Hi howardzheng-ga,
You pose an interesting and somewhat controversial question. Of course
the Beta format lost out to the VHS format, but in the end, both
succumbed to the DVD juggernaut. I guess there's a lesson in there
somewhere, but that's not the question you asked :) In the end, Sony
sold some 18 million Betamax units over a 27 year period. I calculate
that as something over five billion dollars worth, so I'm not feeling
*too* bad for them.
http://www.scenario.com/people/josh/000369.html
But, the fact remains, Sony and the Beta format were aced by JVC and
its VHS videotape format. What did Sony do wrong? Beta is considered
by many to be the superior technology. According to some, Sony goofed
by not offering its videotape technology to other manufacturers.
However, according to urbanlegends.com, Sony did not, as so many
believe, try to withhold their technology from the competition. In
fact, according to James Lardner, author of "Fast Forward: Hollywood,
the Japanese, and the VCR Wars" (1987, New American Library), Sony
offered to license Beta to JVC and Matsushita in 1974, but JVC
(otherwise known as Victor Company) didn't like Sony's "overbearing"
attitude, and wasn't that impressed by their technology, believing
that what they (JVC) already had in development was going to be
superior.
http://www.urbanlegends.com/products/beta_vs_vhs.html
Further, according to urbanlegends.com, JVC released their video
technology, VHS, to the market in 1976, having given Sony an almost
two-year head start. With that advantage to Sony, how did VHS ("video
home system") manage to flog Beta? The answer will continue to be
debated, but there appear to be three primary reasons: (1)
unsuccessful, but disruptive, legal actions by Universal and Disney
Studios in the late 1970's which named only Sony (one of the costs of
being first to market with a groundbreaking technology), (2) the lower
costs of VHS in the late 70's (as much as a $300 advantage to the RCA
version of the VHS technology at one point), and (3) according to Gene
Callahan of the Ludwig von Mises Institute, failure by Sony to
appreciate the advantage in consumers' minds of extended taping time
versus reduced tape size (simply put, consumers didn't mind using a
slightly larger tape in order to get twice the recording time - two
hours for VHS against one hour for Beta). If you'll pardon the pun,
when it came to recording time, Beta was not Max.
http://www.mises.org/fullstory.asp?control=407
As you probably already know, as the momentum shifted towards VHS in
the 80's, so did the preponderance of prerecorded tapes. The more VHS
pulled ahead of Beta, the more tape suppliers wanted to produce
product for the VHS technology (which was also licensed to and
marketed by Hitachi, Mitsubishi, Sharp, Matsushita, RCA, Magnavox,
Sylvania and Sears). Naturally, as more tapes became available for
VHS, the more consumers leaned toward that format. The whole thing
simply snowballed.
http://www.sit.wisc.edu/~ajduerson/history1.html
So what were Sony's fundamental strategy problems?
1) going first into the market, though often a huge marketing
advantage probably backfired somewhat in this case because, while it
readied consumers for a shift in the video paradigm, it attracted the
unwanted legal attention of Hollywood and actually gave the JVC/VHS
competition a leg up by presenting a more accepting market when that
competitive technology became ready to sell, thus making it easy to
quickly lower VHS prices;
2) according to Richard Rosenbloom of Harvard Business School, "Sony
did 'lack the manufacturing capacity' and furthermore refused to
become an 'OEM supplier', hence it sought only those partners able and
willing to take over manufacturing responsibility". In other words, in
a very rapidly developing market "a large part of the VHS advantage
came from the sheer
ability to deliver more VHS machines than Beta producers could make
early on in the competition."
http://www.eh.net/lists/archives/eh.res/nov-1996/0049.php
3) Sony misunderstood the technological attributes most important to
VCR customers (length of record time versus tape cassette size), the
most fatal kind of mistake of all.
