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Bus 478 > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

What is the expected growth for high technology industries

A

25%

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2
Q

What are technical standards

A

Specifications that producers adhere to when making the product or component can be a competitive advantage

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3
Q

What are format wars

A

Battles to control source of differentiation because this differentiation can create for the customer

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4
Q

What is dominant design

A

Refers to a common set of features or design characteristics

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5
Q

What do standards bring

A

Economic benefits

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6
Q

What are the economic benefits from standards

A
    1. Guarantee compatibility between products and complements
    2. Help reduce confusion in the minds of consumers
    3. Help reduce production costs
    4. Help reduce the risks associated with supplying complementary products and increase their supply
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7
Q

What are 3 ways standards emerge in an industry

A
  1. Companies might lobby the government to mandate an industry standard
  2. Technical standards are often set by company cooperation
  3. Government set standards they fall into the public domain meaning that any company can freely incorporate them into their products
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8
Q

What is a public domain

A

Government or association set standards of knowledge or technology that any company can freely incorporate its product

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9
Q

What are network effects

A

Network of complementary products as a determinant of the demand for an industry’s product

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10
Q

How are network effects divided

A
  1. Direct (same side) network effects
  2. Indirect network effects (based on the availability of complementary goods)
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11
Q

What happens when network effects arise in an industry

A

The size of the network of complementary products is a primary determinant of demand for an industry product

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12
Q

What are the key strategies and tactics to win a format war

A
  1. Ensure a supply of complements
  2. Leverage killer application
  3. Aggressive pricing and marketing
  4. Cooperate with competitors
  5. License the format
  6. Have positive feedback loops
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13
Q

What can companies do to get supply of complements

A
  1. Diversify into the production of complements and seed the market with sufficient supply to help jump start demand
  2. May create incentives or make it easy for independent companies to product complements
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14
Q

What are killer applications

A

Uses of new technology or product that are compelling that they persuade customers to adopt a new format or technology in droves thru killing demand for competing formats

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15
Q

What are considerations for exploiting positive feedback cycles

A
  1. Switching costs
  2. Accelerate growth on both sides of the feedback loop
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16
Q

What is a razo and blade strategy

A

Pricing the product low to stimulate demand and increase the installed base and try to make high profits on the sale of the complements which are priced relatively high

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17
Q

What is aggressive upfront marketing

A

Critical in jump starting demand to get an early lead in an installed base

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18
Q

What are point of sales promotion

A

Attract potential early adopters who bear the switching costs and start a positive feedback loop

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19
Q

What are the results for companies to cooperate with their competitors

A
  1. Develop technology
  2. There will be a strong alliance
  3. Can effectively eliminate the competition
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20
Q

What does licensing format mean

A

Other companies can product products based on licenses to gain from licensing fees and enlarge supply of the product which can stimulate demand help accelerate market adoption

21
Q

What is the correct strategy to pursue licensing the format

A
  1. Companies must consider all different strategies and tactics
  2. Companies must keep the goal of rapidly increasing based on its standard
22
Q

What are the advantages of helping jump start demand

A

Can induce consumers to bear the switching costs with adopting its technology and leverage positive feedback process

23
Q

What are the costs of high technology industries

A

Fixed costs are high but producing one extra unit of products are low

24
Q

What is the law of diminishing returns

A

Producing more of a good will lead to an increase in marginal costs

25
Q

Does law of diminishing returns apply in high tech settings

A

Not really

26
Q

What can high tech company emphasize

A

Low cost structure that drive down prices to increase volume

27
Q

What happens when marginal costs are lower and fixed costs are high

A
  1. Profitability may increase
  2. Tech companies should emphasize the low cost structure to drive down prices to increase volume
28
Q

Who is the first mover

A

The firm that pioneers a particular product category or feature by being first to offer it to the market

29
Q

What is the first mover in a high technological industry

A

In a monopoly position and If the new product satisfies unmet consumer needs and demand is high, the first mover can capture revenues and profits, causing stronger barriers of imitation

30
Q

What are the five primary sources of first mover advantage

A
  1. Opportunity to exploit network effects and positive feedback loops locking consumers into its technology
  2. Able to establish significant brand loyalty
  3. Increase sales volume ahead of rivals
  4. Create switching costs for customers
  5. Accumulate valuable knowledge related to customer needs, distribution channels, product and process technology
31
Q

What are the first mover disadvatanges

A
  1. Bearing significant pioneer costs
  2. Mistakes are made bc of uncertainties in the market
  3. Runs the risk of building wrong resources and capabilities because they are too customer focused which is not going to be reflective of the mass market
  4. May invest in inferior or obsolete technology
32
Q

What are the first mover strategies

A
  1. Develop and market innovation
  2. Develop and market innovation jointly with other companies through strategic alliance or joint venture
  3. License the innovation to other companies and allow them to develop the market
33
Q

What are the strategies of exploiting first mover advantages

A
  1. Look at the complementary assets to exploit its innovation and capture first mover advantages
  2. Look at the height of barriers to imitation
  3. Look at the capable competitors that can imitate the innovation
34
Q

What are complementary assets

A
  1. Competitive production and distribution capabilities that can handle customer demand, maintaining high product and service quality
  2. Marketing know how
35
Q

What are the drawbacks of complementary assets

A
  1. Expensive
  2. Need large capital
36
Q

What are the advantages of high imitation barriers

A

Gives an innovator time to establish a competitive advantage and build more barriers to entry in a newly created market

37
Q

What are the disadvantages of high imitation barriers

A

Patents are easy to invent around

38
Q

What are competitors capable of doing to imitate innovation

A
  1. R&D Skills
  2. Access to complementary assets (marketing, sales, manufacturing capabilities)
39
Q

What are technological paradigm shift occurs with new technology

A
  1. Revolutionize structure of the industry
  2. Dramatically alter the nature of competition
  3. Require companies to adopt new strategies to survive
40
Q

What are three innovation strategies

A
  1. Complementary assets
  2. Height of barriers to imitation
  3. Capability of competitors
41
Q

When is marketing a competitive strategy makes most sense

A
  1. Innovator has the complementary assets to develop innovation
  2. Barriers to imitating a new innovation is high
  3. Capability competitors is limited
42
Q

When does joint venture makes most sense

A
  1. The innovator lacks complementary assets
  2. Barriers to imitation is high
  3. Several capable competitors
43
Q

When does licensing make most sense

A
  1. Innovating company lacks the complementary assets
  2. Barriers to imitation are low
  3. Many capable competitors
44
Q

What is technological paradigm shifts

A

Shift in new technologies that revolutionize the structure of the industry, dramatically alter the nature of competition and require companies to adopt new strategies to survive

45
Q

What are the natural limits to technology

A

Rate of performance of technology starts to decline and reach its limit, so there’s no more advances possible

46
Q

What does the technology limit result to

A

Researchers look to alternative technologies to replaced the establish technology

47
Q

What is a disruptive technology

A

technology that revolutionizes industry structure and competition causing a decline of established companies

48
Q

What are the strategic implications for established companies

A
  1. Have access to the knowledge about how disruptive technologies can revolutionize markets
  2. Established companies should invest in newly emerging technologies that become disruptive technologies
  3. Recognize that it is better to develop disruptive technologies than to cannibalize sales base
49
Q
A

Bus 478 (12 decks)

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