4.

Even though Oracle has the second market share in the database
industry (33.7%, behind IBM's 34.1% in 2004), it has chosen to let IBM'DB2
customers use their future products (iFlex, Retek and Fusion). It may seem
all the more strange to form this kind of "alliance" with the competitor just
ahead of them. Analyze Oracle’s strategy using the theory of lock-in and
Compatibility.
Oracle could have made its tools only compatible with Oracle's DB, so that others customers
might want to switch to their DB in order to access these tools. We saw in class how
important and difficult it is to attract new customers.
However, when considering new DB users who hesitate between IBM and Oracle's DB, it
would be wiser for Oracle to prevent other users from utilizing these additional products.
Indeed, if a customer thinks that IBM and Oracle's DB are equivalent, these additional
products might persuade the customers to choose Oracle.

Overall, it seems that it would be more intelligent for Oracle as a database company to
prevent others customers from using these additional products in order to gain a
competitive advantage over the other database companies. However, since Oracle is a
global firm, allowing more customers to access their products will certainly increase
their revenues. Oracle has decided that it would be wisest to become IBM's co-
opetitor. This is a clear sign of Oracle's will to have a broader offering of products that
can be widely used. Oracle might also try to develop a standard with IBM and move the
competition away from the databases to the additional products. With its declining
share in the database software market (39.4% in 2002), this might be the wisest move.
 1. more than a decade since banks began issuing debit cards, but they are still
trying to figure out how to design viable rewards programs for the fast-growing
payment method. Analyze the strategy using the theory of lock-in

The above article introduces and compares loyalty reward programs for debit and
credit cards. Loyalty reward program is a good example of lock-in strategy. Banks try to
keep the customers by providing them with free stuff or money rewards. On the one hand,
the credit card reward program was in place for a quite a while now and proofed itself as a
good way of bringing in new credit card holders, keeping them, and eventually getting
them into debt. On the other hand, debit rewards’ programs are continuously evolving and
depends on many variables. The article suggests that debit cards fees that bank charges
merchant for accepting the plastic are critical for building rewards’ programs for the
consumers. In addition, merchant fees vary dependent on how customer accept the
charges” by using PIN, or by signing the receipt. Since signing the receipt gives larger fees
to the banks they encourage debit-card holder to sign the receipt by offering reward
programs.​
Overall, reward programs are a good way to lock in the consumer and keep him or
her for a long time. Loyalty reward programs proved themselves through the airlines, credit
cards, and finally debit cards. Loosing the consumer would bring bigger losses to the
company than giving something back through the loyalty program. For the banks debit card
reward program can also bring in more customers. When a person is making a decision on
which bank to open an account he or she looks at the availability of the ATM machines in
the area, interest rate, and now – reward program.
 What is Lock-in Strategy
1. A strategy in which the customer is so dependent on a vendor for products and services
that the customer cannot move to another vendor without substantial switching costs, real
and/or perceived.

2. How differential pricing can benefit consumers

The differential pricing strategy means certain customers pay less for the same product
than others pay. ... The discounted prices may come in the form of a temporary
discount or a permanent lower price for a particular group of people.

Let’s be clear: price differentiation is not a new phenomenon. We encounter it regularly and,
as consumers, often profit from it. Market-goers can sometimes get bargain prices on fruit and
vegetables if they come at the end of the day as the stallholders are packing up. Frequent
customers get discounts through loyalty programs.

if I receive a sizeable discount on a pair of sunglasses, I will be unhappy about my bargain if I

discover my neighbor bought the same pair for even less. It doesn’t matter that I benefit: if
someone else gets a better deal than I do, I resent it. This has the potential to seriously
damage my relationship with and attitude towards a company engaging in price
differentiation, for all the economic sense it makes for me and everyone else. What starts as
differentiation becomes discrimination.
 3.Yahoo said people who subscribe to the download service on a monthly basis will see their
memberships increase from $6.99 per month to $11.99 per month. Portal company Yahoo Inc.
(Nasdaq:YHOO - news) informed customers of its subscription music download service that it
will increase pricing for users who transfer their tunes onto portable devices or CDs. Explain
yahoo’s pricing strategy

users have to pay additional money if they want to download their music into a
portable device.

