Challenge 2: Winner Take All Or Shared

Platform
• Critical Strategic Decision: Two stepped process
– Try to dominate the whole market or
– Share the platform
• Examples:
– Windows at the start of the century
– Xbox and PlayStation
– BetaMax Vs VHS standards battle
– DVDs
 Winner Take ALL
Market Characteristics
• Multi homing costs are high for one side
– All the expenses the network incurs
– Spreading through different platform increases expenses
• Network effects are strong and positive
– When cross-side network effects are positive and strong
– those network users will tend to con-
verge on one platform.
• Neither side’s users requires special features
– Differentiation is difficult or irrelevant
– Eg: American Express vs Visa: No preset spending limit
– Visa cards have an upper limit
 Dvds Winner Take It ALL
• Multi-homing costs are high
– expensive to buy multiple players( cost high for both consumers and
producers

• Network effect strong and positive

– Most consumers value access to a wide variety of titles
– studios realize scale economies when they can sell to more
consumers.

• Opportunities for technical differentiation

– DVD players connect to TV sets
Why Industry Collaborated on a Standard?

• To avoid replay of VHS vs Betmax war

• Consumers held off purchase untill winner
declared
• Marketing cost to participate in war is too high
 Winning the Battle
• Require Differentiation or Cost Advantage
• Other factors
– Pre-existing relationship with Market Sides
– Reputation for winning
– Deep Pockets( hefty budget)

• First Movers and Late Movers both have

advantage
– Learn from the mistake of others
– Don’t grow user base faster than you can scale
– Manage cash carefully