Halmstad University Strategic Innovation Management II

VCR Industry - Technology Strategy

- Case study

Group 4 Rosa (Naijing) Du,

Mohamed Mekki,

Samer Al-Mimar

Kalyani Pillalamarri

Termination Date: 16.10.2015

Technical Project Management and Business Administration

Contents 1. Introduction:  .....................................................................................................................  2  1.1 Overview:  ................................................................................................................................................................................  2  1.2 Market Overview:  ................................................................................................................................................................  2  

2. Technology Innovation Timeline:  ......................................................................................  3  

3. Cost Performance Ratio:  ...................................................................................................  3  

4. Technology tree  .................................................................................................................  4  4.1 Former Technology:  ............................................................................................................................................................  4  4.2 Dominant Technology:  .......................................................................................................................................................  5  4.3 Prospective Technology:  ....................................................................................................................................................  5  

5. Transilience map  ...............................................................................................................  5  

6. Product Life Cycle:  ............................................................................................................  6  6.1 Introduction Stage:  ...............................................................................................................................................................  6  6.2 Growth Stage:  ........................................................................................................................................................................  7  6.3 Maturity Stage:  ......................................................................................................................................................................  7  6.4 Decline Stage:  ........................................................................................................................................................................  7  

7. S-Curve  ..............................................................................................................................  7  

8. Six successful factors:  ........................................................................................................  8  8.1 Ampex - One of the loser’s  ...............................................................................................................................................  8  8.2 JVC - One of the winner’s  .................................................................................................................................................  9  

9. Egg models:  .......................................................................................................................  9  9.1 Ampex Egg model:  ..............................................................................................................................................................  9  9.2 JVC Egg Model:  ................................................................................................................................................................  10  

10. Conclusion  .....................................................................................................................  11  

 

1. Introduction: The document analyzes birth of Videocassette Recording industry, which is the major development in the technological pioneering commercial opportunity. Though there are many companies who started the business, only three Japanese became the pioneers in VCR industry for two decades.

1.1 Overview: In 1950, the evolution of technology took place and it is called as videotape recorder (VTR). This technical work took place in the laboratories of RCA and Ampex in USA and Toshiba in Japan but they did not launch the product of competitors. Meanwhile, Toshiba developed prototype video recorder and developed a device called “Helical Scanner” and filed a patent for the product in 1954. In 1956, Ampex launched VTR into the market and had good competitors. To compete the competitors, Ampex developed VCR. Many rivals were soon introduced while major of them are Japanese Companies and later they became the pioneers this industry.

1.2 Market Overview: Year Description

1953 Matsushita owned 50% of JVC

1956 The first commercial VTR was booming and it priced $50,000.

1962 The first VTR product PV-100 has launched by Sony.

1971 Sony launched new version “U-Matic” that priced$1000.

1974 Except Sony, other companies (JVC, Matsushita and RCA) declined to adopt the Beta format.

1977 Seven other Japanese firms started marketing VCR’s under the Sony license

1978 Worldwide consumer demand passed a million unit levels.

1976-1981 The unit is doubled during these five years.

Mid 1980’s Demand exceeded to 30 million.

1984 Demand has been reduced from 80% to 57%.

2. Technology Innovation Timeline: 1951 – Toshiba developed ‘Helical Scanner’. 1956 – Ampex developed ‘Transverse Scanner’. 1958 – Sony and JVC became technical leaders using Ampex model. 1960 – ‘Two headed helical VTR” design was announced by JVC. 1961 – ‘Transistorized VTR” announced by Sony. 1964 – First commercial VTR announced by Matsushita. 1970 – Matsushita, JVC and Sony emerged and became the pioneers in the industry. 1971 – U-Matic by Sony. 1975 - The first “Betamax” model has been offered by Sony. 1976 – JVC developed VHS for 2 hours tape.

3. Cost Performance Ratio:

We try to illustrate in the graph about the cost performance of the types of innovation. The product innovation exists in various stages continuously. In the first stage of innovation, we can see several product changes starting from the initial stage American companies (AMPEX & RCA) and TOSHIBA from japan was the pioneers in VCR industry. Later in the radical

innovation stage MATSUSHITA, SONY and JVC became the pioneer in the industry and successful and succeeded in marketing the products. This development continued to U-Matic and Betamax products till the VHS and now a days the DVD, CD, blue ray, flash player, micro SD chip, amazon fire TV stick and many more technologies in the micro radical innovation stage. We also noticed that the commercial prices declined gradually from $50,000 to $1000, which is a radical and micro radical innovation phase according to the wide use and competitors.

4. Technology tree The intention to innovate VTR, VCR and other similar products is to play audio, video and used as a storage device to store the content. In the above tree, we bring to the notice about the former technology, dominant technology and prospective technology.

