The Birth of the VCR Industry (case analysis)

This case looks at the efforts of six companies to become pioneers of VCR technology over a span of twenty thirty years; the six companies being RCA, Ampex, JVC, Matsushita, Sony and Toshiba. JVC Sony and Matsushita succeed in the 1970s and were the big winners in the VCR race where the others failed. The success of these three companies was based on Learning and on Strategic Clarity and Consistency. When the Strategic Management of Technology is discussed the focus comes down in the end to innovation, that is when and how to best introduce a novel product to a market. And for those purposes the timing of market entry, product positioning and organization of production and distribution. After that a company can either be a pioneer of a technology or it can be a follower. What this case shows that neither promises that the company will be a success in the end. In the 1950s RCA, Ampex and Toshiba were all to develop a practical videotape recorder. Ampex was the first to succeed and their product took the market by storm. A few years later RCA and Toshiba also followed in suit. All three companies did not consider that the VTR could be made commercial for a mass market. They did not keep up pace. When JVC, Sony and Toshiba saw the success of the other three companies they then embarked on programs of technical development and commercial enterprise so as to develop their own competing products which they had ready when the VCR market opened up to the massed in 1975. This new industry yielded billions of dollars for its participants in the mid 1980s. Sony first started by introducing its betamax in 1975. JVC then introduced the rival VHS system in 1976. By 1977 seven other Japanese firms had licensed from Sony and JVC. By the mid 80s demand was 30 million units annually. In the 1970s all six companies had access to the technologies required to design a VCR for the mass market. Ampex withdrew from the race because it had suffered heavy losses in other businesses and was in financial crisis. RCA had come up with an excellent design but their management wasnt of taking that design all the way upto mass manufacturing. Toshiba had partnered up with Ampex but Ampex had withdrawn. Without Ampex Toshiba entered late into the game and was behind on technology. They introduced their 3 head design in 1974 and a second generation in 1976 but it wasnt cost effective and they had to withdraw from the market. Matsushita suffered serious drawbacks when its tape and cartridge designs failed and therefore it had to cut down on employment drastically but the main core of engineers was kept intact which were then used in 1976 to produce VHS based VCRs. Sony worked on different prototypes and designs simultaneously to produce the perfect model spending upto 18 months. They developed their betamx technology this way and tried to get other firms to follow it. JVC focused on R&D to develop their own VCR which they wanted to sell for less than $500 and which used as little tape as possible. They also were working on a new format known as Video Home System. Once this was released it was also adapted by Matsushita. Therefore due to these efforts by the late 1970s and early 1980s Matsushita, Sony and JVC were quickly able to produce VCRs for commercial mass production. Altough Ampex, RCA and Toshiba were the technology leaders in the 1960s they were only able to profit modestly and hence they were not that successful in the end. One of the key reasons why the Matsushita, Sony and JVC were so successful is that they were managed by technically sound people at the top. Upper management understood the entire engineering

and design process. This was not the case with Ampex and RCA and hence one of the reason why they werent successful. The three Japanese companies were able to succeed because they availed the window of opportunity. They harnessed their competitive advantage which was created by the timing of their decision to pioneer, their choice of direction of development and the skill applied to manage the learning process that ensues. Hence they were able to heavily profit with the commercial success of the VCR.