligations in the collaboration and have legal remedies available if a partner should violate the agreement. 23) ______

A) Void contracts B) Alliance contracts C) Corporate charters D) Articles of association

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24) Carl owns a software firm, and Mike owns a computer hardware manufacturing firm. They decide to create an alliance in order to manufacture laptops and desktops using the shared competencies of their respective firms. When creating the alliance, they make sure that each of them invests 50 percent capital and that they would each own a specified right to a percentage of the profits from the alliance. The collaborative relationship in this scenario is known as ________blank. 24) ______

A) equity ownership B) relational governance C) alliance contracts D) solo internal development

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25) Self-enforcing norms based on goodwill, trust, and reputation of partners are known as ________blank. 25) ______

A) capability complementors B) alliance contracts C) equity ownership D) relational governance

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26)

Some firms avoid collaboration for fear of giving up their proprietary technologies. 26) ______ ⊚ ⊚

true false

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27) Solo development has the advantage of allowing firms to save time or money if they believe development efforts are crucial in building and renewing capabilities. 27) ______ ⊚ ⊚

true false

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28) It is unusual for a company to lack certain complementary assets required to transform a body of technological knowledge into a commercial product. 28) ______ ⊚ ⊚

true false

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29) Obtaining some of the necessary capabilities or resources from a partner rather than building them in-house will increase a firm's asset commitment. 29) ______ ⊚ ⊚

true false

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30)

Product life cycles shorten with high-speed technological changes. 30) ______ ⊚ ⊚

true false

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31)

A firm cannot collaborate with its competitor. 31) ______ ⊚ ⊚

true false

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32) Firms can use strategic alliances to exploit their own capabilities by leveraging them in another firm's development efforts. 32) ______ ⊚ ⊚

true false

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33) Through a strategic alliance, firms can establish a limited stake in a venture while maintain-ing the flexibility to either increase their commitment later or shift these resources to another opportunity. 33) ______ ⊚ ⊚

true false

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34) Licensing a technology from another firm is typically more expensive for a licensee than developing a new technology in-house. 34) ______ ⊚ ⊚

true false

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35)

Collective research organizations can take the form of trade associations. 35) ______ ⊚ ⊚

true false

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36) Solo internal development is, on average, a relatively fast and inexpensive way of developing a technology. 36) ______ ⊚ ⊚

true false

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37) After licensing a technology, a firm typically has limited discretion over what it can do with the technology. 37) ______ ⊚ ⊚

true false

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38) A firm's effectiveness at managing its collaborations will increase with the number of collaborations to which it is committed. 38) ______ ⊚ ⊚

true false

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39) Equity ownership helps to align the incentives of the partners and provides a sense of ownership and commitment to the project that can facilitate supervision and monitoring of the alliance. 39) ______

⊚ ⊚

true false

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40) Research suggests that relational governance increases the contracting and monitoring costs of managing an alliance and impedes cooperation between alliance partners. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 8 1)A firm might choose to engage in solo development of a project for several -reasons. First, the firm may not need to collaborate with other organizations because it already possesses all the required capabilities and resources for a particular development project in-house. A firm may also prefer to obtain required resources from a partner, but there may be no willing or appropriate partners available. Additionally, a firm may deliberately choose to develop a project as a solo venture in order to protect its proprietary technologies, or if it seeks to have full control over the project’s development and returns. An advantage of solo development of a technological innovation is that it provides a firm with opportunities to build and renew its capabilities.

2)Collaborating on development projects can offer a firm a number of advantages. First, collaborating can enable a firm to obtain necessary skills or resources more quickly than developing them in-house. Second, obtaining some of the necessary capabilities or resources from a partner rather than building them in-house can help a firm reduce its asset commitment and enhance its flexibility. Third, collaboration with partners can be an important source of learning for a firm. Fourth, one primary reason firms collaborate on a development project is to share the costs and risks of the project. This can be particularly important when a project is very expensive or its outcome highly uncertain. Finally, firms may also collaborate on a development project when such a collaboration would facilitate the creation of a shared standard. Collaboration also has some disadvantages. It requires a firm to share profits and knowledge on proprietary technologies. By relying on a partner, the company does not develop in-house capabilities for the future. Collaboration also means giving up some control over how the technology is developed and used.

3)Licensing agreements typically impose many restrictions on the licensee, enabling the licensor to retain control over how the technology is used. However, over time, licensees may gain valuable knowledge from working with the licensed technology that can enable them to later develop their own proprietary technologies. In the long run, the licensor's control over the technology may erode. Sometimes firms license their technologies to preempt their competitors from developing their own competing technologies. By licensing out the technology to potential competitors, the licensor gives up the ability to earn monopoly rents on the technology. However, doing so may prevent potential competitors from developing their own proprietary technologies. Thus, licensing enables a firm to opt for a steady stream of royalties rather than gambling on the big gain—or big loss—of having its technology compete against others for market dominance.

4)Collective research organizations may take a num-ber of forms, including trade associations, university-based centers, or private research corporations. Groups of organizations may form collective research organizations to jointly work on advanced research projects that are particularly large or risky. Many of these organizations are formed through government or industry associa-tion initiatives. Participation in a collective research organization is typically a long-term commitment rather than an effort to rapidly access capabilities or technology. Collective research organizations can be very valuable ways for a firm to leverage and build upon its existing competencies, as well as to learn from other participating organizations. Though collective research organizations may not yield immediate returns in the form of new products or services, participating in collective research organizations can be extremely useful in industries that have complex technologies and require considerable investment in basic science. By pooling their knowledge and effort, firms in collective research organizations can share the cost and risk of basic research, while accelerating the rate at which it yields useful new solutions.

5)The success of collaborations will depend in large part on the partners chosen. A number of factors can influence how well suited partners are to each other, including their relative size and strength, the complementarity of their resources, the alignment of their objectives, and the similarity of their values and culture. These factors can be boiled down to two dimensions: resource fit and strategic fit. Resource fit refers to the degree to which potential partners have resources that can be effectively integrated into a strategy that creates value. Strategic fit refers to the degree to which partners have compatible objectives and styles. Firms can also evaluate potential partners using many of the same tools used to evaluate the firm's own position and strategic direction. This includes assessing how collaboration with the partner is likely to impact the firm's opportunities and threats in its external environment; its internal strengths, weaknesses, or potential for sustainable competitive advantage; and the firm's ability to achieve its strategic intent. 6) B 7) C 8) C 9) D 10) B 11) B 12) B 13) C 14) A 15) C 16) A 17) D 18) B 19) A

20) D 21) D 22) B 23) B 24) A 25) D 26) TRUE 27) TRUE 28) FALSE 29) FALSE 30) TRUE 31) FALSE 32) TRUE 33) TRUE 34) FALSE 35) TRUE 36) FALSE 37) TRUE 38) FALSE 39) TRUE 40) FALSE Student name:__________ 1) Jonathan has recently developed a new kind of camera. He has a working prototype and plans to patent his invention. He needs to raise money for production, so he wants articles about his camera to appear in various publications. Discuss the problems that Jonathan might have to face if he wants to seek patents in other countries in the future.

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2) Albert has designed a license plate holder for automobiles that makes theft of the license plate practically impossible. He has limited income and feels that he needs to protect his patent in numerous countries so that he can sell his product there in the future. Discuss how Albert can accomplish this.

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3) What is a trademark? How can the rights to a trademark or service mark be established? What are the advantages of registering a mark?

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What is a copyright? Discuss the provisions of the section 106 of the 1976 Copyright Act.

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5) George has come up with a new computer program to help sellers manage online auctions at sites such as eBay. The program is more efficient than just using a spreadsheet to track auctions. He would like his program to become the dominant design, but he also wants to earn a profit from all his hard work. What can George do to most effectively meet both these objectives?

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6) The scientists at Brainstorm Incorporated, a private medical research firm, have come up with a remarkable method for curing cancer. This cancer treatment technology is well protected and cannot be easily duplicated. Based on this information, it would be most accurate to say that this technology 6) ______

A) cannot be patented. B) is easily imitable. C) is not socially complex. D) has a high degree of appropriability.

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Tacit knowledge is best defined as the knowledge that 7) ______

A) cannot be readily codified or transferred in written form. B) cannot be patented. C) has a very low degree of appropriability. D) is not eligible for copyright protection.

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8) After much research, Angela has designed a new automobile tire with a unique polycarbonate exterior that cannot be punctured. In the context of the U.S. patent law, which of the following statements would be true for this invention? 8) ______

A) It can be patented as it is useful, novel, and not obvious. B) It can only receive a plant patent. C) It cannot be patented because tires are intangible products. D) It cannot be patented as it is only eligible for a copyright protection.