Yahoo’s strategy by first charging a very low fare for the service to attract many
users and then suddenly raising the fee once it has a big established customer
base is the result of a strategic move to get extra income from their customer
base. However, I don’t know if this sudden increase of fee will alienate users
from its service. This move also resembles to sort of a lock-in strategic move
however I don’t see much differentiation in the downloadable music market
that will prevent users from switching easily to another service.
 5.In the research, Viard studied several hundred AT&T telephone contracts for big 800-
number users. He traced the history since 1993 to 2003 and saw that after portability, a
regulation made in ’93 allowing customers to take their numbers with them even if
switched their telephone service providers, the cost of 800-numbers fell. How to recognize
the lock-in and its impact on competition.
Lower switching costs led to lower prices.”
Yet, his findings are stretched to an extent because the reason for his outcome
was due to the fact that there were many new customers and as a result a high-growth in
the market. Viardi concludes that “If switching costs do lead to higher prices, regulators will
want to institute rules to reduce such costs for the consumer.” This statement then leads us
to the fact that the FCC has made the move to allow cellular phone portability and,
therefore, lower switching costs to consumers.
 6. SAN FRANCISCO, Nov. 13, 2005. EBay is expected to announce Monday that it is
ending the fees it charges software developers who build Web sites and software
programs that channel buyers and sellers its way. "We hope to encourage new ideas and
accelerate the growth of our developer and affiliate communities," said Greg Isaacs,
director of the eBay developers program. Analyze the eBay’s strategy using the theory of
network externality.
Network externalities are the effects a product or service has on a user while others are
using the same or compatible products or services. Positive network externalities exist if
the benefits (or, more technically, marginal utility) are an increasing function of the
number of other users. Negative network externalities exist if the benefits are a decreasing
function of the number of other users.
one way to forestall any potential threat is to encourage third-party developers to create
more programs that make it easier for buyers and sellers to use eBay. Removing the fees to
use eBay's application programming interface may increase the number of eBay
developers from the current 21,000. The number of third-party developers doubled in the
last year, the company said.
More developers mean more applications and a greater number of Web sites that would
channel additional buyers and sellers through eBay
Developers make their money by getting a small percentage of each transaction
channeled through their application to eBay.
 7. The issue is that whether or not the government should mandate inventors, authors
to register their work to get protection from the law. Obviously, patent and copyright
laws have some benefits but they also have some drawbacks
Pro: Automatic Copyright Protection
One of the strengths of U.S. copyright law is that it automatically extends to all creative
works as soon as your company publishes them. Any work that could be copyrighted
receives limited protections as soon as it’s placed in a fixed format. Companies aren’t
required to place a copyright notice on the work to secure their rights, nor are they
required to register the work with the U.S. Copyright Office to claim ownership of the
piece.
Although these protections are handy for limiting intellectual property theft, they have
restrictions. They won't allow your company to seek punitive damages if any of your
materials are infringed.
Con: Registration and Fees
Although companies that create works for use in their business passively receive basic
protections for their work, they must register the work with the U.S. Copyright Office to be
able to seek punitive damages for any infringement or to receive an injunction to halt an
infringing action.
Copyright owners must submit each work or collection of works individually to the
Copyright Office, accompanied with registration documents – which can be bypassed using
online forms – and registration fees that range from $35 to $220. Registering many works
can be time-consuming and expensive for small businesses.
Pro: Defends Intellecutal Property Rights
Copyright law was designed to protect the intellectual property of workers in creative fields.
Current legislation provides companies a very straightforward and direct approach to
dealing with breach of copyright in a civil setting, where they have to provide only the
burden of proof – versus proof beyond a reasonable doubt as in criminal proceedings – that
the copyright was infringed. Because of this, many copyright actions are much more
straightforward than other litigation that companies undertake.
Con: Expensive for Owners to Enforce
Companies that sell copyrighted work or use copyrighted materials as part of their sales
material must be vigilant to identify infringements on their own. Even when companies
designate a worker to enforce copyright, most matters are handled on a civil basis, rather
than criminally enforced by authorities.
This process can require legal representation in some cases. In the case of appeals, small
copyright owners might have difficulty affording long-term representation. Conversely, a
small defendant might not have the means to fight a copyright infringement lawsuit from a
large corporation, even if she is not guilty.

What is a patent?
It is a type of protection which is offered to a person or even to any legal entity to have
exclusive rights for the making, selling or using of the concept or invention and restricts
others from taking advantage of the same for the given period of patent. A patent can be
defined as a grant towards the protection for any invention.
Pro: Immediate Action
If your company owns a copyright on any work that's registered with the U.S. Copyright
Office, it can seek a court injunction that commands the infringing party to immediately
cease and desist publication or performance of the work in question. This action is
immediate. It moves much more quickly than criminal or civil proceedings against an
infringing party, and it can at least stop additional losses due to copyright infringement.
Con: Ambiguity
Although many issues covered by U.S. copyright law are straightforward, by the very nature
of creativity, some areas are ambiguous and open to interpretation. Concepts such as the
fair use doctrine and distinguishing derivative works from original creations aren’t clearly
defined, and they must be decided by a judge or a jury on a case-by-case basis. Because of
this, sometimes a company that owns copyrighted material expends time and money in
pursuing its case, only to discover that the work wasn't infringing by the court's definition.
Advantages of patents
A patent gives you the right to stop others from copying, manufacturing, selling or importing
your invention without your permission. See protecting intellectual property.
You get protection for a pre-determined period, allowing you to keep competitors at bay.
You can then use your invention yourself.
Alternatively, you can license your patent for others to use it or you can sell it. This can
provide an important source of revenue for your business. Indeed, some businesses exist
solely to collect the royalties from a patent they have licensed - perhaps in combination
with a registered design and trade mark
Disadvantages of patents
Your patent application means making certain technical information about your invention
publicly available. It might be that keeping your invention secret may keep competitors at
bay more effectively.
Applying for a patent can be a very time-consuming and lengthy process (typically three to
four years) - markets may change or technology may overtake your invention by the time
you get a patent.
Cost - it will cost you money whether you are successful or not - the application, searches
for existing patents and a patent attorney's fees can all contribute to a reasonable outlay.
You'll need to remember to pay your annual fee or your patent will lapse.
You'll need to be prepared to defend your patent. Taking action against an infringer can be
very expensive. On the other hand, a patent can act as a deterrent, making defence
unnecessary.
Patent costs and marketing considerations
Because patents are territorial, you will only be able to stop competition in the country in
which you hold a patent.
If you believe your invention has potential in other countries, and you intend to develop those
markets, you will also need to budget for the cost of applying for a patent in your target
market., You may be able to offset this cost against the patented item's projected income over
the lifetime of the patent. Find more information on applying for a patent in other
countries and protecting intellectual property abroad.
Once your patent application has been granted, see how to manage your patents.
 8.With Radio Frequency Identification, or RFID, objects are tagged with tiny computer
chips attached to antennas. An RFID reader can be used to access the chip’s digital
information, which can uniquely identify the tagged item. In recent years, however, there
has been a growing interest in using the technology to identify people. The U.S. State
Department has announced that it will be adding RFID chips to passports. The inconspicuous
nature of RFID chips, and the fact that some types can be read surreptitiously at a distance,
has stirred debate over what effect their increasing presence will have on personal privacy.
Discuss both sides and give your opinion.
SECURITY AND PRIVACY
As the manufacturers and retailers are preparing to embrace RFID technologies, the
primary challenge are the reluctant knowledgeable consumers. The RFID unknowns and
fallacy have generated tremendous privacy concerns that are averting consumers from
accepting the new technology. One issue is the likelihood that readers can be hidden and
personal objects can be identified on a person without their knowledge or permission which is
an infringement of privacy. Consumers fear that the tiny chips, which are fitted with even
tinier antennas that beam unique identification information to scanners, could be used to
track how they shop and what they buy ( Glasser, et al. 2007).

