1. Describe standardization, format wars, and how standardization can lead to a format war.
The standardization and format wars can happen when a market leader or a strong company can develop new standards. Typically, the standardization occurs when the break through is achieved in the development of new products and the same has to be followed by the competitors to remain in the market. For example, the development of USB port was the standardization for organizations. Another example of standardization or format wars is the development of personal computers. IBM developed the personal computer in 1981 and soon other companies followed IBM. This standardization was required so that other companies in the computer business could also remain in the market (Porter, 2004). The format war occurs when the other companies try to copy the format of an existing product that is successful in the market. For example, a forma was occurred with the development of Android and other mobile phone platforms. It has been observed that the large organization or government would develop the standard products and the other players in the industry would enter the market. In the initial phases of the standardization, different organizations can have different formats for the same product and this is known as the format wars. However, as the industry grows and matures different organizations reach towards a standardized product.
2. Once standardization occurs, how does the industry benefit?
It has been observed that the format wars are usually followed by the standardization. The format wars may not be beneficial for the industry and consumers. However, standardization is certainly beneficial for the industry. With standardization, organizations would find it easy to comply with the established quality standard organizations like ISO. In the absence of standardization, organizations would not be able to optimize their cost of operations, as they would not be able to standardize their products and services. It can be said that standardization will raise the industry profitability by reducing the production and marketing costs associated with supplying the complementary products for not following standards. The focus on standardization would also enable the company to have better relationship with customers. The customers would be able to gather a confidence towards the product due to standardization.
3. During a format war, describe how competition occurs and how a price war can take shape.
The format war and standardization creates a platform where the large firms would compete among themselves. Typically, the format war occurs with the introduction of new technology or product that is not compatible with the market. This is the time when different organizations would try to have their own format and standards. It eventually increases the rivalry among the different market players. The organizations may also be involved in the price war when they enter in the format wars in the industry.
4. Define first and second movers. How do these two entities interact within and industry, and who learns what as the industry take shape?
First Mover: The first mover is the company that would be the first to introduce the products and services in the market. The firm would do the research and development to develop the product and introduce in the market (Senge, 1994). The product would be a new product in the market and the competition would be nil or very limited. The advantages and disadvantages of First Mover can be discussed.