Faculty of Business Studies
B222B-Technology and Innovation Management
MID-TERM ASSESSMENT (Set 1)
2016-2017/FALL
Thursday, November 17, 2016
Marking guidelines
Time Allowed: 2 hours / Number of Exam Pages:2 6((including this cover sheet
INSTRUCTIONS TO STUDENTS
- This examination consists of FIVE (5) questions, attempt FOUR questions
- The marks for each part of the question are next to the question.
- Students must not begin writing before the invigilator announces the start of the examination.
- No mobile phones or electronic data devices are allowed into the exam room.
- Any form of cheating should not be tolerated, and should be subject to AOU cheating policy.
- Keep ALL your belongings (bags, mobiles, etc.) in the specified space in the exam room.
- Your ID card should be displayed on the desk for invigilators to see.
- It is absolutely prohibited to exchange or borrow such objects from anyone during the exam.
- The Midterm exam is worth 30% of total course assessment
- Use the Answer Booklet provided to you to answer the questions, and do not forget to write your name, student number and section number in the specified space on the cover of the Answer Booklet.Write in black or blue ink
- Do not remove this questions paper from the examination room unless the invigilator has given you the permission to do so.
- The questions you have chosen to answer must be indicated clearly in the answer book.
- At the end of the examination, candidates must remain seated until the invigilators have collected and checked all the answer books.
Answer FOUR out of the following five questions.
Answers will surely differ among students. Besides tutors’ academic judgment, these are essential guidelines for possible answers to follow while grading MTAs:
Question 1: (25 marks)
The impact of technology is not simply on individual firms but also on societies.
- What aspects of the society are affected either positively or negatively by technology? (16 marks)
- The interaction between society and technology is expressed in terms of pushing and pulling. Explain these two concepts. (9 marks)
Answers are found in chapter 1
- Technology helps push firms to lower costs. However, this has led to increased levels of outsourcing by a number of firms to lower cost settings; technology advances in communication and computers help ensure that such outsourcing can be successful.
For example, the cost of a computer programmer in the United States can be $90,000 a year. This same job in India will cost less than half for the same quality work.
In the past, manufacturing jobs were the only jobs principally outsourced. However, today, the jobs outsourced include not only computer programmers but also other technical jobs such as reading MRI images from medical tests and preparing tax returns
However, outsourcing is not all negative. While individually an outsourced job may be very painful, studies indicate that there is a net 14 percent benefit to the outsourcing nation through new job creation and increased efficiencies. In addition, the development of the economies of India, China, Russia, and other similar nations provides new markets for other businesses from developed economies. (16 marks)
b. The interaction between society and technology can be viewed in terms of pushing and pulling. The technology is pushing the society when innovations in technology lead to changes in society that were not expected. On the other hand, the society can pull the business to create technology in order to meet the demand and needs of the society. (9 marks)
Question 2: (25 marks)
Capabilities are skills that a firm develops. These Capabilities are the building blocks for the firm's strategy because it is at the level of capabilities that the business develops its competitive advantage. What are the two most important classes of organizational capabilities?
Answers are found in chapter 2
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The capabilities of a firm can be classified as either technical or market
• Technical capabilities address how the firm approaches technology it already has or wishes to have in the future.
The firm's approach to these capabilities can be classified in one of three ways: destroy, preserve, or develop.
- Destroying is concerned with eliminating certain technological capabilities in the organization and replacing them with others. Because the technology that has been employed is flawed, and improvement must take place. E.g. After the Exxon Valdez accident, many tanker companies viewed the old technology of single-hull design as too risky to continue using. Therefore, many old, still usable tankers were taken out of commission and replaced with ones with double-hull technology.
- Developing new technology capabilities can give a firm a competitive leap over others in the industry. These capabilities can be purchased externally or developed internally. An example of this includes retailers who pursue new Internet capabilities to complement their existing store locations, such as Sears, Walmart, and Target.
- A firm may seek to preserve its technology. In these situations, the technology may be old, but the firm believes it still has utility. Crayolas are still a viable product even though new technologies have emerged, the makers of Crayola, have improved the product with new colors, washability, and so on, but the fundamental technology has been preserved.( 15 points)
• The firm must also have market-relevant skills that indirectly impact the technology of the firm. Engineers may develop tremendous new products but may have ignored issues such as how to distribute those products.
In summary, technology should be considered a central component of the firm's strategy. The firm's capabilities, including technology, provide the firm with its sustainable competitive advantage.
