Test Bank for Concepts in Strategic Management and Business Policy 12th Edition by Wheelen

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1 Test Bank for Concepts in Strategic Management and Business Policy 12th Edition by Wheelen Web Chapter A: Strategic Issues in Managing Technology and Innovation 1) Innovation and the management of technology are not crucial to corporate success. Answer: FALSE Diff: 1 Page Ref: A-2 Topic: The Role of Management 2) The importance of technology and innovation must be emphasized by top management and reinforced by all employees in the company. Answer: TRUE Diff: 1 Page Ref: A-2 Topic: The Role of Management 3) Between 33% and 60% of all new products that reach the market fail to make a profit. Answer: TRUE Diff: 1 Page Ref: A-4

2 Topic: The Role of Management 4) Research reveals that firms that focus inward on their core competencies as a way to generate new products or processes are more innovative. Answer: FALSE Diff: 1 Page Ref: A-5 5) Focusing one's scanning efforts too closely on one's current product line are dangerous. Answer: TRUE Diff: 1 Page Ref: A-5 6) According to Von Hippel, customers are a key source of innovations in many industries. Answer: TRUE Diff: 1 Page Ref: A-6 7) Lead users are companies, organizations, or individuals that are well ahead of market trends and have needs that go far beyond those of the average user.

3 Answer: TRUE Diff: 1 Page Ref: A-6 2 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 8) The first phase of the lead user process is identifying lead users. Answer: FALSE Diff: 1 Page Ref: A-6 3 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 9) Market research is used to survey current users as to what they would like in a new product. Answer: TRUE Diff: 1 Page Ref: A-7 10) Market research is a good source to provide the information needed for radical innovation. Answer: FALSE Diff: 1 Page Ref: A-7 11) Leading firms often fail to switch to the new technology available because management is

4 ignorant of the new development. Answer: FALSE Diff: 1 Page Ref: A-7 12) Some successful companies are developing their products by probing potential markets with early versions of the products, learning from the probes, and probing again. Answer: TRUE Diff: 1 Page Ref: A-7 - A-8 13) Microsoft follows an embrace and extend strategy of imitating new products developed by pioneers, refining them, and out-marketing the competition. Answer: TRUE Diff: 1 Page Ref: A-8 14) R&D intensity is a principal means of gaining market share in global competition. Answer: TRUE Diff: 1 Page Ref: A-8

5 15) Time to market in the 1980s was generally accepted to be 7 to 11 years; today it is closer to 12 to 15 years. Answer: FALSE Diff: 1 Page Ref: A-9 16) Research indicates that too much emphasis by a firm on efficiency-oriented process R & D can drive out product R & D. Answer: TRUE Diff: 1 Page Ref: A-10 4 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 17) Technology sourcing, typically a sell-or-buy decision, can be important in a firm's R&D strategy. Answer: FALSE Diff: 1 Page Ref: A-10

6 18) By the 1990s, more than 150 cooperative alliances involving 1,000 companies were operating in the United States and many more were operating throughout Europe and Asia. Answer: TRUE Diff: 1 Page Ref: A-11 19) Licensing technology to other companies may be an excellent R & D strategy especially in a stable, low technology environment where second movers have an advantage. Answer: FALSE Diff: 1 Page Ref: A-11 20) Absorptive capacity is a firm's ability to value, assimilate, and utilize new external knowledge. Answer: TRUE Diff: 1 Page Ref: A-13 21) The product/market evolution matrix depicts the types of developing products that cannot be easily shown on other portfolio matrices.

