Exam 2 - CH7

Question 1

What is the AFI Strategy Framework?

Answer 1

A framework used in strategic management that outlines the steps of Analyze, Formulate, and Implement strategies.

Question 2

What are the four steps of the innovation process?

Answer 2

• Idea
• Invention
• Innovation
• Imitation

Question 3

Who coined the term ‘Gale of Creative Destruction’?

Answer 3

Joseph Schumpeter

Question 4

What is the role of entrepreneurs in strategic and social entrepreneurship?

Answer 4

Change agents for creative destruction who undertake economic risk to innovate.

Question 5

What distinguishes strategic entrepreneurship from social entrepreneurship?

Answer 5

Strategic entrepreneurship focuses on innovation for competitive advantage, while social entrepreneurship pursues social goals alongside profit.

Question 6

What are the five stages of the industry life cycle?

Answer 6

• Introduction
• Growth
• Shakeout
• Maturity
• Decline

Question 7

In the introduction stage of the industry life cycle, what is the core competency?

Answer 7

R&D

Question 8

What characterizes the growth stage of the industry life cycle?

Answer 8

Rapid demand increase and emergence of product/service standards.

Question 9

What is the primary competitive weapon during the shakeout stage?

Answer 9

Low price

Question 10

Fill in the blank: Firms often use __________ innovation to create a temporary competitive advantage.

Answer 10

incremental

Question 11

What are the different types of innovation?

Answer 11

• Incremental
• Radical
• Architectural
• Disruptive

Question 12

What is the difference between incremental and radical innovation?

Answer 12

Incremental innovation builds on existing knowledge, while radical innovation creates new knowledge or significantly alters existing products.

Question 13

What is an example of disruptive innovation?

Answer 13

Digital photography

Question 14

What is the definition of reverse innovation?

Answer 14

An innovation developed for emerging economies before being introduced in developed economies.

Question 15

What are the advantages of a platform business model?

Answer 15

• Scales efficiently
• Unlocks new value creation
• Benefits from community feedback

Question 16

What is the definition of network effects?

Answer 16

The value of a product or service increases with the number of users.

Question 17

What is the primary focus of cooperative strategies in innovation?

Answer 17

Manage external innovation through partnerships like licensing and joint ventures.

Question 18

What are the implications for strategists in managing innovation?

Answer 18

• Continuous innovation is crucial
• Addressing different customer needs at each life cycle stage
• Combining internal and external innovation strategies

Question 19

True or False: The maturity stage of the industry life cycle is characterized by decreasing competitive intensity.

Answer 19

False

Question 20

What is the significance of the crossing-the-chasm framework?

Answer 20

It breaks down market potential into different customer segments, highlighting incremental contributions.

Question 21

What is the strategic objective during the introduction stage?

Answer 21

Market acceptance and future growth.

Question 22

Fill in the blank: Established companies often focus on __________ innovation due to economic incentives.

Answer 22

incremental

Question 23

What is an example of a company that exemplifies strategic entrepreneurship?

Answer 23

Apple

Question 24

What are the strategic options firms can pursue during the decline stage?

Answer 24

• Exit
• Harvest
• Maintain
• Consolidate

Question 25

Introduction Stage includes:

Answer 25

small initial market size, slow growth, high barriers to entry, capital intensive.

Question 26

Product innovation describes:

Answer 26

new or recombined knowledge embodied in new products E.g. jet airplane, electric vehicle, smartphone

Question 27

Process innovation describes:

Answer 27

new ways to produce existing products or to deliver existing services

Question 28

Early adopters enter the market during the ___ stage:

Answer 28

growth

Question 29

Early majority enter the market during the ___ stage:

Answer 29

shakeout

Question 30

Late majority enters the market during what stage?

Answer 30

Maturity stage

Question 31

What is the difference between architectural and disruptive innovation?

Answer 31

Architectural innovation reconfigures existing technologies and components to create new products or services, while disruptive innovation introduces new technologies or business models that fundamentally change the market and existing approaches

Question 32

Japanese carmakers first introduced small fuel-efficient cars and then leveraged their low-cost and high-quality advantages into high-end luxury segments, dominated by brands such as Lexus, Infiniti, and Acura. This initiative best illustrates a(n)

Answer 32

disruptive innovation.

Question 33

Which of the following statements is true of the growth stage in the industry life cycle?

Answer 33

Production costs begin to fall during this stage when compared to the introduction stage.

Question 34

A patent is a form of

Answer 34

intellectual property.

Question 35

Carlos waited in line for 12 hours to purchase the first smartphone introduced to the market. He then started a blog to talk about workarounds for some of the bugs in the phone’s first operating system. Which of the following customer segments does Carlos best represent?

Answer 35

technology enthusiasts

Question 36

In developed countries, the industry for thumb drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?

Answer 36

While the thumb drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.

Question 37

Which of the following is the best example of a platform business?

Answer 37

Uber ride-hailing services

Question 38

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n) ________

Answer 38

radical

Question 39

In the third step of the innovation process, a(n)

Answer 39

invention is commercialized by entrepreneurs.

Question 40

According to _____ , a firm’s transition between the different parts of the industry life cycle is difficult because there is a big gulf separating the early adopters from customer segments that make up the mass market.

Answer 40

the crossing-the-chasm framework

Question 41

Which of the following is a disadvantage faced by first movers in an industry?

Answer 41

They will have to find distribution channels and complementary assets.