Solution Manual for Information Systems A Manager's Guide to Harnessing Technoloby v.10 by John Gall by welldoneassistant

Chapter 1 Setting the Stage: Technology and the Modern Enterprise Section 1.1 True/False Questions 1. Apple’s growing business of consumer services bring in so much revenue that if they were a separate division from Apple, they would be ranked as a Fortune 100 firm. True; Easy 2. While Amazon and UPS efforts to offer drone-to-doorstep delivery for the masses remain a work in progress, Silicon Valley’s Zipline is leading the charge for the humanitarian community. True; Moderate 3. Ireland’s data centers use 18 percent of the country’s electricity’s needs. True; Moderate 4. The rise of open source software has lowered computing costs for startup and blue chip companies worldwide. True; Easy 5. Data analytics, business intelligence, and so-called machine learning are driving discovery and innovation. True; Easy 6. Technology has proliferated in Kenya and Somaliland, with text messages used to replace cash, creating mobile money use that, on a population percentage basis, exceeds any nation in the West. True; Moderate 7. Social media does not play a key role in organizing uprisings. False; Easy 8. The United States and China are both currently investigating several tech companies for influence and non-competitive practices. False; Easy 9. The market cap of a publicly traded firm is its total value. Market cap can be calculated by multiplying the number of a firm’s shares by its current share price. True; Easy 10. A server farm is a massive network of computer servers running software to coordinate their collective use. Server farms provide the infrastructure backbone to SaaS and hardware cloud efforts, as well as many large-scale Internet services. True; Easy 11. It took telephones seventy-five years to get to 50 million users, but it took ChatGPT 3.5 just four years to gain double those users. False; Easy 12. Meta, Facebook's parent, has an astonishing 3.6 billion monthly users—a reach no media firm or government had ever remotely approached. True; Easy

Multiple Choice Questions 13. A recent report in Forbes suggests that _____ percent of firms are failing at digital transformation. a. 89 b. 72 c. 40 d. 23 e. 12 b; Easy 14. Select the accurate statement(s). 1) The world’s most valuable retailer, China’s Alibaba, also carries the world’s largest product inventory. 2) Uber, the world’s largest taxi service, owns no vehicles for hire. 3) Airbnb, the world’s largest accommodation provider, owns several major hotel corporations. 4) Facebook does not create media content. a. All statements are accurate. b. Statements 2 and 4 are accurate. c. Statement 4 is accurate. d. Statement 1 is accurate. e. Statements 1 and 3 are accurate. b; Hard 15. Some of the radical changes brought about by new technologies include a. the stagnation of advertising. b. the proliferation of telecommunications into the hands of a few. c. an increase in computing costs owing to the growth of licensed software. d. a decrease in the standards of corporate ethics. e. the creation of an unprecedented set of security and espionage threats. e; Moderate 16. Tech firms are among the best performing firms in the world. Which firm is the most valuable firm in the United States and has also posted some of the most profitable quarters of any business in any industry? a. Amazon b. Apple c. Google d. IBM e. Salesforce b; Easy 17. Zuckerberg got so excited by the Metaverse that he renamed his company _____ and has so far lost over $46 billion on the concept without seeing a penny in profits. a. Facebook 2.0 b. ChatGPT c. NFT d. Meta e. Instagram d; Easy 18. The global pandemic caused which industries to boom? a. telehealth b. work-from-home

c. online grocery d. contactless payment e. All of the above are true. e; Easy Short Answer Questions 19. How are entrepreneurs in sub-Saharan Africa leveraging technologies to serve local needs? Give examples. Ghanaian firm Esoko leverages mobile phones to empower the agrarian poor with farming info and commodity pricing, raising incomes and lowering the chance of exploitation by unscrupulous middlemen. The firm Sproxil uses text message verification to save lives by fighting drug counterfeiting in developing nations around the world. Kenya’s M-Pesa and Somaliland’s Zaad use text messages to replace cash, bringing the safety and speed of electronic payment and funds transfer to the unbanked and leveraging mobile money at rates that far outstrip any nation in the West. Moderate 20. How has social media emerged as a catalyst for global social change? With Facebook and Twitter playing key organizing roles in uprisings worldwide, technology can capture injustice, broadcast it to the world, disseminate ideas, and rally the far-reaching. Moderate 21. Uber and Airbnb are larger than any taxi firm or hotel chain on the planet. In what important way does the infrastructure used by these firms to deliver services differ from more traditional rivals? Uber, the world’s largest “taxi service,” owns no vehicles for hire. Airbnb, the world’s largest accommodations provider, doesn’t own a single hotel or rental property. (Don’t accept “mobile” or “uses smartphones” as answers since traditional rivals also heavily leverage technology, including smartphone apps.) Moderate 22. How have microprocessors and server farms allowed for AI usage to grow in technology companies? Microprocessors allow for massive server farms to handle an increase in AI applications, while server farms allow for faster and quicker applications that are backed by AI. Moderate Fill in the Blanks 23. _____ and _____ are turning sophisticated, high-powered computing into a utility available to even the smallest businesses and nonprofits. Cloud computing, software as a service; Moderate 24. _____ has emerged as a catalyst for global change, with Youtube, Facebook, Instagram, Twitter, and TikTok playing key organizing roles in uprisings worldwide. Social media; Easy 25. It took _____ just two months to gain 100 million users. ChatGPT; Easy 26. Over the span of a decade, Apple was able to transition from washed up to industry leader by creating _____ instead of _____. platforms, products; Easy

27. The rise of _____ has rewritten the revenue models for the computing industry and lowered computing costs for startups to blue chips worldwide. open source; Easy 28. _____ refers to the portion of a firm focused on innovation, typically pioneering advances that will eventually arrive as new products and technologies. Research and development (R&D); Easy Section 1.2 True/False Questions 29. Founders should be wary of crowdfunding sites like Kickstarter, because these efforts require founders to give up large ownership stakes to a large number of contributors before they can raise funds to bring products to market. False; Easy 30. The founding technology entrepreneurs behind many leading firms, such as Apple, Microsoft, and Facebook, got their start in their early 30s, leveraging university study and knowledge from their first post-college jobs to create disruptive new firms. False; Easy 31. Palmer Luckey, the founder of Oculus, was able to get early funding for his product via Kickstarter, exceeding the fundraising goal set by his campaign without giving up a share of equity from this campaign. True; Easy 32. Facebook was founded by Sergey Brin. False; Easy 33. Linus Torvalds created the Linux operating system. True; Easy 34. David Karp, founder of the website Tumblr, sold the website to Google for $1.1 billion. False; Moderate 35. Everyone benefits from an accelerator. False; Moderate 36. You should always ask people to sign non-disclosure agreements. False; Moderate Multiple Choice Questions 37. One contributor to the ease with which young entrepreneurs can have success is low-cost distribution to massive markets worldwide. This is enabled by: a. legacy systems b. big data and business analytics c. Esoko and M-Pesa d. app stores e. Sproxil d; Easy