By the way, you didn't ask about the genesis of the VCR industry but I
found this interesting: "Ampex introduced its first consumer videotape
recorder through a Neiman-Marcus Christmas catalog in 1963 for
$30,000-hardly a consumer-friendly price. More versions of the
videotape recorders (not yet cassettes) were introduced over the next
year with prices falling to as low as $1,100, but these only allowed
up to 25 minutes of recording on each side of an open reel. In 1965,
Sony introduced a model with a built-in clock for timed recording. The
marketers for the recorder had found their angle-as a time-shift
device that allowed you to tape the shows you missed. This would play
an important role in the marketing of the units as well as in their
defense in the courtroom. "
Of course it was the development of the video cassette in the early
70's that resulted in overwhelming consumer acceptance of home video
recording. By "2000, over 85% of the television-owning homes in the
United States owned a VCR"
http://www.sit.wisc.edu/~ajduerson/history1.html
If you want to study this instructive business story in more depth,
you might consider purchasing the Larder "Fast Forward" book. You can
find it here: http://www.amazon.com/exec/obidos/tg/detail/-/0393023893/qid=1045715882/sr=1-1/ref=sr_1_1/104-0179791-3763107?v=glance&s=books
I hope I've answered your question fully, but if you want to follow up
with me about anything, just use the Clarify Answer button before
rating this answer, and I'll get right back to you.
Thanks for your question,
ericynot-ga
Google searches:
beta vs vhs
"fast forward" lardner |
Clarification of Answer by
ericynot-ga
on
20 Feb 2003 13:19 PST
A corporate strategy can be defined as "a plan of action resulting
intended to accomplish a specific goal". Such strategies are arranged
in hierarchical levels, with the overall corporate strategy generally
to maximize company profits and shareholder value, and then subsidiary
strategies to support that main goal. Supporting corporate goals
generally are to dominate each market in which the company competes so
that rival companies will not be able to gain an undesirable
advantage, and perhaps even push the company out of business.
Similarly, many corporations strive to so dominate their rivals to the
extent that they can either absorb them or force them out of business.
Within a company are various divisions, each with its own strategies,
both as defined from within and as mandated by senior management.
Ideally, all of these sub-strategies are well enough planned that they
don't conflict with each other. For instance, management does not want
the products of one division to cannibalize income from another
division within the company.
Within company divisions generally exist product lines and individual
products. Competent management requires intelligent, interlocking
product strategies in order to maximize overall company goals. For
instance, a division typically has products in the marketplace and
other, more advanced, products in various stages of development.
Management strives to maximize the income from each already-released
product before introducing a newer "replacement" product to the
market, all the while also bearing in mind that waiting too long to
introduce a new product could result in a competitor company gaining
an unacceptable market advantage.
When a company, for whatever reason, fails to maximize profit while,
at the same time, holding competition at bay, it can always be said to
be a "strategy failure" - either the company did not have a strategy
in place for a particular situation, or the strategy it had failed.
In the case of Beta vs VHS, Sony's product strategy for its pioneer
Beta videocassette products was defective resulting in non-maximized
profits for its Beta technology and eventual complete withdrawal of
Beta from the market.
Its basic strategic failures were these, as previously provided in the
answer above:
----------------------
So what were Sony's fundamental strategy problems?
1) going first into the market, though often a huge marketing
advantage probably backfired somewhat in this case because, while it
readied consumers for a shift in the video paradigm, it attracted the
unwanted legal attention of Hollywood and actually gave the JVC/VHS
competition a leg up by presenting a more accepting market when that
competitive technology became ready to sell, thus making it easy to
quickly lower VHS prices;
2) according to Richard Rosenbloom of Harvard Business School, "Sony
did 'lack the manufacturing capacity' and furthermore refused to
become an 'OEM supplier', hence it sought only those partners able and
willing to take over manufacturing responsibility". In other words, in
a very rapidly developing market "a large part of the VHS advantage
came from the sheer
ability to deliver more VHS machines than Beta producers could make
early on in the competition."
http://www.eh.net/lists/archives/eh.res/nov-1996/0049.php
3) Sony misunderstood the technological attributes most important to
VCR customers (length of record time versus tape cassette size), the
most fatal kind of mistake of all.
------------------------
A more recent example of strategy failure in the United States has
been the massive overdevelopment of high-speed telephone networks by
the country's telecom companies. In trying to stave off perceived
threats from rival telecoms, many of these companies invested far too
much money too quickly in products (fiber optic networks, etc.) that
the market is simply not yet ready to absorb. This has resulted in
massive earnings deficits and much corporate downsizing in that sector
of the economy. In hindsight, the better strategy for these companies
would have been to develop their own networks slowly, wait for their
competition to overspend on this technology, then, when the
competition faltered, buy the competitions' networks for pennies on
the dollar.
I hope this has provided the desired clarification. Thanks again for
your question.
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