STRATEGIC MGMT 5370 - EXAM #2 QUESTIONS
1. What is industry disruption? - Answers - - Technological Substitution
- Disruptive Innovation
- Radical Institutional Change
2. What are the 3 stages of Industry Evolution? - Answers - - Growth
- Shakeout
- Maturity
3. What is part of the Growth Stage? - Answers - - Scaled-based Cost
- Value Drivers
4. What causes a shakeout? - Answers - dominant firms with strong isolating mechanisms force out weaker
competi- tors and deter new entrants
5. What slows down the Shakeout procress? - Answers - - Expectations about future demand
the degree of sunk costs
- Ease of imitation of the dominant firms market position
- The existence of defendable markets
6. What is the mature stage? - Answers - surviving firms have absorbed the exited firms customers
7. Why don't incumbents adapt? - Answers - - Market Issues
----> Size
----> Uncertainty
----> Incompatibility
----> Cannibalization
- Organizational Constraints
8. How can incumbents adapt to disruption? - Answers - - they control assets
- isolating mechanisms
,- they adapt to change
9. What is strategy execution? - Answers - Putting into action the resources and capabilities that lead to
competitive advantage
10. What is technological substitution? - Answers - Radically new technology with higher return on
investment (ROI) in R&D than the current technology.
11. What is radical institutional change? - Answers - Dramatic shift in the regulation of competition
that opens the market to new firms with greater innovative capabilities.
12. What is the product life cycle? - Answers - Introduction -> Growth -> Maturity -> Decline
, 13. What is the innovation cycle? - Answers - 1. Innovation in products (and process)
2. Improved market position (through higher value, lower costs, or both)
3. Increased profitability- more cash
4. Capacity expansion
5. Firm size - get more resources
14. What is dynamic capability? - Answers - The ability of a firm, as it grows, to build its innovative
potential and exploit it ettectively
15. What is path dependence? - Answers - The tendency of a firm over time to invest in innovations that are
upwardly compatible with each other, thereby creating a relatively unique path of product and process development
16. What is absorptive capacity? - Answers - The ability of a firm to adopt innovations developed by
other organi- zations based on its prior experience with similar or related practices or technologies
17. What is core rigidity? - Answers - The firm's core practices and customers prevent the firm from adapting to
changing market or technological conditions because of its attachments to them
- lack of absorptive capacity
18. What is multipoint competition? - Answers - Large dominant firms compete in many product
lines across geographies and market segments
ex - Answers - cola wars (pepsi & coke, sprite & sierra mist)
19. What is arms race? - Answers - Firms innovating in value and cost in the same way and at roughly the
same pace in order to keep up with competitors
20. What is hypercompetition? - Answers - Multipoint competition + an Arm's Race = Hypercompetition
- where increments in profits and capacity are low, even as firms repeatedly innovate
21. What is a niche market? - Answers - a submarket within an industry whose customers have special
preferences
1. What is industry disruption? - Answers - - Technological Substitution
- Disruptive Innovation
- Radical Institutional Change
2. What are the 3 stages of Industry Evolution? - Answers - - Growth
- Shakeout
- Maturity
3. What is part of the Growth Stage? - Answers - - Scaled-based Cost
- Value Drivers
4. What causes a shakeout? - Answers - dominant firms with strong isolating mechanisms force out weaker
competi- tors and deter new entrants
5. What slows down the Shakeout procress? - Answers - - Expectations about future demand
the degree of sunk costs
- Ease of imitation of the dominant firms market position
- The existence of defendable markets
6. What is the mature stage? - Answers - surviving firms have absorbed the exited firms customers
7. Why don't incumbents adapt? - Answers - - Market Issues
----> Size
----> Uncertainty
----> Incompatibility
----> Cannibalization
- Organizational Constraints
8. How can incumbents adapt to disruption? - Answers - - they control assets
- isolating mechanisms
,- they adapt to change
9. What is strategy execution? - Answers - Putting into action the resources and capabilities that lead to
competitive advantage
10. What is technological substitution? - Answers - Radically new technology with higher return on
investment (ROI) in R&D than the current technology.
11. What is radical institutional change? - Answers - Dramatic shift in the regulation of competition
that opens the market to new firms with greater innovative capabilities.
12. What is the product life cycle? - Answers - Introduction -> Growth -> Maturity -> Decline
, 13. What is the innovation cycle? - Answers - 1. Innovation in products (and process)
2. Improved market position (through higher value, lower costs, or both)
3. Increased profitability- more cash
4. Capacity expansion
5. Firm size - get more resources
14. What is dynamic capability? - Answers - The ability of a firm, as it grows, to build its innovative
potential and exploit it ettectively
15. What is path dependence? - Answers - The tendency of a firm over time to invest in innovations that are
upwardly compatible with each other, thereby creating a relatively unique path of product and process development
16. What is absorptive capacity? - Answers - The ability of a firm to adopt innovations developed by
other organi- zations based on its prior experience with similar or related practices or technologies
17. What is core rigidity? - Answers - The firm's core practices and customers prevent the firm from adapting to
changing market or technological conditions because of its attachments to them
- lack of absorptive capacity
18. What is multipoint competition? - Answers - Large dominant firms compete in many product
lines across geographies and market segments
ex - Answers - cola wars (pepsi & coke, sprite & sierra mist)
19. What is arms race? - Answers - Firms innovating in value and cost in the same way and at roughly the
same pace in order to keep up with competitors
20. What is hypercompetition? - Answers - Multipoint competition + an Arm's Race = Hypercompetition
- where increments in profits and capacity are low, even as firms repeatedly innovate
21. What is a niche market? - Answers - a submarket within an industry whose customers have special
preferences