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9) Felix has designed a pair of sunglasses that can be folded and put into a case that easily fits into a shirt or pant pocket. Felix wants to know if he can receive a patent on this invention. Which of the following responses would be most accurate according to the U.S. patent law? 9) ______

A) He cannot receive a patent as the invention is only eligible for a copyright protection. B) He cannot receive a patent since he is merely making the sunglasses more portable. C) He cannot receive a patent as the invention is not useful. D) He can receive a patent as the invention is a tangible product.

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10) Under the U.S. patent law, which of the following is one of the mandatory requirements to be met by a new invention in order to be eligible for patent protection? 10) ______

A) It must be obvious. B) It must be novel. C) It must substitute one material for another. D) It must substitute an element for an equivalent element.

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11)

Which of the following is true of trade secrets? 11) ______

A) They must meet requirements that are even more stringent than those of patent law. B) They may be legally used by another firm if it acquires the secret through a third party who did not have the right to disclose it. C) They cannot be used if an individual who acquired the secret inadvertently had reason to know that the information was a protected trade secret. D) They may be considered trade secrets under U.S. law even if they do not provide an economic advantage to a company.

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12) Shirley, a U.S. citizen, has invented a solar-powered amplifier that can be used in small speakers, such as Bluetooth speakers, to increase the volume up to five times. She decides to apply for a patent for this device in the United States. If she receives approval for the patent, what would be the duration of patent protection? 12) ______

A) 35 years B) 20 years C) 2.5 years D) lifelong

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13) To ensure that companies do not receive patents in countries where they do not intend to set up production of an invention, some countries have a "working requirement," according to which 13) ______

A) if the product is not profitable, it will not be granted a patent. B) patents in a country will only be granted to people who have been working in the country for at least one year. C) the invention must be manufactured in the country where the patent was granted within a specified period of time. D) the workers who manufacture the product must be from the country where the patent was granted.

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14) Angelo has designed a license plate holder for automobiles that makes theft of the license plate practically impossible. He has filed an application for a patent through the Patent Cooperation Treaty (PCT) office, and it has been approved. How long is this application going to protect his right to file for patent protection in the member countries of the PCT? 14) ______

A) three days B) six months C) one-and-half years D) two-and-half years

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15)

Which of the following statements is true of patent trolling? 15) ______

A) Its primary purpose in owning patents is to extort money from other firms. B) It refers to the situation when a company files for a patent but is not granted approval. C) It refers to a dense web of overlapping patents that can make it difficult for firms to compete or innovate. D) It effectively prevents inventors from patenting inventions in countries in which they have no intention of setting up production.

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16) Joe's Burgers Corporation is a famous fast-food chain that uses a picture of a cook in a red hat as its logo. It would not be legal for a firm to sell hamburgers with the same identification picture as that of Joe's Burgers because that would be a(n) 16) ______

A) patent violation. B) trademark violation. C) embargo violation. D) trade secret violation.

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17) David and Sons Corporation, a firm that manufactures home appliances, uses a symbol resembling a lightning strike to distinguish its products from other similar products in the market. This symbol is an example of a(n) ________blank. 17) ______

A) patent B) embargo C) statute D) trademark

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18)

Which of the following is a difference between copyrights and trademark protection? 18) ______

A) Unlike copyrights, trademarks are indicators used to distinguish the source of a good. B) Unlike copyrights, trademarks are a form of protection granted to works of authorship. C) Unlike trademarks, copyrights are established by the legitimate use of a product. D) Unlike trademarks, copyrights can last as long as a copyright is in use.

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19) Stevenson, a U.S. citizen, wrote a book called The Ten Commandments of Leadership. He gave away copies of the book to the people who attended his workshops on leadership. The copyright protection for this book 19) ______

A) is nonexistent unless Stevenson registers it with the Copyright Office. B) is in effect from the time the book was created and fixed in a copy. C) will be valid for only 20 years since the publication of the book. D) will be valid till Stevenson dies.

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20)

Which of the following can be protected by a copyright? 20) ______

A) familiar symbols B) names of people C) an improvisational speech that has not been recorded D) a novel

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21) Sally has come up with a unique recipe for cookies and is selling them through exclusive outlets all across Atlanta. As the sales skyrocket, her friends tell her to patent the recipe. However, she is so protective of her recipe that she does not even want to reveal her secret ingredients to a government agency. Is there anything she can do to keep the recipe legally protected? 21) ______

A) No, she cannot protect her recipe unless she is willing to get her recipe patented. B) Yes, her recipe can be considered a trade secret and she can legally prevent others from benefiting from her recipe without her permission. C) Yes, she can declare her recipe to be a trade secret and register it with the U.S. Trade Secret Agency. D) No, the recipe is not a tangible product and therefore cannot be protected.

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22) Software whose code is made freely available to others for use, augmentation, and resale is referred to as 22) ______

A) wholly proprietary systems. B) patented software. C) open-source software. D) copyright-protected systems.

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23) Wholly proprietary systems differ from wholly open systems in that wholly proprietary systems 23) ______

A) comprise technology, which is based on available standards or it may be new technology that is openly diffused to other producers. B) are typically compatible with the products offered by other manu-facturers. C) provide their developers with the opportunity to appropriate rents from the technology. D) comprise technologies that may be freely accessed, augmented, and distributed by anyone.

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24) LiteShoes Incorporated has recently obtained architectural control for its shoe glider technology. By doing so, the company has 24) ______

A) improved its efficiency in controlling the rate at which the technology is upgraded or refined. B) limited its ability to measure the product's compatibility with the complements produced by others. C) limited its potential to influence other firms in the industry. D) eliminated the possibilities of "feature creep."

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25) Singing Cards Corporation has decided to make the technology behind its musical cards open. Which of the following is most likely to be one of the advantages associated with this decision? 25) ______

A) The technology will accrue more rapid adoptions. B) The price of the technology will rise exponentially. C) The production of complementary goods will cease. D) The technology's installed base will accumulate much more slowly.

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26) The appropriability of an innovation depends upon how easily or rapidly competitors can replicate the innovation. 26) ______

⊚ ⊚

true false

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27) Discovery of scientific principles that pertain to natural laws can be patented in all countries as they are considered to have always existed. 27) ______ ⊚ ⊚

true false

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28)

Patent thickets make it easier for firms to compete and innovate. 28) ______ ⊚ ⊚

true false

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29)

A service mark distinguishes the provider of a service rather than a product. 29) ______

⊚ ⊚

true false

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30) Trademarks must be registered before a suit can be brought in federal court against an infringement of a mark. 30) ______ ⊚ ⊚

true false

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31) If you live in a country that is a member of the Madrid Union and you register a trademark in your country, that trademark is protected throughout the world. 31) ______ ⊚ ⊚

true false

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32)

Titles and names can be copyrighted. 32) ______

⊚ ⊚

true false

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33) A common set of international copyright laws automatically protects an author's work throughout the world. 33) ______ ⊚ ⊚

true false

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34)

In the United States, there are no laws to protect trade secrets. 34) ______ ⊚ ⊚

true false

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35) In most regions, if owners of a trade secret believe that another party has stolen or improperly disclosed their trade secret, they can ask a court to issue an injunction against further use of the secrets. 35) ______

⊚ ⊚

true false

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36) Wholly open systems are usually quickly commoditized and provide little appropriability of rents to their developers. 36) ______ ⊚ ⊚

true false

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37) When multiple firms can produce a technology, losing money on the technology in the short term to promote it as a standard is highly risky. 37) ______ ⊚ ⊚

true false

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38)

External development efforts typically lack the coordination of internal development. 38) ______

⊚ ⊚

true false

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39) For technologies in which standardization and compatibility are important, maintaining the integrity of the core product is absolutely essential, and external development can put it all at risk. 39) ______ ⊚ ⊚

true false

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40) Original equipment manufacturers (OEMs) licenses allow a company to execute and bundle a software with other goods, as well as to augment the software. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 9 1)The United States allows a one-year grace period, that is, an inventor can publish an invention up to a year before applying for the patent. However, in most other countries, publication of information about the invention before applying for a patent will bar the right to a patent. If Jonathan publishes information about his camera in the United States to create interest and raise funds for production, this may prevent him from obtaining patents in other countries. Many countries also require that the invention be manufactured in the country in which a patent was granted within a certain time frame (often three years) from the time the patent is granted. 2)Albert can file an application for a patent with the Patent Cooperation Treaty (PCT) governmental receiving office. The PCT currently covers more than hundred countries. The PCT will conduct a patent search in the member countries to verify that the invention is not subject to a prior claim. If that is the case, it will approve his application and the date on which it was approved will be established as the date from which he can claim protection for his invention. Once Albert has the funds, he can file for patents in all the member nations of the PCT.