Generally recognized as a basic human right, privacy relates to the capability of a person
to act as an individual, apart from an individual role in society, improving the ability for
personal function without embarrassment or review, even if it sometimes sets the individual’s
interests at odds with those of the world around him or her. Privacy, then, can be broadly
defined as the power to selectively reveal oneself to the world. According to the Oxford
Handbook of Practical Ethics by Anderson and Labay in 2006, moral
philosophers maintain that respecting the many forms of privacy is paramount for respect for
human dignity and personhood, moral autonomy, and a workable community life. The
importance of privacy is partly a matter of psychological health and comfort.

Anonymity and privacy are problems, especially when there are no standards on
whether the tags will be disabled or left enabled by default. Tags must not compromise the
privacy of consumers. The privacy threat comes when RFID tags remain active once an
individual leave a store. Once they buy RFID tagged item, they could be tracked anywhere
they travel. Currently, tags respond to any signal. Anything a firm’s transceiver can detect can
also be detected by unauthorized transceivers. The privacy issue becomes more serious when
the RFID tags are used in smart cards, badges provided to an individual when they attend
conferences (Anderson & Labay, 2006).

Both government and commercial uses demand privacy issues that will need to be
dealt with. Business entities might collect and store information without proper consent or
data protection and utilize it in ways opposing to the consumer’s wishes. Concerns about
most government tagging are parallel, relating the fear of tracking and surveillance and of
information assembling and dissemination for purposes contrary to individual interests,
though the specific concern varies from application to application. Many of the worries
surrounding these concerns have to do with the control of information. Chips read by
unauthorized readers could permit sensitive information such as credit card numbers and
medical histories to become readily accessible.
 9. On August 2005, salesforce.com, the leading provider of on-demand CRM (Customer
Relationship Management) service, publicized its Q2 results. For the 6 months ended
7/31/05, revenues rose 80% to $136.1M. Founded in 1999, salesforce.com provides on-
demand CRM software as a service for small-to-medium sized businesses. While the
worldwide CRM software sales grew by lower than 6% from 2000 to 2004, salesforce.com
increased its sales by a compound annual growth rate of over 80%, going to IPO in 2004.
Siebel, the leader of traditional CRM software market, claimed its revenue fell 3% to $612.5M
for the 6 months ended 6/30/05. Net loss totaled $54M vs. an income of $38.5M. Later on,
Oracle purchased Siebel Systems for $5.85 billion. Are companies like Salesforce.com the
future? What are the prospects to traditional licensing approaches? Are there certain types of
software that are more amenable to being sold as services than others?
License-based software
Traditionally, users bought software license from providers. Besides a large amount of license
fee, users have to pay even more for hidden cost. Using enterprise application software as an
example, users have to purchase expensive servers to run the software, hire IT professionals
to operate and maintenance the system and pay for system upgrading each year
Market trend
As the boom of e-business software sales during the past decades, most large enterprises
have been spending a lot on investing new technology to improve companies’ ability to
communicate and serve customers.
 Technical trend
During the past couple of years, a new software technology called Web Services has
accelerated the rise of Net-native software-as-service providers, which develop the
applications to improve companies’ ability to communicate and serve customers through
hosted online services.
With software system hosted on center servers, Saas vendor uses its website as a portal
of the system and data center. Paying monthly fee, customers access vendor’s server via
browser to use the standardized software and save their data on vendor’s data center. All
customers who select the same product version will share the same software function and
user interface
Unlike the license-based software approach, customers of Saas don’t need to buy
license and install software on a local server. Without operating server and managing
software by themselves, customers of Saas don’t have to hire IT professionals to operate
system and pay the cost for system upgrading and maintenance each year. Compared
with traditional licensing software, Saas greatly reduces the cost users spend on software
as shown in

The risk for customers to use software also greatly reduces. They don’t have to pay a large
amount of upfront license fee so that the switching cost is greatly reduced. On the other
hand, as a result of having subscription model, a customer is far more likely to revisit their
buying decision after subscribing to the solution, which make vendor easier to keep their
revenue consistent or increasing.
Applicability of Software-As-A-Service (Saas) Model
While innovating Saas model is achieving initial success, will it become the standard of the
whole software industry? What kind of software is amenable to provide as a service?

Enterprise Software Applications

Enterprise application software is application software that performs business functions such
as accounting, manufacture scheduling, customer information collection, etc. The purpose of
this kind of software is to organize the internal and external information and efficiently share
the data to a large number of internal or external users via a computer network. It is almost
always hosted on servers and the companies within each type of industry shares similar
business functions for software application. Therefore, enterprise software applications can
be fully supported by Software-As-Service business model. One of the typical examples is
Salesforce.com’s CRM application for communication industry, which standardizes sales
processes and customer services. About 30 companies, including AOL and Nokia, are current
users of this on-demand software application.

