Ch5. Industry Evolution and Strategic Change

Question 1

Change in industries is driven chiefly by the forces of technology, market demand and economics.
a. true
b. false

Answer 1

a. true
p. 152

Question 2

Massive and unpredictable changes occur in some industries, but less so in others.
a. true
b. false

Answer 2

a. true
p. 152

Question 3

Firms are continually trying to erode the competitive advantage of rivals, and to build and maintain their own competitive advantage.
a. true
b. false

Answer 3

a. true
p. 152

Question 4

The industry life cycle comprises 4 stages: introduction, growth, maturity, decline - so is indistinguishable from the product life cycle.
a. true
b. false

Answer 4

b. false
p. 157-158

Question 5

Two main factors drive industry evolution: demand growth and the production and diffusion of knowledge.
a. true
b. false

Answer 5

a. true
p. 157-158

Question 6

The introduction to maturity phases of the industry life cycle curve is characteristically U-shaped.
a. true
b. false

Answer 6

b. false
p. 157-158

Question 7

The industry life cycle consists of four stages: 1) Introductory, 2) Growth, 3) Plateau, and 4) Rejuvenation.
a. true
b. false

Answer 7

b. false
p. 157-160

Question 8

The duration of the industry life cycle varies greatly from one industry to another.
a. true
b. false

Answer 8

a. true
p. 157-160

Question 9

Over time, industry life cycles become longer and longer.
a. true
b. false

Answer 9

b. false
p. 157-160

Question 10

A dominant design is one which is the most noticeable, or receives the most publicity.
a. true
b. false

Answer 10

b. false
p. 157-160
A dominant design is a product architecture that defines the look, functionality and production method for the product and becomes accepted by the industry as a whole

Question 11

The emergence of a dominant product design tends to coincide with a shift towards process innovation.
a. true
b. false

Answer 11

a. true
p. 157-160

Question 12

A dominant design defines the look, functionality and production method for a product and becomes accepted by the industry as a whole.
a. true
b. false

Answer 12

a. true
p. 157-160

Question 13

Technical standards have the most dramatic effect in markets exhibiting network effects because of users not adopting the standard risk isolation.
a. true
b. false

Answer 13

a. true
p. 157-160
Technical standards emerge where there are network effects – the need for users to connect in some way with one another. Network effects cause each customer to choose the same technology as everyone else to avoid being stranded.

Question 14

Emphasis often shifts from product innovation to process innovation, once a dominant design emerges.
a. true
b. false

Answer 14

a. true
p. 159-160
The shift in emphasis from design to manufacture also tends to involve increased attention being paid to process innovation as firms seek to reduce costs and increase product reliability through large‐scale production methods.

Question 15

Firms often imitate each other’s strategies in order to gain legitimacy.
a. true
b. false

Answer 15

b. false
p. 167-168
Isomorphism also results from voluntary imitation: risk aversion encourages companies to adopt similar strategies and structures to their peers.

Question 16

Anderson and Tushman point out that all technological change is “competence destroying”.
a. true
b. false

Answer 16

b. false
p. 168-170
Anderson and Tushman argue that some technological changes are ‘competence destroying’: they render obsolete the resources and capabilities of established firms. Other changes are ‘competence enhancing’: they preserve, even strengthen, the resources and capabilities of incumbent firms.

Question 17

Established firms often find it difficult to adapt to new technologies even though they are well aware of these technologies.
a. true
b. false

Answer 17

a. true
p. 169-170

Question 18

The emphasis of organizational development is upon individual organizational units and bottom-up change.
a. true
b. false

Answer 18

a. true
p. 170-171
Because our emphasis is on strategic change – the redirection and adaptation of the entire organization – our focus is on top‐down change processes. Nevertheless, as political revolutions frequently demonstrate, the power of bottom‐up change should not be underestimated.

Question 19

A firm is said to be “ambidextrous” when it is able to exploit its existing technology successfully.
a. true
b. false

Answer 19

b. false
p. 170-171
A firm is said to be ambidextrous when it is ‘capable of simultaneously exploiting existing competences and exploring new opportunities’.

