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1. Which of the following is a best reason to use a freemium business model when entering a new industry?

A.Reduce initial production costs. industry as inexpensively as possible.

B.Increase the value of a product that has a network effect.

C.Reduce risk of expanding too quickly and therefore avoid reducing quality relative to competitors.

D.Expand the size (in total revenue) for the entire industry.


The Trantor Company has been making an organic soda called Imperial Soda for a decade; it has an all natural no-calorie sweetener and is sold in four packs of glass, 12 oz bottles only. There are only three flavors — cola, ginger ale, and mango. It is also only sold at grocery stores with an emphasis on healthy, organic products. The Imperial Soda brand has a small but loyal following, and so customers have requested that the Trantor Company start selling their soda in more places — convenience stores, large chain grocery stores, discount warehouses, etc. What is the most important threat to the Trantor Company’s competitive advantage by selling through these other retail channels?

A. Trantor would likely not sell very well as a premium product in more direct competition in the non-premium retail channels.

B. Trantor’s brand value would be damaged by changing the way it has always done things.

C. Trantor has no expertise in dealing with retail distribution channels.

D. Trantor’s would have to invest a great deal in new flavors if it were to move to new retail channels.


The Ames Company has been a rival of the Lincoln Company for 30 years and each firm has a very similar market share in a market that has grown very slowly. Both companies have upgraded their products over three decades and have high customer loyalty because product quality is important to customers. If the Ames Company wants to grow its profits, which of the following strategies is most likely to succeed?

A. Increase spending significantly on product innovation.

B. Increase spending significantly on selling to new customers outside the industry.

C. Increase spending significantly on cost reduction projects.

D. Decrease significantly the price of products.


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