3)A trademark is a word, phrase, symbol, design, or other indicator that is used to distinguish the source of goods from one party from the goods of others. The "Intel Inside" logo on many computers is one example of a trademark, as is the familiar Nike "swoosh" symbol. In most countries, the rights to a trademark or service mark are established in the legitimate use of the mark and do not require registration; however, registration pro-vides several advantages. First, registering a mark provides public notice of the reg-istrant's claim of ownership over the mark. Second, marks must be registered before a suit can be brought in federal court against an infringement of the mark. Third, registration can be used to establish international rights over a trademark, as when the U.S. registration is used to establish registration in other countries, and to protect the mark against infringement from imported products.

4)Copyright is a form of protection granted to works of authorship. In the United States, the authors of original literary, dramatic, musical, artistic, and certain other intellectual works can obtain copyright protection. This protection is available whether or not the work is published and prevents others from producing or distributing that work. Under section 106 of the 1976 Copyright Act, the owner of the copyright has the exclusive right to do (or authorize others to do) the following: ● Reproduce the work in copies or phonorecords. ● Prepare derivative works based upon the work. ● Distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending. ● Perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works. ● Display the copyrighted work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work. ● Perform the work publicly by means of a digital audio transmission (in the case of sound recordings).

5)If George makes the program open source, it will quickly diffuse and increase the likelihood that it will become the dominant design. However, George will receive little, if any, profits from the program. If he makes the program a wholly proprietary product, then it will be slower in moving toward dominance. It will be very difficult to get complementary programs, such as payment software, written that will interact with his program. The result may be low sales of his program and also low profits. The answer is to allow limited licensing or partial protection. He may have to allow other developers to access his source code to develop complementary programs, but he will still be able to maintain control over his source code and give his approval to their programs. This way he can still sell his program and reap the profits. 6) D 7) A 8) A 9) B 10) B 11) C 12) B 13) C 14) D 15) A 16) B 17) D 18) A 19) B 20) D 21) B 22) C 23) C

24) A 25) A 26) TRUE 27) FALSE 28) FALSE 29) TRUE 30) TRUE 31) FALSE 32) FALSE 33) FALSE 34) FALSE 35) TRUE 36) TRUE 37) TRUE 38) TRUE 39) TRUE 40) FALSE Student name:__________ 1)

What are some of the advantages and disadvantages of large firms in terms of R&D?

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2) Biotrue Incorporated produces tissues and diagnostics substances for three market segments: hospitals, universities, and pharmaceutical companies. The firm is trying to decide whether to decentralize its R&D activities by division. You have been called in as a consultant to explain the advantages and disadvantages of such a move. What will your opinion be?

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Explain why a mechanistic organizational structure stifles creativity.

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4) Phoenix Motor Corporation is considering using a loosely coupled organizational structure. They have asked for your evaluation of such a structure and if you would recommend it for an automobile manufacturer. What will your answer be?

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5) Briefly describe how creating norms of flexibility and autonomy and cultivating idealistic goals can encourage innovation in an organization.

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As a firm grows bigger, it becomes 6) ______

A) more effective in monitoring and motivating employees. B) less vulnerable to bureaucratic inertia. C) less efficient in R&D because of loss of managerial control. D) increasingly easy for individual scientists to appropriate the returns of their efforts.

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7) In the 1980s and 1990s, Neon Corporation was the most successful firm in the television market. The firm believed that its competitors would never be able to produce televisions that compared to their products' quality and price. As a result, it was unable to compete with the newer models of televisions that its Japanese competitors had begun to infiltrate the market with. Eventually, Neon lost its market leadership to its competitors. This scenario most clearly exemplifies the ________blank. 7) ______

A) Giffen effect B) Hawthorne effect C) Idiosyncrasy Credit D) Icarus Paradox

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8) Since larger companies tend to have more bureaucracy, fixed costs, and commitments to large numbers of employees, customers, and suppliers than smaller firms, you can expect it to 8) ______

A) gamble more on big changes. B) be less responsive to technological changes. C) find it much simpler to monitor employees and reward them for their effort or success at innovation. D) experience higher rates of new product success.

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9) Techworld Zone Incorporated is a renowned laptop and desktop manufacturer. The firm employs thousands of employees and has always followed a rigid hierarchical structure. The management of the company recently decided that it was high time the firm disaggregate in order to 9) ______

A) lengthen new product development cycles and restrict the budget on future innovations. B) prevent large-scale downsizing. C) become more responsive to technological changes. D) decrease flexibility and curb the entrepreneurial culture within the firm.

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10) Urban Fashions Corporation has become very successful in the last few years and now employs a large number of people. Serena, the owner of the firm, had been very informal in running the company. However, because of the increase in the size of the firm, she now feels that the informal ways of management have become ineffective. In order to structure the behavior of employees, Serena wants to introduce written codes of conduct and regulations into the firm. This change being introduced in the company by Serena is referred to as ________blank. 10) ______

A) disintermediation B) formalization C) nationalization D) decentralization

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11) Pioneer Systems Incorporated has a high degree of formalization. Employees in Pioneer Systems are more likely to 11) ______

A) exhibit high levels of creativity and experimentation. B) feel empowered to implement new solutions. C) face morale and motivation problems. D) face ambiguity as a result of a lack of formal rules and procedures.

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12)

Which of the following statements is true of standardization? 12) ______

A) It can ensure that activities within a firm run smoothly and yield predictable outcomes. B) It is defined as the degree to which a firm utilizes rules, procedures, and written documentation to structure the behavior of employees. C) It involves the use of organic structures instead of mechanistic ones. D) It encourages the creativity and experimentation that lead to innovative ideas.

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13) A firm choosing to decentralize its R&D by divisions rather than centralizing it will have a greater possibility of 13) ______

A) maximizing economies of scale in R&D. B) preventing redundant R&D activities from being performed in multiple divisions. C) benefiting from the learning-curve effects. D) matching new products to the requirements of the customers served.

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14) Since much innovation arises from experimentation and improvisation, the ________blank organization structure is typically considered better suited for innovation despite its possible detriment to efficiency. 14) ______

A) mechanistic B) formalized C) standardized D) organic

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15)

Which of the following statements is true of ambidextrous organizations? 15) ______

A) They have uniform incentive plans for all employees within the organization. B) They achieve long-term innovation but not short-term efficiency. C) They fail to tolerate varying cultures and different sets of behavior from employees. D) They have a complex organizational form that is composed of multiple internally inconsistent architectures.

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16) Liam, an employee of Centaurs Incorporated, is part of a new product development team that operates in a completely different manner from its parent organization. Within the team, there is considerable decentralization of authority and limited bureaucracy. It also has its own unique culture. Liam's team can be most accurately referred to as 16) ______

A) a mechanistic team. B) skunk works. C) an inorganic group. D) a mainstream circle.

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17)

According to Schoonhoven and Jelinek, quasiformal structures are 17) ______

A) slow to respond to the need for changes. B) most useful in fostering interactions based on hierarchy. C) less problem-focused than other structures of companies. D) not formally indicated on the organizational chart.

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18) ErgoWorld Incorporated manufactures office furniture. The company is considering adopting a modular production system. A modular system would offer greater value to ErgoWorld if 18) ______

A) most customers are likely to agree on a single product configuration. B) its customers prefer to upgrade their products by replacing their entire system. C) its customers are willing to pay a premium price for extreme customization and personalization. D) its customers have heterogeneous demands that need to be met in a cost-effective way.

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19)

Which of the following statements is true of loosely coupled organizational structures? 19) ______

A) They coordinate development and production activities through their adherence to shared objectives. B) They ensure high synergies are achieved. C) They are most useful in organizations characterized by activities that require the frequent exchange of complex or tacit knowledge. D) They provide mechanisms for resolving conflict that are more effective or less expensive than those available in the market.

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20) M&P Incorporated, a consumer goods manufacturing firm, has subsidiaries throughout the globe that have to respond to varying local market requirements. Therefore, the firm has planned to adopt a local-for-local approach to innovation. Which of the following statements is true in this context? 20) ______

A) The subsidiaries of M&P and their R&D divisions will be highly autonomous. B) The subsidiaries will achieve abundance of scale in R&D activities. C) This approach will make diffusion of valuable innovations across the company simple. D) This approach will eliminate redundancy in activities.

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21)

Not-invented-here syndrome occurs when 21) ______

A) a division of a firm is reluctant to adopt other divisions' innovations. B) a firm tends to adopt innovations developed by competitors. C) an innovation is openly accepted without testing its suitability. D) developers of a failed innovation refuse to take responsibility for its failure.

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22) Oxygenic Incorporated is a company with major decentralized divisions in Germany, Russia, and the United States. The scientists in Russia develop cancer treatment methods. Treatment clinics are organized in Germany. The U.S. division gathers finance and markets the treatment methods. The activities of the different divisions are coordinated by the central office of the firm to meet company-wide objectives. This is most clearly an example of a ________blank strategy. 22) ______

A) center-for-global B) local-for-local C) locally leveraged D) globally linked

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23)

Which of the following is a characteristic of the center-for-global strategy? 23) ______

A) The innovation activities are conducted across different divisions. B) Duplication of activities occurs in multiple divisions. C) Greater specialization and economies of scale in R&D activities are achieved. D) Proprietary technologies are shared with all units.

