Standards

Question 1

Motivations for standards

Answer 1

• Existence of network externalities - value of something increases as more and more people own it (fax machines)
• Avoidance of competing platforms - barriers to adoption, but may lead to best innovation winning (VHS vs. Betamax)
• Users prefer standards more than manufacturers do

Question 2

Types of standards

Answer 2

• Reference standard - metre, centimetre
• Similarity standard - minimum specification
• Management standard - total quality management
• COMPATABILITY STANDARD - MAKING SYSTEMS INTEROPERABLE

Question 3

Negotiating formal standards

Answer 3

• National standards bodies (BSI in UK, ANSI in USA)
• Committees send delegates to represent national interests in international bodies
• International committees negotiate consensus between national standards/members

Question 4

Problems with this process

Answer 4

• Poor user representation in such processes

- May take years to agree on a standard

Question 5

Conclusions

Answer 5

• Most firms are users of standards rather than procedures, many standards are anticipatory and all of the uses are not clear when specified
• Active participation in standardisation can be low. Attraction of having your patents embedded in standard is unattractive.

Question 6

VHS versus Betamax

Answer 6

• Beat was Sony, VHS was JVC
• Beta lost due to its large size and recording scale
• Standard in video technology adapted the VHS format, mostly due to marketing strategies and manoeuvring of JVC
• JVC had linkages to Granada and Thornhill, who were leading British TV operators. This led them to adapt the VHS format
• Japan saw technology in the USA and Europe and developed superior capabilities in mass production and distribution
• Beta and JVC were not compatible, they used different tape handling mechanisms and cassette sizes, as well as coding schemes that varied enough to ensure the two were non-interchangeable
• Sony experiences first mover advantages, but the market was so large that a window of opportunity was created, during which firms with compatible capabilities could challenge them (beta)
• Sony and Beta could not differentiate through basic features. So they could neither gain a technological advantage.
• Sony lost the battle by choosing to make smaller cassettes, that could only hold an hour or film, where beta chose larger cassettes that held 2 hours. People got to do what they wanted with the casettes, at a price they wanted to pay.