Single-User Software Applications

Contrasted to enterprise application, single-user software application runs on the users’ own
local computers and serves only one user at a time. This type of software helps keeping track
of personal information that the users might not willing to share with others. Microsoft office
suite is one example of single-user software applications. Users are more likely to install this
type of software application on their local computers since local installation not only can
ensure the data security but also eliminate the performance issue across the network.
Therefore, single-user software application is not applicable to software-as-service model.
Infrastructure software
Infrastructure software supports the underlying backbone of an enterprise’s technical
architecture and serves as the foundation for most other enterprise software application.
Examples for infrastructure software are Windows XP, Mac OS X and Oracle database. This
type of software cannot be provided as a service because they form the basis on which
other applications are running and the installation has to be on the local machine.

Embedded Software
Embedded software is the software component for embedded system. An embedded
system is a special-purpose computer system, which is completely encapsulated by the
device it controls. It is a programmed hardware device, which has specific requirements
and performs pre-defined tasks. Embedded software and hardware is combined together
as a whole piece and they cannot be separated. Some examples of the embedded software
are the software embedded in ATM machines, cell phones, computer network equipment
(routers, timeservers and firewalls), copiers, medical equipment, etc. Since the embedded
software is the necessary component in embedded system to support the functionality of
the hardware device, it is very unlikely to attain embedded software as a service. Most of
time, the hardware manufacturer has to provide embedded software when they sell
hardware to users.
 10. NEW YORK (Reuters) - Time Warner Inc.'s AOL said on Monday it planned to launch
a free Internet television service by early 2006, in one of the technology and media
industry's most ambitious designs to reach TV viewers online. Yahoo Inc. (Research) and
Google Inc. (Research) threaten to bypass traditional media outlets by linking computer
users with TV shows online, striking partnerships with programmers or creating content
 11. On October 4, 2005, Google Inc. announces that it will promote Sun Microsystems
Inc.’s word processing and office software products in an alliance. As part of the
agreement, Sun will offer Google’s search toolbar with downloads of its free Java software,
which can run a variety of Web-based applications and work with multiple operating
systems. Analyze the benefits of building alliances according to the theory of cooperation
and compatibility.
Strategic Alliances, or alliance partnerships, happen when two or more entities come
together and share resources to achieve a common objective. A successful strategic
alliance is mutually beneficial, but what are some of these benefits?
Here’s a list of the top five.
1. You can get more clients.
As mentioned, if you form a strategic alliance partnership with a company that offers non-
competing services to the same audience, the chances are that both companies have
clients that need what the other can provide.
For example, if you are an accountant for an electrical contracting business they may ask
you about the best way to grow their revenue. If you are in alliance partnership with a
marketing agency, you are able to refer their services to your client, helping them and your
alliance partner.
In turn, the marketing agency refers you to one of their clients who is struggling to manage
their finances. Quid pro quo.
Your alliance partner’s clients are more likely to trust you because you’ve been
recommended by someone they already trust, and the potential for positive word-of-
mouth to spread from there is limitless.
2. Your customers will value you more.
As mentioned, when your alliance partnership is up and running you should be regularly
recommending the services of your partner to your clients and vice-versa.
This has an added benefit for your relationship with your customer. Not only are you
helping your alliance partner by referring them business, but the client being referred also
gets the impression that you genuinely care about their business and are trying to help
them grow any way you can.
This moves you beyond just a company they get a service from, and increases both trust
and customer loyalty. They’ll see you as being just as interested in growing their business as
you are your own. As a result, they will start to reciprocate.

3. Helping your customers grow helps you grow.

As your clients learn more and more from both partners in the alliance, they will start
seeing a positive effect on the bottom line of their business.
It’s only natural that when they begin to expand they have more of a need for your
services.
For example, if you are the HR representative for a company that is now hiring more staff
as a result of a growth in profits, you will get more work organising training and staff
wellbeing etc, which means more business for you!
4. It gives you an edge over competitors.
Your alliance partner’s clients are in need of your service, there’s no doubt about that.
The question is: who will provide it? If you are operating in a local area with many
competitors, having an alliance partner who is actively referring you to everyone they
come into contact with can help eliminate that competition and put you at the forefront
of your local marketplace.
It also helps to establish your reputation as a respected business if other businesses work
with you to provide clients with a service or information.

5. It increases your brand awareness.

Becoming an alliance partner with another company provides you with access to all of
their marketing channels.
This means that a lot more customers, clients and prospects will be aware of your
businesses and your services.
Even if this audience isn’t ready immediately to buy from you or use your services, the
fact that you are now in their brains means that the next time they do need your services,
yours should be the name they recall.
 12. SAN FRANCISCO, Nov. 13 ,2014- EBay is expected to announce Monday that it is ending
the fees it charges software developers who build Web sites and software programs that
channel buyers and sellers its way.The move could help eBay protect its dominance of online
auctioneering from an encroachment by Yahoo or Google. Analyze eBay’s strategies based on
theory of networks and positive feedback.
Positive feedback makes the strong get stronger and the weak get weaker, leading to
extreme outcomes.
Positive feedback is a process that occurs in a feedback loop in which the effects of a
small disturbance on a system include an increase in the magnitude of the
perturbation.[1] That is, A produces more of B which in turn produces more of A.[2] In
contrast, a system in which the results of a change act to reduce or counteract it
has negative feedback.

