Strategic Management Of Technological Innovation 3Rd Edition By Schilling -Test Bank

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Chapter 05

Timing of Entry

True/False

1. Early leaders are firms that are the first to enter the market.

Answer: False

Difficulty: Easy

Page: 93

2. Late entrants usually enter the market only once the product has been adopted by the

mass market.

Answer: True

Difficulty: Easy

Page: 93

3. Irrespective of whether the characteristics of a technology are imitable or not, a first

mover has an opportunity to build brand loyalty before the entry of other competitors.

Answer: True

Difficulty: Easy

Page: 94

4. Once buyers have adopted a good, they can easily switch to another good.

Answer: False

Difficulty: Moderate

Page: 94

5. Although other companies in the gliding shoe market have come out with hydrogen

based power units, the first company in this market, GlideShoe is sticking with the fossil

fuel power units. This is likely an example of incumbent inertia.

Answer: True

Difficulty: Easy

Page: 96

6. Early followers typically bear the bulk of the research and development expenses.

Answer: False

Difficulty: Moderate

Page: 96

7. A later entrant can produce a product that achieves a closer fit with market preferences.

5-1Answer: True

Difficulty: Easy

Page: 96

8. For a very new product technology, market research may be of significant help.

Answer: False

Difficulty: Easy

Page: 97

9. If you are a first mover in the market of a new technology, you may find that your

product offerings will have to be modified as consumers let their preferences be known.

Answer: True

Difficulty: Moderate

Page: 98

10. If you are certain of customer preferences and needs, you can enter the market earlier

than if customer needs were unknown.

Answer: True

Difficulty: Easy

Page: 99

11. All pioneers face customer uncertainty.

Answer: False

Difficulty: Moderate

Page: 99

12. When enabling technologies are mature, you should wait to enter the market later.

Answer: False

Difficulty: Easy

Page: 100

13. Jackson Laboratories has come up with a new diabetic blood sugar monitoring device

that does not require patients to prick their fingers. It has determined that this new

technology is likely to quickly become the dominant method used by diabetics and will

replace the old blood sugar monitoring devices Jackson currently sells. Hence, Jackson

should enter the market quickly.

Answer: True

Difficulty: Moderate

Page: 100

5-214. Even though the technology for high definition DVD players is clearly superior to the

old generation, it requires that users buy high definition television sets. This factor might

reduce the adoption of new DVD players.

Answer: True

Difficulty: Easy

Page: 100

15. A technology that makes a dramatic improvement over previous

generations or different technologies will take time to be accepted by

customers on account of its radical differences.

Answer: False

Difficulty: Easy

Page: 100

16. In industries that have increasing returns to adoption, allowing competitors to get a

head start in building installed base can be a safe strategy.

Answer: False

Difficulty: Easy

Page: 101

17. The credibility of a firm and the rate of adoption are directly related.

Answer: True

Difficulty: Easy

Page: 102-103

18. A firm with fast-cycle development processes has more timing of entry options.

Answer: True

Difficulty: Easy

Page: 103

19. A firm that has very fast-cycle development processes may be able to capitalize on

both first and second-mover advantages.

Answer: True

Difficulty: Easy

Page: 103

20. If a firm intends to refine an earlier entrant’s technology and beat the earlier entrant to

market with a new version of this technology, it must have enabling technologies.

5-3Answer: False

Difficulty: Easy

Page: 103

5-4Multiple Choice

21. Intel pioneered microprocessor development in the 1970s and introduced its

microprocessor well ahead of competitors. According to the classification scheme

provided in the text, Intel would be classified as a(n) _____.

a. first mover

b. early mover

c. late entrant

d. premature developer

Answer: a

Difficulty: Moderate

Page: 93

22. If the aspects that customers have come to expect in a technology are difficult for

competitors to imitate, a technology leader

a. has the opportunity to earn licensing royalties.

b. can yield sustained monopoly rents.

c. has lower bargaining power.

d. is more susceptible to incumbent inertia.