7 Answer: TRUE Diff: 1 Page Ref: A-15 22) With the product/market evolution matrix, the circles represent the sizes of the industries involved, and the pie wedges represent the market shares of the firm's business product lines. Answer: TRUE Diff: 1 Page Ref: A-15 23) The first stage of new product development is preliminary design. Answer: FALSE Diff: 1 Page Ref: A-15 Topic: Importance of Small Business and Entrepreneurial Ventures 24) The final stage of new product development is new business development. Answer: TRUE Diff: 1 Page Ref: A-15 Topic: Importance of Small Business and Entrepreneurial Ventures 5 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

8 25) According to the book Diffusion of Innovations, innovative organizations tend to have a positive attitude toward change. Answer: TRUE Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 26) A sponsor is usually a department manager who recognizes the value of the idea, helps obtain funding to develop the innovation, and facilitates its implementation. Answer: TRUE Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 27) A product champion is a person who generates a new idea and supports it through many organizational obstacles. Answer: TRUE Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 28) Corporate entrepreneurship is also called intrapreneurship. Answer: TRUE Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures

9 29) When an entrepreneurial proposal might not be important strategically to the corporation but is strongly related to present operations, top management might help the entrepreneurial unit to spin off from the corporation. Answer: TRUE Diff: 1 Page Ref: A-18 - A-19 Topic: Importance of Small Business and Entrepreneurial Ventures 30) The managers of Corning report that the stage-gate process increases development time and decreases the ratio of internally generated products that result in commercially successful products. Answer: FALSE Diff: 1 Page Ref: A-19 - A-20 Topic: Evaluation and Control 31) One of the thirteen best practices for improving R&D is that corporate and business unit strategies are poorly defined and communicated. Answer: FALSE Diff: 1 Page Ref: A-21

10 Topic: Evaluation and Control 6 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 32) According to research conducted by Forbes and others, the most important driver of corporate value for both durable and non-durable companies is said to be A) mass customization. B) innovation. C) synergy. D) logistics. E) flexible manufacturing. Answer: B Diff: 1 Page Ref: A-2 Topic: The Role of Management 33) Approximately how much of the profits of all U.S. companies come from products launched in the previous ten years? A) 50% B) 100% C) 80% D) 20% E) less than 1%

11 Answer: A Diff: 1 Page Ref: A-2 Topic: The Role of Management 34) A study of 111 successful and 86 unsuccessful product innovations found that the successful innovations had some of which of the following features? A) They were moderately new to the market. B) They were based on tried-and-tested technology. C) They saved money, met customer needs, and supported existing practices. D) all of the above E) none of the above Answer: D Diff: 1 Page Ref: A-4 Topic: The Role of Management 35) A study by Kuczmarski & Associates revealed that of all newly introduced products were still being sold five years later. A) 21% B) 35% C) 56% D) 80% E) 95%

12 Answer: C Diff: 1 Page Ref: A-5 7 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 36) Information that assesses where breakthroughs are likely to occur can be depicted on a A) technology chart. B) technology strategic blueprint. C) technology roadmap. D) technology highway. E) technology monograph. Answer: C Diff: 1 Page Ref: A-5 37) Most new developments that threaten existing business practices and technologies come from A) within one's own industry. B) outside one's own industry. C) one's current competitors. D) within one's own corporation.

13 E) Bell Labs. Answer: B Diff: 1 Page Ref: A-5 38) The corporation was able to establish itself as the industry standard for browsers. A) Netscape B) Sun Systems C) Apple Computers D) Cisco Systems E) Corel Works Answer: A Diff: 1 Page Ref: A-5 39) Software firms know that in order to remain on the leading edge of technology, they must have a programming presence in A) Silicon Valley, California. B) Austin, Texas. C) Fayetteville, Arkansas. D) New York, New York. E) Los Angeles, California.

14 Answer: A Diff: 1 Page Ref: A-6 8 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 40) Research by Von Hippel indicates that 77 percent of the innovations in the scientific instruments industry come from A) the needs of the supplier. B) the needs of the employees. C) the needs of the customers. D) the needs of the shareholders. E) the needs of the corporation itself. Answer: C Diff: 1 Page Ref: A-6 41) Besides the users of the products, helpful advances toward innovations are derived from A) suppliers. B) employees. C) shareholders. D) government regulators.

