Strategies for Competition Chapter 10 2e Test Bank Answers

Package Title: Chapter 10, Testbank

Course Title: Dyer, SM 2e

Chapter Number: 10

Question type: Multiple Choice

1) Nathan, a designer at Zeal Inc., comes up with a new idea. While Nathan considers turning it into a piece of art, Ricky, his colleague, suggests converting the idea into a product that generates revenue. Ricky’s suggestion to convert the idea into a revenue-generating product refers to a(n) ___________.

a) innovation

b) revolution

c) invention

d) variation

Difficulty: Hard

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Application

Standard 1 : AACSB || Analytic

2) Inks Corp. is a manufacturer of pens. It creates a new product called Quink, a quick-drying ink pen that does not require the use of blotting paper. It creates this product by building on its established knowledge of the properties of ink and the mechanisms of a pen. Which of the following innovations is being exemplified in this case?

a) A revolutionary innovation

b) An incremental innovation

c) A radical innovation

d) A subversive innovation

Difficulty: Hard

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Application

Standard 1 : AACSB || Analytic

3) Pearl Corp., a manufacturer of dental equipment, creates a new instrument. With the experience it has in creating small equipment required for dental surgeries, it customizes the new tool to be more accurate and effective. It also comes with an improvised handle. Which of the following innovations has Pearl adopted in this scenario?

a) An altered innovation

b) An incremental innovation

c) A radical innovation

d) A progressive innovation

Difficulty: Hard

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Application

Standard 1 : AACSB || Analytic

4) Which of the following statements is true of an incremental innovation?

a) It focuses on a different knowledge base to deliver value in a truly unique way.

b) It creates new values through a different set of resources and capabilities than that of rivals.

c) It sustains a company’s current product offering and revenues.

d) It typically creates improvements based on the knowledge perceived from competitors.

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

5) A salon that specializes in haircuts comes up with a new service that sets it apart from those of its rivals. Clients are requested to send in their photographs; the stylists then create a set of digital images with various looks. Once the client chooses a desired look, a stylist goes to the client’s home to deliver the service. The strategy of creating digital images, which requires a unique set of resources and skills, is an example of a(n) ___________.

a) altered innovation

b) incremental innovation

c) radical innovation

d) progressive innovation

Difficulty: Hard

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Application

Standard 1 : AACSB || Analytic

6) Which of the following statements is true of a firm that creates a radical innovation?

a) It focuses on the established knowledge base of a firm to deliver value.

b) It relies on existing technologies and resources to create a new product.

c) It employs a fundamentally different business model than its rivals.

d) It aims to sustain its current product offering and revenues.

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

7) The approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model is called the ___________.

a) cost model

b) customization model

c) differentiation model

d) revenue model

Difficulty: Easy

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

8) A telecommunications service provider, Chrome Inc., creates a new application for its users. The application allows users to make free calls through the Internet. While this increased the number of paid subscribers of Chrome, its competitors who levied a fee for their telecommunication services lost their customers. This is an example of a ___________.

a) supporting innovation

b) complementary innovation

c) disruptive innovation

d) decremented innovation

Difficulty: Hard

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Application

Standard 1 : AACSB || Analytic

9) Which of the following statements is a characteristic of a disruptive innovation?

a) It disturbs an existing market by displacing an earlier technology.

b) It typically uses old technologies used by competitors in the market.

c) It sustains a company’s current product offering by the firm’s established knowledge.

d) It typically offers value in a way that is easy to imitate.