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24)

Which of the following is a disadvantage of the local-for-local strategy? 24) ______

A) It tightly coordinates all R&D activities, thus limiting customization of innovations. B) It can result in significant redundancy in activities. C) It is not usually responsive to the diverse demands of different markets. D) It tends to have limited access to information and resources.

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25) A strategy in which each division or subsidiary of a firm conducts its own R&D activities, but the firm attempts to take advantage of resulting innovations throughout the company is known as a ________blank strategy. 25) ______

A) locally leveraged B) globally linked C) local-for-local D) center-for-global

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26) According to Joseph Schumpeter, small firms are likely to have better-developed complementary activities such as marketing or financial planning that enable them to be more effective innovators than larger firms. 26) ______ ⊚ ⊚

true false

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27) Small firms typically have more bureaucratic inertia due to many layers of authority and well-developed policies and procedures. 27) ______

⊚ ⊚

true false

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28) If a firm codifies all of its activities with detailed procedures, it may stifle employee creativity. 28) ______ ⊚ ⊚

true false

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29) While mechanistic structures are often associated with high centralization, it is also possible for organizations to have a highly decentralized mechanistic structure by using formalization as a substitute for direct oversight. 29) ______ ⊚ ⊚

true false

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30)

A high degree of formalization and standardization in firms results in organic structures. 30) ______

⊚ ⊚

true false

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31) Large firms often make greater use of formalization and standardization because as the firm grows it becomes more difficult to exercise direct managerial oversight. 31) ______ ⊚ ⊚

true false

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32)

Quasiformal structures foster interactions based on hierarchy rather than on interests. 32) ______ ⊚ ⊚

true false

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33) Modular products become more valuable when customers have heterogeneous demands and there are diverse options for meeting them. 33) ______

⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : Modularity and "Loosely Coupled" Organizations

34) In a loosely coupled structure, development and production activities achieve coordination through tight integration. 34) ______ ⊚ ⊚

true false

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35) A loosely coupled structure is best suited for activities that involve exchange of tacit knowledge. 35) ______ ⊚ ⊚

true false

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36) In the context of using culture and norms to foster innovation, requiring people to reach a consensus when making decisions runs the risk of making orthodox solutions the objective. 36) ______

⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : Using Culture and Norms to Foster Innovation

37) Most laboratory studies show that brainstorming results in the production of more ideas and greater novelty than if individuals work alone. 37) ______ ⊚ ⊚

true false

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38) A center-for-global approach tends to be very responsive to the diverse demands of different markets. 38) ______ ⊚ ⊚

true false

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39) The customization of products and processes to a local market makes them particularly difficult to transfer to divisions serving different markets. 39) ______

⊚ ⊚

true false

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40) The transnational approach to R&D leverages resources and capabilities that exist anywhere within a firm and deploys them when and where any opportunity arises. 40) ______ ⊚ ⊚

true false

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Answer Key Test name: chapter 10 1)Large firms have the advantage of having finances, equipment, more highly skilled personnel to use for R&D, and a wider base of complementary assets and skills. If large firms spend more on R&D in an absolute sense, they might also reap economies of scale and learning curve advantages in R&D—that is, they may get better and more efficient at it over time. Large firms are also in a better position to take on large or risky innovation projects than smaller firms. On the other hand, as a firm grows, its R&D efficiency might decrease because of a loss of managerial control. That is, the bigger a firm gets the more difficult it can become to effectively monitor and motivate employees. Furthermore, as a firm grows, it becomes increasingly difficult for individual scientists or entrepreneurs to appropriate the returns of their efforts; therefore, their incentives diminish. Thus, as the firm grows, the effectiveness of its governance systems may decrease. 2)Decentralizing the R&D divisions has many advantages. Each division can develop projects that meet the needs of its particular market segment better. Each division will have unique knowledge of its market and customers and can therefore pursue projects that will benefit them better. The disadvantage is that there may be duplication of efforts among the divisions, which is wasteful. In fact, Biotrue will be giving up some economies of scale and benefits of the learning curve by decentralizing its R&D. If Biotrue's R&D produces outputs that are basically the same across the markets it serves, Biotrue is likely to benefit from keeping its R&D centralized. Students' answers will vary.

3)A mechanistic structure uses formalization and standardization to achieve efficiency. It dictates procedures and detailed rules and standards. This allows for very little deviation from the standard, thus stifling any attempts to do things differently or more creatively. Therefore, mechanistic structures are often deemed unsuitable for fostering innovation. 4)A loosely coupled organization requires that different parts of the organization adhere to shared objectives and common standards and allows considerable autonomy in meeting those objectives and standards. This allows the R&D efforts to be organized in an organic structure that fosters creativity while still ensuring that components will work together. The production department can be organized more mechanistically and therefore be more efficient. However, the company would be giving up the synergistic effects of working closely together and it may find it more difficult to resolve conflicts that arise. It would seem that this structure would work well for this company. Students' answers will vary. 5)Significant research shows that culture and norms can have considerable influence on both the quantity and nature of innovation in the firm. One of the ways in which managers can encourage innovation is by creating an environment in which employees have flexibility and autonomy. This not only attracts creative employees to the company, but also cultivates the creativity of existing employees. Additionally, firms should try and organize themselves around idealistic goals that employees find intrinsically valuable. Employees who are intrinsically motivated are likely to invest more effort to attain the company’s goals. 6) C 7) D 8) B 9) C

10) B 11) C 12) A 13) D 14) D 15) D 16) B 17) D 18) D 19) A 20) A 21) A 22) D 23) C 24) B 25) A 26) FALSE 27) FALSE 28) TRUE 29) TRUE 30) FALSE 31) TRUE 32) FALSE 33) TRUE 34) FALSE 35) FALSE 36) TRUE 37) FALSE 38) FALSE 39) TRUE

40) TRUE Student name:__________ 1)

What is a partly parallel development process? Is it universally used?

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What are the risks of championing?

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3) Delta Cleaning Equipment Corporation is experimenting with a faster and quieter machine to polish floors. To develop this concept, the company is contemplating using the lead user method of concept development. How does this method work? What are its advantages?

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Topic : Involving Customers and Suppliers in the Development Process Difficulty : 2 Medium

Explain the function of the go/kill gate in the stage-gate process for project development.

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5) What are the ways in which measures of the success of the new product development process can help management? What are some of the factors that firms should consider when formulating measures and interpreting results?

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6) The time elapsed from project initiation to product launch, usually measured in months or years, is referred to as ________blank.

6) ______

A) diffusion of innovation time B) technology trajectory C) development cycle time D) the Six Sigma period

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Which of the following statements is true of a firm with a long development cycle time? 7) ______

A) It can quickly revise or upgrade its product offering. B) It is more likely to have a high cost of capital. C) It can benefit from both first-mover and second-mover advantages. D) It is more likely to be able to fully amortize the fixed costs of development before that generation becomes obsolete.

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Which of the following statements is true of partly parallel development processes? 8) ______

A) They enhance the probability that R&D will design products that are difficult to manufacture. B) They require costly iterations between design stages. C) They shorten overall cycle time. D) They initiate product design after concept development is complete.

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9) ________blank engineering involves not only conducting the typical product development stages simultaneously but also takes into account downstream stages of a product’s lifecycle such as maintenance and disposal. 9) ______

A) Agile B) Sequential C) Concurrent D) Asynchronous

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10) Josh is the executive vice president of a bank. The president of the bank has recently asked Josh to use his influence to ensure that the bank's online banking project is developed and implemented. Josh has been asked to be a(n) 10) ______

A) devil's advocate. B) project champion. C) entrepreneur. D) mentor.

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11)

In the context of project development, an "antichampion" is 11) ______

A) a person who wishes to sabotage a new project. B) a person who plays the role of "devil's advocate." C) a person who uses subjective criteria to evaluate a new project. D) a person in a competing firm who sabotages market tests by promoting his or her company's products more heavily than normal.

