Optical Disc and Hd Dvd

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Disruptive and transformational technologies typically appeal to segments of the market that are undeserved, and not to the main stream of the market (Shane, 2009). These technologies have the ability to make traditional tools and processes obsolete virtually overnight. In this paper I use Netflix as an example of a disruptive technology and Toshiba– NEC’s HD-DVD as transformational technology. I begin with a discussion of disruptive technology. Afterwards, I will speak on the success of Netflix; explain the disruptive and shifting technology created once it sustained itself in the market. I then provide a review of transformational technology and explain the transformational change to HD-DVD and the failure to capture and sustain a place in the market. I conclude by comparing and contrasting a successful Netflix and failed HD-DVD format, looking at techniques and key issues that provided success or failure and the lessons learned from them. Disruptive technology is a term coined by Clayton Christensen. Christensen believes that incumbent firms were unable to adopt radical new technologies were often he firms that created them. In order for disruptive technology to be viable for a business, the technology must become sustaining in the market. New startup companies will develop potential disruptive technology because they lack a customer base and cater to the fringe market. A potential disruptive technology is Netflix. According to their 2011 Annual Report, Netflix Inc. is the world’s leading Internet subscription service for enjoying TV shows and movies where subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs, computers and mobile devices. In the United States subscribers can receive standard definition DVDs and their high definition successor, Blu-ray discs (collectively referred to as “DVD”), delivered quickly to their homes (Netflix, 2011). Reed Hastings and Marc Randolph, Netflix Incorporated founders, were hopeful technology entrepreneurs itching to find the next big idea. These men aspired to build a company that specialized in renting and selling DVDs over the Internet. The concept was great, however these men wanted to create a market niche that set them apart from other video rental companies (Netflix, Inc History, n.d.). To this end, Hastings and Randolph used radical innovation to develop a marketing strategy that helped sustain a competitive advantage over other companies within the industry. Netflix was able to sustain their competitive advantage because of the barrier to entry and first mover advantage. “Barriers to entry are unique industry characteristics that define the industry – barriers reduce the rate of entry of new firms, thus maintaining a level of profits for those already in the industry” (Lima, 2006). Through proper management Netflix developed a strategy of Internet streaming, convenient customer service, and a virtual organization to deliver it cheaply and flawlessly (Halal). For a monthly subscription fee starting at $7.99, Netflix presents the convenience of ordering media online and by mail, without the penalty of late fees. Customers can make a few clicks with the computer mouse or the television remote and watch the latest action movie or TV show. In an effort to ensure that customers aren’t waiting for an extended amount of time in between DVD rentals, Netflix has multiple regional shipping centers spread across the United States. “Upon receiving the old DVD back from a customer, a new one from the customer’s rental queue will ship. 95 percent of customers receive their DVDs one day after shipping” (Bakke, n.d.). Netflix created a successful business model by providing a service that allows customers to keep DVD’s for a longer length of time. Bassamboo(2011) states, “The longer Netflix allows customers to keep discs, the more profitable the company could be.” In an interview, Hasting gives 7 reasons why Netflix is...
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