38. Another reason fueling the boom in fast-growing technology services is _____, which, when done right, can virally spread awareness of a firm with nary a dime of conventional ad spending. a. app stores b. big data and business analytics c. Esoko and M-Pesa d. Sproxil e. legacy systems a; Easy 39. Yahoo! was started by _____ and _____. a. Sergey Brin; Larry Page b. Jerry Yang; David Filo c. Steve Chen; Chad Hurley d. Kevin Rose; Mark Zuckerberg e. Catherine Cook; Shawn Fanning b; Easy 40. _____ was just a sophomore when he began building computers in his dorm room at the University of Texas. His firm would one day claim the top spot among PC manufacturers worldwide. a. Bill Gates b. Steve Jobs c. Michael Dell d. Shawn Fanning e. Mark Zuckerberg c; Easy 41. Steve Chen and Chad Hurley are credited as the founders of: a. Google b. Zappos c. Facebook d. YouTube e. Yahoo! d; Easy 42. Tony Hsieh served as CEO of _____, and eventually sold the firm to Amazon for $900 million. a. Zappos b. LinkExchange c. MyYearbook.com d. Napster e. Yahoo! a; Easy 43. Sergey Brin and Larry Page were both twenty-something doctoral students at Stanford University when they founded: a. Yahoo! b. YouTube c. Google d. Amazon e. Napster c; Easy 44. Amazon was started by: a. Jeff Bezos b. Catherine Cook

c. Shawn Fanning d. Linus Torvalds e. Kevin Rose a; Easy Short Answer Questions 45. Name at least three technology firms that were founded by people in their twenties or younger. Facebook was founded by Mark Zuckerberg when he was a nineteen-year-old college sophomore. Sergei Brin and Larry Page of Google, Jerry Yang and David Filo of Yahoo!, Steve Chen and Chad Hurley of YouTube are all in their late twenties when they launched their firms. Jeff Bezos hadn’t yet reached thirty when he began working on what would eventually become Amazon. The founders of Dropbox, Box, and Spotify were all younger than thirty when they founded businesses that would go on to be worth billions. Easy 46. What factors contribute to the current “golden age” of young entrepreneurship, allowing innovators to create and deploy services with less expense than prior generations? We’re in a golden age of tech entrepreneurship where ideas can be vetted and tested online, and funding crowdsourced, Kickstarter-style; “the cloud” means a startup can rent the computing resources one previously had to buy at great expense; app stores give code jockeys immediate, nearly zero-cost distribution to a potential market of hundreds of millions of people worldwide; and social media done right can virally spread awareness of a firm with nary a dime of conventional ad spending. Easy 47. What are some things you should do if you would like to start a startup? Attend high-quality startup-focused events, attend tech events if you are building a tech startup, and start building a product. Easy Fill in the Blanks 48. Funding projects via online efforts such as Kickstarter are referred to by the term _____. crowdsourcing; Hard 49. The technology known as _____ is helping to fuel the current age of fast-growth technology entrepreneurship. This technology means that a startup can rent the computing resources one previously had to buy at great expense. cloud computing, or the cloud; Moderate 50. Shawn Fanning’s _____ was widely criticized as a piracy playground. Napster; Easy 51. Facebook was founded by _____. Mark Zuckerberg; Easy 52. _____ was just twenty-one when he founded Apple. Steve Jobs; Easy 53. _____ means to redefine the market, business, and/or product offering. Pivoting; Easy 54. Spending a lot of time on a “pitch deck,” logo design, or seeking funding is almost always a sign of a “_____.”

wantrepreneur; Easy Section 1.3 True/False Questions 55. Researchers in China and the United States have shown an AI approach that performed better than major trading indices as well as traditional investment portfolio allocation strategies. True; Easy 56. SEO and SEM are key tech industry acronyms that have become vital parts of the accounting professional’s operating toolkit. False; Moderate 57. Many of the careers in marketing are highly tech-centric. True; Easy 58. Firms are increasingly shifting spending from the Web to other media such as print, radio, and television as these are often easier to track and analyze. False; Easy 59. While process redesign, supply chain management, and factory automation are all tech-centric operations, service operations are not. False; Easy 60. Today’s job seekers are writing resumes with keywords in mind, aware that the first cut is likely made by a database search program, not a human being. True; Moderate 61. The number of U.S. patent applications awaiting approval has significantly declined in the past decade. False; Easy 62. Technology experts in the area of user-interface design specialize in technology for competitive advantage. False; Moderate 63. The field of accounting will not be impacted by AI due to newly introduced data security laws. False; Easy Multiple Choice Questions 64. Within roughly four years, _____ were in the hands, backpacks, purses, and pockets of over two hundred million people worldwide, delivering location-based messages and services and even allowing for cashless payments. a. Fitbits b. smartwatches c. android devices d. iOS devices e. tablets d; Easy 65. A company tracks user’s activities on their website. This is an example of the impact of technology in the area of: a. accounting

b. operations c. marketing d. finance e. human resources c; Moderate 66. Crowdsourcing tools and question-and-answer sites such as _____ allow firms to reach out for expertise beyond their organizations. a. Quora b. Oculus VR c. Alibaba d. Twitter e. M-Pesa a; Moderate 67. Technology experts in the area of user-interface design a. work to make sure systems are intuitive and easy to use. b. leverage technology to make legacy systems more efficient. c. specialize in technology for competitive advantage. d. focus on effective back-up systems for critical business data. e. provide direction on technology-related security issues. a; Easy 68. Technology experts in the area of process design a. work to make sure systems are easy to use. b. leverage technology to make firms more efficient. c. specialize in technology for competitive advantage. d. focus on systems dealing with critical business data. e. provide direction on technology-related security issues. b; Easy 69. Technology experts in the area of _____ specialize in technology for competitive advantage. a. user-interface design b. process design c. strategy d. database design e. hardware c; Easy 70. Experts working in the area of _____ work to make sure systems are easy to use, while people working in the area of _____ work to leverage technology to make firms more efficient. a. user-interface design; process design b. process design; user-interface design c. strategy; process design d. process design; strategy e. strategy; user-interface design a; Hard 71. Which area of corporate law is connected to technology? a. privacy b. patents c. piracy d. intellectual property e. All of the above are true. e; Moderate

