Halmstad University

Strategic Innovation Management II

VCR Industry - Technology Strategy

- Case study

Group 4
Rosa (Naijing) Du,
Mohamed Mekki,
Samer Al-Mimar
Kalyani Pillalamarri
Termination Date: 16.10.2015
Technical Project Management and Business Administration

Contents
1. Introduction: ..................................................................................................................... 2
1.1 Overview: ................................................................................................................................................................................ 2
1.2 Market Overview: ................................................................................................................................................................ 2
2. Technology Innovation Timeline: ...................................................................................... 3
3. Cost Performance Ratio: ................................................................................................... 3
4. Technology tree ................................................................................................................. 4
4.1 Former Technology: ............................................................................................................................................................ 4
4.2 Dominant Technology: ....................................................................................................................................................... 5
4.3 Prospective Technology: .................................................................................................................................................... 5
5. Transilience map ............................................................................................................... 5
6. Product Life Cycle: ............................................................................................................ 6
6.1 Introduction Stage: ............................................................................................................................................................... 6
6.2 Growth Stage: ........................................................................................................................................................................ 7
6.3 Maturity Stage: ...................................................................................................................................................................... 7
6.4 Decline Stage: ........................................................................................................................................................................ 7
7. S-Curve .............................................................................................................................. 7
8. Six successful factors: ........................................................................................................ 8
8.1 Ampex - One of the losers ............................................................................................................................................... 8
8.2 JVC - One of the winners ................................................................................................................................................. 9
9. Egg models: ....................................................................................................................... 9
9.1 Ampex Egg model: .............................................................................................................................................................. 9
9.2 JVC Egg Model: ................................................................................................................................................................ 10
10. Conclusion ..................................................................................................................... 11

1. Introduction:
The document analyzes birth of Videocassette Recording industry, which is the major
development in the technological pioneering commercial opportunity. Though there are many
companies who started the business, only three Japanese became the pioneers in VCR industry
for two decades.

1.1 Overview:
In 1950, the evolution of technology took place and it is called as videotape recorder (VTR).
This technical work took place in the laboratories of RCA and Ampex in USA and Toshiba in
Japan but they did not launch the product of competitors. Meanwhile, Toshiba developed
prototype video recorder and developed a device called Helical Scanner and filed a patent for
the product in 1954. In 1956, Ampex launched VTR into the market and had good competitors.
To compete the competitors, Ampex developed VCR. Many rivals were soon introduced while
major of them are Japanese Companies and later they became the pioneers this industry.

1.2 Market Overview:

Year

Description

1953

Matsushita owned 50% of JVC

1956

The first commercial VTR was booming and it priced $50,000.

1962

The first VTR product PV-100 has launched by Sony.

1971

Sony launched new version U-Matic that priced$1000.

1974

Except Sony, other companies (JVC, Matsushita and RCA) declined

to adopt the Beta format.

1977

Seven other Japanese firms started marketing VCRs under the Sony
license

1978

Worldwide consumer demand passed a million unit levels.

1976-1981

The unit is doubled during these five years.

Mid 1980s

Demand exceeded to 30 million.

1984

Demand has been reduced from 80% to 57%.

2. Technology Innovation Timeline:

1951 Toshiba developed Helical Scanner.
1956 Ampex developed Transverse Scanner.
1958 Sony and JVC became technical leaders using Ampex model.
1960 Two headed helical VTR design was announced by JVC.
1961 Transistorized VTR announced by Sony.
1964 First commercial VTR announced by Matsushita.
1970 Matsushita, JVC and Sony emerged and became the pioneers in the industry.
1971 U-Matic by Sony.
1975 - The first Betamax model has been offered by Sony.
1976 JVC developed VHS for 2 hours tape.