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

10) Copper Inc., an existing clothing outlet, decides to shift from direct to online retailing. It offers the same products at a reduced price as it does not have to incur the costs to manage a store. In this case, which of the following patterns of innovative strategies has Copper adopted?

a) Reconfiguring the value chain to eliminate activities

b) Creating low-end disruptive innovations to decrease competition

c) Forming product differentiation strategies to increase value

d) Adding additional product features to increase the product life-cycle

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

11) Stars Corp. decides to eliminate activities associated with collecting and storing the products by directly distributing the finished goods to its customers. This enabled Stars to reduce the total cost. Which of the following is being exemplified in this case?

a) Disintermediation

b) Low-end disruptive innovations

c) Standardization

d) High-end radical innovations

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

12) Gem Inc. a clothing manufacturer, creates a new strategy to increase its customer base. Maya, a marketing student, observes that Gem engages in disintermediation, while Nate, her friend, believes that this observation is incorrect. Which of the following statements is likely to support Maya’s observation?

a) Gem is likely to offer coupons to regular customers and increase brand loyalty.

b) Gem is likely to create disruptive innovations to eliminate competition.

c) Gem is likely to eliminate middlemen and directly deliver products to customers.

d) Gem is likely to misrepresent facts in its promotions to increase sales.

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Analyze

Standard 1 : AACSB || Reflective Thinking

13) An automobile company used its profits from the sale of motorcycles to invest in the development of cars. These cars were less expensive but technologically more advanced than those of its competitors. This is an example of ___________.

a) disintermediation

b) low-end disruptive innovations

c) standardization

d) high-end disruptive innovations

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

14) A software firm decides to offer its products at a lower price. In order to reduce costs, it outsources some of its in-house functions to countries that offer less expensive labor. As a result, it gains a cost advantage. The strategy adopted by this firm is an example of ___________.

a) disintermediation

b) low-end disruptive innovations

c) free business models

d) high-end disruptive innovations

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

15) Crimson Inc. initially introduced a new gadget to the niche market. Eventually, other organizations provided the same product at a lower price. Hence, Crimson had to reduce the price of the gadget to the market price. This is an example of a ___________.

a) disintermediation strategy

b) low-end disruptive innovation

c) differentiation strategy

d) high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

16) An automobile manufacturer creates high-performance products, which are new in the market. Since the product offers features that are unique, customers were willing to pay a high price for the product. However, after a couple of months, other brands offered the same features at a lower price, which made the innovators reduce the price as well. Which of the following innovations is being exemplified in this scenario?

a) A disintermediation strategy

b) A low-end disruptive innovation

c) A customization strategy

d) A high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

17) Which of the following statements is true of a high-end disruptive innovation?

a) It disrupts an existing market by displacing a high-end technology with a low-end tool.

b) It relies on discounted prices to increase the sale of high-end services.

c) It uses the price skimming strategy to gain a foothold in the market.

d) It creates new products that offer superior performance on some existing product features.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

18) A clothing manufacturer produces some basic models on a large scale. The customers can then choose print, color, embellishments, and size and place a specific order. Which of the following is being exemplified in this case?

a) Reconfiguration of the value chain to eliminate activities

b) Creation of a low-end disruptive innovation

c) Reconfiguration of the value chain to allow for mass customization

d) Creation of a high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

19) Prints Inc., offers visiting cards, brochures, business cards, and personalized greeting cards. It allows customers to choose from a set of modules and create their own designs. Which of the following is being exemplified in this case?

a) Reconfiguration of the value chain to eliminate activities

b) Creation of a low-end disruptive innovation

c) Reconfiguration of the value chain to allow for mass customization

d) Creation of a high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

20) Lila, the CEO of Purple Inc., a bag manufacturing company, observes that customers prefer some personalized features. She considers implementing a mass customization strategy, while the production manager, Steven, suggests that standardization is the best strategy. Which of the following will strengthen Lila’s decision?

a) Purple’s customers are wholesalers who prefer bulk order of standard products.

b) Purple’s production budget allows only mass production from start to finish.

c) Purple’s value is primarily based on it being perceived as an economical brand.

d) Purple’s production facility allows for mass production and alterations at the end stage.

