Question

Format wars such as Blu-ray versus HD have been waged for decades. Give other examples of this type of competition and suggest what the firm's management needs to consider when the firm invests resources related to a new format.  

Answer 1

A format war happens when 2 mutually incompatible versions of the same tech compete against each other in the market and almost in every case one of them stands out in the end, completely destroying the other. They are usually common in audio/video tech, digital media, or computers, and one of the most legendary format wars was for electricity.

Some other examples of format wars are:

Betamax vs VHS

Sony's Betamax appeared in 1975. They had better picture quality but only recorded about 60 mins of video. They had a more stable image and colour superiority. But when JVC launched VHS, their tapes held twice the content of Betamax and were also cheaper.

Other wars include Standard vs Russian railroad Gauges, AC vs DC Current.

In General, a firm's management needs to consider the following things before they invest resources in a new format:

• Is it better for the company to rely on existing technology or invent an entirely new one? What will be the costs associated with it?
• Does the new tech give any added benefit to the consumer?
• What is the cost-benefit analysis from the Consumer and Producer viewpoint?
• What will be the likely demand for this tech and how far can it be sustained?
• What is the threat of competitors copying the same?