3. Cost Performance Ratio:

We try to illustrate in the graph about the cost performance of the types of innovation. The
product innovation exists in various stages continuously. In the first stage of innovation, we can
see several product changes starting from the initial stage American companies (AMPEX &
RCA) and TOSHIBA from japan was the pioneers in VCR industry. Later in the radical

innovation stage MATSUSHITA, SONY and JVC became the pioneer in the industry and
successful and succeeded in marketing the products. This development continued to U-Matic and
Betamax products till the VHS and now a days the DVD, CD, blue ray, flash player, micro SD
chip, amazon fire TV stick and many more technologies in the micro radical innovation stage.
We also noticed that the commercial prices declined gradually from $50,000 to $1000, which is a
radical and micro radical innovation phase according to the wide use and competitors.

4. Technology tree
The intention to innovate VTR, VCR and other similar products is to play audio, video and used
as a storage device to store the content. In the above tree, we bring to the notice about the former
technology, dominant technology and prospective technology.

4.1 Former Technology:

Helical Scanner is the former technology in the industry by Ampex, Toshiba and RCA. The
commercial video recorder is implemented into the market is Transverse Scanner. Ampex on
refusing patent rights to JVC, JVC worked on two-headed helical scanner. Ampex continued its
work on transistorized scanner and developed the product into the market successfully. While
Sony closely followed by JVC and Matsushita and launched inch videocassette recorder. In
1972, inch tape was implemented from JVC but recorded for only one hour and had a poor

picture. Sony with the help of U-Matic modified to Betamax as a standardized model but others
denied the model (JVC, Matsushita). Later, the two companies came out with VHS format.

4.2 Dominant Technology:

Optical video recording and laser disc was invented by David Paul Greg and implemented by
Philips in 1990s and have the patent rights. On the other hand VHS was developed by JVC in
1970s.

4.3 Prospective Technology:

During the 1990s innovation of VCD because dominant to the market, it was surprise to replace
the cassette with CD which create new segment.Later on it was developed to DVD which has
larger capacity and better software. The product was sold largely all around the world including
audio and video materials.
Later on the Blu-ray or Blu-ray Disc (BD, BRD) appear in market that is a digital optical disc
data storage format. It was designed to supersede the DVD format, in that it is capable of storing
high-definition video resolution (1080p). Also customers can store and play to video online.
After a while the storage chips appear, which is storage device to keep the data, the data can be
anything with soft format.
Finally the Fire stick invention appear, which is a device connected to the Internet can play video
and music from different sources.

5. Transilience map
Niche innovations:
VHS Format standard, JVC (1976)
Transistorized VTR, Sony (1961)

Architectural innovations:
Helical Scanner, Toshiba (1954)
Transverse scanners, Ampex (1956)

Regular innovations:
Two-head VTR, JVC (1960)
inch tape models, Sony (1965)
3-head helical scanner, Toshiba (1974)
One-inch models, Ampex (1965)

Revolutionary innovations:
Betamax standards, Sony (1975)
U-matic format standards, Sony (1971)

RCA and Ampex in the United States and Toshiba in Japan are the video pioneers who have
invented new technology and opened new market, they invented architectural innovations such
as: Helical Scanner (Toshiba 1954) and Transverse scanners (Ampex 1956). They had
recognized the possibility that video recording technology could be developed to serve a mass
market, but all the three organizations didnt plan to grab that opportunity. At the same time,

JVC, Sony, and Matsushita had been stimulated by the inventive and commercial successes of
the other rivals; soon they pursued this opportunity and began pioneering technical efforts of
their own. The VHS format standard invented by JVC and Transistorized VTR invented by Sony
are the niche innovations, which focus on new market and have the same technologies by
reducing machine size, cost and tape consumption to increase the sales and target different
customers. There are also some regular innovations such as two-head VTR (JVC 1960), inch
tape models (Sony 1965), 3-head helical scanner (Toshiba 1974) and one-inch models (Ampex
1965) that have same market and same technologies but some slight modification in the process
or operation of product. JVC, Sony, and Matsushita grabbed the opportunity and dominated the
mass market that modified the problems that first entrances had met and developed their product
to focused on mass market. They also invented products for instance Betamax standards (Sony
1975) and U-matic format standards (Sony 1971) with new technologies to serve the same
market, which are revolutionary innovation that have revolution in the all the industry and
manufactures.