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Analyze

Standard 1 : AACSB || Reflective Thinking

21) Which of the following statements is true of mass customization?

a) It is the best option when products need to be customized from start to end.

b) It works best if a product can be broken into modules that offer different features.

c) It does not need the additional costs of creating need-specific components.

d) It does not require standard core components to be produced in large scale.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

22) Which of the following statements is true of the blue ocean strategy?

a) It disrupts an existing market by displacing an earlier technology.

b) It relies on its existing knowledge of products to improvise on new features.

c) It uses low-end disruptive innovations to compete in the market.

d) It creates new demand in an uncontested market space.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

23) Palm’s, a new restaurant in Boston, enters the market with a new strategy. Cooking enthusiasts can co-create a dish for their family along with the in-house chefs. They also allow families to cook their meals together and dine by the poolside. None of the other restaurants in the city offers this unique service. This is an example of a ___________.

a) blue ocean strategy

b) low-end disruptive innovation

c) mass-customization strategy

d) high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

24) J.J. Inc., a software company, was the first to create a customized messenger application. The subscribers can choose the features they wish to install. The value offered by J.J. is different from its competitors in the market. Which of the following is being exemplified in this case?

a) A blue ocean strategy

b) A low-end disruptive innovation

c) A standardization strategy

d) A high-end disruptive innovation

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

25) Jobs Now is an employment website. Like its competitors, it offers free listings in every category, which is free for job seekers but not for companies. This feature of Jobs Now is an example of ___________.

a) a blue ocean strategy

b) a mass-customization strategy

c) a standardization model

d) a revenue model

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

26) Zolac Inc. is an online store that sells lifestyle products. It offers 15% discount on weekend purchases. This marketing strategy is an example of a ___________.

a) blue ocean strategy

b) differentiation model

c) standardization strategy

d) revenue model

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

27) An organization launched a new product in the market. It offered a free trial of the basic model to gain widespread initial use, after which users were offered a nonfree premium version of the same product. Which of the following strategies is used by the company in this case?

a) A blue ocean strategy

b) A cross-sell strategy

c) A third-party pay strategy

d) A bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

28) Which of the following statements is true of the cross-sell strategy?

a) It focuses on a small product user base.

b) It offers premium features to free users.

c) It requires a high conversion rate.

d) It uses discounts to gain widespread initial use.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

29) Ochre Inc. uses the freemium strategy to enter a market. This strategy becomes successful and the organization gains a wide customer base. Which of the following is likely to be true in this case?

a) It is likely to use the high-end disruptive innovation strategy.

b) It is likely to use product differentiation to mark-up the initial price of the product.

c) It is likely to gain a wide customer base only if there is a high conversion rate.

d) It is likely to gain new customers in an existing market only through price skimming.

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

30) The Table Mat, an online review site, provides information about restaurants, the products they offer, details on home delivery, take away, and so on. Restaurants are charged by The Table Mat for advertising to millions of product users. Which of the following is being exemplified in this case?

a) A blue ocean strategy

b) A cross-sell strategy

c) A third-party pay strategy

d) A bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

31) Flytech Inc. is an online store where people and businesses buy and sell a broad variety of goods and services. Various brands pay Flytech to advertise and sell their products online. Which of the following is being exemplified in this case?

a) A blue ocean strategy

b) A cross-sell strategy

c) A third-party pay strategy

d) A bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

32) Lica Inc., a software company, initially offers a small percentage of its services for free. Once customers get familiar with the services, they decide to purchase them at a premium. The company makes money on the add-on services like application downloads, messenger updates, and other online services. Other companies pay Lica for advertising through these portals. Which of the following innovative strategies has been adopted by the company?

a) A combination of freemium and third-party strategies

b) A cross-sell strategy

c) A combination of high-end and low-end disruptive strategies

d) A bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

33) Which of the following statements is true of a third-party pay strategy?

a) It focuses on a small product user base.

b) It charges the consumers of the actual product or service a high price.

c) It requires a targeted community of users that comprises a customer segment.

