High-technology industries are those in which the underlying scientific knowledge that companies in the

industry use is advancing rapidly.

True

Technical standards create benefits primarily for those firms that do not adhere to them
False

In the past, format wars have been relatively common in the consumer electronics industry.
True

At the moment, Motorola appears to have the advantage in format for the next generation of TV and
DVD players.
False

It can be argued that Microsoft's near monopoly of PC operating systems helped raise the level of
industry profitability
True

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

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

True

Technical standards always exist in the public domain so that any company can use them.
False

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

Consumers chose Microsoft Windows operating system as the technical standard through their many
purchases of that software.
True

Dolby Laboratories' exploited a positive feedback loop in becoming the standard for sound quality.
True

Digital music downloads have high marginal costs.

False

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

False

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

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

False

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

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

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

True

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

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

In high-technology industries, the underlying scientific knowledge companies use is

advancing rapidly

Which of the following has been thought of as a high-technology industry?

All of these choices

Technical standards in high-technology industries are

specifications that all producers adhere to when making a product or product component

Which of the following is an example of a technical standard?

All of these choices

When standards are part of the public domain, the can be used
freely by any company

An industry is considered to be high technology, or high tech, when

the underlying scientific knowledge that companies in the industry use is advancing rapidly

When an industry's products rely on a common set of features, these features are called a
dominant design

Makers of complementary products will begin large-scale production when

the technical standard is firmly established

When a standard exists in the public domain

the standard may be used by any company

Which of the following economic benefits result from the use of standards?
All of these choices
Intellectual property refers to
the product of any intellectual and creative effort

Matsushita licensed its VHS technology to rivals, while Sony kept its Beta technology proprietary. This
action allowed Matsushita to
win the format war

What advice would you give to a firm that wants to exploit network effects?
Create incentives for other firms to develop complementary products.

Which of the following strategies should a company not adopt if it wants to win a format war?
Price the product high to recover steep upfront costs.

When it comes to developing a business model and strategies that will lead to competitive advantage
and superior profitability, high-technology companies
often face similar situations

What percentage of the world's PCs adhere to the Wintel standard?

95%

Often, the industry standard is selected competitively by

market demand

An adequate supply of complements to a product helps ensure that consumers

will buy the company's product

Killer applications are applications or uses of a new technology or product that

are so compelling they persuade customers to adopt or use the new technology in droves.

The razor-and-blade strategy was pioneered by

Gillette

Marginal cost refers to the cost of

producing once extra unit of product

Aggressive marketing to jump-start demand for a product often involves

All of these choices

Consider a cost curve, with production volume on the horizontal axis and marginal costs on the vertical
axis. What shape would the marginal cost curve most resemble in a high-tech industry?
Straight and flat

In 2001, Intel spent $7.5 billion to upgrade its facilities so it could produce the Pentium 4 semiconductor
chip. Each chip cost $130 to make and sold for $200 each. What is the marginal cost of a Pentium 4
chip?
$130

Which of the following is not intellectual property?

A new organizational structure

Digitalization refers to
turning intellectual property into digital form

Which of the following actions will not help protect intellectual property rights?
Digitalizing creative output

Which of the following is not a true statement?

First movers are the first to recover the costs of a new technology.

Which of the following is not one of the benefits that first movers enjoy?
Lower pioneering costs

Which of the following is not a disadvantage to being a first mover?

Accumulation of market knowledge

The various strategies that companies should adopt to win format wars revolve around
making network effects work in their favor and against their competitors

Licensing a format to other enterprises is often used by a company so that the company can
produce products that can be based on the licensed format

Which of the following are major sources of first-mover advantages?

All of these choices

Which of the following factors is a disadvantage of being a first mover?

All of these choices

Which of the following is not a basic strategy for a first mover?

Discourage development of complementary assets

If a first mover has complementary assets, barriers to imitation are high, and capable competitors are
few, the first mover should
develop and market the innovation itself

If a first mover does not have complementary assets, barriers to imitation are high, and there are
several capable competitors, the first mover should
enter into a joint venture to protect the product

If a first mover does not have complementary assets, barriers to imitation are low, and there are many
capable competitors, the first mover should
license the innovation to others

A technological paradigm shift is most likely to occur in which stage of the industry life cycle?
Maturity

Consumers will bear the costs of switching technologies when

the benefits of adopting the new technology outweigh the costs of switching

Cell phone technology is replacing traditional wired phone technology. This is an example of
technological paradigm shift

