Sony Vs Matsushita Case Analysis in classroom

The case of setting global standards

1. Setting Global Standards Matsushita Vs Sony MBA-I Term III, DoMS Nalsar University of Law, Hyderabad

2. $ 50000 !!!!!!!

3. Sony U- Matic Video Recorder

4. VCR history 1956:invention of the Ampex VCR 1960‘s:stagnation on the VCR market 1970:cross-licensing agreement for video recording patents (Sony, Matsushita, JVC) 1971:Sony : Leadership of U- Matic invention 1975:introduction of Sony`s Betamax format: 1976:JVC introduced the Video Home System (VHS) format

5. Development of VCR market 1975: Sony introduced Betamax 1976 JVC Introduction of VHS 1977 VHS enters European Market RCA adopts VHS format 1978 : Major European Brands adopt VHS standard 1984 : Zenith drops Beta format VHS Group: Matsushita, JVC, Hitachi, Sharp, Mitsubishi (40) Beta Group: Sony, Sanyo, Toshiba (12) Europe and US: VHS adoption in Europe 30% Penetration in USA Pre-recorded tapes soar

6. Cumulative No of Units Sold

7. Share of VCR Market (VHS + Beta)

8. First Mover Advantage Learning curve Patents R & D Special Equipment (Asset Locking) Might capture shelf space Switching cost

9. Action by followers Might adapt to first mover technology Might invest in differentiation Might be a free rider on investment of first mover by solving design or manufacturing problems May ride on first mover technology to develop better ones May take advantage of inertia or inflexibility of first mover

10. Technological Pioneers Vs First Movers Better information on market preferences More time to plan for efficient manufacturing operations Organize alliances for production and distribution : The bandwagon effect – for production and for complimentary products

11. Domination of global market Required cooperation for Production Licensing Distribution For both hardware and software

12. How did it happen? And Why??

13. Market Professional video for broadcast Home video

14. How No single producer or coalition strong enough to impose worldwide standard Standard set by marketplace Initial advantage exploited by Matsushita and network externalities complementing it to move forward

15. Standardization was the key Three sets of principal players The main protagonists : Sony, JVC & Philips Remaining consumer electronic producers who would choose one format for production / distribution Producers / Distributors of complimentary product, i.e. Pre-recorded software

16. Alliances Alliance for main product Alliance for complimentary products

17. The Standardization Route 1974 – 77 Decision period and shaped the industry through intense battle for a decade more Six different incompatible formats Sony, JVC, Philips Hitachi, Sharp & Zenith (No commitment for home video) Beta and VHS comparable in cost and performance Mid 1977: 10 large firms divided into 3 families

18. JVC was aggressive for alliance Matsushita known for generic skills in mass production JVC first to reach Europe Sony believed in fast commercialization before alliance Sony - No OEM, only license Playing time issues Refusal to Hitachi ..still hoping for Matsushita Looked for companies with large manufacturing base only

19. JVC Tried to form as large group as possible Agreed for OEM and licensing Roped in Hitachi and Sharp End of 1976…started discussion with RCA Allowed partners to develop and refine What was generic strategy for all? Matsushita offered more features and models RCA and Matsushita offered extended warranty

20. Advantage By 1978 VHS group had major edge in manufacturing capability and market power JVC focused on designs which were easy to manufacture and service Low cost design Fewer components Fewer assembly steps Matsushita capable of delivering low priced VCR with more variety of features US market was the key Matsushita took RCA into fold Matsushita was the key in creating massive capacity Sony had to play to the game set by VHS group – renegotiation with Zenith

21. Alignment for complimentary products Three uses Time shifting Home movies Pre-recorded tapes Mid-eighties…..demand grew exponentially Europe started the trend Tie-up with TV rentals RCA tied up with Magnetic Video Corporation of America Matsushita helped MV with machines for faster duplication Sony tried with VCA but it continued with VHS too In 1984 Zenith switched sides

22. In a nutshell

23. Sony – Not an OEM Manufacturer Reluctant to share technology Brand image consideration Started production before asking others Differentiation strategy Developed new features Unable to satisfy market

24. JVC – The power of standardization Polite and humble Integrated partners in development Alliance building Mass production Supplied OEMs Imitating Sony‘s features Initial advantage: Longer playing time

25. Why Sony lost? Neglected early majority (Mass Market) Not able to satisfy demand Production capacity Recording / Playing length of tapes No compromise regarding technical standards Human factor of business (Arrogance) Refused to license Betamax to movie industry Network externalities

26. Thanks