Answer: b

Difficulty: Moderate

Page: 93-94

23. Joan had been using WordPerfect 5.1 for DOS for several years and was quite an

expert in it. When her boss wanted her to change to a Windows-based system, Joan told

him that it would slow her down and it would cost a lot of money to be trained on using

such a new system. The is an example of

a. consumer irrationality.

b. high switching costs.

c. technical influence.

d. early entry continuation.

Answer: b

Difficulty: Easy

Page: 94

24. Which of the following scenarios describes the benefits of being a first-mover in the

market?

a. A firm that has developed a watch that requires a microchip which is still in its nascent

stage.

b. An automobile manufacturer that must undertake the task of developing radiator caps

for the engines of its cars.

c. A maker of breakfast cereals whose customers are unaffected by switching costs.

d. A radio station that is given authority over large portion of radio spectrum.

5-5Answer: d

Difficulty: Hard

Page: 94

25. Which of the following statements is true regarding first movers?

a. First movers can build brand loyalty so long as technology characteristics are

inimitable.

b. Low switching costs work in favor of first movers.

c. First movers are often more successful than later entrants.

d. First movers can preemptively capture scarce resources.

Answer: d

Difficulty: Moderate

Page: 95

26. The tendency of 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. organizational passivity.

b. organizational lethargy.

c. incumbent inertia.

d. incumbent apathy.

Answer: c

Difficulty: Easy

Page: 96

27. U-Totem was one of the early entrants into the convenience market boom of the

1970s and enjoyed huge success in the Arizona market. However, these stores did not sell

gasoline. When later entrants combined gasoline sales with convenience markets, U-

Totem was slow to respond and lost market share. This is an example of

a. incumbent inertia.

b. technological retardation.

c. an immature enabling technology.

d. delayed market dominance.

Answer: a

Difficulty: Easy

Page: 96

28. When McDonalds first moved into Russia, it had to teach farmers how to grow better

potatoes and cattle, and bakers how to make hamburger buns. This is an example of

a. corporate social responsibility.

b. an undeveloped supply channel.

c. development partnerships.

5-6d. late-mover manipulation.

Answer: b

Difficulty: Moderate

Page: 96

29. TechSense was the first company to introduce a GPS-enabled shoe into the market

and shoe sales are rapidly increasing. Which of the following is most likely to be true for

TechSense?

a. TechSense has incurred significant research and development expenses.

b. Consumers will be able to change to a competitor’s product relatively easily.

c. TechSense’s product is a perfect match with customer requirements.

d. Complementary goods producers are aplenty.

Answer: a

Difficulty: Hard

Page: 96

30. 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.

Answer: b

Difficulty: Moderate

Page: 96

31. Which of the following is not true regarding first movers?

a. They can shape customer preferences.

b. They can exploit incumbent inertia.

c. They bear most of the R&D expenses.

d. They can establish the precedent for product design.

Answer: b

Difficulty: Moderate

Page: 96

32. When Fisher Athletics wanted to provide better landing mats for gymnasts, it asked

its supplier—North Carolina Foam Industries (NCFI) — to come up with a higher quality

foam to use in its mats. NCFI represents a(n) _____ for Fisher Athletics.

a. complementary competitor

b. facilitative partnership

c. enabling technology

d. pioneer opportunity

5-7Answer: c

Difficulty: Moderate

Page: 96

33. If you enter the market too early, the risk is that

a. the technology (or complements) will be underdeveloped.

b. legal aspects related to the product do not exist.

c. you will have large cash flow initially but it will deplete faster.

d. consumers will lock you out of the market.

Answer: a

Difficulty: Moderate

Page: 97

34. In the video game console industry, Magnavox was the first mover but was not the

winner. Atari and Nintendo came up with their respective gaming consoles soon

afterwards. They were

a. also first movers.

b. early movers

c. laggards.

d. late movers.