Structural ambidexterity is where different parts of the organization undertake exploratory and exploitative activities.

Contextual ambidexterity involves the same organizational units and the same organizational members pursuing both exploratory and exploitative activities.

Question 20

Change in the industry environment faced by a firm is:

a. Massive and unpredictable
b. Gradual and predictable
c. Could be either answer a or b, depending on the industry and the prevailing conditions
d. Easier for large firms to cope with

Answer 20

c. Could be either answer a or b, depending on the industry and the prevailing conditions

Question 21

Change in an industry is the result of:

a. The forces of technology, consumer preferences, and economic growth
b. Both external forces and the incumbents’ competitive strategies
c. The effect of the “5 forces” model of competition
d. Economic and psychological factors

Answer 21

b. Both external forces and the incumbents’ competitive strategies

Question 22

The industry life cycle:

a. Is an extension of the concept of the product life cycle
b. Uses the same stages as the product life cycle
c. Often lasts much longer than a typical product life cycle
d. All of the above

Answer 22

d. All of the above

Question 23

The text claims that two factors are fundamental to the industry life cycle. One of these is:

a. The production and diffusion of knowledge
b. Industrial production and the diffusion of knowledge
c. Demand during the growth phase
d. Demand for growth in the diffusion of knowledge

Answer 23

a. The production and diffusion of knowledge

The other factor is an industry’s demand growth rate over time

Question 24

The decline phase of the industry life cycle is caused by:

a. The emergence of a radically better substitute product, representing a new industry
b. Tired old firms running out of new ideas
c. Existing firms leaving the industry to move to a more profitable one
d. Excessive market saturation

Answer 24

a. The emergence of a radically better substitute product, representing a new industry

Question 25

A new industry life cycle begins when:

a. A very large gap in the market emerges
b. Another industry dies
c. New knowledge manifests itself in the guise of a sufficiently radical product innovation
d. There are sufficient entrepreneurs

Answer 25

c. New knowledge manifests itself in the guise of a sufficiently radical product innovation

Question 26

A dominant design is:

a. One which has won the most industrial design awards
b. An emergent de facto industry standard broad product format
c. The one advertised most strongly by the market leader
d. The latest new product which gains the most media attention

Answer 26

b. An emergent de facto industry standard broad product format

De facto standards emerge through voluntary adoption by producers and users.

Mandatory standards are set by government and have the force of law behind them.

Question 27

A technical standard:

a. Only occurs in computing when there is a network effect
b. Emerges when there are interconnectivity and interface compatibility issues
c. Can emerge for safety and other reasons from standards bodies
d. Answers b and c

Answer 27

d. Answers b and c

Question 28

The different stages of the industry life cycles are characterised by:

a. The evolution of the industry growth rate over time
b. The evolution of the competition in the industry
c. The evolution of a firm’s market share
d. None of the above

Answer 28

a. The evolution of the industry growth rate over time

Question 29

An industry life cycle:

a. Always follows the theoretical pattern
b. May never enter the decline phase in industries supplying basic essential products or services
c. Must be the same everywhere, due to globalisation
d. Can never really experience a resurgence

Answer 29

b. May never enter the decline phase in industries supplying basic essential products or services

Question 30

The PC industry clearly began in the 1970’s because:

a. It did not exist at all prior to this time
b. The introduction phase was typical: no mass market, many product variants, small firms
c. By the 1980’s, the growth phase had begun, with a design standard emerging
d. All of the above

Answer 30

d. All of the above

Question 31

As the industry life cycle progresses, overall strategies need to:

a. Stay steady and not waver; don’t change anything
b. Change in most major aspects
c. Primarily focus on cost-cutting
d. None of the above

Answer 31

b. Change in most major aspects

Question 32

Start-up firms in a new industry are also sometimes known as:

a. de alio entrants
b. de novo entrants
c. de bono entrants
d. de facto entrants

Answer 32

b. de novo entrants
Some are start‐up companies (de novo entrants); others are established firms diversifying from related industries (de alio entrants).

