OIM 210 FINAL EXAM QUESTIONS & ANSWERS
Network Effects - Answer -Also known as Metcalfe's Law, or network
externalities...when the value of a product or service increases as its number of users
expands...when products or services become more valuable as its installed base
expands (not physical wires or wireless system that connects pieces of electronics)
network effects - Answer -The internet is a good example of __________ ___________
Initially, there were few users of the internet...As more users gained access to the
internet, however, there were more and more websites to visit and more people to
communicate with. The internet became extremely valuable to its users
Facebook, eBay, Microsoft, Google, Instagram, Twitter, Skype, YouTube, Uber, Airbnb -
Answer -Examples of companies who boomed from network effects
More value - Answer -More users = __________ _________
Network effects (a complimentary benefit) - Answer -___________ _________ are
among the most important reasons you'll pick one product or service over another...not
every product or service is subject to them (trash bags, pancake syrup, socks)
Switching Costs ("Sticky" or "Friction" or "lock-in" or "barnacles") - Answer -the cost a
consumer incurs when moving from one product to another...it can involve actual money
spent (EX. Buying a new product) as well as investments in time, any data loss, and so
forth...can strengthen value of network effects as a strategic asset
Barnacles - Answer -Customers known as ___________are tightly anchored to the
firm, are what a company wants versus "butterflies" (that flutter away to rivals)
switching costs - Answer -The more friction available to prevent users from migrating to
a rival, the greater the ___________ ___________
Complementary Benefits - Answer -products or services that add additional value to the
primary product or service that makes up a network (ex. more accountants know excel -
invest time and resources where they're likely to reach the biggest market and get the
greatest benefit)
APIs (application programming interfaces) (a complimentary benefit) - Answer -
Programming hooks, or guidelines, published by firms that tell other programs how to
get a service to perform a task such as send or receive data EX. Amazon provides them
to let developers write their own applications and websites that can send the firm orders
their your - Answer -Allowing other firms to contribute to your platform can be a brilliant
strategy because those firms will spend _______ time and money to enhance ________
, offerings (EX. iOS branching into many other areas besides apple phones...apple pay
and site make iOS platforms more valuable)
exchanging
complementary
staying power - Answer -When users _____________ information attract more users,
they can also attract firms offering _______________ products. When developers of
complementary products invest time writing software—and users install, learn, and
customize these products—switching costs are created that enhance the
____________ _____________ of a given network. From a strategist's perspective this
can be great news for dominant firms in markets where network effects exist. The larger
your network, the more difficult it becomes for rivals to challenge your leadership
position
Platform - Answer -allowing for the integration of third-party software products and
other complementary goods creating an ecosystem of value-added offerings. Windows,
iOS (hardware, cars, gym equipment, and medical records), Kindle, and the standards
that allow users to create Facebook apps are all examples
value - Answer -Sources of __________ in network effects: exchange opportunities,
staying power, switching costs, complementary benefits
Exchange - Answer -creates value, a network becomes more valuable because its
users can potentially communicate with more people ... as each new fax user comes
online network becomes more valuable
Staying Power - Answer -the long-term viability of a product or service (users don't
want to sign up for a service that's likely going to go away) ...greater number of users =
greater ______ ________
One Sided Market - Answer -A market that derives most of its value from a single class
of users (EX. Messaging) (messaging members who attract other members who want to
communicate with them)
Same-Side Exchange Benefits - Answer -Benefits derived by interaction among
members of a single class of participant (EX. the exchange value when increasing
members of IM users gain the ability to message each other)
Two Sided Market - Answer -Network market that comprises two distinct categories of
participant, both of which are needed to deliver value for the network to work (EX. video
game console owners and developers of video games) (Apple pay - more people that
use more places will offer)
Network Effects - Answer -Also known as Metcalfe's Law, or network
externalities...when the value of a product or service increases as its number of users
expands...when products or services become more valuable as its installed base
expands (not physical wires or wireless system that connects pieces of electronics)
network effects - Answer -The internet is a good example of __________ ___________
Initially, there were few users of the internet...As more users gained access to the
internet, however, there were more and more websites to visit and more people to
communicate with. The internet became extremely valuable to its users
Facebook, eBay, Microsoft, Google, Instagram, Twitter, Skype, YouTube, Uber, Airbnb -
Answer -Examples of companies who boomed from network effects
More value - Answer -More users = __________ _________
Network effects (a complimentary benefit) - Answer -___________ _________ are
among the most important reasons you'll pick one product or service over another...not
every product or service is subject to them (trash bags, pancake syrup, socks)
Switching Costs ("Sticky" or "Friction" or "lock-in" or "barnacles") - Answer -the cost a
consumer incurs when moving from one product to another...it can involve actual money
spent (EX. Buying a new product) as well as investments in time, any data loss, and so
forth...can strengthen value of network effects as a strategic asset
Barnacles - Answer -Customers known as ___________are tightly anchored to the
firm, are what a company wants versus "butterflies" (that flutter away to rivals)
switching costs - Answer -The more friction available to prevent users from migrating to
a rival, the greater the ___________ ___________
Complementary Benefits - Answer -products or services that add additional value to the
primary product or service that makes up a network (ex. more accountants know excel -
invest time and resources where they're likely to reach the biggest market and get the
greatest benefit)
APIs (application programming interfaces) (a complimentary benefit) - Answer -
Programming hooks, or guidelines, published by firms that tell other programs how to
get a service to perform a task such as send or receive data EX. Amazon provides them
to let developers write their own applications and websites that can send the firm orders
their your - Answer -Allowing other firms to contribute to your platform can be a brilliant
strategy because those firms will spend _______ time and money to enhance ________
, offerings (EX. iOS branching into many other areas besides apple phones...apple pay
and site make iOS platforms more valuable)
exchanging
complementary
staying power - Answer -When users _____________ information attract more users,
they can also attract firms offering _______________ products. When developers of
complementary products invest time writing software—and users install, learn, and
customize these products—switching costs are created that enhance the
____________ _____________ of a given network. From a strategist's perspective this
can be great news for dominant firms in markets where network effects exist. The larger
your network, the more difficult it becomes for rivals to challenge your leadership
position
Platform - Answer -allowing for the integration of third-party software products and
other complementary goods creating an ecosystem of value-added offerings. Windows,
iOS (hardware, cars, gym equipment, and medical records), Kindle, and the standards
that allow users to create Facebook apps are all examples
value - Answer -Sources of __________ in network effects: exchange opportunities,
staying power, switching costs, complementary benefits
Exchange - Answer -creates value, a network becomes more valuable because its
users can potentially communicate with more people ... as each new fax user comes
online network becomes more valuable
Staying Power - Answer -the long-term viability of a product or service (users don't
want to sign up for a service that's likely going to go away) ...greater number of users =
greater ______ ________
One Sided Market - Answer -A market that derives most of its value from a single class
of users (EX. Messaging) (messaging members who attract other members who want to
communicate with them)
Same-Side Exchange Benefits - Answer -Benefits derived by interaction among
members of a single class of participant (EX. the exchange value when increasing
members of IM users gain the ability to message each other)
Two Sided Market - Answer -Network market that comprises two distinct categories of
participant, both of which are needed to deliver value for the network to work (EX. video
game console owners and developers of video games) (Apple pay - more people that
use more places will offer)