15 E) lobbyists. Answer: A Diff: 1 Page Ref: A-6 42) The involvement of the customer in the commercialization of a new technology is known as A) lead technology. B) co-development. C) technology customization. D) developmental manufacturing. E) technological continuity. Answer: B Diff: 1 Page Ref: A-6 43) Companies, organizations, or individuals that are well ahead of market trends and have needs that go far beyond those of the average user are known as A) first to market benefactors. B) traditionalists. C) lead users. D) strategic pursuers.

16 E) technological maneuvers. Answer: C Diff: 1 Page Ref: A-6 9 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 44) The first phase of the lead user process is A) determining the trends. B) identifying lead users. C) laying the foundation. D) developing the breakthrough. E) hosting seminars. Answer: C Diff: 1 Page Ref: A-6 45) Lead user teams are typically composed of employees from the A) accounting department. B) marketing department. C) technical department. D) finance department. E) marketing and technical departments. Answer: E Diff: 1 Page Ref: A-6

17 46) Based on the lead user team process, what company was able to successfully implement this process in eight of its 55 divisions? A) 3M B) Corning C) Microsoft D) America Online E) General Electric Answer: A Diff: 1 Page Ref: A-6 47) For a lead user team, what is the minimum duration of each phase in the process? A) one day B) one week C) three weeks D) four weeks E) eight weeks Answer: D Diff: 1 Page Ref: A-6

18 10 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 48) The effort to talk with users at the leading edge of the target and related market to understand their needs is indicative of which phase in the lead user process? A) determining the trends B) identifying lead users C) laying the foundation D) developing the breakthrough E) hosting seminars Answer: B Diff: 1 Page Ref: A-7 49) A study of the impact of technological discontinuity in various industries revealed that the leading firms failed to switch to the new technology because A) management was ignorant of the new development. B) it was too expensive. C) they listened too closely to their current customers. D) of government regulations. E) they did studies which revealed that the new technology was inferior to the current technology.

19 Answer: C Diff: 1 Page Ref: A-7 50) What company has been able to successfully use market research in its survey of current users in directing incremental improvements in existing products? A) 3M B) Proctor and Gamble C) BMW D) General Motors E) Chrysler Answer: B Diff: 1 Page Ref: A-7 51) According to the textbook, the watch maker that introduces hundreds of new models of watches into the marketplace then makes more of the models that sell, dropping those that don't sell is A) Timex. B) Wittnauer. C) Swatch.

20 D) Seiko. E) Pulsar. Answer: D Diff: 1 Page Ref: A-8 11 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 52) Imitating new products developed by pioneers, refining them, and outmarketing the competition is a process known as A) embrace and extend strategy. B) no change strategy. C) first to market strategy. D) hold strategy. E) refinement strategy. Answer: A Diff: 1 Page Ref: A-8 53) What company was cited in the textbook as using the embrace and extend strategy as a way to monitor the competition for new developments? A) Seiko B) Microsoft

21 C) Maytag D) Trilogy E) 3M Answer: B Diff: 1 Page Ref: A-8 54) The consulting firm Arthur D. Little found that the use of standard market research techniques has resulted in a success rate for new cereals of A) over 92%. B) only 8%. C) around 75%. D) 50%. E) around 25%. Answer: B Diff: 1 Page Ref: A-8 55) Instead of conducting traditional market research, a number of companies are A) conducting untested market research procedures. B) simply following what the market leader does.

22 C) probing potential markets with early versions of new products to see which have potential. D) developing new, much more sophisticated market research techniques which involve global testing. E) forming alliances to pool their research findings. Answer: C Diff: 2 Page Ref: A-7 - A-8 12 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 56) What percentage of sales is spent on R&D for the computer software and drug industries? A) between 11% and 13% B) between 2% and 5% C) between 18% and 20% D) between 25% and 28% E) between 41% and 44% Answer: A Diff: 1 Page Ref: A-8 57) A rule of thumb for R&D spending is that a corporation should A) spend twice as much as the market leader. B) spend half as much as the market leader.