Question 33

Firms entering a new industry who were already established in a related industry are sometimes known as:

a. de alio entrants
b. de novo entrants
c. de facto entrants
d. Both b and c

Answer 33

a. de alio entrants

Question 34

The basis of entering a new industry at the Introduction phase is:

a. Effective product innovation
b. Effective process innovation
c. Effective promotional material
d. Effective sales people

Answer 34

a. Effective product innovation

Question 35

A “born global” company is one which:

a. Interacts across the world from the outset - especially regarding selling
b. Is a “virtual” company
c. Is spun out of an existing global company
d. Has an international cultural appreciation

Answer 35

a. Interacts across the world from the outset - especially regarding selling

Question 36

Often, to succeed in the evolution from introduction to growth a firm:

a. Needs to acquire an injection of cash from a venture capital company
b. Needs to be closely associated with the dominant design which emerges
c. Needs to buy a major competitor
d. Needs to pull back on product innovation

Answer 36

b. Needs to be closely associated with the dominant design which emerges

Question 37

The key challenges for firms entering the growth phase of the industry life cycle is

a. “scaling up” its output
b. obtaining sufficient resources and capabilities to support effective scaling-up of operations
c. adapting their product designs and manufacturing capabilities to accommodate large-scale production
d. All of the above

Answer 37

d. All of the above

Question 38

To survive going into the maturity phase of the industry life cycle a firm needs to:

a. Outsource all production
b. Get rid of all research and development staff
c. Emphasise cost efficiency
d. Cut wages

Answer 38

c. Emphasise cost efficiency

Question 39

With the onset of the maturity stage, the number of firms in most industries:

a. Remains relatively stable
b. Tends to decrease significantly
c. Increases significantly
d. Decreases or increases, depending on the industry

Answer 39

b. Tends to decrease significantly

Question 40

The typical cause of the decline phase in an industry is:

a. Technological substitution e.g. the horse and cart replaced by the car
b. Local regional decline due to low-cost foreign competition
c. Changing consumer tastes e.g. tobacco
d. Any of the above

Answer 40

d. Any of the above

Question 41

Key features of the decline phase of the industry life cycle typically include:

a. aggressive price competition and a declining number of competitors
b. aggressive price competition and an increasing number of competitors
c. excess capacity and rapid technical change
d. shortages in capacity and a lack of technical change

Answer 41

a. aggressive price competition and a declining number of competitors

Question 42

The determining factors of how calamitous the decline phase turns out to be are:

a. The way capacity is dismantled as demand declines, and how dramatic is the decline in demand
b. Whether a price war breaks out, and how many firms remain
c. The actions of foreign competition, and how fast workers can be fired
d. How quickly the new industry can ramp up production, and what prices they sell at

Answer 42

a. The way capacity is dismantled as demand declines, and how dramatic is the decline in demand

Question 43

The key success factor in the Introduction phase of the industry is:

a. Effective product innovation i.e. getting new products launched and in front of customers
b. Making sure the workforce is multi-skilled
c. Having a committed workforce, e.g. prepared to work weekends for no extra wages
d. Just being creative

Answer 43

a. Effective product innovation i.e. getting new products launched and in front of customers

Question 44

The key success factor for leading firms in the Growth phase is:

a. Knowing what competitors are doing - even resorting to espionage
b. Taking business away from rivals
c. Employing a commission-oriented sales force
d. Being able to scale up volume production and operations effectively and efficiently

Answer 44

d. Being able to scale up volume production and operations effectively and efficiently

Question 45

The key success factor for firms surviving in the Maturity phase is:

a. Buying as many competitors as you can
b. Maintaining cost efficiency that matches or exceeds that of competitors
c. “Two for One” deals and other special offers
d. All of the above

Answer 45

b. Maintaining cost efficiency that matches or exceeds that of competitors

Question 46

Which of the following elements function as limitations for organizational change?

a. anthem quest for satisfactory rather than optimal performance
b. Managers limiting the scope of options they are able or willing to consider
c. Preference for exploitation rather than exploration
d. All of the above