A competitive advantage is what the firm does better than any of its competitors. However, this will lead to a sustainable competitive advantage only if the activity is something that the customers value. ( 10 points)
Question 3: (25 marks)
Classify the following statements into either offensive or defensive strategy.
a- Attacking a competitor with similar products, price, quality, promotion and distribution. (5 marks)
b- Protect market shares, position and profitability (5 marks)
c- Improving own position by taking away market shares of competitors (5 marks)
d- Keep up the customers’ confidence and loyalty (5 marks)
e- Introduction of new products , entering new markets or simply making changes in existing products (5 marks)
Answer is based on the understanding of concepts covered in chapter 2
a- Offensive (5 marks)
b- Defensive (5 marks)
c- Offensive (5 marks)
d- Defensive (5 marks)
e- Defensive (5 marks)
Question 4: (25 marks)
The first concern for internal innovation planning is considering the basic question of whether the firm should innovate or not.
a- What factors favor innovation as a strategic activity? (8 marks) What are the possible obstacles to pursuing such a strategy? (6 marks)
b- Elaborate on the characteristics of being a first mover and explain its benefits and risks. (11 marks)
Answers are found in chapter 3
a- Factors for and against pursuing an innovation strategy:
• Factors That Favor, Innovation :
- Greater control of the process and the outcomes
- Greater understanding of the technology produced and how to apply it
- Greater ability to potentially develop the next generation of technology
- Greater profit potential as a first mover
(2 marks each)
• Obstacles to pursuing this strategy (or Factors That Discourage Innovation):
- Time required for an internal development strategy is greater. If a new product is purchased, it is almost immediately available to the firm. However, if it is developed internally, it may take years to develop the new product.
- There is a greater risk of failure to develop the right product at the right time.
- Keeping a pipeline of new products is difficult at best. There is always the danger that another firm will enter the market first.
(2 marks each)
b- A first mover is a firm that is first to market in some manner
Being first often leads to competitive advantages, such as customer loyalty and brand recognition. These advantages can be difficult for competitors to match or overcome
It was this factor that helped establish IBM's competitive advantage in computer mainframes for many years.
In some settings, it can be more beneficial to be a follower in an industry. The first mover can spend many resources educating the market about the product. Additionally, the follower can learn from the mistakes of the first mover. Typically, if not a first mover, then a fast follower, will perform best in an industry. (11 marks)
Question 5: (25 marks)
Explain briefly the following concepts:
a- NPV(5 marks)
b- Process innovation(5 marks)
c- Radical technology(5 marks)
d- S-curve (5 marks)
e- Applied research(5 marks)
Answers are found in chapter 3 for part a :
a- NPV or Net Present Value: In making an investment in technology, a firm expects to receive some financial benefit over time. However, money received in the future is not as valuable as money received today because the future money needs to be discounted. The discount rate is chosen based on factors such as size of the market and its growth, risk of obsolescence and deterioration in the equipment, risk of technological breakthroughs, inflation and so on. The net present value is a function with the following variables: The initial investment, The net cash or cash flow generated by the investment, the discount rate. (5 marks)
Answer is found in chapter 1 for part b:
b- Process innovation; The purpose of process innovation is to increase the efficiencies or the effectiveness of an organization. Process innovations help to improve the output-to-input ratio of the firm. The most common actions that address process innovation are restructuring and reengineering. Restructuring is a major reorganization of a firm and it is commonly caused by events such as information is not reaching the proper people to make timely decisions; opportunities and threats are missed by the organization and a disruption has occurred in the firm's environment that has caused the firm extreme stress. Reengineering requires fundamental rethinking and radical redesign of work processes. (5 marks)
Answer is found in chapter 2 for part c:
c- Radical technology: a development that causes a dramatic change in the way things are done. The automobile was a radical technology when introduced. It provided an extreme change in modes of transportation. Smart phones are speeding complex information to other locations (i.e. heart monitor info instantly sent to doctors and medical centers) (5 marks)
Answer is found in chapter 2 for part d:
d- The S-curve is used to represent the technology life-cycle. It consists of four phases: embryonic, growth, maturity, and aging.
- The embryonic phase includes the invention and application of the invention through innovation.
- Improvement in the uses directly related to the technology marks the growth phase.
- During the maturity phase, firms can enjoy high profitability.
- In the aging phase, there is a decline in the utility of the technology. The technology may be rejuvenated and a modification of the S-curve will take place, or the product may become obsolete. (5 marks)
Answer is found in chapter 3 for part e:
e- Applied research: Applied research utilizes the new knowledge developed by the basic research to create new products
The purpose of applied research is to add value to the firm and its customers in the marketplace. The risks of applying the innovations from this type of research are less than those in basic research. (5 marks)
END OF EXAMINATION
B222B MTA – Set 1 - MGPage 1 of 62016-2017 / Fall