NETW 583 Week 7 Discussion 1 – Pricing Strategy (GRADED A)

NETW 583 Week 7 Discussion 1 – Pricing Strategy WEEK 7: PRICING STRATEGY Identify one or more circumstances when a company might wish to delay introducing its product. Use an example of a prod uct that will you may have used over time, such as the iPhone, and comment on the firm's market strategies especially regarding pricing. When they have an existing product that is still generating cash flows, with no potential competitors to establish a competitive advantage, companies choose to delay the introduction of their new product for different reasons. The company competes for technologies dominance; customers will compare the overall value of each technology. On the other hand, the delay could be a strategy to bring the product to market at a point in the business cycle. The video game console manufacturers like Sega and Sony are a perfect example. When Sega and Sony introduced the Saturn and PlayStation 32-bit systems, Nintendo was a long way from introducing its next-generation console. To stall consumer purchases of the 32-bit systems, Nintendo began promoting its development of a 64-bit system, though the product would not reach the market until later. SCHILLING, MELISSA. (01/2016). Strategic Management of Technological Innovation, 5th Edition [VitalSource Bookshelf version]. Retrieved from vbk://3 WEEK 7: DEPLOYMENT STRATEGIES USING DIVERSE TEAMS How can managers ensure that a team reaps the benefits of diversity while not being thwarted by some of the challenges that diversity raises? Managers can ensure that teams reap the advantages of diversity while not being thwarted by building teams to tap diversity on some dimensions and commonality on others. Having a policy that will allow the team members to come in and communicate with the manager at any time and ensure that they are comfortable to speak freely regardless of the issues. Having team members from different functional areas, with similar types of projects knowledge. Firms use team bonding and communication exercise to develop team identify and coordination skills before starting working on projects. To avoid pitfalls while working in diverse environment managers should educating the group about other cultures. Simultaneously avoiding the pitfalls are by; establishing an inclusive and clear direction, increasing involvement, increasing level interactions, and considering the person in their entirety. When an organization has a team project, they need to establish a clear vision the team is to take to accomplish their goal. Diversity is required to enhanced design but should limit according to location and project. The team project cannot have an immense difference to the point that it is impossible to working together on the final project. SCHILLING, MELISSA. (01/2016). Strategic Management of Technological Innovation, 5th Edition [VitalSource Bookshelf version]. Retrieved from vbk://3 Simultaneously avoiding the pitfalls are by; establishing an inclusive and clear direction, increasing involvement, increasing level interactions, and considering the person in their entirety. When an organization has a team project, they need to establish a clear vision the team is to take to accomplish their goal. In a diverse team they need to ensure this process and goal is inclusive of all diverse members. Included in this vision needs to be a plan to increase the involvement of the team members. The more interaction people have with each other on the project the more the distinctions between them will be blurred. That blurring is exactly what needs to happen with the paradigm toward management as well. Managers need to make sure there is more involvement and better involvement for them to ensure they can extract the best efforts out of a diverse team. Finally, managers need to be understanding that the "leave your problems at the door" isn't entirely the best practice. It is better than any potential area of contention is hashed out early. Also, in general employees are unable to separate their work life form the rest of their life and both effect the other, sometimes in extreme ways. So the more understood and supported the individuals on the group feel the more they will project this toward the other members. Generally, firms try to decrease their development cycles to reduce their costs and to increase their timing of entry options, but this does not imply that firms should always be racing to launch their products as early as possible. A firm can strategically use launch timing to take advantage of the business cycle or seasonal effects, to position its product concerning previous generations of related technologies, and to ensure that production capacity and complementary goods or services are in place. The role of each of these tactics is illustrated in the video game industry. Nintendo, Sony, and Microsoft all took advantage of seasonal effects by introducing their consoles shortly before Christmas so that the hype of the consoles’ launch would coincide with the Christmas buying season. The majority of video game consoles are sold in December. By launching their consoles close to December, firms could target their advertising for this time and leverage the free publicity that surrounded a console’s launch such as press releases announcing the introduction and external product reviews. Finally, timing the introduction of a console to coincide with production capacity and games availability has proven very important in the video game console industry. For example, in Sega’s rush to ensure that the Saturn beat Sony’s PlayStation to market, it introduced the product before it had built