Google has been encouraging software developers to create online programs using Google
applications like Google Maps to entrench its applications as a dominant standard. Yahoo,
and more recently Microsoft with its Windows Live and Office Live initiatives, are adopting
a similar strategy, an approach known as Web services or Web 2.0.
Yahoo already maintains a marketplace that it has been enhancing. As Google and
Microsoft show increased interest in creating online marketplaces,
eBay needs to ensure that it stays at the center of e-commerce. Google, for instance, has
been filing patent applications for a system that would let individuals quickly create an
online classified ad for a product or service.
 1.Illustrating the cost characteristics of information goods, how these characteristics
affect firms' competitive pricing strategy.
The cost characteristics of information goods are as follow:
• Information is costly to produce but cheap to reproduce.
• Once the first copy of an information good has been produced, most costs are sunk and
cannot be recovered.
• Multiple copies can be produced at roughly constant per-unit costs.
• There are no natural capacity limits for additional copies.
Large up-front sunk costs, minimal capacity constraints, and low incremental cost allow for
only a few viable market structures. Understanding how your industry will shake out is
critical to formulating an effective long-run strategy.
These cost characteristics of information goods have significant implications for competitive
pricing strategy. The first and most important point is that markets for information will not,
and cannot, look like textbook-perfect competitive markets in which there are many
suppliers offering similar products, each lacking the ability to influence prices.
The high sunk cost, low marginal cost feature of information markets has significant
implications for the market structure of information industries. In the final analysis, there are
only two sustainable structures for an information market.
1. The dominant firm model may or may not produce the "best" product, but by virtue of its
size and scale economies it enjoys a cost advantage over its smaller rivals. Microsoft is
everyone's favorite example, since it controls the market for operating systems for desktop
computers.
2. In a differentiated product market we have a number of firms producing the same "kind" of
information, but with many different varieties. This is the most common market structure for
information goods: the publishing, film, television, and some software markets fit this model.
2.Illustrating the reasons why the firm might want to sell the information goods to group
rather than directly to end users
There are four reasons why you might want to sell to groups rather than directly to end
users:
Price sensitivity: If members of different groups systematically differ in their price
sensitivity, you can profitably offer them different prices. Student and senior citizen
discounts are prime examples.
Network effects: If the value to an individual depends on how many other members of his
group use the product, there will be value to standardizing on a single product. Microsoft
has exploited this desire for standardization with its Microsoft Office suite.
Lock-in: If an organization chooses to standardize on a particular product, it may be very
expensive for it to make the switch owing to the costs of coordination and retraining.
Again, Microsoft serves as the obvious example.
Sharing: In many cases it is inconvenient for the individual user to manage, or organize all
information goods that he or she will want to consume. Information intermediaries such
as libraries or system administrators can perform this coordination task.
3. Illustrating the basic principles for designing a product line of information goods.

Your profits will depend on both the total value you create for your customers and
the fraction of that value which you are able to extract through the fees you charge
for the information. To maximize your profits, you want to make the total value
created as large as possible and then extract as much of that value as you can. This
observation leads to the two basic principles for designing a product line of
information goods.

• Offer versions tailored to the needs of different customers. A full line of information
products will maximize the total value of the information you are providing.

• Design these versions to accentuate the needs of different groups of customers.

Emphasizing customer differences allows you to extract more of the value you have
created, as each cus- tomer selects the version that best meets his or her needs.

Economists call the second principle self-selection. You don't have to figure out what
value the customer puts on your information product, because the customer reveals that
value through the version that he or she selects.
 4. The firm can offer different versions to different groups, illustrating the dimensions
for versioning the information goods.
A firm can offer different versions of their products and services to different segments and
the key is to identify dimensions of your information product.The fact that different types
of customers value these dimensions differently is what provides the basis for successful
sorting. The dimensions are as follow:
Delay is a tried and true tactic for companies selling various services, not just information.
(stock market quotes as example)
User Interface: Another possibility is to provide high-paying customers with more
powerful search capabilities.
A versioning strategy that is closely related to delay is control of convenience by restricting
the time or place at which an information service is used.
Image Resloution: Professional users want high-resolution images that can be printed in
commercial journals; non-professionals want medium- or low-resolution image sfor
newsletters
Speed of operations: Intel followed much the same strategy with its 386SX chip, designing
the chip with an integrated mathematical coprocessor that was then disabled. That
allowed Intel to sell a low-priced chip to those who didn't need floating-point calculations
while still maintaining a relatively high price for the math-enabled CPU.
Flexibilty of use :Another important dimension of information that can form the basis for
versioning is the ability to store, duplicate, or print the information. Back in the days of copy-
protected software, some software companies (such as Borland) sold two versions of their
software—a low-priced version that could not be copied and a high-priced version without
the copyprotection.
Capability: The products are distinguished by the total size of the vocabulary included and
by the addition of vocabulary appropriate to specific professions.
Features and Functions: The Quicken Deluxe version offers a mutual fund finder, a
mortgage calculator, an insurance needs estimator, and other features valued by high-
powered users. The basic version of the software offers only the core checkbook software.
Comprehensiveness: In some cases, comprehensiveness is a crucial dimension: some
customers will pay a big premium for more complete information. Scholars and students
writing in-depth articles will place great value on historical depth. For marketing purposes,
managers often value information that is broken down by customer or offers lots of details
about historical purchasing patterns.
Annoyance: A prime example of this is "nagware," a form of shareware that is distributed
freely but displays a screen at the start or end of the session encouraging you to pay a
registration fee.
The final dimension that we consider is technical support. McAfee Associates, offers its
virus detection software in a free, shareware version or as part of a subscription service
that provides professional advice, notification, and technical support.
 5. The traditional protections offered by intellectual property law seem powerless to
deal with many of the issues raised by digital media Illustrating the impact of digital
technology on the management of intellectual property

Intellectual property comes in many forms, including patents, trademarks, copyright,

registered designs, knowhow, database rights and integrated circuit topography rights.

