Exam 8: Understanding Network Effects: Strategies for Competing in a Platform-Centric, Winner-Take-All World

Adobe gives away the Acrobat Reader to build a market for the sale of software that creates Acrobat files. This is an example of:

Microsoft's Live Maps and Virtual Earth 3D was a late entrant to the Internet mapping game. Users had already put in countless hours building resources that meshed with Google Maps and Google Earth. However, by adopting the same keyhole markup language (KML) standard used by Google, any work done by users for Google in KML could be used by Microsoft. What strategy of Microsoft has allowed it to catch up with Google?

In the absence of network effects, the value of a product or service increases as the number of users grows.

Apple, which controls over 75 percent of digital music sales, was able to dictate song pricing for years, despite the tremendous protests of the record labels. This implies that:

Windows OS, the iPhone, the Wii, and Facebook's application programming interfaces allow for the development and integration of complementary goods by third parties. Based on this evidence, all these products or services are said to be _____.

Are the markets for mobile payments one-sided or two-sided? Describe why you chose your answer.

Sure, network effects are valuable, but why? List the three sources of the value (cited in our textbook & in class) that fuel the competitive advantage of network effects.

The video game console market offers important lessons for the strategist. The video game console market is a network market in which Sony's PlayStation 2 (PS2) dominated over Microsoft's Xbox offering. This has been possible due to:

Distinguish between one-sided and two-sided markets. Provide examples for each and mention the benefits derived from these markets.

Technological leapfrogging is offering a new technology that is superior to existing offering that the value overcomes the total resistance.

Mobile software developers often find iOS more attractive than the Android operating system, because Android runs on many more types devices than iOS and the Android operating system is fragmented into differnet versions, each combination of which needs to be tested.

Many firms attempt to enhance their network effects by creating a platform for the development of third-party products and services that enhance the primary offering.

_____ are products and services that allow for the development and integration of complementary goods.

Envelopment is a management strategy where a dominant firm acquires all the layers in its value chain to increase profitability.

Which of the following factors represents one of the sources of value derived from network effects?

Cross-side benefits arise due to interaction among members of a single class of participant.

One way firms seek to strengthen their platforms and encourage third parties to develop complementary goods is by offering ___________.

Large firms often find new markets attractive, but might not have products ready for delivery. What strategy do such firms use to get potential adopters to delay their purchasing decisions?

Viral promotion involves:

What are the primary sources of value for network effects? Give a brief description of how each of these factors provides value for network effects.