Q&A Hero

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

Q: With respect to a research and development (R&D) program, which of the following can be considered the exercise price? 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

Q: Which of the following is a disadvantage of using internal rate of return for assessing a project? 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.

Q: Which of the following is true of the internal rate of return of a project? A. The discounted cash flow estimates are only as accurate as the original estimates of the profit. B. It maximizes the net present value of the investment. C. It neglects the timing of investment and cash flows. D. It does not discriminate against projects that are long term or risky.

Q: If the net present value of a project is greater than zero, then the: A. project cannot be carried out as the cash outflow is too high. B. present value of cash outflows is higher than present value of cash inflow. C. project will require 5 years to break even. D. project generates wealth.

Q: 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? A. $2,000 B. $5,000 C. $10,000 D. $15,000

Q: Which of the following is true of quantitative methods of analyzing new projects, particularly in rapidly changing environments? 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.

Q: The discounted cash inflows of a project minus the discounted cash outflows is referred to as the _____. A. internal rate of return B. net present value C. real option D. screening value

Q: _____ refers to the allocation of a finite quantity of resources over different possible uses. A. Systematic enrollment B. Translational funding C. Organizational appropriation D. Capital rationing

Q: 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.

Q: Explain the advantages and disadvantages of rewarding and promoting the development of core competencies.

Q: What are core competencies?

Q: What properties must resources have to be a potential source of sustainable competitive advantage?

Q: Explain the influences on the threat of potential entrants into a market according to Porter's five-force model.

Q: 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 the entire region including the five contiguous counties. This is most accurately an expression of: A. vertical integration. B. strategic intent. C. monopoly rent. D. supplier bargaining power.

Q: Piezo Tech Solutions supplies hospitals with software to track insurance claims. As insurance regulations and policies are always changing, its software needs to have the ability to be agile and responsive to change. In other words, the software needs: A. dynamic capabilities. B. tacit resources. C. rigid competencies. D. to be path dependent.

Q: Which of the following statements is true of core competencies? 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.

Q: Socially complex resources are: 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.

Q: The relationship between a _____ resource and the outcome it produces is poorly understood. A. socially complex B. causally ambiguous C. logistically outbound D. logistically inbound

Q: A resource can be extremely difficult to imitate if: 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.

Q: Which of the following would be an example of a tacit resource? 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. Chipset manufacturing machine bought by an electronics company D. A distiller used to make malt liquor

Q: According to Michael Porter's model of a value chain, which of the following is a support activity? A. Accounting activities B. Outbound logistics C. Marketing D. Inbound logistics

Q: The Corner Shop Corp. 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? 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

Q: Sam's Sugar Corp., a leading cane sugar manufacturer, faces a threat of going out of business when a rival company introduces a zero-calorie sweetener to replace the high-calorie cane sugar. According to Porter's five-force model, the two products are: A. complements. B. supplements. C. intermediates. D. substitutes.

Q: Ample Espresso Corp. is a coffeehouse located across from Tian's Kitchen, a restaurant. According to Porter's five-force model, the services and products provided by both are most accurately classified as: A. complements. B. competitors. C. substitutes. D. intermediates.

Q: Scripts & Scrolls Corp. 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: A. bargaining power of buyers. B. bargaining power of suppliers. C. threat of substitutes. D. vertical integration of buyers.

Q: Allure Fabrics Corp. 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: A. forward vertical integration. B. backward vertical integration. C. horizontal integration. D. substitution.

Q: Perfecto Espresso Corp. 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: A. forward vertical integration. B. backward vertical integration. C. horizontal integration. D. substitution.

Q: According to Porter's five-force model, if a buyer can threaten to backward vertically integrate, it will: 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.

Q: Factors that make it difficult or expensive to change suppliers or buyers are referred to as _____. A. transactional costs B. monopoly costs C. marginal costs D. switching costs

Q: Ceramic Customs Corp. 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: 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.

Q: According to Porter's five-force model, if suppliers of a particular good are very abundant, _____. 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

Q: Mr. Crunchy Inc. is a firm experiencing severe losses. However, with large initial investment in manufacturing equipment and infrastructure, the firm is finding it difficult to abandon the industry. According to Porter's five-force model, the company is facing a(n): A. vertical integration. B. exit barrier. C. horizontal integration. D. substitute threat.

Q: Which of the following statements is true of Porter's five-force model? 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.

Q: Dynamic capabilities enable firms to quickly adapt to emerging markets or major technological discontinuities.

Q: 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.

Q: 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.

Q: Path dependency refers to the abilities that make a firm more agile and responsive to change.

Q: Resources of a tangible nature that can be readily codified are called tacit resources.

Q: A strategic stakeholder analysis emphasizes the stakeholder management issues a firm ought to attend to due to their ethical or moral implications.

Q: According to Porter's value chain model, firm infrastructure is a primary activity.

Q: Ammunition can be considered a complement for firearms.