23 C) spend the same as the market leader. D) spend at a "normal" rate for that industry. E) spend whatever it takes to build market share. Answer: D Diff: 1 Page Ref: A-8 58) According to one study cited in the textbook, what is the innovation rate of small businesses? A) 200 innovations per million employees B) 225 innovations per million employees C) 275 innovations per million employees D) 322 innovations per million employees E) 350 innovations per million employees Answer: D Diff: 1 Page Ref: A-8 - A-9 59) An extension of a product can be referred to as A) incremental innovation. B) novel innovation. C) incentive innovation. D) strategic innovation.

24 E) radical innovation. Answer: A Diff: 1 Page Ref: A-9 13 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 60) What is the term that refers to the development of completely new products? A) incremental innovation B) radical innovation C) innovative technology D) manufacturing technology E) flexible manufacturing Answer: B Diff: 1 Page Ref: A-9 61) Research by Hitt, Hoskisson, and Harrison indicates that the maximum innovator in an industry tends to be A) the smallest firm. B) the largest firm. C) the middle-sized firm. D) the newest firm.

25 E) the one with the largest R&D department. Answer: C Diff: 1 Page Ref: A-9 62) Confirming that R&D spending can be wasted, between 1950 and 1979, which country's steel industry spent 20% more money on plant maintenance and upgrading for each ton of production capacity added or replaced than did the Japanese steel industry? A) United States B) Sweden C) Germany D) France E) Korea Answer: A Diff: 1 Page Ref: A-9 63) What technology(ies) was the catalyst for the United States to lose its market share of the world steel market when they were not recognized and adopted? A) flexible manufacturing B) reengineering C) assembly line manufacturing

26 D) basic oxygen furnace and reengineering E) basic oxygen furnace and continuous casting Answer: E Diff: 1 Page Ref: A-9 14 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 64) What term refers to the time from inception to profitability of a specific R&D program? A) duration of innovation B) time to market C) time to shelf D) duration of R&D intensity E) span of R&D Answer: B Diff: 1 Page Ref: A-9 65) Time to market is an important consideration in the management of technology because A) cycle times are getting longer. B) technology management is a discontinuous business. C) 60% of successful patented innovations are imitated within four years at 65% of the cost of

27 the innovation. D) R&D budgets are becoming a higher proportion of total revenues in most large corporations. E) the distinction between process and product R&D is becoming blurred. Answer: C Diff: 1 Page Ref: A-9 66) In the early stages of a product's life cycle, are most important. A) process innovations B) product innovations C) cost leadership strategies D) improved manufacturing facilities E) faster distribution Answer: B Diff: 1 Page Ref: A-9 67) Innovations such as improved manufacturing facilities, increasing product quality, and faster distribution, are A) logistical innovations. B) product innovations. C) category one innovations.

28 D) process innovations. E) category two innovations. Answer: D Diff: 1 Page Ref: A-9 - A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 68) Innovations such as new product designs and features are A) logistical innovations. B) product innovations. C) category one innovations. D) process innovations. E) category two innovations. Answer: B Diff: 1 Page Ref: A-9 69) Which type of innovation is important in achieving differentiation strategies? A) logistical innovation B) product innovation C) category one innovation D) process innovation E) category two innovation

29 Answer: B Diff: 1 Page Ref: A-10 70) Which type of innovation is important in achieving cost leadership strategies? A) logistical innovation B) product innovation C) category one innovation D) process innovation E) category two innovation Answer: D Diff: 1 Page Ref: A-10 71) What percent of their R & D budgets do U.S. firms spend on product R&D? A) 30% B) 50% C) 60% D) 70% E) 90% Answer: D Diff: 1 Page Ref: A-10 16

30 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 72) What percent of their R&D budgets do U.S. firms spend on process R&D? A) 30% B) 50% C) 60% D) 70% E) 90% Answer: A Diff: 1 Page Ref: A-10 73) What percent of their R&D budgets do German firms spend on product R&D? A) 30% B) 50% C) 60% D) 70% E) 90% Answer: B Diff: 1 Page Ref: A-10 74) What percent of their R&D budgets do Japanese firms spend on process R&D? A) 30%