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12) A ________blank of a product is an early working prototype of the product released to users for testing and feedback. 12) ______

A) beta version B) substitute C) spiral model D) sigma model

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13) Astech Incorporated has been developing a new graphic design software. The firm has released a functional version of the software and has sent it to several lead users for testing. Based on the feedback from the lead users, the firm is going to improve the design of the product and begin commercial production. This initial version of the product is referred to as the ________blank. 13) ______

A) spiral model B) substitute product C) beta version D) theta model

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14) In the ________blank process, a product is divided into many smaller features or functionalities, and these are rapidly created into minimum viable products and presented to the customer for feedback, enabling rapid incremental adaptation. 14) ______

A) stage-gate B) additive manufacturing C) agile development D) crowdsourcing

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15) Customers who face the same general needs of the marketplace but are likely to experience them months or years earlier than the rest of the market and stand to benefit disproportionately from solutions to those needs are referred to as ________blank. 15) ______

A) laggards B) intrapreneurs C) early followers D) lead users

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16) Electrocartonics Incorporated recently approached people worldwide to come up with ideas to create a vehicle that could run on electricity or solar power, was affordable, easy to use and maintain, safe, and that could cover long distances. Millions of people shared their ideas and designs with the company. The shortlisted individuals were then invited by the company to discuss with their R&D team potential ideas, problems with the existing vehicle models, and possible solutions. These individuals were then given an exclusive tour of the manufacturing and assembly units and a preview of the models that were yet to be introduced in the market. Which of the following terms best describes the problem-solving model used in the scenario? 16) ______

A) groupthink B) crowdsourcing C) herd mentality D) social loafing

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17) Beta Cleaning Equipment Corporation has started the actual design and development of a new floor buffing machine. It has the details of manufacturing, marketing, and operations of the new product as well. According to the stage-gate process, what is the next stage of this project? 17) ______

A) launch of the product by producing it commercially and selling it B) verification and validation of the new product and its marketing and production C) formation of a focus group to make sure the product meets user expectations D) development of a business case to justify the project

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18) According to the stage-gate process developed by Robert G. Cooper, ________blank are the results of the previous stage and are the inputs for the gate review. 18) ______

A) criteria B) outputs C) deliverables D) beta versions

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19) Theta Cleaning Corporation wants to use the house of quality matrix in designing and developing a new vacuum cleaner. What is the first step that Theta Cleaning should take? 19) ______

A) identification of customer requirements B) determination of the relative value or weight of customer requirements C) identification of the engineering attributes that determine the performance of the vacuum cleaner D) evaluation of the competing products to determine how well they meet customer needs

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20) Omega Cleaning Corporation wants to use the house of quality matrix in designing and developing a new vacuum cleaner. The use of the house of quality is most likely to 20) ______

A) provide a common language and framework for members of a project team to use. B) blur the relationship between product attributes and customer requirements. C) conceal the competitive shortcomings of the company's existing products. D) hide design trade-offs.

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21)

Which of the following statements is true of design for manufacturing (DFM) methods? 21) ______

A) They lengthen the development cycle time of products. B) They introduce design rules that increase the complexity of the product designs, thus making them harder to manufacture, which ultimately increases the unit costs. C) They facilitate integration between engineering and manufacturing and bring issues of manufacturability into the design process as early as possible. D) They help firms identify potential failures in a system and classify them according to their severity.

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22) Jupiter Tech Incorporated has conducted a failure modes and effects analysis of a digital identification system that it developed. The scores are as follows: Severity = 4 Likelihood of occurrence = 2 Inability of controls to detect it = 3 What is the risk priority number of the digital identification system? 22) ______

A) 24 B) 6 C) 2.67 D) 9

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23) In the context of failure modes and effects analysis, which of the following formulas is used to calculate the risk priority number? 23) ______

A) risk priority number = total profits from new products/total expenditures B) risk priority number = total profits from new products − total expenditures C) risk priority number = successful projects/total project portfolio D) risk priority number = severity × likelihood of occurrence × inability of controls to detect

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24) Howard, an engineer, has plans to introduce additive manufacturing in his firm. He has heard that this method can create a model in a couple of hours. His team is not aware of this method of product development and hence Howard decides to give a presentation and explain the technique of generating a model using this method. Which of the following statements would he most likely mention during his presentation? 24) ______

A) The design is printed by laying down thin horizontal cross sections of material until the model is complete. B) The new design is printed manually, which then converges with an old design by adding details. C) The model is constructed by injection molding. D) The model is constructed by machining a mold.

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25) Which of the following measures assesses the ratio of a firm's total profits from new products to its total expenditures? 25) ______

A) return on innovation B) average cycle time of the innovation C) percentage of development projects meeting deadlines D) percentage of development projects within the estimated budget

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26)

The majority of all new product development projects result in an economic return. 26) ______ ⊚ ⊚

true false

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27) A company with a short development cycle can quickly revise or upgrade its offering as design flaws are revealed or technology advances. 27) ______ ⊚ ⊚

true false

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28) A sequential process has an early warning system to indicate that planned features are not manufacturable. 28) ______ ⊚ ⊚

true false

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29)

The use of executive sponsors reduces the effectiveness of a development process. 29) ______ ⊚ ⊚

true false

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30)

A firm can benefit from developing "antichampions." 30) ______ ⊚ ⊚

true false

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31)

Champions are solely involved with radical innovation projects. 31) ______ ⊚ ⊚

true false

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32)

Many firms use beta testing to get customer input early in the development process. 32) ______ ⊚ ⊚

true false

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33) Suppliers can contribute ideas for product improvement or increased development efficiency. 33) ______ ⊚ ⊚

true false

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34) In the product development process, go/kill gates act as funnels that cull mediocre projects. 34) ______ ⊚ ⊚

true false

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35) The drawback of using crowdsourcing as a tool for improving the new product development process is that unless monetary rewards are provided, most people will not be willing to participate. 35) ______ ⊚ ⊚

true false

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36) In the context of design rules for fabricated assembly products, minimizing the number of parts for a product reduces direct labor and material handling costs. 36) ______ ⊚ ⊚

true false

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37) Using computer-aided design (CAD) to build and test product design increases cycle time. 37) ______

⊚ ⊚

true false

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38) Computer-aided manufacturing (CAM) is faster and more flexible than traditional methods of manufacturing. 38) ______ ⊚ ⊚

true false

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39) Three-dimensional printing and traditional methods of constructing take the same amount of time to generate a model. 39) ______ ⊚ ⊚

true false

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40) When measuring performance, using a single measure provides a more accurate representation of a firm's overall innovation performance than using multiple measures. 40) ______

⊚ ⊚

true false

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Answer Key Test name: chapter 11 1)To shorten the development process and avoid time-consuming and costly iterations between stages of the development cycle, many firms have adopted a partly parallel development process. Product design is initiated before concept development is complete, and process design is begun long before product design is finalized, enabling much closer coordination between the different stages and minimizing the chance that R&amp;D will design products that are difficult or costly to manufacture. This should eliminate the need for time-consuming iterations between design stages and shorten overall cycle time. Parallel development processes are not universally endorsed. In some situations, using a parallel development process can substantially increase the risks or costs of the development process. 2)A manager's role as champion may cloud judgment about the true value of the project. Managers may fall victim to escalating commitment and be unable (or unwilling) to admit that a project should be killed even when it is clear to many others in the organization that the project has gone sour, or the factors driving the project's original value are no longer relevant. Managers who have invested their reputations and years of their lives in development projects may find it very difficult to cut their losses. Though the champion's seniority is an asset in gaining access to resources and facilitating coordination, this same seniority may also make others in the firm unwilling to challenge the project champion even if it has become apparent that the project's expected value has turned negative.

3)Lead users are those who face the same needs of the general marketplace but face them months or years earlier than the bulk of the market and expect to benefit significantly from a solution to those needs. In this case, the lead users might be large janitorial services groups. Delta Cleaning Equipment would ask these users to provide some input with respect to the design concept for such a machine, perhaps through a focus group. The users might identify the features that are desirable in the machine and may even come up with ideas about how to design the machine. This method increases the probability that the finished product will meet the needs of the users. Students' answers will vary. 4)Go/kill gates are designed to control the quality of a project and to ensure that the project is being executed in an effective and efficient manner. Gates act as the funnels that cull mediocre projects. Each gate has three components: deliverables (these are the results of the previous stage and are the inputs for the gate review), criteria (these are the questions or metrics used to make the go/kill decision), and outputs (these are the results of the gate review process and may include a decision such as go, kill, hold, or recycle; outputs should also include an action plan for the dates and deliverables of the next gate).

5)Several firms use various metrics to measure the performance of their new product development process. These measures help firms to improve their existing innovation development processes and provide valuable feedback about a new product. Additionally, measures of development performance can help management to identify which projects met their goals and why, benchmark the organization’s performance in comparison to that of competitors or the organization’s own prior performance, improve the way resources are allocated and employees are compensated, and fine-tune future innovation strategies. When devising methods for measuring development processes and interpreting results, a company should take into account the firm’s development strategy, industry, and other environmental circumstances. Students answers may vary. 6) C 7) B 8) C 9) C 10) B 11) B 12) A 13) C 14) C 15) D 16) B 17) B 18) C 19) A 20) A 21) C 22) A

23) D 24) A 25) A 26) FALSE 27) TRUE 28) FALSE 29) FALSE 30) TRUE 31) FALSE 32) TRUE 33) TRUE 34) TRUE 35) FALSE 36) TRUE 37) FALSE 38) TRUE 39) FALSE 40) FALSE Student name:__________ 1) What are the advantages and disadvantages of having a heterogeneous new product development team?

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Write a short note on functional teams.