Answer 46

d. All of the above

Question 47

The fact that some firms such as BASF, Exxon, and General Electric have been leaders in their industries for almost a century, indicates that:

a. Some firms have built the capability to adapt themselves to change in their environment time after time
b. Economies of scale are the most powerful drivers of performance
c. Size is the key predictor for success
d. A firm’s age is the critical variable for profitability

Answer 47

a. Some firms have built the capability to adapt themselves to change in their environment time after time

Question 48

Firms that create new products or services are often not the ones that successfully market them. The reason is that:

a. The capabilities needed for invention are different and even conflict with those required for commercialization
b. There is a connection between the stage of the industry life cycle and the age of firm
c. Large companies steal their ideas.
d. The innovators have shifted their strategic orientations to different products or services

Answer 48

a. The capabilities needed for invention are different and even conflict with those required for commercialization

Question 49

Disruptive technologies are:

a. Innovations that threaten existing industry leaders and generally offer potentially superior performance at lower price than existing products
b. Innovations that radically change the product or service
c. Innovations that overcome existing barriers to entry in the industry
d. Quite normal in an industry’s life

Answer 49

a. Innovations that threaten existing industry leaders and generally offer potentially superior performance at lower price than existing products

Question 50

The starting point for managing change is:

a. For managers to recognize the sources of inertia or barriers to change
b. That managers do not let their own agenda supersede the firm’s overall interest
c. To possess enough resources to implement change
d. That managers exhibit enough courage and will to change

Answer 50

a. For managers to recognize the sources of inertia or barriers to change

Question 51

Some firms create new organizational units instead of modifying the existing structure, because:

a. Existing structures are often locked into existing routines
b. There is not enough time to transform existing structures
c. These firms want a fresh start
d. These firms do not plan; they manage change reactively

Answer 51

a. Existing structures are often locked into existing routines

Question 52

A firm can simultaneously pursue dual strategies:

a. This goes against all the theory on strategy
b. It can, so long as it maintains separate organizations to pursue each strategy
c. This is impossible
d. This is only possible in large multinational firms.

Answer 52

b. It can, so long as it maintains separate organizations to pursue each strategy

Question 53

Radical top-down organizational change:

a. Is usually only successfully implemented if the workforce is convinced that a crisis looms
b. Often should be implemented in advance of a crisis occurring
c. Is typically only undertaken following declining performance.
d. All of the above

Answer 53

d. All of the above

Question 54

Dynamic capabilities:

a. Are the capacity to learn new capabilities
b. Can be acquired through ‘reverse takeovers’
c. Develop rapidly in some industries, then die
d. Answers b and c

Answer 54

a. Are the capacity to learn new capabilities

Dynamic capabilities refer to a ‘firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’.

Question 55

Scenario analysis is usually used to deal with:

a. What a firm might do in the long-term future
b. The uncertainty and consequences of radically different possible futures
c. How flexibly managers should think in coping with uncertain futures
d. All of the above

Answer 55

d. All of the above

Question 56

The value of the scenario analysis lies in:

a. The results of the analysis
b. The process of managers being involved in the analysis
c. The practical implications of the results
d. Its low cost

Answer 56

b. The process of managers being involved in the analysis

Question 57

A succession of management gurus including Tom Peters to Gary Hamel have argued that the key to achieving competitive advantage is:

a. adapting quickly to external change
b. changing incrementally
c. initiating change and achieving internal “revolution”
d. adapting to change in an orderly fashion

Answer 57

c. initiating change and achieving internal “revolution”

Question 58

The statement that organizational capabilities are path dependent means that:

a. past circumstances influenced past capabilities
b. a company’s capabilities today are the result of its history
c. a company needs to plan how it develops new capabilities
d. Both a and c

Answer 58

b. a company’s capabilities today are the result of its history

Question 59

The building for developing new capabilities include:

a. creating mechanisms that facilitate “learning by doing”
b. locating the people that can contribute to the capability in the same organizational unit
c. ensuring the components of the capability are aligned
d. all of the above

Answer 59

d. all of the above