adequate production capacity. Sega was subsequently unable to stock many important distributors, and it alienated companies that had supported Sega in previous generations. Similarly, the importance of having games available at the time of launch is also clearly demonstrated: Every video game console producer that has been successful in at least one generation (e.g., Atari, Nintendo, Sega, Sony, Microsoft) has ensured that games would be available at the console’s launch, even if that meant buying games development companies to force them to produce compatible games! Games availability was also encouraged through licensing strategies, as discussed later in the chapter. (SCHILLING, 01/2016, pp. 292-293) SCHILLING, MELISSA. (01/2016). Strategic Management of Technological Innovation, 5th Edition [VitalSource Bookshelf version]. Retrieved from vbk://3 The project underwent so many delays that some industry observers dubbed it “Project Unreality.”18 Nintendo was successful in persuading many customers to wait for its Nintendo 64, and the system was ultimately relatively successful. When two technologies compete for dominance, customers will compare the overall value yielded (or expected) from each technique, as discussed in the previous section. In Figure 4.9, two methods, A and B, each offer similar technological utility, and have similarly shaped network externality returns curves. To illustrate the competitive effects of two technologies competing for market share, the graphs in Figure 4.9 are drawn with a market share on the horizontal axis instead of the installed base. Furthermore, the curve for B is drawn with the market share dimension reversed so that we can compare the value offered by the two different technologies at different market share splits, that is, when A has a 20 percent market share, B has an 80 percent market share, and so on. This graph shows that at every point where A has less than 50 percent market share (and thus B has greater than 50 percent market share), B will yield greater overall value, making B more attractive to customers. On the other hand, when A has a greater than 50 percent market share (and B thus has less than 50 percent market share), A yields more overall value. When each technology has precisely 50 percent market share, they yield the same total value and customers will be indifferent between them. However, if both techniques earn similar network externality returns to market share, but one technology offers greater stand-alone utility, the indifference point will be shifted in its favor. In the right-hand graph in Figure 4.9, technology B provides a higher level of independent technological service, moving its overall value curve up. In this graph, technology A must have greater than 60 percent market share (and B must have less than 40 percent market share) for A to offer more overall value than B. Another interesting scenario arises when customers attain their desired level of network externality benefits at lower levels of market share, depicted graphically in Figure 4.10. In this graph, the curves flatten out sooner, implying that the maximum amount of network externality value is obtained by customers at lower levels of market share. In this case, customers may face a relatively large indifference region within which neither technology dominates. This may be the case with the video game console industry: While customers may experience some network externality benefits to a console having a significant share (more game titles, more people to play against), those benefits might be achieved by a console without attaining a majority of the market. For example, even with Sony, Microsoft, and Nintendo splitting the game console market, there is still an abundance of game titles for all three consoles and a significant pool of people to play games against. Such demands may not experience enormous pressure to select a single dominant design; two or more platforms may successfully coexist. Because the video game industry is characterized by distinct generations of technology, the timing of a console’s launch also plays a crucial role in its positioning within a technological age and concerning competing consoles. If a console is introduced too early, it may receive a warm welcome because customers want to wait to compare the consoles with others that will compete in the generation. Furthermore, by launching well ahead of competitors, a console maker may forfeit the opportunity to incorporate more advanced technology or may create customer confusion about which generation the product belongs to. For example, though the Xbox offered a processor that was double the speed of the PS2, its first timing positioned it as being in the same generation as the PS2. Many customers saw it as a competitor to a product they already had, rather than as a next-generation technology. For example, though the Xbox offered a processor that was double the speed of the PS2, its first timing positioned it as being in the same generation as the PS2. Many customers saw it as a competitor to a product they already had, rather than as a next-generation technology. If the console is introduced page 293too late, the company can lose its image as a technological leader and may have already conceded a considerable installed base lead to earlier entrants. This is aptly illustrated in the quote about Nintendo’s late introduction of the SNES in the opening vignette: “To tell the truth, Nintendo isn’t cool anymore. This one is 16 bits, so it’s better than the original Nintendo. But the company only made it compete with Sega, and most kids already have that. So they don’t need Super Nintendo ….” Show Less