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Questions and Answers
What is a significant barrier to entry for new companies in a market with established firms?
How does product differentiation affect market entry for new competitors?
What role do governmental regulations play in market entry?
Which of the following accurately describes resources in a company?
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What is meant by 'first mover advantages'?
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What effect do high switching costs have on consumer behavior?
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What is vertical integration primarily aimed at achieving for a company?
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Why is access to raw materials important for new entrants in a market?
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Which of the following best describes the purpose of management systems?
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What is included in the general environment affecting an organization?
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What does upstream vertical integration involve?
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How do short-term goals differ from long-term goals in organizational planning?
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Which of the following accurately defines key success factors (KSF) in an industry?
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Which of the following companies is mentioned as an example of no vertical integration?
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What characterizes a sustainable competitive advantage?
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What three components are essential for a business model?
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What is meant by consumer surplus?
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What process involves forecasting shifts in the market and preparing accordingly?
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What does resource allocation refer to in an organization?
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In the given example, if the willingness to pay is €1,000 and the price is €900, what is the consumer surplus?
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What characterizes successful firms in relation to their business models?
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Which of the following factors is NOT considered part of the industry-specific environment?
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What is a value proposition?
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What market characteristic does AUSA target?
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What was one major defect of the Orange Read and Go device related to customer behavior?
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Which of the following was a reason for the failure of the Orange Read and Go?
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What was a potential barrier to adoption for the Orange Read and Go?
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Which of the following speaks to the relationship issues between Orange and newspapers?
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What aspect of the e-paper technology posed a drawback for the Orange Read and Go?
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Which characteristic is essential for successful organizations as indicated?
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Which of the following reflects a failure in targeting for the Orange Read and Go?
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What was one of the reasons cited for unclear choices related to the Orange Read and Go project?
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What is disruptive innovation primarily characterized by?
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Which of the following best describes low-end disruptive innovation?
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What aspect of disruptive innovation is illustrated by the emergence of digital photography?
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What drives incremental sustaining innovation?
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What defines new market disruptive innovation?
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Why might a product initially underperform compared to existing products in disruptive innovation?
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How does disruptive innovation relate to the concept of blue ocean strategy?
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What is a characteristic of consumers in the context of low-end disruptive innovation?
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Study Notes
Orange Read and Go Failure
- Orange Read and Go was a tablet that failed due to various issues.
- The product was a kind of e-book reader that allowed users to download French newspapers.
- The company lacked a clear understanding of customer demand and the target audience.
- The product required a change in customer behavior, as people did not use e-books for reading newspapers.
- Orange needed to subsidize the device to encourage subscriptions.
- There were revenue-sharing issues between Orange and the newspapers, resulting in limited earnings.
- Orange lacked control over customer relationships.
- Customers could access the content using Wi-Fi, bypassing Orange's network.
- The product failed to attract new customers and retain existing ones.
- The target customer was unclear, and potential cannibalization of existing users was a concern.
- E-paper technology had drawbacks that offset the benefits of e-ink.
- Orange stores were not designed to sell the product.
- The product relied entirely on the content provided by newspapers.
- Orange incurred additional costs for customer acquisition, network management, and software development.
- E-paper advertising was inefficient and lacked the interactivity of online ads.
- Newspapers did not view Orange as a partner and could save costs without Orange actively capturing a portion of those savings.
- The product failed to contribute significantly to Orange's revenue and profit.
Success and Failure
- Successful organizations set simple, consistent, and long-term goals that align with their mission, vision, and values.
- They understand their competitive landscape.
- They implement management systems to control and guide their operations.
- They analyze the general environment (political, economic, social, technological factors) and industry-specific factors (market trends, competition, regulation).
- They consider short-term and long-term time horizons for planning and decision-making.
- They identify and manage stakeholder interests.
- They understand the key success factors (KSFs) of their industry and strive to achieve them.
- They focus on building a sustainable competitive advantage that is durable and difficult for competitors to replicate.
- They analyze their industry to understand competition, customer needs, and opportunities.
- They secure and allocate resources efficiently.
- They anticipate changes in the environment and competitors' moves.
- They follow a strategic management cycle that includes analyzing, planning, executing, and controlling.
Barriers to Entry
- Organizations with a stable foundation and cost advantages face significant barriers to entry.
- Product differentiation creates barriers to entry for new competitors.
- Customer loyalty and switching costs act as barriers to entry.
- Government regulations and licensing requirements can make entry difficult.
- Access to raw materials and distribution channels can pose a significant barrier to entry.
- The need for specific resources or capabilities can limit new entrants.
- Aggressive responses from existing companies can deter new entrants.
- First movers often have advantages such as experience, cost efficiencies, and consumer loyalty.
Threat of Substitute Products
- A high number of direct or indirect substitute products can negatively impact existing companies.
- A limited number of substitutes, however, creates a more favorable environment for existing businesses.
Vertical Integration
- Vertical integration refers to companies reducing their reliance on customers (retailers) and suppliers by integrating those stages into their operations.
- Inditex is an example of a company with both upstream and downstream vertical integration, controlling everything from raw materials to retail sales.
- Companies with downstream integration manufacture products and sell them directly to consumers.
- Companies with upstream integration engage in manufacturing and also control the production of raw materials.
- Levis is an example of a company that does not practice vertical integration, relying on external suppliers for raw materials and retailers for distribution.
Business Model
- A business model describes how a company creates value for customers and captures a portion of that value through pricing.
- The value created is the difference between the customer's willingness to pay and the cost of production.
- A business model includes a value proposition (product or service), a targeted customer segment, and a value chain to deliver the product or service.
- The value proposition is the offering provided to customers in exchange for payment.
- Choices made in different business dimensions can create virtuous cycles, where consequences lead to choices and vice versa.
- Successful companies make deliberate choices about customers, products, and value chain activities, and make trade-offs to focus their efforts.
Dell and AUSA
- Dell and AUSA are companies that have achieved success by following a clear business model with strategic choices that reinforce each other.
Disruptive Innovation
- Disruptive innovation is a radical innovation that disrupts an existing industry.
- Examples include digital photography replacing traditional film photography and digital music platforms disrupting the CD industry.
- Disruptive innovation often involves selling lower-quality products at lower prices, initially targeting less demanding customers.
- It is linked to the concept of blue ocean strategy.
Types of Disruptive Innovation
- Incremental sustaining innovation involves improving existing products, such as Apple's iPhone upgrades.
- Disruptive sustaining innovation creates new markets that did not exist before.
Low-End Disruptive Innovation
- Occurs when existing products are overpriced or overly complex for some consumers.
- Targets less demanding customers at the lower end of the market.
- Example: early, affordable Android phones that provided basic functionality for price-sensitive consumers.
New Market Disruptive Innovation
- Targets non-consumers who do not use existing products due to limitations.
- Creates new use cases and opens up new markets.
- Example: early digital cameras targeting individuals who found traditional cameras too complex or expensive.
- Disruptive innovations often underperform existing products initially, but are cheaper, simpler, smaller, and more convenient to use.
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Description
Explore the reasons behind the failure of Orange Read and Go, an e-book reader targeting French newspaper consumers. This quiz delves into customer behavior issues, revenue-sharing challenges, and market misunderstanding that contributed to its lack of success. Learn about the misalignment between product design and consumer needs.