Short Answer Questions 72. How has technology changed the marketing landscape? The skill set of today’s marketers is radically different from what was leveraged by the prior generation. Online channels have provided a way to track and monitor consumer activities, and firms are leveraging this insight to understand how to get the right product to the right customer, through the right channel, with the right message, at the right price, and at the right time. Savvy firms are using social media to generate sales, improve their reputations, better serve customers, and innovate. Search engine marketing (SEM), search engine optimization (SEO), customer relationship management (CRM), personalization systems, and a sensitivity to managing the delicate balance between gathering and leveraging data and respecting consumer privacy are all central components of the new marketing toolkit. Moderate 73. What kind of an impact has technology had in the area of human resources? Technology helps firms harness the untapped power of employees. Knowledge management systems are morphing into social media technologies—social networks, wikis, and Twitter-style messaging systems that can accelerate the ability of a firm to quickly organize and leverage teams of experts. Crowdsourcing tools and question-and-answer sites like Quora and Stack Overflow allow firms to reach out for expertise beyond their organizations. Human resources directors are using technology for employee training, screening, and evaluation. Sites like LinkedIn can help HR quickly target a wider group of qualified employees. Potential hires are sharing online material with HR, hoping that thoughtful blog posts, a compelling LinkedIn presence, Twitter activity reflecting an enthusiastic and engaged mind, and, for tech professionals, participation in collaborative coding communities like GitHub and Stack Overflow, all work to set apart a candidate from the herd. The hiring and retention practices of the prior generation are also in flux. Recruiting hasn’t just moved online; it’s now grounded in information systems that scour databases for specific skill sets, allowing recruiters to cast a wider talent net than ever before. Job seekers are writing resumes with key words in mind, aware that the first cut is likely made by a database search program, not a human being. Moderate 74. Provide a brief overview of the different careers in the area of information systems. Students studying technology can leverage skills in ways that range from the highly technical to those that emphasize a tech-centric use of other skills. Opportunities for programmers abound, but there are also roles for experts in areas such as user-interface design, process design, and strategy. Careers that involve consulting and field engineering are often particularly attractive for those who enjoy working with clients and problems across various industries and in different geographies. Consultants can become partners who work with the most senior executives of client firms, helping identify opportunities for those organizations to become more effective. Technology specialists can rise to be chief information officer or chief technology officer and many firms are developing so-called C-level specialties in emerging areas with a technology focus, such as chief information security officer (CISO) and chief privacy officer (CPO). Moderate Fill in the Blanks 75. The _____ department in an organization that not only ensures that systems get built and keep running but also take on strategic roles targeted at proposing solutions for how technology can give the firm a competitive edge. information systems; Easy 76. Aspiring investment bankers should study the tech industry since tech firms represent a large portion of firms selling shares on public stock markets for the first time. This process is known as

_____. IPO, initial public offering, or going public; Easy 77. The number of U.S. patent applications awaiting approval has _____ in the past decade. tripled; Easy Section 1.4 True/False Questions 78. A firm that is late in adopting a technology may find itself unable to create the competitive advantages of early movers. True; Easy 79. ChatGPT was invented by OpenAI. True; Moderate 80. The hype cycle is described as a curve with market expectations plotted against time. True; Easy 81. IBM Watson did not beat Jeopardy champ Ken Jennings. False; Easy 82. Xerox invented the graphical user interface. True; Easy Multiple Choice Questions 83. Which of the following is not a key to competitive assets that an early mover may be able to create over its slow-moving rivals? a. scale b. network effects c. switching costs d. technology effects e. None of the above are true. d; Moderate 84. “Uh, where’s the ROI?” is which stage of the Hype Cycle Curve? a. trough of disillusionment b. emerging innovation c. inflated expectations d. slope of enlightenment e. plateau of productivity c; Easy 85. Which tech company founder stated “the tech industry is more fashion-driven than women’s fashion”? a. Bill Gates b. Larry Ellison c. Mark Zuckerberg d. Jeff Bezos e. Sergey Brin b; Easy Short Answer Questions

86. What causes an innovation trigger in a Hype Cycle? A stage of emerging innovation, sometimes referred to as an innovation trigger, is where a new tech or other concept arrives. If interest accelerates, expectations rise and the curve slopes sharply upward. This typically happens as early proofs-of-concept show promise, early-stage venture capitalists plow money into startups focused on this area, and firms launch experimental efforts. Moderate Fill in the Blanks 87. A firm may give up _____ or sour on an early, unrealized _____ only to see some characteristics of technologies and markets change the game for adoption. tech, investment; Easy

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Chapter 2 Zara: Fast Fashion from Savvy Systems Section 2.1 True/False Questions 1. The U.S. Department of Justice needed to provide a special exemption to the Fair Factories Clearinghouse, and before doing so, had to be convinced that the effort wouldn’t be used by buyers to collude and further squeeze prices from competitors. True; Easy 2. The Fair Factories Clearinghouse is subject to network effects. True; Easy 3. Making seasonal apparel decisions is a challenge because it often involves making predictions on what customers will be interested in, months in advance of clothing appearing on store shelves. True; Easy 4. Zara’s dominance in the fashion industry is due to its horizontally integrated structure accompanied by a globally dispersed production model. False; Easy 5. Zara’s clothing looks high fashion but is comparatively inexpensive. True; Easy 6. Most fashion retailers place orders for a seasonal collection a few days before these lines make an appearance in stores. False; Easy 7. Maintaining large inventories is highly essential for the viability of the fashion industry. False; Easy Multiple Choice Questions 8. In an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly _____, keeping huge swaths of its production process in-house. a. privatized b. vertically integrated c. publicly traded d. subsidized e. autonomous b; Easy 9. What was considered the source of Mickey Drexler’s inventory problems at Gap? a. He personally approved sweatshop-affiliated contract manufacturers. b. He wrote the code for Gap’s disastrously broken inventory system. c. The firm guessed wrong about fashion, placing big bets on trends that consumers didn’t want. d. He led a botched merger with Disney in the hopes that combining technology with the Disney Store would create a super-efficient set of shopping mall destination stores.

e. All of the above are true. c; Easy 10. Zara holds a competitive advantage over its rivals in spite of a. refusing to implement technology in its operational model. b. conducting business only through online storefronts. c. its globally distributed contract manufacturing model. d. operating through fewer stores across the world than its closest rivals. e. keeping large portions of its production processes in-house. e; Easy 11. _____ involves outsourcing production to third-party firms. a. Vertical integration b. Long tailing c. Peer production d. Contract manufacturing e. Viral production d; Easy 12. In retail in general and fashion in particular, having _____ is considered the kiss of death. a. excess inventory b. storefronts in expensive districts with costly rents c. a large labor force d. limited production runs e. dispersed production facilities a; Easy 13. Contract manufacturers used by the apparel industry are often criticized because a. they hike up the costs of producing goods. b. firms cannot maintain high profit margins by employing them. c. they charge exorbitant labor costs that drive down sales. d. they are known to grossly overprice their services. e. of poor working conditions. e; Easy 14. _____ is a non-profit organization that shares audit information on contract manufacturers among members of the apparel industry and other industries. a. Fair Factories Clearinghouse b. PricewaterhouseCoopers c. Amnesty International d. Klynveld Main Goerdeler e. Transparency International a; Easy Essay Questions 15. What were the problems encountered by Gap in the early part of the decade following the 1990s? What were the measures taken to overcome these problems? Gap was an industry leader for much of the 1990s in apparel retail, with over $1 billion in profits. However, sales declined in the early part of the following decade, prompting the firm to try revitalizing the brand. Chasing the youth market, Gap filled its stores with miniskirts, low-rise jeans,