The digital community is well aware of the many forms of intellectual property and
successfully implements schemes to capture and protect them. For example, copyright has
long been a central pillar of protection for software code and many will know how to
identify and capture copyrighted code in a way that allows the copyright in it to be
successfully enforced.
Branding or building a community or franchise is also widely used in the digital field. In
this respect, trademarks are widely used to help protect the identities and values of many
entities from commercially successful products to open source communities.
Apart from trademark and copyright, intellectual property takes a variety of forms, many
of which are less well understood. For example, in Europe, design registration can be used
to protect visually appealing aspects of digital design, which is useful if you have devised a
great-looking user interface, games characters, icons, fonts, or indeed any product that
relies on graphic design or attractive visuals.
Then there is data – Clive Humby’s new oil. Database rights are among the lesser known
forms of intellectual property, but can be exceedingly valuable and could apply if there has
been a “substantial investment” in obtaining, verifying or presenting the contents of a
database.
Patents are among the better known forms of intellectual property. Patents can be
particularly beneficial because they can cover wide-ranging technical concepts, including
features of products and methods of making, installing and using.

Essentially, there are a number of mechanisms available to protect intellectual

property associated with digital innovation – and it is up to the innovators to
make sure that the results of their skill, investment and labour are protected.
Given the rapid speed of digital change, it is increasingly important to have a
strategy in place to make the most of your intellectual property.
 6. Copyright owners continue to be ambivalent about the Internet. On the one hand, it
represents a fantastic new medium for distribution; on the other, many in the publishing
industry see it as one "giant, out of control copying machine." Illustrating how the firms
can take advantage of digital technology and work for them.

Better Experiences
Customers will get a better experience. Their concerns will get addressed right away and in
real time. A traditional approach saw them getting a reply within a few days or weeks. It does
not bode well for business. Customers want their information instantly. We live in a world
where instant gratification is considered normal. People want their results right away.
Patience is a thing of the past. A digital firm like the one mentioned can provide this instant
gratification and more. Going digital means, you will get everything you need in real time.
The more you deliver real-time results, the more likely a customer is to stay with you. Studies
have shown that not getting information fast enough is a big factor in businesses losing their
customers. Which side of the fence would you want to be on?
Enhanced Brand Reputation and Development
These firms offer an enhanced brand reputation and development. Companies who use the
old and outdated approach tend not to have too many customers these days. Some
customers like the old-schoolfamiliarity. This old school approach works for them. Most
people want something new and exciting. They want to see the brand reinvented into
something tangible. It goes for the customer service experience as well.
.
Think of brand reputation and customer service in the vain of brick and mortar store.
Stores who still use the old 70’s fluorescent lighting are not going to have many customers.
Companies who use the technology of today will. We are in the year of 2017. Technology
sells. The old outdated customer service does not. Digital formats are a big part of the sell

More Streamlined Approach

Going digital means a company has a more streamlined approach. Digital technology and
formatting will take out the old and useless stuff. Technology like this presents everything in
a new light. Almost 60% of all businesses have found their failure to adapt their internal
processes to digital has led to some major losses. Many are still working with people on
their payroll who are no longer need.
Some view these people as family, but this comes at a price. Digital firm and formatting will
revamp everything, including old job posts that are no longer needed. When you can do
something for half the price, why would you keep using the same old formula?
Major Increase in Sales
Those who go digital and use these firms see a major increase in sales. Sales will go up by
at least 25% or more. Many companies have seen a higher market valuation. The last study
conducted showed this number at around 12% or more.
Keep More Customers in The Long Run
Back in the 70’s, 80’s and 90’s, these old formulas still worked. Ever since the onset of the
2000’s, customers see things differently. We are dealing with a new generation now. They
do not see things the way we do. Some of us still have old school ways of thinking. The new
generations do not want this.
They want to see something they can relate too. The more the can relate to what a
business is offering, the more likely they are to stay valued customers. Digital marketing
and the firms that offer these services are a big part of this movement.

Extend Your Brand to Other Places

Digital formatting allows you to extend your brand base to other places. You can tap
into social media platforms you would not be able to otherwise. A digital company can help
you do this. They have their pulse on what is going on. They will take your brand and plant
seeds in the proper channel. You cannot get this with some of the older, more traditional
marketing strategies. There are more options now.
More Robust Management Choices
These companies will allow you to make more robust management choices. This frees up
time for you to make other company choices. You may have to make some hiring and firing
choices. You may not have had the time due to logistics and company planning. Going digital
allows you to get back to making these choices.
Development Times
Your company is going to have speedier developmental times. It works out well for
companies looking to streamline their costs. When you free up time in one place, this
allows you to speed something in another place. Digital formatting will allow you to take a
product and develop it faster. You can still go through all the right channels, and it will not
be as long.
You can make faster decisions on which products need to move forward and which ones
need to be pushed back. This way you are not spending money on something that is not
ready yet. This is a big step up from how the more traditional marketing strategies
worked before. Companies were spending money on brands that were not ready and
never would be ready. Companies were spending more money than they had to or
needed to. Digital formatting and branding cut through all of this.

Are you convinced?