Q: Weekly News Inc. bought the paper mill that supplied paper for printing its magazine. This is an example of horizontal integration.

Q: According to 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.

Q: According to Porter's five-force model, the threat of potential entrants is influenced by the height of entry barriers.

Q: Low exit barriers intensify rivalry by making firms reluctant to abandon the industry.

Q: When demand is increasing, there is less revenue to go around and firms will experience more competitive pressure.

Q: In general, the more firms competing that are of comparable size, the more competitive the industry will be.

Q: Formulating a technological innovation strategy first requires an accurate appraisal of where the firm currently is.

Q: What assumptions underlie the use of timing of entry strategies into the market for new products?

Q: Since SmartShoe Inc. is the market leader in the gliding shoe market, it 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.

Q: 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 has very little personal money to invest in this new product. Therefore, he borrows enough 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?

Q: Explain why sometimes the follower and not the first mover of a new technology is more successful in the marketplace.

Q: 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.

Q: _____ require multiple stages of a new product development process to occur simultaneously. A. Incumbent development processes B. Parallel development processes C. Monopoly development processes D. Slow-cycle development processes

Q: New innovations typically tend to: A. be adopted very slowly at first. B. eliminate incumbent inertia for late entrants. C. eliminate monopoly rents when they are first introduced. D. reduce the effectiveness of future enabling technologies.

Q: Which of the following calls for an early entry into a market? A. Immature enabling technologies B. Unavailability of complementary goods C. High customer uncertainty D. Low entry barriers

Q: Which of the following is an advantage of being a late entrant into a market? 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.

Q: A delayed entry into a market with a new technology is preferred if: A. support by complementary goods providers is high. B. enabling technologies are less mature. C. customer uncertainty is low. D. the scope for improving over previous technologies is high.

Q: Which of the following statements is true of customer preferences? 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.

Q: When Fun Bun Inc., an international fast-food chain, first moved into 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: A. corporate social responsibility. B. an undeveloped supply channel. C. incumbent inertia. D. monopoly rents.

Q: Which of the following statements is true of a firm entering a market too early? 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.

Q: Fashion Fair Corp., the first mover in the "all-year discount" stores market, lost its market share to a late entrant, Brand Fair Inc. Brand Fair operates its discount stores solely through the Internet, which saves a lot of expenses. Fashion Fair has been unable to replicate this strategy by adopting the online store business model due to its existing contracts with suppliers and heavy investment in retail stores. Fashion Fair has been experiencing: A. incumbent inertia. B. monopoly rents. C. path dependency. D. technology attrition.

Q: Pioneer Athletics Inc. 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 for use in its mats. This new process used to develop the foam represents a(n) _____ for Pioneer Athletics. A. network externality B. preemption rent C. enabling technology D. incumbent rent

Q: 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: A. monopoly costs. B. path dependency. C. incumbent inertia. D. technology trajectory.

Q: Component technologies that are necessary for the performance or desirability of a given innovation are referred to as _____. A. architectural technologies B. diffused technologies C. primary technologies D. enabling technologies

Q: Which of the following statements is true of first movers in comparison with early followers and late entrants? A. 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.

Q: Jupiter Inc., a software firm, is starting to face competition from the new entrant in its market, Coral Inc. 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? A. Ensuring that customers find its software simpler and more convenient to use than that of Coral 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 that set by Coral D. Ensuring that fewer complementary products are available for its products in comparison to that for the products of Coral

Q: Alpen Inc. is a manufacturing firm that holds the patent for a new food processing machine 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. This is referred to as _____. A. monopoly rent B. technology lag C. incumbent inertia D. absorptive capacity

Q: If the aspects that customers have come to expect in a technology are difficult for competitors to imitate, being the technology leader will: A. result in an inability to preemptively capture scarce assets. B. enable it to yield sustained monopoly rents. C. result in lower bargaining power over suppliers. D. mean negligible research and development costs.

Q: 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) _____. A. first pioneer B. late mover C. early follower D. eccentric laggard

Q: Magnitude Inc. 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 Corp. and Adventura Inc. came up with their respective gaming consoles and successfully established their products. In this scenario, Mantel and Adventura would be considered: A. pioneers. B. early followers. C. laggards. D. late movers.

Q: Doven Inc. 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) _____. A. first mover B. early follower C. early leader D. laggard

Q: The first entrants to sell in a new product or service category are referred to as _____. A. pioneers B. early leaders C. early followers D. laggards

Q: A disadvantage of using parallel development processes is that it greatly lengthens the new product development time.

Q: A firm intending to refine an earlier entrant's technology should avoid fast-cycle development processes.

Q: Other things being equal, an entrant with a strong reputation can attract adoptions earlier than entrants without strong reputations.

Q: Many start-up firms demise because new innovations tend to be adopted very slowly at first.

Q: 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.

Q: Not all innovations require complementary goods.