Competitive Strategy 413video distributers, Blockbuster and Netflix, and major retailers such as Best
Buy and Wal-Mart to its side. The final tipping point was persuading Warner
Bros., the leading video distributer, to release its features exclusively in Blu-
ray.^5 With an overwhelming critical mass of studios, distributers and retailers,
the Sony group had effectively claimed the upper-left equilibrium in Table 10.4.
Fortunately, mutual advantage is a strong force behind the emergence of com-
mon standards. Twenty years ago, there existed a plethora of operating systems in
the emerging personal computer market. Today Microsoft Windows is the domi-
nant standard (85 percent market share). More generally, the world has moved
toward a number of common standards: metric measurement, left-hand-steering
automobiles, and common principles of international law. (Obviously, countries
retain different languages, currencies, customs, and laws, even though English, the
U.S. dollar, and most recently the euro serve as de facto, partial standards.)
Competitive situations such as that embodied in Table 10.4 are ubiquitous.
(Standards setting is but one example.) In fact, they commonly are referred to
under the label “battle of the sexes.” In that domestic version, husband and
wife must decide whether to attend a ball game or the ballet on a given night.
Each strongly prefers the other’s company to attending an event alone. The
two equilibria have husband and wife making the same choice. But which
choice? The wife prefers that they both attend the ball game; the husband
prefers the ballet. Based on past experience, we will not hazard a guess as to the
outcome of the domestic discussion and negotiations. The general point is that
the battle of the sexes is a model applicable to any bargaining situation.Though it has had its ups and down, your company released its breakthrough
product in 2007, a smartphone that combines calling, media playing, and
Internet connectivity. A year later came the launch of your online store where
users can download tens of thousands of “apps”—applications software
enabling the smartphone to do almost anything from playing games to navi-
gating via GPS. You are Steve Jobs, your company is Apple, and the break-
through product is the iPhone.
Apple’s longtime strategic formula has been: “If you build a far better prod-
uct, they will pay.” Accordingly Apple launched the iPhone at a premium price,
and has steadily rolled out improved models (including the iPhone 5) over its
first four years. Besides enjoying spectacular sales and a significant first-mover
advantage, Apple wields strict control over the platform—producing the iPhone
handset itself, specifying allowable “app” interfaces, approving apps, partnering
exclusively with cellular provider AT&T until belatedly adding Verizon as a carrier.
In short, Apple tightly controls the iPhone’s integrated hardware and software.(^5) This account is based on D. Leiberman, “Is the Tug of War over High-Def DVD Format Over?” USA
Today,February 15, 2008, p. 1B; B. Barnes, “Warner Backs Blu-ray, Tilting DVD Battle,” The New York
Times, January 5, 2008, p. B1; and S. McBride, P. Dvorak, and K. Kelly, “Industry Tries Again to
Reach Agreement on New DVD Format,” The Wall Street Journal,April 15, 2005, p. A1.
The Platform
Wars Continue
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