d) It typically sells products for a premium price rather than at a discount.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

34) A cell phone manufacturing company gives away a free case with a purchase of any product higher than $50. Which of the following is being exemplified in this case?

a) A blue ocean strategy

b) A cross-sell strategy

c) A third-party pay strategy

d) A bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

35) Mel Inc., a popular cosmetics and perfume brand, delivers free samples with products worth $75 and more. This is an example of ___________.

a) a blue ocean strategy

b) a cross-sell strategy

c) a third-party pay strategy

d) a bundling strategy

Difficulty: Hard

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Application

Standard 1 : AACSB || Analytic

36) Which of the following statements is true of a bundling strategy?

a) It works particularly well when a company offers a broad array of products.

b) It works best in markets where freebies are likely to be very expensive.

c) It typically uses price skimming as a strategy to increase profits.

d) It encourages sales by providing products at a discount.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

37) ___________ refers to Professor Rich’s argument that competitive intensity has increased, and that periods of competitive advantage have decreased.

a) Hypercompetition

b) Mass customization

c) Third-party competition

d) Standardization

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

38) Paws Corp., a manufacturer of pet products, tries to get a few customers to try out their products. The primary goal of the organization is to get some reference customers that will seed future growth to increase market acceptance. In this case, the organization is in the ___________ stage of the product life cycle.

a) introduction

b) growth

c) maturity

d) decline

Difficulty: Hard

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Application

Standard 1 : AACSB || Analytic

39) Which of the following is true of the introduction stage of the product life cycle?

a) It tries to get early adopters to try out a new product.

b) It focuses not only on a proven concept but also a low price.

c) It emphasizes increased sales and high profits.

d) It tries to minimize competition by forming an alliance with rivals.

Difficulty: Medium

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

40) Peach Corp. continues to refine its chocolate products even as they look for innovative ways to reach customers through marketing and new distribution channels. In this case, the organization is in the ___________ stage of the product life cycle.

a) introduction

b) growth

c) maturity

d) decline

Difficulty: Hard

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Application

Standard 1 : AACSB || Analytic

41) Which of the following statements is true about invention?

a) It essentially enables firms to deliver value in new ways.

b) It refers to the use of a novel idea or method.

c) It is the creation of a unique or novel concept, method or process that is often turned into a tangible outcome such as a new product.

d) It is the conversion of a novel concept into a product, process, or business model that generates revenues and profits.

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

42) Which of the following statements refers to incremental innovation?

a) It is a pricing strategy that a company uses to get paid for the value it delivers through its business model.

b) It can be described as building on a firm’s established knowledge base to create minor improvements to the product or service a firm offers.

c) It can be described as innovation that draws on a different knowledge base, technologies, or methods to deliver value in a truly unique way.

d) It can be described as building on a competing firm’s established knowledge base to steadily improve a firm’s own product or service.

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

43) Strategies that draw on more radical innovations ________.

a) build products on a firm’s established knowledge base

b) employ a fundamentally similar business model as a firm’s rivals

c) often use new technologies to create, deliver, and capture value

d) create minor improvements to the product or service a firm offers

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

44) Radical innovation strategies are sometimes referred to as disruptive innovation because ________.

a) they disrupt the normal functioning of the activities in the industry value chain

b) they disrupt the production process, thus reducing the production capability of the firm

c) companies in the same industry can easily imitate this innovation

d) rival firms find them so disruptive that they can no longer do business as usual

Difficulty: Medium

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

45) Identify a true statement about the innovative strategy of disintermediation.

a) It uses the price skimming strategy to gain a foothold in the market.

b) It involves reconfiguring the value chain to eliminate activities or steps.

c) It creates products that outperform existing products in the market.

d) It involves producing a low-cost product or service at the low-end or most price-sensitive segment of the market.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

46) Which of the following is a characteristic of products created through top-down disruptive innovation?

a) They move upmarket as they improve their technology and processes.