Answer: b

Difficulty: Moderate

Page: 98

35. In the personal computer operating system market Microsoft, who was a(n) _____

became the winner in the market place.

a. first mover

b. late mover

c. follower

d. laggard

Answer: c

Difficulty: Easy

Page: 98

36. Which of the following statements is true regarding customer preferences?

a. The importance of technological features to customers stays constant over time.

b. Customers themselves are unsure about the importance of different features offered by

a technology.

c. All pioneers have faced customer uncertainty.

d. Established customer preferences are undesirable by producers.

Answer: b

Difficulty: Moderate

5-8Page: 99

37. A delayed entry into the market is preferred when

a. complementary goods are available.

b. enabling technologies have matured.

c. customer preferences are unknown.

d. the ability to withstand early losses is high.

Answer: c

Difficulty: Moderate

Page: 99

38. A technology that makes a dramatic improvement over previous generations or

different technologies that serve similar functions will

a. not be easily accepted by customers.

b. more rapidly gain customer acceptance.

c. not be accepted by customers at all.

d. experience lesser customer acceptance.

Answer: b

Difficulty: Easy

Page: 100

39. In which of the following scenarios would an earlier entry into the market be

beneficial?

a. A firm that has developed a new line of video games for which the required graphics

card is yet to become mainstream.

b. A cell phone manufacturer who has developed a touch phone without conducting any

market research.

c. A firm that has developed a new line of vacuum cleaners that can be preprogrammed to

function automatically without any user involvement.

d. A firm that has patented its technological innovation.

Answer: c

Difficulty: Hard

Page: 100

40. Jackson Laboratories has come up with a new diabetic blood sugar monitoring device

that does not require patients to prick their fingers. It has determined that this new

technology will offer a great advantage to customers, that no other competitors possess

the capabilities to deliver it, and that the product will not be easily imitated by others.

Jackson should enter the market

a. early.

b. late.

c. in the middle of the pack.

d. whenever it wants to.

5-9Answer: d

Difficulty: Moderate

Page: 101

41. Jackson Laboratories has come up with a new diabetic blood sugar monitoring device

that does not require patients to prick their fingers. It has determined that this new

technology will quickly become the dominant method used by diabetics and will replace

the old blood sugar monitoring devices Jackson currently sells. However, competitors

might be able to easily imitate the device. Jackson should enter the market

a. early.

b. late.

c. in the middle of the pack.

d. whenever it wants to.

Answer: a

Difficulty: Moderate

Page: 101

42. Lee Peterson has invented a new product that detects water leaks due to broken pipes

and sends out an alarm similar to a smoke alarm. However, Lee has very little personal

money to invest in improving this new product. Seeing his initial technical success, major

corporations have now entered the market with competing products. What will be the

probable destiny of Lee Peterson’s company?

a. His company will most likely be overtaken by a larger company or it will go out of

business.

b. His company will remain in the top spot due to its head start.

c. His company will enjoy commercial success because the entry of other companies will

add more legitimacy to the product.

d. His company will grow rapidly introduce several other related products.

Answer: a

Difficulty: Hard

Page: 102

43. Acme Products was late to enter the desk height adjuster market. However, Acme has

vast financial resources compared to the 2 other small companies in this new market.

Which of the following best represents Acme’s chances of success?

a. Slim because it is a late entrant into the market.

b. Excellent because it can outspend the other companies in further development and

marketing of the product.

c. Acme’s chances of success cannot be determined.

d. Acme’s chances of success are exactly equal to those of the other companies.

Answer: b

Difficulty: Moderate

5-10Page: 102

44. When S.C. Johnson Company came up with a new hair care product that repaired

split ends, it spent money on market education and provided incentives to wholesalers

and retailers to sell the product. This strategy will _____ the early adoption of this

innovative product.

a. hinder

b. have no effect on

c. accelerate

d. delay

Answer: c

Difficulty: Moderate

Page: 102

45. In the past, Apex Systems had successfully released 10 new products in the shoe

gliding market. Today it is recognized as the market leader. It has just released a new

shoe glider called SmoothShoe. How difficult will it be for Apex to get distributors to

take on this new product?

a. Very difficult because they will be reluctant to carry so many products of the same

company.

b. Somewhat difficult because it will just cannibalize current products.

c. Not very difficult because they will trust in Apex’s past record.

d. Cannot be determined.