31 B) 50% C) 60% D) 70% E) 80% Answer: D Diff: 1 Page Ref: A-10 75) What term is appropriate for identifying a make-or-buy decision as it relates to technology? A) technology sourcing B) technology continuity C) technology discontinuity D) process innovation E) product innovation Answer: A Diff: 1 Page Ref: A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 76) The traditionally heavy emphasis by U.S. major home appliance manufacturers on is one reason they have such a strong position in the North American market. A) technology sourcing

32 B) technology continuity C) technology discontinuity D) process innovation E) product innovation Answer: D Diff: 1 Page Ref: A-10 77) The innovations which dominate the major home appliance industry are A) financial innovations. B) product innovations. C) technological innovations. D) process innovations. E) category two innovations. Answer: D Diff: 1 Page Ref: A-10 78) Following the resource-based view of the firm, a company should technologies that are commonly available but those that are rare, valuable, and hard to imitate and that have no close substitutes.

33 A) buy; license B) buy; make C) make; license D) make; acquire firms producing E) none of the above Answer: B Diff: 2 Page Ref: A-11 79) Licensing technology to other companies may be an excellent R & D strategy especially in A) a stable low-tech environment. B) a turbulent high-tech environment. C) an environment where being a late mover may be desirable. D) a low-tech environment E) none of the above Answer: B Diff: 1 Page Ref: A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 80) What term describes the situation where a corporation finances the costs of developing a new technology by coordinating its R&D effort with that of other firms?

34 A) venture affiliation B) vertical integration C) R&D outsourcing D) strategic R&D alliance E) corporate entrepreneurship Answer: D Diff: 1 Page Ref: A-11 81) Which of the following is characteristic of a strategic R&D alliance? A) joint programs or contracts to develop a new technology B) joint ventures establishing a separate company to take a new product to market C) minority investments in innovative firms wherein the innovator obtains needed capital and the investor obtains access to valuable research D) all of the above E) none of the above Answer: D Diff: 2 Page Ref: A-11 82) Outsourcing technology may be appropriate when A) the technology is of low significance to competitive advantage.

35 B) the supplier has proprietary technology. C) the technology development process requires special expertise. D) the technology development process requires new people and new resources. E) all of the above Answer: E Diff: 2 Page Ref: A-11 83) A company should develop a technology INTERNALLY rather than externally when A) the technology is of little significance to competitive advantage. B) the supplier has proprietary technology. C) the technology development process requires special expertise. D) the technology development process requires new people and new resources. E) technology is rare, valuable, hard to imitate and has no close substitutes. Answer: E Diff: 1 Page Ref: A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 84) Which term is used to describe a firm's ability to recognize, to assimilate and to utilize new external knowledge?

36 A) anticipated benefit B) flexible manufacturing system C) planned potential D) absorptive capacity E) competitive advantage Answer: D Diff: 1 Page Ref: A-13 85) An organization's ability to use a new technology effectively is called A) technological competence. B) absorptive capacity. C) technological continuity. D) technology transfer. E) index of R&D effectiveness. Answer: A Diff: 1 Page Ref: A-13 86) Which of the following is NOT one of the categories of innovation? A) improving core businesses B) allocating resources C) exploiting strategic advantages D) developing new capabilities

37 E) creating revolutionary change Answer: B Diff: 1 Page Ref: A-13 87) The Fifteen-cell Product/Market Evolution Matrix A) varies with the number of products considered. B) represents the amount of assets deployed by the company to the product or SBU. C) represents market shares of the firm's SBUs or products. D) represents the size of the industries involved in terms of sales. E) is based on the product life cycle. Answer: E Diff: 1 Page Ref: A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 88) A matrix that depicts the types of developing products according to their competitive positions and their stages of product/market evolution is referred to as A) BCG Matrix. B) GE Business Screen. C) Product/market evolution matrix. D) Developing product evolution matrix.