b) They are of poorer quality than the existing products in the market.

c) They are priced significantly lower than other similar products in the market.

d) They are initially purchased by the most discriminating and least price-sensitive buyers.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

47) Identify a true statement about the innovative strategies based on the concept of mass customization.

a) They do not need the additional costs of creating need-specific components.

b) They do not require standard core components to be produced in large scale.

c) They work best in markets where customers have a variety of different needs.

d) They are the best option when products need to be customized from start to end.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

48) Identify an accurate statement about blue ocean strategy.

a) It involves creating new markets by targeting nonconsumers.

b) It disrupts an existing market by displacing an earlier technology.

c) It uses low-end disruptive innovations to compete in the market.

d) It relies on its existing knowledge of products to improvise on new features.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

49) The cross-sell strategy involves offering a ___________.

a) paid product with another unrelated product at discount

b) free product with a paid product when the product requires ongoing maintenance

c) free basic product to gain widespread initial use, after which users are offered a nonfree premium version

d) free product to a community of product users as a method of generating revenue from a third party who pay to access those users

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

50) High conversion rate refers to ___________.

a) the high rate at which the production cost is returned in the form of profits from sales

b) a high percentage of sales achieved as a result of a firm’s current marketing strategy

c) the high rate at which people switch to a firm’s product from a rival firm’s product

d) a high percentage of free users who are willing to convert to paid customers for premium features

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

51) Which of the following statements best describes third-party pay strategy?

a) It involves providing free products to a community of product users as a method of generating revenue from a third party who pay to access those users.

b) It involves offering a free product with a paid product or service when the product requires ongoing maintenance.

c) It involves offering a free basic product to gain widespread initial use, after which users are offered a nonfree premium version.

d) It involves offering a free version of a product to consumers to use at home, but offering a paid version with additional features to the third-party market.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

52) Identify a true statement about bundling strategy.

a) It works well when the product requires ongoing maintenance.

b) It typically uses price skimming as a strategy to increase profits.

c) It encourages sales by providing products at a discount.

d) It requires bundled products to be related to free products.

Difficulty: Medium

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

53) Which of the following statements best describes the introduction stage of a product’s life cycle?

a) New products enter the market that cause demand to fall.

b) Product innovation is much more important than process innovation.

c) The increasing market growth leads to a decrease in competitive rivalry.

d) A standard emerges that signals the market’s agreement on a common set of engineering and design features.

Difficulty: Medium

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

54) Which of the following statements is true of the maturity stage of an industry’s life cycle?

a) The market size of the product shrinks significantly.

b) Growth starts to slow as total market penetration increases.

c) Demand increases as the early majority is convinced that the product concept works.

d) Toward the end of this stage product innovation starts to give way to process innovation.

Difficulty: Medium

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

55) Identify a true statement about the decline stage of an industry’s life cycle.

a) The market size of the product increases significantly during this stage.

b) The increasing market growth leads to a decrease in competitive rivalry.

c) Some firms try to minimize competition and consolidate the industry by buying rivals.

d) A standard emerges that signals the market’s agreement on a common set of engineering and design features.

Difficulty: Medium

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Comprehension

Standard 1 : AACSB || Analytic

Question type: Text Entry

56) A(n) ___ describes the creation of a unique or novel concept, method or process that is often turned into a tangible outcome.

Difficulty: Easy

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

57) A radical innovative strategy in which companies in the same industry find the innovation so destructive that they can no longer do business as usual is called a(n) ___.

Difficulty: Easy

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

58) Creating new demand in an uncontested market space is called the ___.

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

59) Groups of people who share similar needs and thus are likely to desire the same features in a product are called ___.

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

60) ___ coined the term hypercompetition.

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Question type: Essay

61) Define two general categories of innovations.

Difficulty: Easy

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: An incremental innovation builds on a firm’s established knowledge base and steadily improves a product or service it offers.

