7Strategy in High-   Technology   Industries
• ASSIGNMENT:             – Make a research on IPR – Intellectual Property               Rights, Patent and Legal issues  ...
Overview      • Technology             – The body of scientific knowledge used in the               production of goods or...
The Importance of High-Tech      • Technology is accounting for an ever larger        share of economic activity      • Ma...
Technical Standards for Personal                       ComputersCopyright © Houghton Mifflin Company. All rights reserved....
Benefits of Standards      •    Helps to guarantee compatibility      •    Can help to reduce confusion      •    Can help...
Establishments of Standards      • Companies may lobby the government to        mandate an industry standard      • Techni...
Network Effects and Positive Feedback      • Network effects             – The size of the network of complementary       ...
Positive Feedback in the Market for                      VCRsCopyright © Houghton Mifflin Company. All rights reserved.   ...
Lockout and Switching Costs      • Lockout             – Occurs when the market settles on a standard and               co...
Strategies for Winning a Format War         • Ensure a supply of complements         • Leverage killer applications       ...
Managing Intellectual Property Rights      • Intellectual property rights             – The product of any intellectual an...
Managing Intellectual Property Rights                  (cont’d)      • Strategies for managing digital rights             ...
Capturing First-Mover Advantages      • The company that is first to develop        revolutionary new products      • If t...
The Impact of Imitation on Profits of a                First MoveCopyright © Houghton Mifflin Company. All rights reserved...
First-Mover Advantages      • Opportunity to exploit network effects and        positive feedback loops      • Potential t...
First-Mover Disadvantages      • Bear significant pioneering costs      • More prone to make mistakes      • Run the risk ...
Strategies for Exploiting First-Mover                   Advantages      • Develop and market the innovation itself      • ...
Choosing a Strategy for Exploiting First-          Mover Advantages      • Does the company have the complementary        ...
Strategies for Profiting from InnovationCopyright © Houghton Mifflin Company. All rights reserved.   7 - 20
Technological Paradigm Shifts      • When new technologies emerge that             – Revolutionize the structure of the in...
Paradigm Shifts and the Decline of               Established Companies      • Paradigm shifts are more likely to occur whe...
The Technology S-CurveCopyright © Houghton Mifflin Company. All rights reserved.   7 - 23
Established and Successor TechnologiesCopyright © Houghton Mifflin Company. All rights reserved.   7 - 24
Swarm of Successor TechnologiesCopyright © Houghton Mifflin Company. All rights reserved.   7 - 25
Disruptive Technology      • A new technology that gets its start from the        mainstream of a market and then, as its ...
Strategic Implications of Paradigm          Shifts for Established Companies      • Having access to knowledge about how  ...
Strategic Implications of Paradigm               Shifts for New Entrants      • May be constrained by lack of capital     ...
QUESTIONS?Copyright © Houghton Mifflin Company. All rights reserved.   7 - 29
Copyright © Houghton Mifflin Company. All rights reserved.   7 - 30
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Hi tech industry

  1. 1. 7Strategy in High- Technology Industries
  2. 2. • ASSIGNMENT: – Make a research on IPR – Intellectual Property Rights, Patent and Legal issues – Group reporting on Dec. 5, Wednesday – Make sure every member in the group has role to play or part in the presentation. – As to who will report, randomly picked after checking of the attendance.Copyright © Houghton Mifflin Company. All rights reserved. 7-2
  3. 3. Overview • Technology – The body of scientific knowledge used in the production of goods or services • High-tech industries – Those in which the underlying scientific knowledge that companies in the industry use is advancing rapidly, and by implication so are the attributes of the products and services that result from its applicationCopyright © Houghton Mifflin Company. All rights reserved. 7-3
  4. 4. The Importance of High-Tech • Technology is accounting for an ever larger share of economic activity • Many low-tech industries are becoming more high tech • High-tech products are making their way into a wide range of businesses • Even in industries not thought of as high tech, technology is changing aspects of the product or production systemCopyright © Houghton Mifflin Company. All rights reserved. 7-4
  5. 5. Technical Standards for Personal ComputersCopyright © Houghton Mifflin Company. All rights reserved. 7-5
  6. 6. Benefits of Standards • Helps to guarantee compatibility • Can help to reduce confusion • Can help to reduce production costs • Can help to reduce the risks associated with supplying complementary productsCopyright © Houghton Mifflin Company. All rights reserved. 7-6
  7. 7. Establishments of Standards • Companies may lobby the government to mandate an industry standard • Technical standards are often set by cooperation among businesses – Public domain • Standard is often selected competitively by market demandCopyright © Houghton Mifflin Company. All rights reserved. 7-7
  8. 8. Network Effects and Positive Feedback • Network effects – The size of the network of complementary products is a primary determinant of demand for an industry’s products • Positive feedback – Reinforcing network effects to encourage adoption of a standardCopyright © Houghton Mifflin Company. All rights reserved. 7-8
  9. 9. Positive Feedback in the Market for VCRsCopyright © Houghton Mifflin Company. All rights reserved. 7-9
  10. 10. Lockout and Switching Costs • Lockout – Occurs when the market settles on a standard and companies promoting alternate standards are no longer able to compete • Switching costs – The costs consumers must bear to switch from a product based on one standard to a product based on another • If consumers are unwilling to bear switching costs, a company will be locked outCopyright © Houghton Mifflin Company. All rights reserved. 7 - 10