and other offerings. But the throngs of teenagers they sought to attract never showed up, and the shift in offerings sent Gap’s mainstay customers to retailers that easily copied the styles that Gap had made classic. Gap’s same-store sales declined for twenty-nine months straight and profits vanished. The firm’s debt was downgraded to junk status. Closing down hundreds of stores did not work either and Gap was forced to write off much of its inventory. The marketing model used by Gap to draw customers in via big-budget television promotion also collapsed. The firm has since ceded its position as the market leader. Moderate 16. What is contract manufacturing? What advantages can a firm expect to gain from contract manufacturing? What are the downsides associated with this practice? Contract manufacturing refers to outsourcing production to third-party firms. Firms that use contract manufacturers do not own the plants or directly employ the workers who produce the requested goods. Conventional wisdom suggests that leveraging cheap contract manufacturing in developing countries can keep the cost of goods low and allow firms to leverage specialized manufacturing expertise if production is not seen as core to competitive advantage. Firms can lower prices and sell more products or maintain higher profit margins. Many firms have also experienced the ugly downside to this practice. Global competition among contract firms has led to race-to-the-bottom cost-cutting measures. Too often, this means that in order to have the low-cost bid, contract firms skimp on safety, ignore environmental concerns, employ child labor, and engage in other ghastly practices. Incidents such as the Spring 2013 Bangladesh Rana Plaza disaster, which killed more than 1,100 people in the collapse of an illegally constructed eight-story building housing multiple contract garment factories, underscore the human toll of unacceptable contract manufacturing practices. Big firms are big targets and those that fail to adequately ensure their products are made under acceptable labor conditions risk a brand-damaging backlash that may turn off customers, repel new hires, and leave current staff feeling betrayed. Moderate Short Answers 17. The U.S. Justice Department initially reviewed the Fair Factories Clearinghouse but eventually approved the effort as described in readings and class. What was the government initially concerned about? The government was initially concerned about price-fixing or price collusion. Easy Fill in the Blanks 18. Leveraging cheap _____ in developing countries can keep the cost of goods low. contract manufacturing; Easy 19. _____ is a non-profit organization that shares audit information on contract manufacturers. Fair Factories Clearinghouse; Easy 20. Outsourcing production to third-party firms is called _____. contract manufacturing; Easy 21. Retailers can lose profits if they have excess _____. inventory; Easy

22. In recent years, _____has closed operations in Myanmar due to labor concerns and has shed stores in Russia due to the war in Ukraine and Venezuela due to ongoing political strife. Inditex; Moderate Section 2.2 True/False Questions 23. Zara’s high-fashion styles are inspired by customer tastes, with technology used to gather data on preferences at given store locations. True; Easy 24. Elaborate customer surveys help Zara designers predict fashion trends months into the future and design products accordingly. False; Easy 25. Limited production runs ensure customers do not have to visit Zara’s stores as often as they visit other stores, allowing the firm to save money through staff reductions when compared to peers. False; Easy 26. Zara’s IT expenditure, measured by IT workers as a percentage of total employees, is only slightly higher than the industry average. False; Moderate 27. Zara's use of technology across the value chain allows the firm to manufacture more unique items than rivals H&M and Gap. True; Easy 28. Zara encourages employee use of technology by tying employee salaries to sales performance. True; Easy 29. Goods to be further customized based on designer/manager collaboration are called greige. True; Easy 30. RFID tags allow Zara staff to take in-store inventory less frequently than rivals, saving money on staffing. False; Easy 31. An information system consists of hardware, software, data, procedures, and the people who interact with and are impacted by the system. True; Easy Multiple Choice Questions 32. Personal digital assistants are a. transaction processing systems that capture customer purchases. b. small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to. c. systems that provide rewards and usage incentives, typically in exchange for a method that provides a more detailed tracking and recording of customer activity. d. handheld computing devices meant largely for mobile use outside an office setting.

e. artificial intelligence systems that leverage rules or examples to perform a task in a way that mimics applied human expertise. d; Easy 33. Zara’s staff members regularly collect data from customers at its stores. This data is used to a. decide the designs and styles of Zara’s products for the next few seasons. b. determine the in-store soundtrack and layout. c. inform designers of customer preferences and staff on store sales results. d. determine where future Zara stores should be located. e. identify the products that customers would like to buy through discounted sales. c; Easy 34. _____ are critical for capturing sales data and are usually linked to systems that manage a firm’s inventory. a. Point-of-sale systems b. Legacy systems c. CRM systems d. Server farms e. Data aggregators a; Easy 35. Many firms have developed and deployed innovative information systems, only to see these systems go unused by key staff members. How has Zara helped ensure its systems will be used by staff? a. Employees are monitored by in-store cameras. b. Employee time on information systems is recorded each time the system is engaged. c. System use drives store success and as much as 70 percent of salaries are tied to sales performance d. All employees must have a Fair Factories Clearinghouse account, which is used to log and report employee activity e. The systems were designed by employees, who feel a sense of ownership in the technology deployed c; Moderate 36. Zara’s clothing lines are designed a. by star designers like Stella McCartney. b. in collaboration with celebrities and pop artists. c. by design school graduates to suit customer demand. d. by designers who win talent shows sponsored by Zara. e. mostly by foreign designers in European design hotspots of Paris and Milan. c; Easy 37. How does Zara differ from its competitors in converting ideas into products? a. Zara concepts appear in stores in fifteen days on average compared to rivals who receive new styles once or twice a season. b. Zara’s ideas are inspired by social media, compared to the intrinsic design processes followed by its competitors. c. Zara’s design and concept teams use data from customers to predict fashion trends many months into the future and stock up inventory accordingly, as opposed to its rivals. d. Collaborations with celebrities help Zara churn out a limited, yet profitable, volume of items every year, while rivals produce a higher volume of less fashionable items.

e. By focusing on a smaller number of products than rivals like Gap, Zara manages to limit exposure to wrong guesses. a; Moderate 38. A value chain is a set of a. similarly profitable firms competing against each other in any given industry. b. large firms that are vertically integrated. c. activities through which a product or service is created and delivered to customers. d. a large number of small firms that dominate a given market. e. robotically controlled conveyor belts that deliver products quickly from manufacturing stations to shipping containers. c; Easy 39. Which of the following is not a benefit achieved through Zara’s integration of technology throughout the firm? a. limited product runs of many unique products b. higher markdowns c. fewer write-offs d. less need for advertising e. All of the above are true. b; Moderate 40. Zara store staff gain as much as three hours in prime selling time to assist customers at stores. Which of Zara’s practices is instrumental in these time savings? a. concepts going from ideas to appearances in stores in fifteen days on an average b. three hundred member-strong design teams churning out up to thirty thousand items a year c. distribution centers iron clothes in advance and packing them on hangers, with security and price tags affixed d. collecting data from customers on what kind of clothes to stock in stores, using PDAs e. tweaking shipping models through Air France–KLM Cargo to coordinate outbound shipments with return legs loaded with raw materials. c; Easy 41. Due to limited production runs, Zara’s customers a. tend to delay their shopping until the products go on sale. b. visit the stores more often. c. buy products at discounted rates after a few weeks. d. visit stores less often. e. create a greater opportunity for increased markdowns and write-offs. b; Easy 42. According to an independent study, Zara books some 85 percent of its products at full price compared to the industry average markdown ratio of 50 to 70 percent. This is made possible by a. keeping a major part of the production processes under direct proprietary control. b. coordinating the outbound shipments of all Inditex brands with return legs loaded with return materials and half-finished items. c. applying data analytics to purchase trends. d. the practice of having limited production runs of its designs. e. leveraging contract manufacturers to produce only staple items with longer shelf-lives, which account for one-eighth of dollar volume. d; Moderate

