RC Passage: VHS

  
Time 0 0 : 0 0 : 0 0

Traditionally, the first firm to commercialize a new technology has benefited from the unique opportunity to shape product definitions, forcing followers to adapt to a standard or invest in an unproven alternative. Today, however, the largest payoffs may go to companies that lead in developing integrated approaches for successful mass production and distribution. 

Producers of the Beta format for videocassette recorders (VCRs), for example, were first to develop the VCR commercially in 1975, but producers of the rival VHS (Video Home System) format proved to be more successful at forming strategic alliances with other producers and distributors to manufacture and market their VCR format. Seeking to maintain exclusive control over VCR distribution, Beta producers were reluctant to form such alliances and eventually lost ground to VHS in the competition for the global VCR market. 

Despite Beta's substantial technological head start and the fact that VHS was neither technically better nor cheaper than Beta, developers of VHS quickly turned a slight early lead in sales into a dominant position. Strategic alignments with producers of prerecorded tapes reinforced the VHS advantage. The perception among consumers that prerecorded tapes were more available in VHS format further expanded VHS's share of the market. By the end of the 1980s, Beta was no longer in production.

According to the passage, today's successful firms, unlike successful firms in the past, may earn the greatest profits by

(A)

investing in research to produce cheaper versions of existing technology

(B)

being the first to market a competing technology

(C)

adapting rapidly to a technological standard previously set by a competing firm

(D)

establishing technological leadership in order to shape product definitions in advance of competing firms

(E)

emphasizing the development of methods for the mass production and distribution of a new technology

GMATTM is a registered trademark of the Graduate Management Admission CouncilTM. The Graduate Management Admission CouncilTM does not endorse, nor is it affiliated in any way with the owner or any content of this web site.