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3) The CEO of Bright Electronics Incorporated has put together an autonomous new product development team. He is now trying to decide the type of leader who should be appointed to head the team. What should he look for in the leader of this team to improve its chances of success?

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4) Describe project charter and contract book. Explain their purposes. How are they related to each other?

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In the forming of virtual teams, what criteria must be used to select team members?

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In the context of product development teams, which of the following statements is true? 6) ______

A) The larger a team is, the easier it is to foster a shared sense of identity among team members. B) As the size of a team increases, the potential for social loafing increases. C) Formation of cross-functional teams hinders the cross-fertilization of ideas. D) Increasing the diversity of team members eliminates the possibility of homophily.

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7) Karen's supervisor, while discussing her participation in a new product development team, tells her that she has been engaging in social loafing. This means that Karen 7) ______

A) has been involved in whistle-blowing activities. B) has been discriminating against colleagues belonging to minority groups. C) has not been putting much effort into the team's work. D) has stolen office property.

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8) At Tech Edge Incorporated, a special team is set up for designing and developing a robot capable of assisting visually impaired individuals with their daily chores. The members of the team are specialists from various divisions of the firm, including R&D, marketing, manufacturing, and distribution. The new team is put under the charge of a senior manager. This team is most accurately an example of a 8) ______

A) cross-functional team. B) laggard team. C) homogeneous team. D) self-directed work team.

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Which of the following is an advantage of cross-functional teams? 9) ______

A) A cross-functional interface ensures that cross-fertilization of ideas is reduced. B) Cross-functional teams allow a project to draw on a wider mix of information sources in the environment. C) Cross-functional teams usually reduce coordination and communication costs. D) Cross-functional teams are most efficient in eradicating homophily.

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10) The vice president of Biomedics Incorporated is trying to decide the composition of a new product development team. If she chooses members from multiple functional areas in the firm, which of the following disadvantages is she most likely to experience? 10) ______

A) increase in instances of whistle-blowing B) increase in communication and coordination costs C) less cross-fertilization of ideas D) fewer instances of social loafing

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11) June is a member of a new product development team. Her supervisor asks her about her experience in the team, and she replies, "Our team seems to be suffering from homophily." This statement means that 11) ______

A) team members are not exerting the expected amount of effort. B) team members spend all their time chatting about their personal issues. C) team members are only interested in talking to people who are senior to them. D) team members only like other people whom they perceive as being similar to themselves.

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12)

Which of the following is true of group idea cross-fertilization? 12) ______

A) It results in creativity losses, regardless of whether individuals take turns to voice their ideas or volunteer their ideas at will. B) It improves an individual's ability to focus on their own idea generation process. C) It reduces the fear of judgment thus facilitating the generation of novel ideas. D) It causes more weight to be given to original ideas rather than ideas that are feasible.

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13) Albert has put together a new product development team based on the functional team structure. Which of the following statements is most likely to be true about this team? 13) ______

A) Team members will spend up to 50 percent of their time on team-related activities. B) The team will typically require dedicated liaison personnel. C) The team will have a high degree of cross-functional integration. D) The team structure will be straightforward to implement.

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14)

Which of the following statements is true of functional teams? 14) ______

A) Functional teams consist of members from multiple areas in the firm such as R&D, marketing, manufacturing, distribution, and so on. B) The functional team structure provides little opportunity for cross-functional coordination. C) Functional teams are not appropriate for derivative projects that affect only a single function. D) Functional teams are usually permanent.

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15)

Which of the following statements is true of lightweight teams? 15) ______

A) They are permanent. B) They seldom have dedicated liaison personnel and typically work independent of managers. C) They are most appropriate for projects in which high levels of coordination are required. D) They offer a small improvement in team coordination and likelihood of success over functional teams.

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16)

Which of the following is an advantage of lightweight teams? 16) ______

A) Lightweight teams are more stable as they are permanent in nature. B) Lightweight teams do not have dedicated liaison personnel, and the members have more decision-making authority. C) The team structure of lightweight teams increases the possibility of homophily. D) It is easier to coordinate activities in lightweight teams than in functional teams.

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17)

Which of the following statements is true of heavyweight teams? 17) ______

A) Project managers of heavyweight teams lack the authority to command resources. B) Heavyweight teams are always temporary. C) In heavyweight teams, members are collocated with the project manager. D) Heavyweight teams are considered inappropriate for platform projects.

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18)

Which of the following is an advantage of heavyweight teams? 18) ______

A) Heavyweight teams have strong cross-functional coordination and communication. B) The team structure of heavyweight teams increases the possibility of social loafing. C) Heavyweight teams are typically permanent. D) The team structure of heavyweight teams decreases the cross-fertilization of ideas.

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19)

Which of the following is a defining characteristic of autonomous teams? 19) ______

A) Autonomous teams are not held accountable for the success of a project. B) Autonomous teams do not have a project manager, which leads to constant problems with coordination of activities. C) The degree of cross-functional integration is low in autonomous teams. D) Autonomous teams often do not conform to the operating procedures of the rest of the organization.

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20)

Which of the following statements is true of the autonomous team structure? 20) ______

A) In autonomous teams, individuals may spend less than 10 percent of their time working on team-related activities. B) In autonomous teams, the potential for conflict between teams and functions is low. C) In autonomous teams, team members are collocated with a senior project manager. D) The project manager of an autonomous team is not given full control over resources.

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21)

Which of the following is a disadvantage associated with autonomous teams? 21) ______

A) The project manager of an autonomous team does not have any control over resources contributed from different functional departments. B) The autonomous team structure does not accommodate cross-functional integration. C) It is hard for autonomous teams to fold back into the parent organization when a project is completed. D) Autonomous teams do not have project managers because of which they face a lot of coordination problems.

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22)

Virtual teams are best defined as teams in which members 22) ______

A) may be situated at a great distance from each other and collaborate intensively via advanced information technologies. B) are drawn from multiple functional areas in the firm such as R&D, marketing, manufacturing, and distribution, and they work at the company headquarters. C) have the tendency to cooperate only with people whom they perceive as being similar to themselves. D) have the tendency of shirking their responsibilities and blaming one another for their poor performance.

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23) According to Gassman and von Zedtwitz, which of the following patterns of teams are likely to be used only for strategic innovations of utmost importance? 23) ______

A) centralized venture team B) decentralized self-coordination C) system integrator as coordinator D) core team as system architect

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24)

Which of the following statements is true of team leadership? 24) ______

A) Lightweight teams require senior managers with significant experience and organizational influence. B) Heavyweight and autonomous teams require junior or middle-management leaders who provide basic coordination between functional groups. C) In heavyweight and autonomous teams, the project manager must act as a concept champion for the team within the organization. D) In lightweight teams, the project manager must be someone who can champion the development project both within the team and to the wider organization and act as a translator between various functions.

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25)

Which of the following statements is true of project charters? 25) ______

A) They estimate the resources required, the development time schedule, and the results that will be achieved. B) They provide a tool for evaluating a team's performance in meeting objectives by providing a set of performance benchmarks to which the team's performance can be compared. C) They are important mechanisms for establishing team commitment to a project and a sense of ownership over the project. D) They encapsulate a project's mission and articulate exact and measurable goals for the project.

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26) When a brainstorming group is created with the purpose of generating novel ideas, asking groups to select and submit their best ideas is the most efficient way to achieve that outcome. 26) ______ ⊚ ⊚

true false

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27) A lack of cross-functional communication can lead to a poor fit between product attributes and customer requirements.

27) ______ ⊚ ⊚

true false

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28) Studies show that demographic diversity in teams improves innovative outcomes and overall performance. 28) ______ ⊚ ⊚

true false

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29) Homogeneous teams should possess more information, on average, than heterogeneous groups. 29) ______ ⊚ ⊚

true false

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30) In functional teams, members remain within their functional departments but project managers provide cross-functional integration. 30) ______ ⊚ ⊚

true false

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31)

Functional teams typically have a project manager or dedicated liaison personnel. 31) ______ ⊚ ⊚

true false

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32) Managers of lightweight teams are normally junior or middle management employees, who are not able to exert significant authority over team members. 32) ______ ⊚ ⊚

true false

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33) Lightweight teams are appropriate for derivative projects in which low levels of coordination and communication are required. 33) ______ ⊚ ⊚

true false

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34) In heavyweight teams, the long-term career development of individual members rests with their project managers rather than their functional managers. 34) ______ ⊚ ⊚

true false

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35) Project managers of heavyweight teams are typically junior or middle management employees, who are not able to exert significant authority over team members. 35) ______ ⊚ ⊚

true false

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36)

Heavyweight teams are typically considered appropriate for platform projects. 36) ______ ⊚ ⊚

true false

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37)

A contract book must be developed before a project charter is written. 37) ______ ⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : The Management of New Product Development Teams

38) Virtual teams have difficulties with forming trust, conflict resolution, and exchanging tact knowledge. 38) ______ ⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : The Management of New Product Development Teams

39) A contract book is an important mechanism for establishing team commitment to a project and a sense of ownership over the project. 39) ______ ⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : The Management of New Product Development Teams

40) Proximity and frequent interaction help teams to develop shared norms and a dialect for communicating about a project. 40) ______ ⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : The Management of New Product Development Teams

Answer Key Test name: chapter 12 1)Teams that incorporate cultural diversity should show better problem solving by incorporating multiple viewpoints, and teams composed of members who are diverse in terms of education, gender, or age can help ensure a variety of viewpoints are considered and external resources are tapped. Studies have demonstrated that demographic diversity in teams can increase innovative outcomes and overall performance. Heterogeneous teams often have greater difficulty integrating objectives and views, leading to conflict and lower group cohesion. Heterogeneous teams should possess more information, on average, than homogeneous groups. The heterogeneity of a team can increase the creativity and variance in decision making, leading to more innovative outcomes and higher overall performance. However, to realize this potential performance advantage, heterogeneous teams may require long-term contact and incentives to foster communication and cooperation.