43. Zara’s IT expenditure is low by fashion industry standards and is also highly effective. Which of the following makes this possible? a. targeting technology investment at points in the value chain where it has the most significant impact b. utilizing the money spent on IT infrastructure to improve the IT skills of its employees through training programs c. using the best and most expensive software and hardware in the market, as it lowers any maintenance costs later on d. outsourcing IT management to third-party firms that provide IT services at lower costs e. investing IT funding in improving the infrastructure and cutting down employee overhead costs a; Easy 44. Small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to are called: a. personal digital assistants b. smart adaptors c. trackbacks d. legacy labels e. RFID tags e; Easy 45. High-end fashion house Prada’s experiment of implementing the latest technology in its flagship store failed because a. Prada targeted technology investment only at points in its value chain where it would have the most significant impact. b. the execution of the technological advancements was poor and didn’t work well during customer interactions, so managers and staff stopped using it. c. the effort was unlike Prada’s signature style, being more functional than fashionable. d. Prada skimped on spending with its IT expenditure being less than one-fourth the fashion industry average. e. the RFID technology used on items in the store were not state of the art and suffered from legacy system problems. b; Moderate 46. _____ represents an integrated solution that combines hardware, software, data, procedures, and the people who interact with and are impacted by the system. a. A neural network b. Artificial intelligence c. An information system d. Supercomputing e. Cloud computing c; Easy 47. ROI is a term used to represent the: a. return on information b. rate of information-generated c. regular order intake d. return on investment e. relay-ordered inventory d; Easy

48. The e-commerce strategy that blends online and offline sales is called: a. sales channel b. betterline c. omnichannel d. blended sales e. omniline c; Moderate 49. At Zara, clothes are ironed in advance and packed on hangers, with security and price tags affixed. This system means that employees in Zara stores simply move items from shipping box to store racks, spending most of their time on a. outsourcing their sales activities. b. value-added functions like helping customers find what they want. c. wrestling with inventory during busy periods. d. packing unsold merchandise that needs to be returned to the distribution center. e. whisking items from their stores to the staging areas. b; Moderate

50. Zara ensures they are selling items that customers want by a. using PDAs to collect data from customers on what kind of clothes to stock in stores. b. sending surveys to their customers via email. c. completing rigorous research on items sold by their rivals. d. following trends created by influencers. e. All of the above are true. a; Moderate Essay Questions 51. What are some of the new technologies that Zara is rolling out in its stores? Why do you think Zara is rolling out these new technologies? Self-checkout, fitting room reservations, and robot-delivered online orders highlight some of the tech rolling out in Zara stores. A store like Zara might implement technologies such as self-checkout, fitting room reservations, and robot-delivered online orders to enhance customer experience and operational efficiency. Self-checkout allows customers to avoid long lines, offering a faster, more convenient checkout process. Fitting room reservations can streamline the shopping experience by reducing wait times and personalizing the service. Meanwhile, robot-delivered online orders can expedite the delivery process, reduce labor costs, and minimize human error, ensuring that customers receive their purchases more quickly and accurately. Overall, these technologies aim to meet the growing consumer demand for efficiency, convenience, and a seamless integration of online and offline shopping experiences. Moderate 52. Walmart is a large firm, but some suggest that Zara has had more success implementing effective RFID. Why? Firms from Walmart to JCPenney have struggled to effectively implement RFID, but Zara’s vertical integration is an advantage here, as well. Since the entire supply chain is under Zara control and all items flow through one of two warehouses, Zara can affix tags to all products before sending them out to stores (a challenge for other retailers that have third-party suppliers ship to multiple warehouses or directly to stores). Stores then send tags back to Zara warehouses for reuse

(reassigning a tag’s unique item to a new clothing item). Although tags only cost ten cents, with hundreds of millions of items sold each year, these costs would easily add up, so the reusable tag system makes solid financial sense (Zara bought so many tags at launch that it actually consumed one in every six tags produced for the entire apparel industry that year). Moderate 53. How does RFID improve in-store customer service? RFID lets Zara know where products are, so if a customer asks for an item in a store (perhaps in a different size or color), staff using custom apps on an iPod Touch can immediately tell if a product is in store, in a nearby store, or if it can be ordered from the distribution center or Zara.com. Moderate 54. Briefly explain the intelligence-gathering exercises carried out by Zara in its stores and the role of technology in such efforts. Zara’s designs are based on the evidence of customer demand. Zara’s store managers lead the intelligence-gathering effort that ultimately determines what ends up on each store’s racks. Armed with personal digital assistants (PDAs) to gather customer input, staff members regularly chat up customers to gain feedback on what they’d like to see more of. Once stores are closed, the staff looks for trends in the piles of unsold items that customers tried on but didn’t buy to spot any preferences in cloth, color, or styles offered among the products in stock. PDAs are also linked to the store’s point-of-sale (POS) system showing how garments rank by sales. Managers send updates that combine the hard data captured at the cash register with insights on what customers would like to see. All of this valuable data allows the firm to plan styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal is to improve the frequency and quality of decisions made by the design and planning teams. Moderate 55. Describe how Zara’s counterintuitive practice of making limited production runs is profitable and effective in maintaining a competitive advantage over the firm’s rivals. While running out of bestsellers might be seen as a disaster at most retailers, at Zara the practice delivers several benefits. Limited runs allow the firm to cultivate the exclusivity of its offerings. Each Zara store is stocked with items tailored to the tastes of its local clientele. Limited runs encourage customers to buy right away and at full price. Customers realize that waiting for items to go on sale means the products have almost certainly been sold or moved to make room for newer stock. Zara rarely runs discount sales and this is evidenced in data that suggests that Zara books some 85 percent of its products at full price, compared to the industry average of just 50 percent. The constant parade of new, limited-run items also encourages customers to visit often. The average Zara customer visits the store seventeen times per year, compared with only three annual visits made to competitors. This ensures that Zara spends almost nothing on advertising. Finally, limited production runs allow the firm to reduce to a minimum the risk of making mistakes, such as stocking up on inventory with items customers would not buy and incurring losses. Moderate 56. What role does Zara’s headquarters play in the running of its stores? Zara’s store managers, armed with personal digital assistants (PDAs), gather customer input. Staff members regularly chat up customers to gain feedback on what they’d like to see more of. The staff looks for trends in the piles of unsold items that customers tried on but didn’t buy to spot any preferences in cloth, color, or styles offered among the products in stock. Managers send this valuable data to Zara’s headquarters, which allows the firm to plan styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal is to improve the frequency and