Call-to-Action.
Those who want the most cutting-
edge technology with digital branding need to
contact this company. They will help you out
with any problem you have. Very friendly. Very
reasonable. You are not going to get any better
than these people.
What are you waiting for?
7. Illustrating the primary economic patterns leading to lock-in and the impact of lock-
in on customers and market competition.
 Like path dependency, lock-in occurs in economics when an actor acts in a certain way
because it is more efficient when change costs are considered, although it may not be
efficient when change costs are not considered. Lock-in is generally viewed as a bad thing
because if change costs were negligible then actors could almost always act in ways that are
more efficient. Most schools of economics assume that change costs are reduced to 0 in the
long run.
Change costs include but are not limited to hiring and firing costs, transaction costs,
transportation costs, communication costs, other switching costs, even more switching costs,
and certain taxes and legal costs

Lock-in occurs in this market on two separate levels: the systemlevel and the
vendor level. Customers are certainly loathe to switch computers or operating
systems; they are locked into an IBM system. But they are also wary of
switching vendors for their systems manage- ment software; they are locked
into their software suppliers, too. Since this software is mission critical, the risks
in using a new vendor, espe- cially an unproven one, are substantial.
8. As the buyers, how to minimize lock-in and avoid monopoly exploitation

Buyer's ChecklistHere's a checklist of the items in our recommended

strategy for buyers facing lock-in:
•Bargain for initial sweeteners, such as discounts or support for switching
from your previous system.
• Don't be too anxious. Convey the impression that your benefits from
switching are small and the costs large.
• Depict yourself as an attractive customer down the road, because of
either your own future purchases or your ability to influence other
purchasers.
• Seek protection from monopolistic exploitation down the road, but
beware of vague promises offering such protection.
• Keep your options open via second sourcing. Partial switching is a way
to gain leverage in negotiation.•
• Watch out for creeping lock-in, and retain information about us- age
records.
 9.illustrating the difference between the old and new (digital) economies.

The economy is evolving and changing. The ubiquitous proliferation of technology and
social networks in all aspects of our global village is having a clear impact on the world’s
economy.

The manner of doing business was in large part based on the so-called net mentality.
Companies would cast as wide a net as possible and make it reach as far as possible with the
hope that they would catch as much metaphorical fish as possible. And that undoubtedly
worked. But it worked at a time when the channels for outreach to potential clients were
much more limited compared to 2018’s reality. Also, the consumer’s choices in business
offering services and products are far greater today. Another difference is the extreme
targeting of very specific niches which has never existed before. There are TV channels
dedicated specifically to children, golfers, foodies, fishermen and many more.
Compared to back in the day when there were a handful of channels on TV on which to run
ads. What about YouTube? It is comprised of literally millions of channels which could be used
to advertise any imaginable business.
There is a clear distinction between new and old economy. But what are the actual main
characteristic, meaning, and importance of the “new economy”? Mainstream media has left a
lot to be desired in providing an extensive answer to this question.
We could with confidence call the new economy a “collaboration economy”. The philosophy
of the new economy can be, albeit admittedly rather simplistically, summed up in the
equation “1+1=3”.
 It is all about connections and partnerships. Less emphasis is placed on competition and
more of cooperation. It is about learning that coexisting is not detrimental to business, on
the contrary, it can be beneficial.
At the core of every successful collaboration, you will find shared goals and values but also
skills which complement and supplement each other. The new economic model is open to
using this to its full advantage.
The new economy is also distinctly decentralised with different people or networks of people
handling different parts of a unit. Companies no longer feel obliged to run their own
department for each aspect of their business. They can co-curate with another company
which offers a specific service. Thus a network of specific services comes together as a living
puzzle.
The new economy is strongly characterized by an increased emphasis on delivering better
quality and having an impact on consumers. Those businesses which are thriving in the new
economic environment are the once who understand that the client wants goods and
services which raise their overall quality of life. Consumers are informed, connected and
inquisitive, with a tendency to begin putting their core values above creature comfort. They
want to know how their purchase will optimise and improve them long-term. That is part of
the reason why some giant companies are utilizing corporate social responsibility as a
marketing tool.
nother pillar for cooperation between businesses is the assertion of blockchain technology.
The future of information is decentralised. The new economy is favoring blockchain
technology for its agility of use and safety mechanism against malicious alteration of
information.
How does the “new economy” mentality compare to the old one?
It used to be that employees were more than happy to have a stable job and it was not
uncommon to spend your entire professional life with one employer. Hopping from
company to company was frowned upon. Working hours were clearly outlined as was the
distinction between work life and personal life and people left their job at their desk, rarely
bringing it home with them.
The new encourages the opposite professional behavior in many ways. Employees are
more than happy to change things up by switching companies when a better opportunity
presents itself. The work day is enhanced with a ping pong game in the break room or
pizza-lunch-brainstorming. Working hours get moved all over the place around in the span
of a 168 hours work week, do it on a Sunday morning if you have to as long as it gets done.
In the old economy it helped if you knew the right people but in the new economy, it would
be impossible to succeed if you don’t know them.
10.illustrating the direct externality, indirect externality and cross-group externality.

According to the examples given in the paper, direct externality results from, among other
things, unsolicited promotions, while the sources of indirect / consequential
externality are price discrimination, etc.
In this sense, the externality on the individuals (whose information is collected and used) is
deemed direct if the information about them is used directly back at them (in the form of
targeted advertising, for example). In contrast, indirect externality only occurs if the
individuals choose to engage in transactions with the firm which has (collected or
purchased) their information, and that these transactions make them vulnerable to price
discrimination, etc. In other words, externality of this second kind occurs consequently.

Relative sizes of cross"group externalities: If a member of group 1 exerts a

large positive externality on each member of group 2, then group 1 will be
targeted aggressively by platforms.
 11. illustrating the basic marketplace tactics when the firms are pursuing in a standards
battle
Preemption
Preemption is one of two crucial marketplace tactics that arise over and over again in
standards battles. The logic of preemption is straightforward: build an early lead, so
positive feedback works for you and against your rival. The same principle applies in
markets with strong learning-by-doing: the first firm to gain significant experience will
have lower costs and can pull even further ahead. Either way, the trick is to exploit
positive feedback. With learning-bydoing, the positive feedback is through lower costs.
With network externalities, the positive feedback comes on the demand side; the leader
offers a more valuable product or service. One way to preempt is simply to be first to
market. Product development and design skills can be critical to gaining a first-mover
advantage.
Expectations Management
The second key tactic in standards wars is the management of expectations.
Expectations are a major factor in consumer decisions about whether or not to
purchase a new technology, so make sure that you do your best to manage those
expectations. Just as incumbents will try to knock down the viability of new
technologies that emerge, so will those very entrants strive to establish credibility.
Vaporware is a classic tactic aimed at infiuencing expectations: announce an
upcoming product so as to freeze your rival's sales. The most direct way to manage
expectations is by assembling allies and by making grand claims about your
product's current or future popularity.
12 illustrating the unpleasant surprises that firms operating in information technology
businesses commonly face
7. Illustrating the primary economic patterns leading to lock-in and the impact of lock-in
on customers and market competition.

