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Ch. 7 - Tech
Terms in this set (13)
High technology industries
knowledge is advancing rapidly & so are the products of companies using this technology.
1)Technology is accounting for an ever-larger share of economic activity.
2)As technology advances, many low-technology industries are becoming high-tech.
3)High technology products are making their way into a wide range of businesses.
Set of technical specifications that producers adhere to when making the product, or a component of it.
Advantages of technical standards
§Guarantees compatibility between products and their complements.
§Reduces confusion in the minds of consumers.
§Reduces production costs and risks associated with supplying complementary products.
§Leads to low-cost and differentiation advantages for individual companies.
§Helps raise the level of industry profitability.
Common set of features or design characteristics.
Any company can freely incorporate the knowledge and technology upon which the standard is based into its products. (when govt sets stds they fall here)
Battles to control the source of differentiation, and the value that such differentiation can create for the customer.
Winning format wars
§Make network effects work in one's favor and against competitors.
§Build the installed base for the standard as rapidly as possible.
§Ensure a supply of complements.
§Leverage killer applications.
§Pursue aggressive pricing and marketing.
§Razor and blade strategy
§License the format.
Applications or uses of a new technology or product so compelling that customers adopt them in droves, killing competing formats.
Razor Blade Strategy
Pricing the product low to stimulate demand, and pricing complements high.
First-mover advantages & disadvantages
1) Pioneering new technologies and products that lead to slowing the rate of imitation.
••Opportunity to exploit network effects and positive feedback loops.
••Ability to establish brand loyalty and increase sales volume ahead of rivals.
••Ability to create switching costs for customers and accumulate knowledge.
1) Competitive disadvantages associated with being first.
••Bear significant pioneering costs.
••More prone to making mistakes.
••Risk of building the wrong resources and capabilities.
••Risk of investing in inferior or obsolete technology
costs that make customers reluctant to switch to another product or service
costs that a consumer incurs as a result of changing brands, suppliers, or products.
a product whose use is directly related to the use of another base or associated product such that a surge in demand for one product results in an increase in demand for the other
for example, an iPhone and the apps used with it.
Technological paradigm shift
Shifts in new technologies that revolutionize the structure of the industry, dramatically altering the nature of competition and require companies to adopt new strategies in order to survive.
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