BU415 Chapter Notes - Chapter 4: Whatsapp, Network Effect, Videotelephony
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(cid:862)value is t(cid:455)pi(cid:272)all(cid:455) fou(cid:374)d i(cid:374) s(cid:272)a(cid:396)(cid:272)it(cid:455) a(cid:374)d the hea(cid:396) of (cid:271)usi(cid:374)ess st(cid:396)ateg(cid:455) is a(cid:271)out (cid:271)ei(cid:374)g u(cid:374)i(cid:395)ue i(cid:374) a positi(cid:448)e (cid:449)a(cid:455). (cid:863) The usage of a networked product goes up our willingness to pay for it goes up as well. Networked product = whatsapp, instagram, skype, etc. Physical networks = nodes of the network are connected by physical links. Virtual networks = connection b/w network nodes is invisible/intangible; nodes are usually people. Size still matters larger network = more valuable. Positive feedback - self-reinforcing mechanism by which the strong gets stronger and the weak gets weaker. Simply means that the process is self-reinforcing, not that it is beneficial. The weak will get weaker unless they are able to find a profitable niche or create differentiation. Negative feedback - here, the strong gets weaker, and the weak gets stronger: past a certain size, the dominant firm encounters difficulties that limit further growth.