4.1 Former Technology: ‘Helical Scanner’ is the former technology in the industry by Ampex, Toshiba and RCA. The commercial video recorder is implemented into the market is ‘Transverse Scanner’. Ampex on refusing patent rights to JVC, JVC worked on two-headed helical scanner. Ampex continued its work on transistorized scanner and developed the product into the market successfully. While Sony closely followed by JVC and Matsushita and launched ¾ inch videocassette recorder. In 1972, ½ inch tape was implemented from JVC but recorded for only one hour and had a poor

picture. Sony with the help of U-Matic modified to Betamax as a standardized model but others denied the model (JVC, Matsushita). Later, the two companies came out with VHS format.

4.2 Dominant Technology: Optical video recording and laser disc was invented by David Paul Greg and implemented by Philips in 1990’s and have the patent rights. On the other hand VHS was developed by JVC in 1970’s.

4.3 Prospective Technology: During the 1990s innovation of VCD because dominant to the market, it was surprise to replace the cassette with CD which create new segment.Later on it was developed to DVD which has larger capacity and better software. The product was sold largely all around the world including audio and video materials. Later on the Blu-ray or Blu-ray Disc (BD, BRD) appear in market that is a digital optical disc data storage format. It was designed to supersede the DVD format, in that it is capable of storing high-definition video resolution (1080p). Also customers can store and play to video online. After a while the storage chips appear, which is storage device to keep the data, the data can be anything with soft format. Finally the Fire stick invention appear, which is a device connected to the Internet can play video and music from different sources.

5. Transilience map Niche innovations: VHS Format standard, JVC (1976) Transistorized VTR, Sony (1961)

Architectural innovations: Helical Scanner, Toshiba (1954) Transverse scanners, Ampex (1956)

Regular innovations: Two-head VTR, JVC (1960) ½ inch tape models, Sony (1965) 3-head helical scanner, Toshiba (1974) One-inch models, Ampex (1965)

Revolutionary innovations: Betamax standards, Sony (1975) U-matic format standards, Sony (1971)

RCA and Ampex in the United States and Toshiba in Japan are the video pioneers who have invented new technology and opened new market, they invented architectural innovations such as: Helical Scanner (Toshiba 1954) and Transverse scanners (Ampex 1956). They had recognized the possibility that video recording technology could be developed to serve a mass market, but all the three organizations didn’t plan to grab that opportunity. At the same time,

JVC, Sony, and Matsushita had been stimulated by the inventive and commercial successes of the other rivals; soon they pursued this opportunity and began pioneering technical efforts of their own. The VHS format standard invented by JVC and Transistorized VTR invented by Sony are the niche innovations, which focus on new market and have the same technologies by reducing machine size, cost and tape consumption to increase the sales and target different customers. There are also some regular innovations such as two-head VTR (JVC 1960), ½ inch tape models (Sony 1965), 3-head helical scanner (Toshiba 1974) and one-inch models (Ampex 1965) that have same market and same technologies but some slight modification in the process or operation of product. JVC, Sony, and Matsushita grabbed the opportunity and dominated the mass market that modified the problems that first entrances had met and developed their product to focused on mass market. They also invented products for instance Betamax standards (Sony 1975) and U-matic format standards (Sony 1971) with new technologies to serve the same market, which are revolutionary innovation that have revolution in the all the industry and manufactures.

6. Product Life Cycle:

The above graph shown the fourth stages of the product life cycle development:

6.1 Introduction Stage: This is the hardest stage for a company launching a new product especially if there is a competitor in the market for many reasons, if the market will accept this product or not? And the cost of researches and development of that product versus the sales. American companies RCA/Ampex and Toshiba from japan considered as the first pioneers who entered the market in the introduction stage by inventing the helical scanner also in this stage RCA (through cross-license with Ampex) and Toshiba (in a Joint venture with Ampex) also became important suppliers of VTRs for Use in broadcast studios.

6.2 Growth Stage: At this stage Sony, JVC and Matsushita evolved by starting doing research to launched their products in the market , for example JVC (VHS) and Sony (U-Matic). In the stage the challenge about the sales and the profit and how the company can benefit from the profit to improve and develop its products.

6.3 Maturity Stage: During this stage the most important things for firms is to increase their market segmentations and maintain their growth and sales in the industry.in the VCR industry case the American can't keep up the competition with the Japanese companies beside this the Japanese made a lot of development and improvement in the products.

6.4 Decline Stage: At his stage the market becomes saturated, most of the customers purchased the products or other competitor's products, so to avoid the decline and make some profits companies can reduce their cost even in production or operation. The VCR industry demand was reduced from 80% to 57% within 5 years after reached 30 million units/year and other products like the DVD or CD destroyed VCR industry.

7. S-Curve

S-Curve is a model to analyze technology innovation in regard to VCR industry, there exists four major stages of innovation: Starting, Developing, Maturity, and Discontinuity. In 1990, Optical video recording, VHS and laserdisc was invented by David Paul Greg and implemented by Philips were the existing technologies. Compared to optical video recording, VHS and laserdisc, VCD, CD and DVD are the new technologies, Blu-ray or Blu-ray Disc (BD, BRD) appear in market which is a digital optical disc data storage format were newer technologies.