38 E) Innovative product evolution matrix. Answer: C Diff: 1 Page Ref: A-15 89) What is a limitation of the product/market evolution matrix? A) developing products cannot always be depicted on other portfolio matrices B) the size of an industry is seldom known C) the product life cycle does not always hold for every product D) a company's market share is rarely known E) all of the above Answer: C Diff: 2 Page Ref: A-15 90) What is the first stage of new product development? A) idea generation B) concept evaluation C) preliminary design D) prototype build and test E) final design and pilot production Answer: A Diff: 1 Page Ref: A-15 Topic: Importance of Small Business and Entrepreneurial Ventures

39 91) What is the last stage of new product development? A) idea generation B) preliminary design C) prototype build and test D) final design and pilot production E) new business development Answer: E Diff: 1 Page Ref: A-15 Topic: Importance of Small Business and Entrepreneurial Ventures 21 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 92) What stage of new product development is occurring when a venture team is formed to prepare desired product specifications? A) idea generation B) preliminary design C) prototype build and test D) final design and pilot production E) new business development Answer: B Diff: 1 Page Ref: A-15 Topic: Importance of Small Business and Entrepreneurial Ventures

40 93) All of the following are characteristics of innovative organizations as cited by Rogers in his book, Diffusion of Innovation EXCEPT A) complexity. B) interconnectedness. C) formal structure. D) large size. E) decentralized decision-making. Answer: C Diff: 2 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 94) According to the textbook, companies with entrepreneurial cultures have two characteristics in common: A) centralized R&D responsibility with decentralized operating management. B) employees are dedicated to a particular project outcome and are responsible for all functional activities and for all phases of the innovation process. C) project champions and matrix structures. D) employees dedicated to innovation in general and total freedom to pursue any new idea they wish.

41 E) total management control of all new project budgets coupled with the dart board approach to new product selection. Answer: B Diff: 2 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 95) A department manager who recognizes the value of an idea, helps obtain funding to develop the innovation, and facilitates its implementation is called a(n) A) orchestrator. B) conductor. C) sponsor. D) product champion. E) angel. Answer: C Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 22 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 96) What is the term for a person who generates a new idea and supports it through many organizational obstacles? A) orchestrator

42 B) conductor C) sponsor D) product champion E) innovative champion Answer: D Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 97) To improve its R&D effectiveness, Chrysler Corporation A) replaced its entire R&D Department. B) introduced cross-functional teams. C) began utilizing the index of R&D effectiveness. D) hired scientists from its competition. E) started using strategic alliances. Answer: B Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 98) What term describes the birth of new businesses within an existing organization? A) spin-off project B) corporate entrepreneurship C) enterprise creation D) venture origination

43 E) industry growth Answer: B Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 99) Intrapreneurship is another name for A) entrepreneurship. B) mentoring. C) corporate entrepreneurship. D) joint ventures. E) strategic alliances. Answer: C Diff: 1 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 23 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 100) According to Burgelman, what are the two interacting factors which result in the nine organizational designs for corporate entrepreneurship? A) management support and individual initiative B) industry skills and consumer demand C) the strategic importance of the new business to the organization and the relatedness of the

44 unit's operations to those of the corporation D) financial sponsorship and available technology E) venture spirit and management direction Answer: C Diff: 2 Page Ref: A-17 Topic: Importance of Small Business and Entrepreneurial Ventures 101) Which organizational design for corporate entrepreneurship occurs when the new business has a great deal of strategic importance and operational relatedness and must be a part of the corporation's mainstream? A) direct integration B) special business units C) new product business department D) micro new-venture department E) new venture division Answer: A Diff: 1 Page Ref: A-17 Topic: Importance of Small Business and Entrepreneurial Ventures 102) Which organizational design for corporate entrepreneurship occurs when the new business has uncertain strategic importance and is only partly related to present corporate operations?