Primary economic patterns like long term contract with vendors, persistence of recession,
strong vendor relationships, monopolization of vendor market, etc lead to vendor lockin
and customer cannot easily switch to newer vendors.
This leads to limited innovation for customers, high cost and high prices, high customer
switching behaviour, lower customer loyalty and hence derails market competition as
players tend to offer better products and services with lpwer rates and higher quality to
steal away customers.

12 illustrating the unpleasant surprises that firms operating in information technology

businesses commonly face
There are numerous unpleasant surprises for the firms operating in information technology.
The advanced information technology may attract thieves and hackers to get the access to
the data of the firm especially on the identities. The data may consist of the personal data of
the firm’s managements, bank records, the intellectual properties, client information, vendor
information and many more. The thieves may sell the data to the competitor firms or
distribute the firm's data to the internet or use the data to destroy the images of the firm.
 5.In the research, Viard studied several hundred AT&T telephone contracts for big 800-
number users. He traced the history since 1993 to 2003 and saw that after portability, a
regulation made in ’93 allowing customers to take their numbers with them even if
switched their telephone service providers, the cost of 800-numbers fell. How to recognize
the lock-in and its impact on competition.
This lock-in was largely due to low switching costs as customer wanted to keep their 800
series by switching to new vendors but due to low switching costs and elimination of
penalties and various levies which could be refunded, customers switched easily and hence
the competition gained traction and various players offered competitive rates leading to
very intense competitive market.
13. SAN FRANCISCO, Nov. 13, 2005. EBay is expected to announce Monday that it is ending the
fees it charges software developers who build Web sites and software programs that channel
buyers and sellers its way. "We hope to encourage new ideas and accelerate the growth of our
developer and affiliate communities," said Greg Isaacs, director of the eBay developers
program. Analyze the eBay’s strategy using the theory of network externality.
Ebay is waving off the fees it charged to software developers who build the websites and
software programs that channel buyers and sellers its way. With the waving off the charges, it
will be more profitable for software developers to build websites. Network externality is that
when the consumer base changes or increased from the previous consumer base when the
waving off the fees was not there. This happens because not only the software developers, but
also others associated with the software developers will be able to accrue benefits from the
waving off the charges.
3.Yahoo said people who subscribe to the download service on a monthly basis will see
their memberships increase from $6.99 per month to $11.99 per month. Portal company
Yahoo Inc. ( Nasdaq: YHOO - news) informed customers of its subscription music
download service that it will increase pricing for users who transfer their tunes onto
portable devices or CDs. Explain yahoo’s pricing strategy
Answer: this is lock-in pricing strategy.
This is the strategy where price are kept very low initially (cheaper than market price,
$6.99). Such low price attracts customers. Customers are locked in. Once the business gets
lots of customers who are used to with the product, the business increases the price
suddenly at very high rate (may be just double, $11.99). The business hopes that the
existing customers should not leave because they become almost addicted using the
product; therefore, rising price increases business profit.

5.In the research, Viard studied several hundred AT&T telephone contracts for big 800-
number users. He traced the history since 1993 to 2003 and saw that after portability,
a regulation made in ’93 allowing customers to take their numbers with them even if
switched their telephone service providers, the cost of 800-numbers fell. How to
recognize the lock-in and its impact on competition.
This lock-in was largely due to low switching costs as customer wanted to keep their 800
series by switching to new vendors but due to low switching costs and elimination of
penalties and various levies which could be refunded, customers switched easily and
hence the competition gained traction and various players offered competitive rates
leading to very intense competitive market.
6. SAN FRANCISCO, Nov. 13, 2005. EBay is expected to announce Monday that it is ending
the fees it charges software developers who build Web sites and software programs that
channel buyers and sellers its way. "We hope to encourage new ideas and accelerate the
growth of our developer and affiliate communities," said Greg Isaacs, director of the eBay
developers program. Analyze the eBay’s strategy using the theory of network externality.
Ebay is waving off the fees it charged to software developers who build the websites and
software programs that channel buyers and sellers its way. With the waving off the charges,
it will be more profitable for software developers to build websites. Network externality is
that when the consumer base changes or increased from the previous consumer base when
the waving off the fees was not there. This happens because not only the software
developers, but also others associated with the software developers will be able to accrue
benefits from the waving off the charges.
7. The issue is that whether or not the government should mandate inventors, authors to
register their work to get protection from the law. Obviously, patent and copyright laws
have some benefits but they also have some drawbacks
The government should mandate inventors and authors or register their work to get
protection from the law as due to non copyright and patent a person can misuse or name the
invention of his and the original inventor may have to suffer loss due to this . The protection
provides justice and records are maintained according to registration of work which easily
clarifies the originality of the inventor . Whereas with such parents and copyrights
government can also generate income which can be used in the welfare of the society and
thus benefitting both the inventor and the society .
Every function consists of drawbacks but the benefits of registration increases the inventors
credibility and helps in minimizing cheat and loss to it. Therefore by mandatory registration
such problems can be avoided .