Which of the following will not help an established company in addressing the potential challenge of a
disruptive technology?
Distinctive competencies in the current business model

Technological disruption
causes firms to adopt a new business model

One of the great growth industries of the past few decades has been the wireless phone industry.
True

Nokia and IKEA are both German companies

False

The globalization of production has been increasing as companies take advantage of lower barriers to
international trade and location economies.
True

Relative to the United States, Mexico has more advanced factors of production.
False

A company can increase its growth rate by taking goods or services developed at home and selling them
internationally.
True

Location economies refer to the economic benefits that arise from performing a value creation activity
at central headquarters.
False

Walmart's basic approach to overseas expansion has been to open retail outlets in each of the countries
to which it exports.
False

Local responsiveness may be driven by economic and political demands placed on companies by host
country governments.
True

A transnational strategy makes the most sense when there are strong pressures for cost reductions and
when demand for local responsiveness is minimal.
False

Most manufacturing companies begin their global expansion by exporting

True
When a company licenses its technology it can quickly lose control over it.
True

One advantage of a joint venture is that a company may benefit form a local partner's knowledge of the
many dimensions of a host country
True

An early mover entering a foreign country will experience many advantages but few or no
disadvantages.
False

An important ingredient of success in a strategic alliance appears to be cultural sensitivity

True

The most rapid growth rate for household TV ownership is in the US

False

The majority of programming for MTV networks now takes place overseas.
False

Which of the following has occurred in international trade over the past half-century?
All of these choices

The globalization of production has allowed firms to

lower their cost structure

When a company increases its growth rate by taking goods or services developed at home and selling
them internationally, it is
leveraging its existing products

When a company expands its sales volume through international expansion, it can realize cost savings
from economies of scale through all of the following except
improved responsiveness

When a company performs a value creation activity in the optimal location for that activity, wherever in
the world that might be, it is trying to capitalize on
location economies

Which of the following is not a necessity for leveraging the skills of global subsidiaries?
The firm must be pursuing a strategy of differentiation

Global expansion
can enable companies to increase their profitability and grow their profits more rapidly

The ability to realize cost economies from global volume is greatest in the case of
commodity-type products that serve universal needs

Which of the following factors increases pressures for cost reductions?

Price as the main competitive weapon in a market

Which of the following factors increases pressures for local responsiveness?

Difference in customer tastes and preferences

Differences in tastes and preferences

increase pressures for local responsiveness

Host government demands generally

increase pressures for local responsiveness.

A localization strategy is based on which of the following ideas?

Consumer tastes and perefernces differ among national markets.

Clear Vision's decision to own a manufacturing facility overseas was not influenced by which of the
following factors?
Geographical proximity to India

Cost reduction pressures can be particularly intense in industries producing

commodity- type products

Strong pressures for local responsiveness emerge when customer tastes and preferences.
Differ significantly between countries.

When entering an overseas market, which of the following factors should be considered?
All of these choices

Procter & Gamble grew rapidly in international markets because of its

skills in mass-marketing

Managers of a multinational enterprise must recognize that skills

may arise from anywhere within the firm's global network

The Achilles heel of international strategy is that

competitors inevitably emerge

Disadvantages of a global strategy include

Lack of local responsiveness

Which of the following is not an objective of a transnational company?

low cross-national integration

Foreign subsidiaries play a major role in shaping the future direction of a company pursuing a
transnational strategy

Firms should choose likely countries for an international expansion effort based on all of the following
except
age of the country
A localization strategy is most appropriate when
consumer tastes and preferences differ substantially across nations

A company that enters a foreign market by entering into a licensing agreement with a local company
risks losing control over its technology to the venture partner

Which entry mode gives a multinational the tightest control over foreign operations?
Setting up a wholly owned subsidiary

Which of the following companies exemplifies the trend toward national markets merging into one large
global marketplace?
All of these choices

A nation's companies gain competitive advantage if their domestic customers are

sophisticated and demanding

Global economies of scale can be realized by

all of these choices

Factors of production include all but which of the following?

Ethnic diversity

Which of the following entry modes allow a company to engage in global strategic coordination?
Wholly owned subsidiaries

A key to making a strategic alliance work is

selecting the right partner

Attaining a credible commitment from a potential partner

is a way to minimize opportunism

Companies that pursue a transnational strategy are trying to develop

all of these choices

Most manufacturing companies begin their global expansion by

exporting

Which of the following is not a risk of exporting?

prime interest rates

What are the risks associated with licensing as a means of entering overseas markets?
All of these choices