45 A) direct integration B) special business units C) new product business department D) micro new-venture department E) new venture division Answer: E Diff: 1 Page Ref: A-18 Topic: Importance of Small Business and Entrepreneurial Ventures 103) Which organizational design for corporate entrepreneurship occurs if the new business has uncertain strategic importance and high operational relatedness and is a peripheral project which is likely to emerge in the operating divisions on a continuous basis? A) nurturing and contracting B) micro new-venture department C) new venture division D) new product business department E) complete spin-off Answer: B Diff: 1 Page Ref: A-18 Topic: Importance of Small Business and Entrepreneurial Ventures 24

46 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 104) Which organizational design is appropriate when the strategic importance and operational relatedness of the new business are negligible? A) complete spin-off B) new product business department C) special business units D) new venture division E) nurturing and contracting Answer: A Diff: 1 Page Ref: A-18 - A-19 Topic: Importance of Small Business and Entrepreneurial Ventures 105) Which organizational design for corporate entrepreneurship occurs when an entrepreneurial proposal might not be important strategically to the corporation but is strongly related to present operations and top management might help the entrepreneurial unit to spin-off from the corporation? A) nurturing and contracting B) micro new-venture department C) new venture division D) new product business department

47 E) complete spin-off Answer: A Diff: 1 Page Ref: A-18 Topic: Importance of Small Business and Entrepreneurial Ventures 106) Which organizational design for corporate entrepreneurship occurs as the required capabilities and skills of the new business are less related to those of the corporation, but the parent keeps some relationship with the new firm? A) nurturing and contracting B) micro new-venture department C) new venture division D) new product business department E) contracting Answer: E Diff: 1 Page Ref: A-18 Topic: Importance of Small Business and Entrepreneurial Ventures 107) Developed at Mitsubishi's Kobe shipyards, the tool to help project teams make important design decisions by getting them to think about what users want and how to get it to them most effectively is A) stage-gate process.

48 B) house of quality. C) total quality management. D) outsourcing. E) reengineering. Answer: B Diff: 1 Page Ref: A-20 Topic: Evaluation and Control 25 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 108) The Index of R&D Effectiveness is calculated by A) totaling the number of new patents obtained by a company. B) dividing the percentage of total revenue spent on R&D into new product profitability. C) measuring the revenue coming from new products as a percentage of total revenue. D) averaging the amount of time it takes for all new products to move from the lab to the marketplace. E) comparing the company against the 13 best R&D practices. Answer: B Diff: 2 Page Ref: A-21 Topic: Evaluation and Control

49 109) Which of the following is NOT one of the 13 best practices reported in the textbook that successful MNCs followed? A) Corporate and business unit strategies are well defined and clearly communicated. B) Core technologies are defined and communicated to R&D. C) Transfer of technology to business units is the least important measure of R&D effectiveness. D) Formal mechanisms are used for monitoring external technological developments. E) Formal, cross-functional teams are created for basic, applied, and developmental projects. Answer: C Diff: 1 Page Ref: A-21 Topic: Evaluation and Control 110) What are lead users? Discuss the four phases of the lead user process. Answer: Lead users are "companies, organizations, or individuals that are well ahead of market trends and have needs that go far beyond those of the average user". They are the first to adopt a product because they benefit significantly from its use even if it is not fully developed. The four phases of the lead user process are: laying the foundation (identifying target markets

50 and the type and level of innovations desired), determining the trends (researching the field and talking with experts with a broad view of emerging technologies), identifying lead users (talking with them to understand their needs), and developing the breakthrough (hosting a workshop with several lead users and marketing/technical people). Diff: 2 Page Ref: A-6 - A-7 111) What is R&D intensity? Answer: R&D intensity is a company's spending on R&D as a percentage of sales revenue. This is a principal means of gaining market share in global competition. Diff: 1 Page Ref: A-8 26 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 112) Distinguish between product and process R&D. Answer: In the early stages of the product life cycle, product innovations are most important because the product's physical attributes and capabilities most affect financial performance. Later, process innovations such as improved manufacturing facilities, increasing product quality,

51 and faster distribution become important to maintaining the product's economic returns. Generally product R&D has been key to achieving differentiation strategies, whereas process R&D has been at the core of successful cost leadership strategies. Diff: 2 Page Ref: A-9 - A ) Under what conditions may outsourcing technology be appropriate? Answer: Outsourcing technology may be appropriate when: The technology is of low significance to competitive advantage The supplier has proprietary technology The supplier's technology is better and/or cheaper and reasonably easy to integrate into the current system The company's strategy is based on system design, marketing, distribution, and service not on development and manufacturing The technology development process requires special expertise The technology development process requires new people and new resources. Diff: 2 Page Ref: A ) What are the four basic categories of innovations? Answer: The four basic categories of innovations are as follows:

52 Improving core businesses: this type of innovation focuses on incremental innovations that can be developed rapidly and inexpensively. Exploiting strategic advantages: this type of innovation focuses on taking existing brands and product lines to new customers and markets without requiring major change in current capabilities. Developing new capabilities: this type of innovation focuses on deepening customer satisfaction and loyalty to the brand or product line by adding new organizational capabilities without introducing major changes in strategic scope. Creating revolutionary change: this type of innovation focuses on radical innovations that transcend current product lines or brands to make fundamental changes in both its strategic scope and its capabilities Diff: 2 Page Ref: A-13 - A Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 115) According to Rogers, what are some of the characteristics of innovative organizations? Answer: According to Rogers, innovative organizations tend to have the following

53 characteristics: Positive attitude toward change Decentralized decision-making Complexity Informal structure Interconnectedness Organizational slack Large size System openness Diff: 2 Page Ref: A-16 Topic: Importance of Small Business and Entrepreneurial Ventures 116) Discuss the nine organizational designs for corporate entrepreneurship. Answer: The nine organizational designs for corporate entrepreneurship are as follows: Direct integration: A new business with a great deal of strategic importance and operational relatedness must be a part of the corporation's mainstream. New product business department: A new business with a great deal of strategic importance and partial operational relatedness should be a separate department, organized around an entrepreneurial project in the division where skills and capabilities can be shared. Special business units: A new business with a great deal of strategic importance and low

54 operational relatedness should be a special new business unit with specific objectives and time horizons. Micro new ventures department: A new business with uncertain strategic importance and high operational relatedness should be a peripheral project, which is likely to emerge in the operating decisions on a continuous basis. New venture division: A new business with uncertain strategic importance that is only partly related to present corporate operations belongs in a new venture division. Independent business units: Uncertain strategic importance coupled with no relationship to present corporate activities can make external arrangements attractive. Nurturing and contracting: When an entrepreneurial proposal might not be important strategically to the corporation but is strongly related to present operations, top management might help the entrepreneurial unit to spin off from the corporation. Contracting: As the required capabilities and skills of the new business are less related to those of the corporation, the parent corporation may spin off the strategically unimportant unit, yet keep some relationship through a contractual arrangement with the new firm. Complete spin-off: If both the strategic importance and the operational relatedness of the new

55 business are negligible, the corporation is likely to completely sell off the business to another firm or to the present employees in some form of ESOP. Diff: 3 Page Ref: A-17 - A-19 Topic: Importance of Small Business and Entrepreneurial Ventures 28 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 117) What are the 13 best practices of successful R&D operations that can be used as a benchmark for a company's R&D activities? Answer: The 13 best practices of successful R&D operations that can be used as a benchmark for a company's R&D activities are as follows: Corporate and business unit strategies are well defined and clearly communicated. Core technologies are defined and communicated to R&D. Investments are made in developing multinational R&D capabilities to tap ideas throughout the world. Funding for basic research comes from corporate sources to ensure a long term focus; funding for development comes from business units to ensure accountability. Basic and applied research are performed either at a central facility or at a small number of labs. Development work is usually performed at business unit sites. Formal cross-functional teams are created for basic, applied, and developmental projects.

56 Formal mechanisms exist for regular interaction among scientists, and between R&D and other functions. Analytical tools are used for selecting projects. The transfer of technology to business units is the most important measure of R&D performance. Effective measures of career development are in place at all levels of R&D. Recruiting of new people is from diverse universities and from other companies when specific experience is required that would take a long time to develop internally. Some basic research is performed internally, but there are also many university and third-party relationships. Formal mechanisms are used for monitoring external technological developments. Diff: 3 Page Ref: A-21 Topic: Evaluation and Control