MIS Exam 2 Review

MIS Exam 2 Review - Chapter 6 Understanding Network Effects...

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MIS 301 Exam 2 Study Guide Chapter 6: “Understanding Network Effects” Terms: Backward compatibility - The ability to take advantage of complementary products developed for a prior generation of technology. Blue Ocean strategy- An approach where firms seek to create and compete in uncontested “blue ocean” market spaces, rather than competing in spaces and ways that have attracted many, similar rivals Complementary benefits- Products and services that add additional value to the network, and add value to existing products to provide complementary benefits Examples: Xbox Games only for Xbox (Halo), “How-to” Books, Software add-ons, even labor. iPod for Apple has brought many complementary goods - different speakers, docking stations, and even car manufacturers that allow iPods to be accessed through the navigation system. Convergence- When two or more markets, once considered distinctly separate, begin to offer features and capabilities. As an example: the markets for mobile phones and media players are converging. Congestion effects- When increasing numbers of users lower the value of a product or service. Exchange- Every product/service subject to network effects fosters some kind of exchange. Wiki-Software: enables people to build an encyclopedia-like website Firms that leverage technology: movies, music, money , video games, computer games refers to the extent of the network that you can connect to Feedback Loops Positive feedback loops 1 Example: The bigger the network, the more developers want in, the more people want to use the applications. Negative feedback loop- the output of the system acts to oppose changes in the input of the system Network effects- Also known as Metcalfe’s Law, or network externalities. When the value of a product or service increases as its number of users expands. Metcalfe’s Law states that the value of a network grows with the square of the number of users. Value = (Users)^2 Increase barriers to entry a new entrant needs to have more technological functionality than the recumbent’s switching costs, complementary products, exchange, and technological functionality Oligopoly- A market dominated by a small number of powerful sellers.
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MIS 301 Exam 2 Study Guide One-sided market- Derive most value from single class of users AIM: IM users attract other IM users Platform- Products and services that encourage others to offer complementary goods Allow for development and integration of software products and other complementary goods Allowing other firms to contribute to your platform can be a brilliant strategy - those firms spend their time and money to enhance your offerings! Ex: Windows, the iPhone, the Wii and the standards that allow users to create Facebook
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This note was uploaded on 03/08/2015 for the course MIS 301 taught by Professor Mccleod during the Fall '08 term at University of Texas.

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MIS Exam 2 Review - Chapter 6 Understanding Network Effects...

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