ACC 270 Ch. 8 Notes
ACC 270 Ch. 8 Notes ACC 270
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This 3 page Class Notes was uploaded by Jessie Frank on Thursday February 18, 2016. The Class Notes belongs to ACC 270 at Illinois State University taught by Vishal Midha in Spring 2016. Since its upload, it has received 20 views. For similar materials see Information Systems in Organization in Accounting at Illinois State University.
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Date Created: 02/18/16
Competing When Network Effects Matter When crafting a plan for market dominance, it is critical to know if network effects exist, how strong they might be, where they come from, and how they might be harnessed to your benefit. Move Early Being first allows your firm to start eh network effects snowballing in your direction. Exchange depends on the ability to communicate. Timing is critical when entering the markets. Those who jump on the opportunity to create something will become superior and more profitable because they have more time for their product to be on the market. Subsidize Adoption Starting a network can be tough, since there is little incentive to join a network if there’s no one in the system to communicate with. In one admittedly risky strategy, firms may offer to subsidize initial adoption in hopes that network effects might kick in shortly after. o Subsidies to adopters might include a price reduction, rebate, or other giveaways. Often, if subsidizing adoption is completed after a rival has achieved dominance is a difficult battle to overcome, since dominant firms have the upper hand… even when you offer your product for free. o Ex. Yahoo! began a U.S. auction service to compete with eBay, initially not charging sellers at all. eBay sellers remained loyal to the company since there were not enough buyers on Yahoo!, plus they would be losing their stellar seller rating. Leverage Viral Promotion In order for a product to be sold or a service to be performed, an exchange must occur. o Many firms leverage their customers to promote their product or service being offered. Skype is an internet calling service that has over 600 million registered users… yet they have barely spent any money on advertising since the users were recruited through word of mouth (since users were pleased with the free and low-cost Internet Calls). Social media is a great medium to promote products and services since it is able to be easily shared and viewed. Expand by Redefining the Market Big markets are able to attract more users, therefore the space in doing so should be redefined to bring in even more users. Market expansion often puts rivals in a more intense competition with one another. These markets were once two individual and separate markets, however they are offering products and services that have similar features and capabilities, which leads to a greater competition. o Ex. Portable electronic device market – calling, cameras, media players, GPS, etc. are starting to combine and be included in one product, therefore the markets are merging. Alliances and Partnerships Firms can use partnerships to grow their market share for a network. o This often leads to two not-as-strong competitors coming together to get the leading competitor out of business. Ex. ATM networks. Google pushes approaches that encourage rivals to cooperate to challenge a leader. Leverage Distribution Channels Firms often find novel ways to distribute a product or service to their customers. If the distribution channel that you need does not exist, create one. o Apple did this when opening its retail stores, since its attractive, high-service storefronts were a great platform to promote the unique products of Apple.
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