quality of decisions made by the design and planning teams. While stores provide valuable front-line data, headquarters plays a major role in directing in-store operations. Software is used to schedule staff based on each store’s forecasted sales volume, with locations staffing up at peak times such as lunch or early evening. This constant refinement of operations throughout the firm’s value chain has helped reverse a prior trend of costs rising faster than sales. Even the store displays are directed from the firm’s headquarters outside, where a basement staging area known as “Fashion Street” houses a Potemkin village of bogus storefronts meant to mimic some of the chain’s most exclusive locations throughout the world. It is here that workers test and fine-tune the chain’s award-winning window displays, merchandise layout, even determine the in-store soundtrack. Every two weeks, new store layout marching orders are forwarded to managers at each location. Moderate 57. Why has Zara been more effective in leveraging technology to enhance its operating strategies than its rivals? Provide an example to contrast Zara’s handling of technology in its operations. Whether measured by IT workers as a percentage of total employees or total spending as a percentage of sales, Zara’s IT expenditure is less than one-fourth the fashion industry average. Zara excels by targeting technology investment at the points in its value chain where it will have the most significant impact, making sure that every dollar spent on tech has a payoff. High-end fashion house Prada’s efforts at its flagship Manhattan store contrast Zara’s efforts. The firm used radio frequency identification (RFID) tags on clothes in its store. By wirelessly reading the tags on each garment, dressing rooms would recognize what was brought in and make recommendations of matching accessories as well as similar products that patrons might consider. Customers could check inventory, and staff sporting PDAs could do the same. A dressing room camera would allow clients to see their front and back view side-by-side as they tried on clothes. However, as slick as it sounded, the effort had disastrous consequences and the investment in Prada’s in-store technology was simply too high, with estimates suggesting the location took in just one-third the sales needed to justify expenses. At Prada’s Manhattan flagship store, the effort looked like tech was chosen because it seemed fashionable rather than functional. Moderate 58. Many firms have developed innovative information systems, only to find that employees fail to adopt these tools. How does Zara encourage store managers to effectively use the systems deployed in stores? Managers have “skin in the game,” with compensation tied to overall store performance. Store performance is improved through managers’ use of information systems that help ensure that fashions arrive in store tailored to customer feedback, requests, and preferences. Easy 59. Prada’s venture of designing a technology enhanced store in Manhattan was described as fashionable over functional. What issues did Prada face with the new concept? What did managers fail to consider when implementing the new technology? Prada made a considerable investment in the technology used for the Manhattan store. Unfortunately, they experienced issues when customers did not understand the technology of the smart dressing rooms. The store was also a high-traffic location, and the technology was not built to withstand the abuse. In addition, the inventory database did not accurately stock items causing missed opportunities for sales. The store failed to meet the return on investment in the technology. The managers invested in hardware and software, but failed to consider the need for data, procedures, and people. Moderate

Short Answers 60. Our analysis of Inditex’s Zara stores showed the power of data to fuel competitive advantage. List the two acronyms for technologies that Zara uses to collect data in stores and describe what the data from each of these respective systems “tells” the firm. The two acronyms are POS, which tells what the store is selling, and PDA, which tells what customers want to see on the shelves. Easy Fill in the Blanks 61. A(n) _____ is a transaction process that captures customer purchase information. point-of-sale system; Easy 62. Coordinating and enabling the flow of goods, people, information, and other resources among locations is known as _____. logistics; Moderate 63. An information system is an integrated solution that combines five components: hardware, software, data, _____, and the people who interact with and are impacted by the system. procedures; Moderate 64. _____ are goods to be further customized based on designer/manager collaboration. Greige; Easy 65. When a single firm owns several layers in its value chain, it is said to be _____. vertically integrated; Easy 66. Zara's new in-store technology includes self-checkout using the _____.

app; Easy Section 2.3 True/False Questions 67. The strengthening of the euro relative to the dollar has insulated Zara against financial vulnerabilities. False; Moderate 68. Rising fuel costs are likely to make Zara’s model of twice-weekly deliveries more expensive to maintain. True; Easy 69. Zara also saves money by simplifying pricing. An item sold in Bangkok is likely to cost the same as a similar item sold in Barcelona. False; Moderate 70. Zara’s vertically integrated model is easier for rivals to copy compared to Dell’s, as computing is more complex than clothing in terms of number of new models offered. False; Moderate

71. Inditex has invested in several firms to help improve sustainability. True; Easy Multiple Choice Questions 72. Which firm is trying to get out in front of both legislation and critics by setting aggressive sustainability goals? a. Amazon b. Inditex c. Wal-Mart d. Google e. All of the above are correct. b; Moderate 73. Factors such as weather, natural disaster, terrorism, labor strife, or political unrest can shut down a firm’s operations. Which of the following is one of the measures taken by firms to hedge such risks? a. driving up profitability by increasing prices of market goods b. spreading productions facilities across the globe c. requesting government intervention in the form of subsidies or nationalization d. sourcing raw materials from countries with low labor costs e. diverting marketing and advertising budgets to accommodate greater production b; Moderate 74. Zara is susceptible to any disruption in northern Spain because a. it moves all of its deliveries through just two locations, both in Spain. b. it conducts its trade operations based on the American dollar rather than the stronger euro. c. most of Zara’s products are sold in markets outside Spain and Europe. d. Zara’s products are sold at much lower costs around the world than in Spain, and this harms profitability. e. Zara’s production facilities in Asia and Central America are threatening employment in Spain. a; Easy 75. Zara’s production costs could rise at higher rates than its competitors because many of the firm’s costs are tied to the: a. euro b. dollar c. yen d. pound e. franc a; Easy 76. The Zara experience involves a regular supply of new stock on the shelves, because of which customers tend to visit Zara’s stores more often than they visit other retailers’ stores. However, such a policy will become more expensive to maintain if a. star designers demand a higher fee for its designs. b. PDAs are not used. c. fuel costs rise. d. Zara’s horizontal integration fails. e. Zara outsources its production process. c; Easy

