Philips' Compact Disc Introduction (A)

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Case

Reference no. 9-792-035

Subject category: Strategy and General Management

Authors: Anita McGahan (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1991

Version: 26 November 1993

Length: 17 pages

Data source: Field research

Topics: Licensing; Computers; Innovation; Pricing strategy; Strategy formulation

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Abstract

Asks that students adopt the perspective of Philips in 1979, after technical development of the CD was complete, but three years before it was introduced commercially. At that time, Philips'' management had to decide whether to attempt to establish a CD standard through an alliance with another consumer electronics firm. Raises questions regarding the costs and benefits of standardization, optimal pricing of CD players and discs (given their complementarity), optimal pricing of a durable good, and the effects of proprietary information on entry strategies. Also requires analysis of several related industries, with special attention to opportunities to invest in product-specific capital.

Location:

Netherlands

Other setting(s):

1979