Exam 2

Question 1

5 factors impacting an innovation’s rate of adoption:

Answer 1

1. Relative advantage
2. Compatibility
3. Complexity
4. Trialability
5. Communicability/Observability

Question 2

Define Relative Advantage:

Answer 2

How readily do adopters see the innovation’s value over existing products/technologies?

Question 3

Define Compatibility:

Answer 3

How easily can the innovation be adopted within existing infrastructure/lifestyles?

Question 4

Define Complexity:

Answer 4

How easy is it to understand the innovation, how to use it, and recognize its value?

Question 5

Define Trialability

Answer 5

How easy is it to test-use the innovation on a limited scale?

Question 6

Define Communicability/Observability:

Answer 6

How easily can the innovation be communicated to/observed by others?

Question 7

What does it mean to bridge the chasm?

Answer 7

Making the leap from early adopters to mainstream consumers by fixing the problems innovators/early adopters will put up with but mainstream consumers won’t.

Question 8

Porter’s 5 Forces:

Answer 8

1. Threat of new entrants
2. Rivalry among existing competitors
3. Threat of substitutes
4. Bargaining power of suppliers
5. Bargaining power of buyers

Question 9

Porter’s 3 Generic Strategies:

Answer 9

1. Cost Leadership
2. Differentiation
3. Focus

Question 10

Cost Leadership

Answer 10

Having the lowest prices by having the lowest production cost.

Question 11

Differentiation

Answer 11

This focuses on delivering a unique benefit or feature not available from competitors. “Class leader”

Question 12

Focus

Answer 12

Achieve competitive advantage by concentrating on serving a narrow segment of a larger market.

Question 13

Middle of the Road:

Answer 13

Firms that do not pursue one of the 3 generic strategies are stuck in the middle with no focus. They become vulnerable to changes in the market.

Question 14

Tjan’s 4 Value Propositions that Work:

Answer 14

1. Best Quality
2. Best Bang for the Buck
3. Luxury & Aspiration
4. Must-have

Question 15

Barney’s 5 criteria for a sustainable competitive advantage:

Answer 15

1. Is the competitive advantage valued by customers?
2. Is the competitive advantage rare?
3. Can the competitive advantage be imitated or copied?
4. Are there strategically equivalent substitutes or alternatives?
5. Is the competitive advantage complex? (interrelationship between various skills and assets)

Question 16

BCG - Product Life Cycle

Answer 16

Intro = Question Marks
Growth = Stars
Maturity = Cash Cows
Decline = Dogs

Question 17

What to do with Question Marks?

Answer 17

Build up market share to become a star… or get out if the market position cannot change

Question 18

What to do with Stars?

Answer 18

Typically needs cash investments to maintain growth to pursue learning curve/economies of scale

Question 19

What to do with Cash Cows?

Answer 19

Excess cash generation should be “milked” and invested into stars or question marks

Question 20

What to do with Dogs?

Answer 20

Need to divest (exit market) or harvest (maximize remaining profits by targeting laggards)

Question 21

10 characteristics of “cool” brands:

Answer 21

1) Rebellious, 2) Extraordinary/Useful, 3) Aesthetically appealing, 4) Original, 5) Popular, 6) Iconic, 7) High Status, 8) Energetic, 9) Authentic, 10) Subcultural

Question 22

2 Paths to Affordable Luxury

Answer 22

1. High-end
2. Low-end

Question 23

High-end Affordable Luxury:

Answer 23

Offering products that are almost as good as major competitors, but at a reduced price.
Ex: Coach handbags & Lexus
* Do this in High Priced Categories

Question 24

Low-end Affordable Luxuries:

Answer 24

Offering products that are better quality than major competitors, but a higher (but affordable) price.
Ex: Starbucks
* Do this in low-priced categories