2)In functional teams, members remain in their functional departments (e.g., R&amp;D, marketing, manufacturing, etc.), and report to their regular functional manager; however, they may meet periodically to discuss the project. Such teams are usually temporary, and individuals may spend less than 10 percent of their time working on team-related activities. Functional teams also typically do not have a project manager or dedicated liaison personnel. While this team structure is straightforward to implement because it requires little (if any) deviation from the firm's normal operations, this structure provides little opportunity for cross-functional coordination. Further, since individuals are still evaluated and rewarded almost exclusively based on their functional performance, the team members may have little commitment to the development project. Functional teams are more likely to be appropriate for derivative projects that primarily affect only a single function of the firm. 3)Because of the nature of an autonomous team, the team leader should be a senior manager with significant experience and organizational influence. He or she will have to champion the product concept within the organization, resolve conflicts, and be able to communicate with personnel from different functional areas in the terms they understand and identify with. He or she will also have to exert influence on the engineering, manufacturing, and marketing functions to get the project completed.

4)To ensure that members have a clear focus and commitment to the development project, many organizations now have heavyweight and autonomous teams develop a project charter and contract book. The project charter encapsulates the project's mission and articulates exact and measurable goals for the project. It might include a vision statement for the project and a background statement for why this project is important for the organization. The charter may describe who is on the team, the length of time members will spend on the team, and the percentage of their time that will be spent on team activities. It may also stipulate the team's budget, its reporting timeline, and the key success criteria of the project. Once the team charter is established, core team members and senior managers must negotiate a contract book. The contract book defines in detail the basic plan to achieve the goal laid out in the project charter. Typically, the contract book will estimate the resources required, the development time schedule, and the results that will be achieved. The contract book provides a tool for monitoring and evaluating the team's performance in meeting objectives by providing a set of performance benchmarks and deadlines to which the team's performance can be compared. More important, however, the contract book is an important mechanism for establishing team commitment to the project and a sense of ownership over the project. After negotiation and acceptance of this contract, all parties often sign the contract book as an indication of their intention to honor the plan and achieve the results. Team members who sign the contract book typically feel a greater sense of duty to work toward the project's goals.

5)In the forming of virtual teams, it is important to select personnel who are both comfortable with the technologies being used to facilitate collaboration and who have strong interpersonal skills. Team members must be able to work independently and have a strong work ethic. Since distance makes it easy for team members to deflect opportunities for interaction, it is important to choose individuals who tend to seek interaction rather than avoid it. It is important that members of the team establish standards for how quickly they will respond to messages, and how often they will be available for synchronous communications (communications where the involved parties must participate at the same time, such as telephone calls, videoconferencing, and instant messaging). Furthermore, because many of the opportunities for informal interaction may be lost in a virtual environment, more types of interaction may have to be incorporated into the ground rules of the team. 6) B 7) C 8) A 9) B 10) B 11) D 12) A 13) D 14) B 15) D 16) D 17) C 18) A 19) D 20) C

21) C 22) A 23) A 24) C 25) D 26) FALSE 27) TRUE 28) TRUE 29) FALSE 30) FALSE 31) FALSE 32) TRUE 33) TRUE 34) FALSE 35) FALSE 36) TRUE 37) FALSE 38) TRUE 39) TRUE 40) TRUE Student name:__________ 1) BioSense Prosthetics Incorporated is a market leader in prosthetics and earns very high profits. The company has developed a computerized prosthetic arm and is trying to decide when to introduce it to the market. What options does it have?

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2) When Pearl Soft Shampoo was released by Clary Laboratories Incorporated in the late 1970s, it was an innovative hair care concept because it repaired split ends. Even though the new product was an improved version of the previous ones, Clary Laboratories entered the market with low prices and dealer incentives. Discuss the possible reasons for this marketing strategy.

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3) Gerald Rupert is a retired race car driver. He is writing a book and planning a video release to share his racing experiences. He is trying to decide whether to market these items directly to consumers over the Internet or to use intermediaries. To make this decision, he needs to know the pros and cons of each route. Provide the necessary information and make a recommendation to him.

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4) Frosty Products Incorporated is coming out with a new type of computerized refrigerator with a flat panel display that accesses the Internet for recipes, nutrition information, etc. Which group (innovators, early adopters, early majority, late majority, or laggards) should the company target its promotion toward initially, and what type of message and medium should it use?

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5) In the context of Gladwell's theories, define the terms connectors, mavens, and salespersons.

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6) When Pearl Love Incorporated introduced its new range of body wash, consumers switched from using its soap bars, being sold under the same brand name, to using the body wash. As a result, the company experienced a sharp drop in its soap sales. This scenario represents ________blank. 6) ______

A) cannibalization B) the vampire effect C) the halo effect D) vaporware

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7) BioSense Prosthetics Incorporated was a leader in the prosthetics market and was earning high profits. The firm developed a new computerized prosthetic arm that would render its previous models obsolete. It decided to withhold the new computerized prosthetic arm from the market. This would allow the firm to 7) ______

A) minimize its return on investment in developing each generation of the product. B) make its products backward compatible. C) avoid cannibalization of the sales of its current prosthetics. D) build a smaller installed base for the new computerized prosthetics.

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8) Maverick Systems Incorporated is a leading company in the mobile phone market, and profits from its mobile phones are very high. Maverick Systems has developed a new generation of smartphones, which is better than its existing line of smartphones and has decided to embrace cannibalization of its existing line of smartphones. This means that the company is going to 8) ______

A) introduce the new technology right away and increase its market lead while taking away profits from its existing line of smartphones. B) delay introduction of the next generation product until profits have begun to significantly decrease for the existing line of smartphones. C) use up most of its financial resources in promoting the new smartphone. D) wait for the existing line of smartphones to become obsolete and then introduce the new generation of smartphones into the market.

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9) Genetech Incorporated has produced a new generation of video game consoles. The new product can be used to run the games used in the previous generation of the video game console as well. In this context, Genetech is most accurately applying the concept of ________blank. 9) ______

A) backward integration B) backward compatibility C) backward linkage D) backward traceability

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10) Speeding Horse Incorporated, a leader in the video game console market, is making its new generation consoles backward compatible with its previous games. This means that 10) ______

A) it is giving away its own installed base or complementary goods advantages to competitors. B) it is providing a significant incentive to the owners of its previously developed consoles to buy the new console. C) the transition of customers through product generations will become impossible. D) a large range of complementary goods of the previous generations, mainly the games, will lose its existing value and utility.

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11) Which of the following is an advantage of making a new generation of technology backward compatible? 11) ______

A) Consumers will have to buy completely new complements. B) Consumer switching costs may be lower because they anticipate using their existing complements. C) It directly increases the sales of complementary goods for its new generation of technology. D) It is typically less expensive to make a new generation of technology backward compatible than to make it incompatible.

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12) A(n) _____ price strategy is a short-run strategy that prices goods to cover variable costs and some fixed costs, and it is used by firms in industries plagued with intense price competition. 12) ______

A) market skimming B) penetration C) survival D) economy

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13) When Sports 360, a sports bar in New York, saw yet another sports bar open up across the street, it knew that it would have to lower its price again to stay in business. The city already had too many sports bars, and Sports 360 intended on being one of those left after the inevitable shake out. In this situation, the best pricing strategy for Sports 360 would be 13) ______

A) premium pricing. B) market skimming. C) survival pricing. D) a freemium program.

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14) The Rocketingbusiness.com Web site offers large volumes of business research information at no cost. If a user is interested in more comprehensive information and business consultation, the site offers these services for a premium fee. This is typically an example of a ________blank pricing model. 14) ______

A) penetration B) market skimming C) survival D) freemium

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15) Companies that buy manufacturers' products in bulk and then resell them (often in smaller or more diverse bundles) to other supply channel members are referred to as _____. 15) ______

A) wholesalers B) manufacturers' representatives C) retailers D) value-added resellers

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16) Gemini Car Incorporated buys car components from various manufacturers and assembles them into cars, which it sells under its own brand name. From the given information, Gemini Car is most accurately an example of a(n) 16) ______

A) pirate operator. B) original equipment manufacturer. C) disintermediation factor. D) category captain.

