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Nt1310 Unit 3 Network Market Approaches

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1. It is important for a firm to achieve positive feedback and network externalities. Therefore, the three important strategies that a firm must consider at the early stages of a market are: a. Identifying, analyzing, measuring and understanding the switching costs as well as primary economic patterns such as contractual commitments, loyalty programs, search costs, durable equipment etc. in order to anticipate lock-in cycles and develop strategies on who to subsidize. It is also important to gain exclusive users to gain momentum of users on the platform. b. A new firm needs to make a trade off between performance and compatibility by employing an evolution strategy (offering a migration path) or a revolution strategy (offering superior compelling performance). A firm also needs to make a trade off between being an open system or a closed system as open technologies are popular but rewards are not as desirable as a proprietary technology holder. By using these strategies, firms in network markets approach by using one of the generic strategies from performance play, controlled migration, open migration and discontinuity. c. It is extremely essential to not get swallowed or enveloped by competitors (existing or new). In …show more content…

When multiple platforms have overlapping user bases, there is a possibility of one platform provider to swallow the network of other providers. This is called as platform envelopment. One of the examples from the readings is RealNetworks whose business model was well suited to 2-sided network. Microsoft however tried enveloping Real by bundling Windows Media Player with its all-purpose NT server. Users preferred the offer of getting free music streaming and switched to Microsoft creating huge losses to Real. In order to survive envelopment, a firm can (1) Revamp its existing business model and offer services as a systems integrator, (2) Form alliances through partnerships and (3) Take legal course of action under antitrust laws (if

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