Radical innovation draws on a different knowledge base, technologies, or methods to deliver value in a truly unique way. Examples of products based on radical innovations include the computer (versus the typewriter), CT scanner (versus the X-Ray), cell phone (versus the landline phone), and MP3 player (vs. CD player).

62) What is a business model? Briefly explain the revenue model.

Difficulty: Easy

Section Reference 1: What Is an Innovative Strategy?

Learning Objective 1: Discuss innovative strategy and the differences between the types of innovation.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: The term business model refers to the rationale of how an organization delivers and captures value. The way a company generates revenue streams to get paid for the value it delivers. The term revenue model is sometimes used to refer to the approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model.

63) What are low-end disruptive innovations? Explain with an example.

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: Students’ examples may vary. However, their answers should include the following concepts. A second type of innovative strategy is called a low-end disruption. Rather than eliminating steps in the value chain, some firms use a different set of activities or technologies than their rivals to produce a low cost product or service. Harvard professor Clayton Christensen observed a pattern in a number of industries where a firm leverages new technologies to launch a product at the low end—the most price-sensitive segment of the market—and then gradually moves upmarket as it improves its technology and processes.

Honda started at the low end in the automobile industry by offering 50cc and 150cc motorcycles. When Honda first launched, Harley-Davidson wasn’t concerned about the competition because its market was superheavyweight motorcycles. Harley-Davidson’s CEO even proclaimed that Honda’s entry was good for Harley-Davidson because Honda would get more people riding a motorcycle and eventually they would graduate to a Harley. But over time, Honda used profits from its large volume of small motorcycles to invest in the development of larger motorcycles and eventually entered the superheavyweight motorcycle categories with bikes that were less expensive but more technologically advanced than Harley-Davidson’s.

64) Explain mass customization with an example.

Difficulty: Easy

Section Reference 1: Categories of Innovative Strategies

Learning Objective 1: Identify the different categories of innovative strategies.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: Students’ examples may vary. However, their answers should include the following concepts.

Mass customization is an oxymoron, like “jumbo shrimp” or “act naturally.” Until recently, most products in business were either mass produced OR customized, but not both. However, new technologies and processes have allowed for the mass production of individually customized goods or services. Take Build-A-Bear Workshop, for example. Customers “build” their own teddy bear or other stuffed animal by choosing from a large variety of body styles, after which the animal is stuffed at the store to the customer’s liking. The customer can also add a heart or sound box during stuffing, enabling the animal to “talk” or play music. After helping to stuff their animal, the customer can dress their furry friend in an outfit of their choice from a soccer uniform, or witch costume, to a sequin shirt and jeans, and they can even add shoes. In short, the components of the teddy bear are mass produced but put together in a customized way by each individual customer.

65) Explain the four stages of the product life cycle.

Difficulty: Easy

Section Reference 1: Innovation and the Product/Business/Industry Life Cycle (S-Curve)

Learning Objective 1: Describe the accelerating pace of innovation and the product, business, and industry life cycle.

Bloomcode: Knowledge

Standard 1 : AACSB || Analytic

Solution: Introduction Stage: During the introduction stage the company tries to get early adopters—those types of buyers willing to try out the latest new gadget—to try out the new product. The primary goal is to get some reference customers that will seed future growth to increase market acceptance.

Growth Stage: Sales accelerate during the growth stage as the initial innovation gains traction and increased market acceptance. A company continues to refine a product during this stage as they also look for innovative ways to reach customers through marketing and new distribution channels. As the product starts to gain widespread acceptance a standard (or dominant design) emerges that signals the market’s agreement on a common set of engineering and design features. Toward the end of this stage product innovation starts to give way to process innovation.

Maturity Stage: As an industry moves into the mature stage, growth starts to slow as total market penetration increases. What little growth there is comes from buyers called the late majority entering the market who want not only a proven concept but also a low price.

Decline Stage: The decline stage is often initiated by new products entering the market that cause demand to fall.