Video Cassette Recorder: The Value of Co-operation
This chapter focuses on the video cassette recorder (VCR), which serves as an excellent example of how product compatibility standards may be used to ensure the success of a new product. Sony Betamax was ultimately driven out of the market by the more advanced technology of the JVC's VHS system, and the key factor to its success was the standards strategy. This case study shows how the power of network externalities worked by means of the market for complementary goods. It follows the introduction of VCR and shows how standards strategy gradually came to dominate other efforts. It provides some lessons in how to recognize products influenced by compatibility standards. Conventional competition and product features will not have much effect once the installed base effect takes over. The main lesson from the case is how an open standards and market penetration strategy may win against propriety standards.
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