Answer: c

Difficulty: Easy

Page: 102

46. Apex is the leader in the shoe glider market while Summit is a new startup company.

Both have just released new generation shoe gliders. Which entry is likely to be adopted

more quickly?

a. Apex

b. Summit

c. Both will be adopted at the same rate

d. Neither

Answer: a

Difficulty: Easy

Page: 102

47. A firm with fast cycle development processes

a. can introduce a refined version of a competitor’s technology.

b. is susceptible to more quality problems.

c. can exit the market sooner.

d. has only a first mover advantage.

5-11Answer: a

Difficulty: Easy

Page: 103

5-12Essay

48. Explain the reasons why more efficient keyboards were not able to replace the

QWERTY keyboard. Which principle is illustrated in this scenario?

Answer: The QWERTY keyboard was initially introduced to slow down typing and

prevent key jamming on mechanical keyboards. Since so many people had already

learned to use this keyboard they were unwilling to learn how to type on more efficient

keyboards even after key jamming was no longer an issue. This illustrates the principle of

high switching costs and points out how early entries into a new technology may become

dominant and be impossible to overcome even with technically superior products.

Difficulty: Moderate

Page: 94-95

49. Explain why sometimes the follower and not the first mover of a new technology is

more successful in the market place.

Answer: Although first movers have the opportunity to shape the market and be the first

shot at becoming the dominant design, often they are not sure of consumer preferences.

As consumer preferences become known, they may have to modify their product designs.

Sometimes they must also engage in consumer education about using the new

technology, which can be an expensive proposition. Followers can capitalize on what is

learned about consumer preferences and from the market place education. They can

introduce products that meet consumer preferences without having to make costly

adjustments. They do not have to worry as much about consumer education. This will

help them in becoming more successful in the market place.

Difficulty: Hard

Page: 96-98

50. Lee Peterson has invented a new product that detects water leaks due to broken pipes

and sends out an alarm similar to a smoke alarm. However, Lee has very little personal

money to invest in this new product. He finally raised enough money to enter the market

and began to experience some success. The product was not patentable because it was too

similar to other existing technologies. Major corporations saw his success and have now

entered the market with competing products. What will be the probable destiny of Lee

Peterson’s company?

Answer: Since Mr. Peterson does not have significant resources and the income will

probably be slow coming, he will probably not last very long in this new industry. His

lack of funds means that he will have very little to invest in product enhancements while

his competitors will be able to improve the product. For example, one company might

attach a dialing system to the alarm that notifies a neighbor, a plumber, or the police

department in case the owner is not at home. The larger companies will be able to

5-13outspend Mr. Peterson in advertising also. This will make them out to be leading

companies with the trusted names.

Difficulty: Moderate

Page: 101-102

51. Since SmoothShoe Inc. is the market leader in the gliding shoe industry, it enjoys an

excellent reputation. It was the pioneer of this new market and currently holds 40 percent

market share. Now SmoothShoe wants to introduce a new gliding shoe. Discuss how its

reputation will affect its acceptance among distributors and consumers.

Answer: Its excellent reputation will give it high credibility and will increase the

likelihood of its acceptance into the market. The fact that it has such a strong track record

will increase the likelihood that it will be able to line up distributors to carry its new

product. Consumers are also more likely to trust this entry due to satisfaction with past

products of the company. All of this will mean earlier adoption of the product than any

other company could expect.

Difficulty: Easy

Page: 102-103

52. The text talks about the timing of entry strategies into the market for new products.

What assumptions underlie the use of such strategies?

Answer: The assumption is that the company can come up with a new product or

technology at any time it wants. To be able to take advantage of timing strategies for

entry the firm must have a fast-cycle development process in place and it must have the

financial resources to develop, produce, and market the product.

Difficulty: Hard

Page: 103

5-14