Lecture 11: Crafting a Deployment Strategy

Question 2

Timing as deployment strategy

Answer 2

1. Strategic Timing of Entry
2. Optimizing Cash Flow vs embracing cannibalization

Question 3

Licensing and Compatibility

Answer 3

= Protecting too little: can result in low quality complements and clones
= Protecting too much: may hinder development of complements

Question 4

What do firms have to carefully decide regarding licensing and Compatibility?

Answer 4

= How compatible to be products of other
-> Dominant firm: incompatibility, but controlled licensing
-> firm at installed base disadvantage: prefers some compatibility and aggressive licensing
= Whether to make a product compatible with own previous generations (Backward compatibility)
-> installed base and complements are important: backward compatibility is best

Question 5

Pricing

Answer 5

= Price influences product positioning, rate of adoption, and cash flow
= What are firms objectives regarding pricing?
-> Survival
-> Maximize current profits
-> Maximize market share

Question 6

What are the Pricing Strategies?

Answer 6

1. Market skimming strategy
   -> high initial prices
2. Penetration Pricing
   -> very low price or free
3. Manipulation of customer’s perception of price

Question 7

What’s the market skimming strategy (Pricing)?

Answer 7

= Signals market that innovation is significant
= Recoup development expenses (assuming there is demand)
= Attracts competitors
= May slow adoption

Question 8

What is Penetration Pricing?

Answer 8

= very low price or for free
= Accelerates adaption, driving up volume
= requires large production capacity established very early
= Risky
= Common strategy when competing for dominant design

Question 9

What is “manipulation of customer’s perception of price”?

Answer 9

= Free initial or introductory pricing
= Initial product for free but pay for a monthly service
= Razor or razor blade model: Plattform is cheap but complements are expensive

Question 10

What choices are there regarding Distribution?

Answer 10

= Selling direct vs Using Intermediaries

Question 11

Selling direct

Answer 11

= great control over selling process, price, and services
= Can be expensive and/or impractical

Question 12

Using intermediaries for distribution

Answer 12

1. Manufactureres’ representatives
   -> independent agents that promote and sell the product lines
   -> useful for direct selling when its impractical
2. Wholesalers
   -> firms that buy products in bulk and then resells them
   -> Provide bulk breaking and carry inventory
   -> Handles transactions with retailers and provides transportation
3. Retailers: firms that sell goods to the public
4. Original equipment manufacturers (OEMs)
   -> a company that buys products from other manufacturers and assembles them or customizes them and sells them under its own brand name

Question 13

Factors that determine whether and what types of intermediaries a firm should use

Answer 13

1. How does the new product fit with the distribution requirements of firm’s existing product lines?

2.