77. Zara implements limited production runs to a. offer exclusivity. b. encourage full price purchases. c. increase customer visits. d. reduce the risk of making a mistake with a collection. e. All of the above are true. e; Moderate 78. Who is demanding that clothing companies make efforts to be more planet-friendly? a. customers b. employees c. vendors d. All of the above are true. e. None of the above are true. d; Moderate Essay Questions 79. What are the operational and financial challenges that Zara faces? In spite of its effectiveness, Zara’s Spain-centric, just-in-time manufacturing model has certain defects. By moving all of the firm’s deliveries through just two locations, both in Spain, the firm remains hostage to any disruption in the region, such as weather, natural disaster, terrorism, labor strife, or political unrest. Firms often hedge risks that could shut down operations by spreading facilities throughout the globe. If problems occur in northern Spain, Zara has no such fall back. Moreover, this model also leaves the firm potentially more susceptible to financial vulnerabilities as the euro has strengthened relative to the dollar. Many low-cost manufacturing regions have currencies that are either pegged to the dollar or have otherwise fallen against the euro. This situation means that Zara’s Spain-centric costs rise at higher rates compared to competitors, presenting a challenge in keeping profit margins in check. Rising transportation costs are another concern. If fuel costs rise, the model of twice-weekly deliveries that has been key to defining the Zara experience becomes more expensive to maintain. Zara is liable to be overtaken by rivals who might, in time, succeed in copying its vertically integrated value chain, despite the difficulty involved. Dell’s loss of market share due to the same reason can be cited as precedent for Zara’s potential vulnerability in this regard. Finally, the firm’s financial performance can also be impacted by broader economic conditions. When the economy falters, consumers simply buy less and may move a greater share of their wallet to less-stylish and lower-cost offerings from deep discounters like Walmart. Zara is particularly susceptible to conditions in Spain, in particular, and Western Europe, in general. Hard 80. Although Inditex was a latecomer to e-commerce, they have grown their online sales by implementing an omnichannel strategy. Describe how the firm’s omnichannel strategy contributes to Zara’s e-commerce success. Implementing an omnichannel strategy helped Zara blend online and offline sales to best benefit the customer. For example, customers can return and pick up online orders in store. While in store, staff can locate out-of-stock items or alternatives to ensure the customer has a successful trip. To meet the demand for online orders, Zara added e-commerce stockrooms and collection stations where robots deliver packages to customers via conveyor belt. Sales at Zara are flourishing online and in store. The omnichannel strategy provides customers with a seamless shopping experience and aligns with the company’s strategy to utilize technology.

Moderate Fill in the Blanks 81. The organizational activities that are required to produce goods or services are known as _____. operations; Moderate 82. _____ targets for the end of the decade include a commitment to use 40 percent recycled fibers across the product line. Inditex; Moderate 83. _____ occurs when customers browse a retailer but buy competing items online. Showrooming; Easy

Chapter 3 Strategy and Technology: Concepts and Frameworks for Achieving Success Section 3.1 True/False Questions 1. When offerings are roughly the same, they are more commodity than differentiated. True; Easy 2. A firm’s financial performance that consistently outperforms its industry’s peers is known as operational effectiveness. False; Easy 3. According to Michael Porter, the reason many firms suffer margin-eroding competition is because they have defined themselves according to strategic positioning rather than operational effectiveness. False; Moderate 4. When technology can be matched quickly, it is rarely a source of competitive advantage. True; Easy 5. According to the resource-based view of competitive advantage, if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that are valuable and can be substituted easily. False; Moderate 6. Fast growing Groupon was able to dissuade rivals from entering its market because the firm’s technology was so difficult to replicate. False; Easy 7. In the crowded market space of 175 mattress firms, CNBC’s claim that “you can’t tell them apart” reinforces the idea that similar offerings become commoditized. True; Easy 8. Cisco’s acquisition of Pure Digital, makers of the Flip video camera line, was largely considered a flop because comparable technology soon became a feature in other popular consumer electronics products. True; Easy 9. Nortel was one of the dominant firms providing telecom equipment during the early Internet buildout. True; Easy Multiple Choice Questions 10. Which entrepreneur said, “Advertising is the price you pay for having an unremarkable product or service”? a. Steve Jobs b. Jeff Bezos c. Bill Gates d. Michael Dell

e. Jerry Yang b; Easy 11. A firm’s financial performance that consistently outperforms its industry’s peers is known as: a. comparative advantage b. absolute advantage c. sustainable competitive advantage d. first mover advantage e. operational efficiency advantage c; Easy 12. Which of the following statements about technology is true? a. Technology alone is enough to provide sustainable competitive advantage to a firm. b. Technology plays a marginal role in creating strategic differences. c. Technological improvements are not important in strengthening a firm’s strategic advantages. d. Technological improvements can often be copied by rivals, leading to a profit-eroding arms race. e. Technology cannot be used by late entrants to gain a share of the industry. d; Moderate 13. Technology that super-imposes content, such as images and animation on top of real-world images is called: a. alternative imaging b. strategic design c. illustration editing d. augmented reality e. product placement d; Hard 14. Operational effectiveness refers to a. the implementation of technology in a business context. b. performing the same tasks better than rivals perform them. c. the number of times inventory is sold or used during the course of a year. d. performing different tasks or the same tasks in different ways. e. matching the benefits of a successful position while maintaining an existing position. b; Easy 15. The _____ problem exists when rivals watch a pioneer’s efforts, learn from their successes and missteps, and then enter the market quickly with a comparable or superior product at a lower cost. a. late entrant b. early starter c. first mover d. intellectual property e. fast follower e; Easy 16. _____ refers to performing different tasks than rivals or the same tasks in a different way. a. Straddling b. Operational effectiveness c. Strategic positioning d. Vertical integration e. Scale advantage

c; Easy 17. A firm is said to be _____ when it attempts to match the benefits of a successful position while maintaining its existing position. a. switching b. straddling c. dovetailing d. streamlining e. vertically integrating b; Easy 18. According to Porter, strategy is fundamentally about being: a. different b. efficient c. superior d. scalable e. profitable a; Easy 19. The resource-based view of competitive advantage states that for a firm to maintain sustainable competitive advantage it must control a set of exploitable resources that have four critical characteristics. What are these characteristics? a. inventory turns, high margins, long account payable periods, brand building relationships b. operational effectiveness, strategic positioning, scale, distribution channels c. rareness, value, imperfect imitability, non-substitutability d. a website, an app, cloud-based systems, a savvy technology staff e. low margin, high delivery, infrastructure, customizable c; Moderate 20. Many telecom firms began digging up the ground and laying webs of fiberglass to meet the growing demand for Internet connectivity. However, rivals and startups began to imitate these firms and soon these new assets were not so rare and each day they seemed to be less valuable. It can be inferred from this example that a. resource-based thinking can help avoid the trap of carelessly entering markets simply because growth is spotted. b. the telecommunications market is only big enough to support one or two major players. c. the immense scale advantages enjoyed by major firms can help them fight off competition from newer entrants. d. technology assets that require high investment and maintenance are liable to becoming obsolete much quicker than others. e. the scale of technology investment required to run a business is not a huge enough factor to act as a barrier to entry for new, smaller competitors. a; Moderate 21. In _____, the light inside fiber is split into different signal-carrying wavelengths in a way similar to how a prism splits light into different colors. a. polarization b. time-division multiplexing c. space-division multiplexing d. frequency hopping spread spectrum e. dense wave division multiplexing