In the beginning of existing technology such as optical video recording, VHS and laserdisc, companies have to sacrifice more cost of development to achieve less improvement. Because the technology, designs and products are completely new, it requires more efforts to find out the dominant designs or products and compete with rivals. For example, the Ampex had cost long period time and resource to invent Transverse scanners. In the development process, compared to the starting process, same efforts will reach more achievement or improvement, the dominant designs or products cause the rapid growth when the technology innovations are gradually accepted by mass market. Such as JVC (VHS) and Sony (U-Matic). When it comes to maturity, products have been completely accepted by the public and have matured. Meanwhile, the products become gradually standardized and the products are less unique and customized. For instance, the Sony’s Betamax and U-matic format became the standards for the VCR industry; all the manufacturers have started to adapt these formats. In the discontinuity part, after a product has reached maturity it runs that risk of being discontinued by newer technologies, VCD, CD and DVD are the new technologies and Blu-ray or Blu-ray Disc (BD, BRD) newer technologies.

8. Six successful factors: 8.1 Ampex - One of the loser’s 1. Business Focus · Change the business to other profitable business as they considered. · No focus in the VCR market in the evolution stages. 2. Adaptability · Stop competing with the Japanese. · Top management they not believe in the engineers and the financial crisis lead them to leave the industry. · Lost the competition with the Japanese companies in commercializing the products. 3. Organizational Cohesion · The do well in the production stage but stopped development as mentioned before to do other business like audio products, computer peripherals and magnetic recorders. 4. Entrepreneurial Culture · Not available at all after succeed in the production phase, being pioneers at the first doesn’t mean you are the winner. · The top management focused in selling the existing bulky products which create a monopoly in the market. 5. Sense of Integrity · Lack of top management focus and support lead the engineers to don’t deliver the expected results in time. 6. ''Hands-on'' Top Management · Due to the lack of support from the top management to the engineers and product development AMPEX failed after being first in the industry.

8.2 JVC - One of the winner’s 1. Business Focus · Commercializing the product for the mass market. · Continuous developing. 2. Adaptability · Top management always close to the engineers and monitoring the development. 3. Organizational Cohesion · Good organizational structure. · Developing VHS instead of BETAMAX. 4. Entrepreneurial Culture · Good Management Focus in commercializing the products. · Launching the VHS with better quality and cost more than BETAMAX. 5. Sense of Integrity · The top management play a vital role in JVC product development and their believe in the engineers. 6. Hands on Top Management · Top management and Governmental agencies (MITI) continuous support. · Continuous development .

9. Egg models: 9.1 Ampex Egg model: Ampex is the first electronic company in the market who implemented VTR design. In early 1962, Ampex is able to produce 75% of television recorders in the consumer market. The decided to reduce on VTR revenues and concentrated on consumer audio production, computer peripheral. The company gave more importance and their top priority to studio equipment market. But soon new pioneers emerge in the market and Ampex could not sustain in the market. Three Japanese companies Madsushita, JVC and Sony concentrated on new applications of consumer electronics. Soon the three companies became the pioneers in the technology.

9.2 JVC Egg Model: JVC Japanese Company, like Sony aiming at the market for many years. JVC in secret on VHS and soon adapted U-Matic standard for the audio-visual market and launched a new R&D project after five years. JVC is the first to announce the design of a two-headed VTR with 20 engineers from NHK Yuma Shiraishi, the manager. The company is the first to market its product with little tape as less as possible with low picture quality. The company’s first prototype used ½ inch tape which recorded only for one hour with poor picture quality. The company had a good management skills and implemented new ideas into the technology and concentrated on the consumers interests and modified the technical difficulties and solved the issues with matrix as a roadmap for the project and used to get top management.

10. Conclusion Why Japanese companies made success in the market? The Japanese government has been very supportive which led to the development of VCR industry in Japan and make it a profitable one. Meanwhile the American companies make the first entrance but they didn’t develop themselves or maybe found it difficult to launch the product into the market, also the American companies could underestimate the Japanese, on the same American doesn’t want to share information with others. The oil crises and Vietnam War exhausted the US economy which could be one of the reason why American drift away from the market. Also the Ampex high cost of the machine reach to 50,000 USD. One other reason could be low labor cost in Far East or the American had a lot of fun with drugs and alcohol during 1970s. After a technology becomes mature, the products become gradually standardized and the products are less unique and customized. What lesion learned? Development always Management Development and innovation always the key factor in each industry, with VCR industry it doesn’t matter to be the first into the market but the first to innovation and develop the product. Although from JVC we should learn the managing skills are foremost important and leads to the success. Relying on particular standardized model the company leads to better procedure in the innovation world.