Closing Case Chapter 7 1. Why did both Sony and Toshiba perceive it to be so important to get an early lead in sales? Based on past format wars, the trend had been “winner takes all. ” With that in mind, Sony and Toshiba attempted to get as many early adopters as possible and secure early sales so that more people would recognize and buy their particular format over the other in the future. Whichever company achieved the quickest jump start would see an accelerated demand for its format and hopefully lockout its competition, even though that did not end up being the case for the Sony and Toshiba format wars. 2. What strategies and assets enabled Sony to win the format war? Sony successfully executed many of the strategies that are needed to win the format war. They beat Toshiba to owning Columbia Pictures, MGM, Disney and Fox Studios, while Toshiba only ended up with Universal Studios committed to HD DVD. Sony continued to implement strategies that would help them sustain the competitive advantage over Sony. They then introduced Blu-Ray to its gaming consoles and laptops. To further increase the supply of Blu-Rays, Sony licensed the format to other consumer electronics firms. By licensing their product to others, it made the Blu-Ray player more available to customers, thus causing companies to make more products in their format. 3. What might Toshiba have done that might have led to a different outcome? If Toshiba would have been more proactive in attempts to line up film studios to commit to issuing discs for HD DVD and licensed their format at to other electronics firms, they could have seen just as much success as Sony. They limited the sales of the format by preventing it from being easily accessible to customers. Or Toshiba could have done extensive R&D to come out with a gaming console, or other type of electronic device that could be compatible with the HD DVD graphics instead of battling Sony directly in acquiring studio films. . The companies that developed first generation DVD technology decided not to compete on technology, instead harmonizing their technology under the auspices of the DVD Forum. Why do you think they chose a different approach this time around? By allowing the DVD Forum to do the actual leg work of developing the technology of the companies’ product it may mean better quality and less chance of technology defect/failure, but it also means payments of royalties. These royalties to the DVD Forum in turn, lower profit margin. By choosing the approach of keeping the creation of the Blu-ray and HD DVD player internal, each company can reap 100% of the revenue. Also, the shift from VHS to DVD was a technological paradigm shift, whereas the shift from DVD to ultimately an improved DVD player is only a technological improvement. There is much more risk involved in a paradigm shift, because little is known about the new technology trying to be implemented and there is no past history or past knowledge to rely on. However, this time around each company probably felt much more confident in the amount of knowledge they had in the DVD technology field, so decided to save the money that would paid to the DVD forum and create the technology themselves. 5. What are the risks associated with fighting a format war like this? The risks of fighting a format war are that there is little to no compromising with the competitor. It is very difficult for both competitors to win. Fighting a format war also entails making very risky decisions, and beating the competitor to it. One missed opportunity could ultimately be the downfall of your product.
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