e; Easy 22. Sometimes technology can sound geeky, and so technical that executives might think that it doesn’t require managerial or investor attention. However, many investing in the telecom sector suffered from a lack of insight on how a key technology was impacting their industry. Telecom firms failed to anticipate the impact of a technology known as _____, which enabled existing fiber to carry more transmissions than ever before. a. radio frequency identification (RFID) b. dense wave division multiplexing (DWDM) c. cloud computing d. open source software e. resource-based software b; Moderate 23. As a small business owner, you might use an affiliate to promote your products and services online. What is a potential challenge of working with a single affiliate? a. The affiliate may limit your ability to work with others. b. The affiliate may discontinue use of your product or service. c. The affiliate may increase traffic to your website. d. The affiliate might have a targeted audience for your brand. e. All of the above are true. b; Moderate Essay Questions 24. What are Porter’s views in relation to operational effectiveness and strategic positioning? Contrast the two concepts. According to Porter, the reason so many firms suffer aggressive, margin-eroding competition is because they’ve defined themselves according to operational effectiveness rather than strategic positioning. Operational effectiveness refers to performing the same tasks better than rivals perform them. Everyone wants to be better, but the danger in operational effectiveness is “sameness.” This risk is particularly acute in firms that rely on technology for competitiveness, as technology can easily be acquired. Because of this, operational effectiveness is usually not sufficient enough to yield sustainable dominance over the competition. In contrast to operational effectiveness, strategic positioning refers to performing different activities from those of rivals, or the same activities in a different way. According to Porter, strategy is fundamentally about being different. While technology itself is often very easy to replicate, it can also play a critical role in creating and strengthening strategic differences—advantages that rivals will struggle to match. Moderate 25. One of the key questions posed by 21st century managers is “How can we possibly compete when everyone can copy our technology and the competition is a click away?” One path to take involves creating a resource or set of resources for sustainable competitive advantage. List the four characteristics that such resources must have for the possibility of sustainable competitive advantage to exist. Why is it important to have all four simultaneously? These resources must be (1) valuable, (2) rare, (3) imperfectly imitable (tough to imitate), and (4) non-substitutable. Having all four characteristics is key. Miss value and no one cares what you’ve got. Without rareness, you don’t have something unique. If others can copy what you have, or others can replace it with a substitute, then any seemingly advantageous differences will be undercut.

Moderate 26. Suppose you are in the market for a new laptop. You already own three devices in the Apple ecosystem and your account information and content is synced across all devices. However, you have come across a great deal offering a $200 rebate from a rival. What are the potential switching costs if you move to the rival? How likely are you to stay with the incumbent? There may be several costs associated with a move to the rival. First, I may need to invest time in learning the new interface or commands. There might also be a loss of information and data since the incumbent laptop may not be compatible with the rival laptop. Lastly, duplicating the convenience of having my information and data on all of my devices might require an investment in new equipment. Ideally, the $100 rebate appears to be a good deal. However, investing time, possible information and data loss, and fees associated with upgrading additional devices outweighs the rebate. Moderate Fill in the Blanks 27. According to TechCrunch, Facebook’s development mantra, formerly, “Move Fast and Break Things” should now be “_____.” Move Last and Take Things; Moderate Section 3.2 True/False Questions 28. In commodity industries, data is not the only substantive differentiator. False; Moderate 29. Bundling is not effective when a software product or service is included with a hardware product. False; Easy 30. Firms that build an imitation-resistant value chain develop a way of doing business that others struggle to replicate. True; Easy 31. A trademark is the symbolic embodiment of all the information connected with a product or service of a firm. False; Easy 32. A salesperson’s ability to effectively bargain with his/her consumers is called viral marketing. False; Easy 33. Businesses benefit from economies of scale when the cost of an investment can be used in serving a niche customer base. False; Easy 34. The scale of technology investment required to run a business can act as a barrier to entry by discouraging new, smaller competitors. True; Easy 35. Commodities are products or services that vary across multiple vendors. False; Easy

36. Network externalities exist when a product or service becomes less expensive as more people use it. False; Moderate 37. Metcalfe’s Law is used to explain the concept of switching costs. False; Moderate 38. Many firms choose not to implement operational components of ERP software and instead elect to create their own propriety solutions in part because they see their uniqueness in certain operations areas as key to creating difficult-to-imitate competitive advantages. True; Moderate 39. When firms see distribution partners as rivals, this is known as Channel Conflict. True; Moderate 40. Bundling can give a firm a key advantage. True; Easy 41. A firm can benefit from high switching costs, even when rivals offer free products. True; Moderate Multiple Choice Questions 42. The set of activities through which a product or service is created and delivered to customers is known as a(n): a. marketing plan b. value chain c. inventory turnover d. strategic position e. pure play b; Easy 43. How did Apple trump Google to become the dominant mapping platform on iOS? a. Apple’s control of iOS gave it control of the distribution channel to reach its users, kicking Google out as the default mapping app and capturing the majority of user engagement. b. Apple sued Google for copyright infringement related to the look and feel of Apple Maps. c. Apple sued Google for privacy violations related to the collection of map data. d. Apple hasn’t trumped Google Maps. Google’s Map app is used by the majority of iOS customers, whereas most users ignore Apple Maps. e. None of the above are true. a; Moderate 44. Which of the following represents one of the primary components of the value chain? a. outbound logistics b. firm infrastructure c. human resource management d. research and development e. procurement a; Moderate

45. Dell, previously the world’s number one PC manufacturer, has seen its market share shrink because of rivals copying its value chain and reducing the price advantage it enjoyed over rivals. Dell’s present struggles a. underscore the importance of continually assessing a firm’s strategic position among changing market conditions. b. are a result of rivals adopting supply chain management of software products that have yielded competitive advantages. c. imply that publicly traded firms are at a disadvantage in the technology sector. d. highlight the fact that scale advantages of an established firm are a huge factor in discouraging newer entrants to the market. e. demonstrate that resource-based thinking can help firms avoid the trap of carelessly entering markets simply because growth is spotted. a; Moderate 46. A(n) _____ is the symbolic embodiment of all the information connected with a product or service. a. trademark b. copyright c. patent d. brand e. advertisement d; Easy 47. A strong brand can be an exceptionally powerful resource for competitive advantage by lowering _____, proxying _____ and inspiring _____. a. price; strategy; innovation b. switching costs; quantity; performance c. expenses; marketing; respect d. search costs; quality; trust e. customer concern; investment; profits d; Moderate 48. Leveraging consumers to promote a product or service is known as: a. straddling b. affiliating c. long tailing d. crowdsourcing e. viral marketing e; Easy 49. Benefits related to a firm’s size are referred to as: a. network effects b. brand recall c. scale advantages d. vertical integration e. disintermediation c; Easy 50. Businesses benefit from economies of scale when the cost of an investment can be a. spread across increasing units of production. b. used in serving a niche and loyal customer base. c. used to build a brand image for products through advertising.