  11. 11. Strategies for Winning a Format War • Ensure a supply of complements • Leverage killer applications – New technology or products that are so compelling that customers adopt them in droves, killing demand for competing formats • Aggressively price and market – Razor and blade strategy: pricing the product low to increase the installed base, then pricing complements high to make profits • Cooperate with competitors • License the formatCopyright © Houghton Mifflin Company. All rights reserved. 7 - 11
  12. 12. Managing Intellectual Property Rights • Intellectual property rights – The product of any intellectual and creative effort – Patents, copyrights, and trademarks give individuals and companies incentives to engage in the expense and risk of creating new intellectual property • Digitalization and piracy rates – Scale of the problem is very large – Legal and technological solutions are requiredCopyright © Houghton Mifflin Company. All rights reserved. 7 - 12
  13. 13. Managing Intellectual Property Rights (cont’d) • Strategies for managing digital rights – Recognize that low costs of copying and distributing digital media can be used to the company’s advantage – Take advantage of low costs of copying and distribution to drive down costs of purchasing media (coupled with encryption software)Copyright © Houghton Mifflin Company. All rights reserved. 7 - 13
  14. 14. Capturing First-Mover Advantages • The company that is first to develop revolutionary new products • If the new product satisfies unmet consumer needs and demand is high: – The first mover can capture significant revenues and profits – Revenues and profits signal an opportunity to potential rivalsCopyright © Houghton Mifflin Company. All rights reserved. 7 - 14
  15. 15. The Impact of Imitation on Profits of a First MoveCopyright © Houghton Mifflin Company. All rights reserved. 7 - 15
  16. 16. First-Mover Advantages • Opportunity to exploit network effects and positive feedback loops • Potential to establish significant brand loyalty • May be able to reap economies of scale and learning effects • May be able to create switching costs for customers • May be able to accumulate valuable knowledgeCopyright © Houghton Mifflin Company. All rights reserved. 7 - 16
  17. 17. First-Mover Disadvantages • Bear significant pioneering costs • More prone to make mistakes • Run the risk of building the wrong resources and capabilities • May invest in inferior or obsolete technologyCopyright © Houghton Mifflin Company. All rights reserved. 7 - 17
  18. 18. Strategies for Exploiting First-Mover Advantages • Develop and market the innovation itself • Develop and market the innovation jointly with other companies through a strategic alliance or joint venture • License the innovation to others and let them develop the marketCopyright © Houghton Mifflin Company. All rights reserved. 7 - 18
  19. 19. Choosing a Strategy for Exploiting First- Mover Advantages • Does the company have the complementary assets to exploit its innovation? • How difficult is it for imitators to copy the company’s innovation (height of barriers to imitation)? • Are there capable competitors who could rapidly imitate the innovation?Copyright © Houghton Mifflin Company. All rights reserved. 7 - 19
  20. 20. Strategies for Profiting from InnovationCopyright © Houghton Mifflin Company. All rights reserved. 7 - 20
  21. 21. Technological Paradigm Shifts • When new technologies emerge that – Revolutionize the structure of the industry – Dramatically alter the nature of competition – Require companies to adopt new strategies to surviveCopyright © Houghton Mifflin Company. All rights reserved. 7 - 21
  22. 22. Paradigm Shifts and the Decline of Established Companies • Paradigm shifts are more likely to occur when – The established technology in the industry is mature and approaching its natural limit – A new disruptive technology has entered the marketplace and is taking root in niches that are poorly served by incumbent companies using established technologyCopyright © Houghton Mifflin Company. All rights reserved. 7 - 22
  23. 23. The Technology S-CurveCopyright © Houghton Mifflin Company. All rights reserved. 7 - 23
  24. 24. Established and Successor TechnologiesCopyright © Houghton Mifflin Company. All rights reserved. 7 - 24
  25. 25. Swarm of Successor TechnologiesCopyright © Houghton Mifflin Company. All rights reserved. 7 - 25
  26. 26. Disruptive Technology • A new technology that gets its start from the mainstream of a market and then, as its functionality improves over time, invades the main market • Revolutionizes the industry structure and competition, often causing the decline of established companies because they listen to customers who say they do not want it • Causes a technological paradigm shiftCopyright © Houghton Mifflin Company. All rights reserved. 7 - 26
  27. 27. Strategic Implications of Paradigm Shifts for Established Companies • Having access to knowledge about how disruptive technologies can revolutionize markets is valuable • It is important to invest in newly emerging technologies that may become disruptive • Commercialization of disruptive technology may require a different value chain with a different cost structureCopyright © Houghton Mifflin Company. All rights reserved. 7 - 27
  28. 28. Strategic Implications of Paradigm Shifts for New Entrants • May be constrained by lack of capital • May have to manage the organizational problems associated with rapid growth • May need to find a way to take the technology from a small niche into the mass market • May need to decide whether to go it alone or partner with an established companyCopyright © Houghton Mifflin Company. All rights reserved. 7 - 28
  29. 29. QUESTIONS?Copyright © Houghton Mifflin Company. All rights reserved. 7 - 29
  30. 30. Copyright © Houghton Mifflin Company. All rights reserved. 7 - 30

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