The discounted rate that makes the net present value of the investment maximize is
called the internal rate of return.
When manufacturers bypass wholesalers and retailers to sell directly to end users it is
called backward compatibility.
With advances in information technology, loosely coupled organizational structures are
losing their popularity.
Using computer-aided design (CAD) to build and test product design increases cycle
time.
GDP does not relate directly to the amount of goods consumers can purchase.
Other things being equal, less customer uncertainty favors earlier timing of entry.
A firm’s prior success in the market increases its ability to respond to new technological
generations. This is known as an Icarus Paradox.
Patent laws do not vary from country to country.
User innovators typically create new product innovations in order to profit from the sale
of the innovation to customers.
Though learning curves are found in a wide range of organizational processes, there are
substantial differences in the rates at which organizations learn.
When Pioneer Athletics wanted to provide better landing mats for gymnasts, it asked its
supplier Delta Foam Industries (DFI) used a new processes to manufacture higher
quality, durable foam for use in its mats. This foam represents a(n) _____ for Pioneer
Athletics.
a. network externality
b. monopoly cost
c. enabling technology
d. incumbent inertia
Which of the following is true of lightweight teams?
a. Lightweight teams are typically permanent.
b. Lightweight teams do not have any dedicated liaison personnel.
c. Lightweight teams are most appropriate for projects where high levels of
coordination are required.
d. Members of lightweight teams are also part of their functional departments.
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.
Easymake Webmakers Co. developed new Web designing software to build Web pages
for its clients. However, Easymake soon realized it could make more money by selling
this software to others wishing to quickly build Web pages to sell their products. Which
of the following is the most appropriate strategy for Easymake?
a. It should not sell the Web designing software as it will give rise to competition on the
Internet.
b. It should become a licensor of the new Web designing software.
c. It should become a licensee of the new Web designing software.
d. It should make the Web designing software available to users as open source
software.
Clear Vision Inc. has been the market leader for eye-related products, such as
eyeglasses and lenses. It has also most recently developed the use of laser technology to
correct eye defects. Due to its prior related experiences, it has been successful in
recognizing the value of new information and using it to develop new technologies
ahead of others. This phenomenon is called:
a. absorptive capacity.
b. disintermediation.
c. technology determinism.
d. technology trajectory.
Genetech Inc. has produced a new generation video game console. The new product can
still be used to run the same games as the previous generation of the video game
console. In this context, Genetech is typically applying:
a. backward integration.
b. backward compatibility.
c. backward linkage.
d. backward traceability.
Firms often make decisions about projects on the basis of marketing criteria.
Combining the capabilities and other resources of partner firms, but not necessarily
transferring those resources between the partners is referred to as _____.
a. capability transfer
b. capability complementation
c. resource modification
d. disintermediation
Altair Inc., the largest firm in the electronics market, is facing stiff competition from a
relatively smaller firm, the Cygnus Group. Which of the following is an advantage that
Cygnus has over Altair due its size?
a. Large fixed-asset bases
b. Multiple layers of administration
c. Flexibility and an entrepreneurial culture
d. Greater bureaucratic inertia due to well-developed policies and procedures
Which of the following collaborative arrangements is usually thought to offer the most
opportunity for firms to access other firms’ competencies?
a. Outsourcing
b. Joint venture
c. Licensing
d. Sole internal development
Which of the following is characteristic of successful inventors?
a. They specialize solely in a single field rather than several fields simultaneously.
b. They are curious and more interested in solutions than problems.
c. They blindly accept the assumptions made in previous work in the field.
d. They seek global solutions rather than local solutions.
The _____ of an economy is its total annual output, measured by the final purchase
price.
a. balance of payment
b. gross domestic product
c. cash reserve ratio
d. net national income
Mr. Crunchy Inc. is a firm that manufactures potato chips. With more and more people
becoming health conscious, it made no profit in the last quarter. But with large initial
investment, factories, and the high-technology chips-making machines, the firm found
it difficult to abandon the industry. According to Porter’s five-force model, the company
was facing a(n):
a. vertical integration.
b. exit barrier.
c. horizontal integration.
d. substitute threat.
_____ is the ability of an organization to recognize, assimilate, and utilize new
knowledge.
a. Cognitive ability
b. Absorptive capacity
c. Organizational agility
d. Reasoning ability
The term _____ indicates that the product is novel to the individual who made it, but
known to everyone else.
a. discovery
b. reinvention
c. creativity
d. innovation
Which of the following is true of s-curves in technological improvement?
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,
then slow improvement, then 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 when
diminishing returns to effort begin to set in.
Which of the following is an advantage of collaborating?
a. It enables a firm to obtain necessary skills quickly by developing them in-house.
b. It increases a product’s cycle time.
c. It gives firms more flexibility.
d. It helps firms to increase their asset commitment.
Increasing returns to adoption imply that technology trajectories are characterized by
_____, meaning that relatively small historical events may have a great impact on the
final outcome.
a. the ratchet effect
b. the funnel effect
c. technological trajectories
d. path dependency
Which of the following is true of skunk works?
a. They are isolated from the mainstream organization to which they belong.
b. They have a mechanistic structure.
c. They are bound by the demands of the rest of the organization.
c. They are teams that face high degrees of centralization of authority and bureaucracy.
Which of the following is an advantage of being a later entrant into a market?
a. Firms can capture scarce resources.
b. Firms do not have to invest in exploratory research.
c. Firms have to develop their own supply and distribution channels.
d. Firms are unaffected by switching costs.
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.
Allured Cosmetics Co. establishes a contractual agreement with Pure Cosmetics Inc., a
manufacturing firm in the West Coast. According to the contract, Pure Cosmetics can
use the manufacturing process and formulas of Allured Cosmetics Co. to produce
cosmetics in return for a specific fee. Pure Cosmetics Inc. is bound to sell its products
under the trade name of Allured Cosmetics and adhere strictly to its product
specifications. This collaborative arrangement is most likely to be classified as _____.
a. licensing
b. outsourcing
c. a joint venture
d. capability complementation
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.
Alpha Cleaning Equipment Co. has started the actual design and development of a new
floor buffing machine. It also has the details of manufacturing, marketing, and
operations of the new product. According to the stage-gate process, what is the next
stage of the project?
a. Launch the product by producing it commercially and selling it.
b. Verify and validate the new product, its marketing, and production.
c. Form a focus group to make sure the product meets user expectations.
d. Build a business case to justify the project.
In the context of Gladwell’s theories, define the terms connectors, mavens, and
salespersons.
Since SmartShoe Inc. is the market leader in the gliding shoe market, it enjoys an
excellent reputation. It was 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 its acceptance among distributors and
consumers.
Nancy argues that with modern information technologies, collocation of team members
is no longer important. How would you respond to this argument?
Greyer Co. has developed a method of killing cancer cells with light in a process called
Photodynamic Therapy (PDT). While their scientists have the medical knowledge, they
are short on equipment, money, and marketing know-how. As a consultant what would
you advise Greyer to do?
You have just been given an assignment within your company to design a creativity
training program. Describe the elements you would include in the program and explain
the rationale of each one.