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17) Blue Water Publication Corporation is planning to sell its books solely through its Web site BlueWaterbooks.com. By doing so, it ceases to require wholesalers and retailers. This is most accurately an example of ________blank. 17) ______

A) disintermediation B) backward compatibility C) value-added reselling D) bundling arrangement

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18) Super Alarm Incorporated makes customized door security systems, which it sells under its own brand name. These security systems require installation, extensive customer education, and regular services. ________blank would be the most appropriate selling method for Super Alarm Incorporated. 18) ______

A) employing a direct sales force B) creating an online ordering system C) using a mail-order catalog system D) using a cannibalization strategy

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19) When Green Water Publication publishes academic books or revises previous editions of its books, it donates or sends a number of these new books to university libraries and professors. Its intention is that the professors and students would use those books for their courses and also recommend those books to their colleagues and fellow students in other universities. Which of the following strategies is the firm using to accelerate distribution? 19) ______

A) bundling relationship B) product modularity C) sponsorship D) consignment arrangement

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20) BioMark Lifesystems Incorporated wanted to enhance the adoption of its new diagnostic substances by medical laboratories. It made an agreement with the dominant producer of syringes and test tubes to have its diagnostic substances sold to laboratories in a package along with the syringes and tubes. Such an arrangement is known as ________blank. 20) ______

A) sponsorship B) product modularity C) a bundling relationship D) disintermediation

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21) Meghan is a popular celebrity who mostly endorses beauty products on Instagram and Facebook. Several branded beauty product manufacturers reach out to her with free samples. She takes to social media to describe these products, their benefits, and her experiences with using the products. Since she has several followers on social media, the companies believe that they can advertise their products and reach out to several more potential customers. Which of the following marketing strategies has been described here? 21) ______

A) ambush marketing B) viral marketing C) test marketing D) real-time marketing

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22)

Which of the following statements is true of innovators and early adopters? 22) ______

A) They are unwilling to take risks and to pay high prices. B) They may demand considerable customization and technical support. C) They are more likely to respond to marketing that communicates the product's completeness. D) For this market segment, detailed technical information is not as important as using market channels with high reach and high credibility.

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23) Which of the following is a disadvantage of using online advertising such as social media? 23) ______

A) potential for customer reach and viral marketing offered is low B) conversion of visitors to customers is often low C) slow deployment D) relatively high cost

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24) Sanwey Incorporated is a mobile phone manufacturer. In order to keep up with the competition in the market, it has decided to advertise devices that are not yet in the market. These devices are part of its future release plans but have not received approval from the board for manufacturing them. These products advertised by Sanwey Incorporated are most likely ________blank. 24) ______

A) substitute products B) value-added products C) consignments D) vaporware

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25) Which of the following statements is true of using marketing to shape perceptions and expectations? 25) ______

A) Preannouncements reduce excitement about a product before its release. B) A firm that aggressively promotes its products loses its actual installed base and its perceived installed base. C) A firm should avoid using vaporware if other vendors beat the firm to market and the firm fears that customers may select a dominant design. D) A firm can signal its commitment to an industry by making substantial investments that would be difficult to reverse.

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26) do.

The value of a technological innovation is solely determined by what the technology can 26) ______ ⊚ ⊚

true false

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27) Firms try to decrease their development cycles in order to increase their timing of entry options. This move indicates that firms should always be racing to launch their products as early as possible. 27) ______ ⊚ ⊚

true false

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28) If a firm wishes to avoid giving away its own installed base or complementary goods advantages to others, it may protect them by ensuring its products are incompatible with those of future entrants. 28) ______ ⊚ ⊚

true false

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29) By manipulating the timing of when the price of a good is paid, firms can influence the customer's perception of the product price. 29) ______ ⊚ ⊚

true false

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30) If a firm's objective is maximum market skimming, it will initially set a high price on new products. 30) ______

⊚ ⊚

true false

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31) Firms intending to maximize market share typically use a market skimming pricing strategy. 31) ______ ⊚ ⊚

true false

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32) Firms in industries characterized by increasing returns will often use the objective of maximizing market share and a penetration pricing strategy. 32) ______ ⊚ ⊚

true false

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33) Bundling enables a new technology to piggyback on the success of another product that already has a large installed base. 33) ______

⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : Distribution

34) Bundling arrangements have proven to be a very suc-cessful way for firms to build their installed base and ensure provision of complemen-tary goods. 34) ______ ⊚ ⊚

true false

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35) When set to release a new technological innovation, a firm's reputation for both technological and commercial competence is unlikely to influence the market's expectation about its likelihood of success. 35) ______ ⊚ ⊚

true false

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36) In crafting an advertising message, firms must focus more on making the advertisements entertaining and memorable than on providing a significant quantity of informative content.

36) ______ ⊚ ⊚

true false

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37) Viral marketing is based on the fact that people are more receptive to, or have greater faith in, information that comes through personal contacts. 37) ______ ⊚ ⊚

true false

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38) Marketing channels that enable high content and selective reach are appropriate for innovators and early adopters. 38) ______ ⊚ ⊚

true false

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39) When marketing a new product to the late majority and laggards, a company should emphasize the advanced technological features of the new product. 39) ______ ⊚ ⊚

true false

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40) While mavens with a valuable piece of information are likely to expose it to a great number and diversity of people, connectors are likely to convey the information to fewer people but in more detail. 40) ______ ⊚ ⊚

true false

Question Details Accessibility : Keyboard Navigation Accessibility : Screen Reader Compatible Difficulty : 1 Easy Topic : Marketing

Answer Key Test name: chapter 13 1)One option is to withhold the computerized prosthetic arm from the market until sales and profits from its current offerings begin to decline significantly. This will allow it to maximize its investment in its current prosthetics. The drawback in implementing this strategy is that the competition might introduce a computerized prosthetic arm that could steal market share from BioSense and cause the company to fall behind in the market. The other option is to introduce the product immediately and embrace cannibalization of its current product. This could help the company to increase its lead in the market and could create a bigger gap between itself and its competitors. 2)When achieving high volume is important, firms will often emphasize a maximum market share objective. To maximize market share, firms often use penetration pricing. The firm will set the lowest price possible hoping to rapidly attract customers, driving volume up and production costs down. Low pricing was a way to penetrate an already crowded shampoo market. Offering dealer incentives helped the company gain shelf space and the low price helped Clary Laboratories "buy market share." This helped the company increase production and take advantage of lower production costs to keep prices lower.

3) Gerald Rupert can sell the book and the video online. This will give him complete control over the product and the profits. He can establish a Web site or even sell it on eBay. However, he will have to advertise to get customers to his Web site. He will need to have his own storage and shipping facility as well as personnel to handle the orders. If he sells through intermediaries, they may also sell his items via the Internet. Online stores such as Amazon.com may sell the item for him. Bookstores may sell the items both in their retail outlets and online. In this case, he will have to ship large quantities to the intermediaries and they will break them down into single units and do the shipping. Of course, he will have to share his profits but will also have reduced costs. The best recommendation is to use intermediaries. Students' answers will vary. 4)Not only are innovators and early adopters the first to adopt a new product, they are also often the opinion leaders for others, so they should be targeted first. They are most interested in a product that offers advanced technology with significant advantages over previous generations, which should be emphasized in the promotional campaign. A medium that allows Frosty Products to explain in detail the technological advances and advantages of its new refrigerator should be used. Magazines, trade journals, and newspapers are good media examples for this approach.

5)Gladwell identifies three distinct types of individuals who have disproportionate amount of influence: connectors, mavens, and salespersons. Connectors are individuals who tend to form an exceptionally large circle of acquaintances. They belong to multiple social worlds. Thus, connectors can bring together people who would otherwise be unlikely to meet. Mavens are individuals who are driven to obtain and disseminate knowledge about one or more of their interests. They will frequently volunteer information and derive great pleasure out of helping other consumers. Finally, salespersons are those individuals who are naturally talented persuaders. Such individuals are gifted at providing verbal responses that their listener is likely to find compelling. These individuals can infect others with their moods. 6) A 7) C 8) A 9) B 10) B 11) B 12) C 13) C 14) D 15) A 16) B 17) A 18) A 19) C 20) C 21) B 22) B 23) B

24) D 25) D 26) FALSE 27) FALSE 28) TRUE 29) TRUE 30) TRUE 31) FALSE 32) TRUE 33) TRUE 34) TRUE 35) FALSE 36) FALSE 37) TRUE 38) TRUE

39) FALSE 40) FALSE