focus on the Entry / Exit decisions

Discussion 1:

There are two (maybe three?) inter-related entry decisions that Phillips is considering - the CD pressing plant, the CD player and the CD technology itself.

1. Regarding the technology question, we know what the outcome is because we are told at the beginning of Part B. But let's spend some time thinking through WHY Phillips opted for the route they took.In particular, if you are Phillips in 1979 what are the advantages of "going it alone" with a proprietary technology?What are the advantages of pushing for an industry standard? What insight does our discussion of the past two weeks lend us on why the issue was resolved as it was?

Note: we will re-visit this discussion using game theory & repeated interactions next week

1. What sort of market structure do you predict for the CD player and disc-pressing industries?Where will Phillips' profits in these markets come from?
2. Chapter 6 discusses the actions of incumbents as well as entrants. One idea that is critical to this case is the idea of "first mover" advantages or disadvantages. The first mover becomes the incumbent, right? Outline the advantages and disadvantages of Phillips being the first mover in
   1. The CD technology
   2. Building a CD pressing plant in the US
3. There's quite a bit of discussion on pricing decisions - how should Phillips price its players and discs? Are there opportunities to earn greater profits by tying the prices of the two goods now that the decision on standardization has been made? Chapter 6 discusses various pricing strategies to deter or delay entrance. Make sure to consider if Phillips pricing should or might follow one of these strategies.
4. As we've discussed and as chapter 6 highlights, uncertainty can play a key role in how a firm ultimately decides. What are the key sources of uncertainty in this market(s)? What about timing of decisions? How critical a role does that play in these decisions and can Phillips about mitigating these risks?