6. Product Life Cycle:

The above graph shown the fourth stages of the product life cycle development:

6.1 Introduction Stage:

This is the hardest stage for a company launching a new product especially if there is a
competitor in the market for many reasons, if the market will accept this product or not? And the
cost of researches and development of that product versus the sales. American companies
RCA/Ampex and Toshiba from japan considered as the first pioneers who entered the market in
the introduction stage by inventing the helical scanner also in this stage RCA (through crosslicense with Ampex) and Toshiba (in a Joint venture with Ampex) also became important
suppliers of VTRs for Use in broadcast studios.

6.2 Growth Stage:

At this stage Sony, JVC and Matsushita evolved by starting doing research to launched their
products in the market , for example JVC (VHS) and Sony (U-Matic). In the stage the challenge
about the sales and the profit and how the company can benefit from the profit to improve and
develop its products.

6.3 Maturity Stage:

During this stage the most important things for firms is to increase their market segmentations
and maintain their growth and sales in the industry.in the VCR industry case the American can't
keep up the competition with the Japanese companies beside this the Japanese made a lot of
development and improvement in the products.

6.4 Decline Stage:

At his stage the market becomes saturated, most of the customers purchased the products or other
competitor's products, so to avoid the decline and make some profits companies can reduce their
cost even in production or operation. The VCR industry demand was reduced from 80% to 57%
within 5 years after reached 30 million units/year and other products like the DVD or CD
destroyed VCR industry.

7. S-Curve

S-Curve is a model to analyze technology innovation in regard to VCR industry, there exists four
major stages of innovation: Starting, Developing, Maturity, and Discontinuity.
In 1990, Optical video recording, VHS and laserdisc was invented by David Paul Greg and
implemented by Philips were the existing technologies. Compared to optical video recording,
VHS and laserdisc, VCD, CD and DVD are the new technologies, Blu-ray or Blu-ray Disc (BD,
BRD) appear in market which is a digital optical disc data storage format were newer
technologies.

In the beginning of existing technology such as optical video recording, VHS and laserdisc,
companies have to sacrifice more cost of development to achieve less improvement. Because the
technology, designs and products are completely new, it requires more efforts to find out the
dominant designs or products and compete with rivals. For example, the Ampex had cost long
period time and resource to invent Transverse scanners. In the development process, compared to
the starting process, same efforts will reach more achievement or improvement, the dominant
designs or products cause the rapid growth when the technology innovations are gradually
accepted by mass market. Such as JVC (VHS) and Sony (U-Matic). When it comes to maturity,
products have been completely accepted by the public and have matured. Meanwhile, the
products become gradually standardized and the products are less unique and customized. For
instance, the Sonys Betamax and U-matic format became the standards for the VCR industry;
all the manufacturers have started to adapt these formats. In the discontinuity part, after a product
has reached maturity it runs that risk of being discontinued by newer technologies, VCD, CD and
DVD are the new technologies and Blu-ray or Blu-ray Disc (BD, BRD) newer technologies.

8. Six successful factors:

8.1 Ampex - One of the losers
1. Business Focus

Change the business to other profitable business as they considered.

No focus in the VCR market in the evolution stages.

2. Adaptability
Stop competing with the Japanese.

Top management they not believe in the engineers and the financial crisis lead them to leave
the industry.
Lost the competition with the Japanese companies in commercializing the products.
3. Organizational Cohesion
The do well in the production stage but stopped development as mentioned before to do other
business like audio products, computer peripherals and magnetic recorders.
4. Entrepreneurial Culture
Not available at all after succeed in the production phase, being pioneers at the first doesnt
mean you are the winner.
The top management focused in selling the existing bulky products which create a monopoly
in the market.
5. Sense of Integrity

Lack of top management focus and support lead the engineers to dont deliver the expected
results in time.
6. ''Hands-on'' Top Management

Due to the lack of support from the top management to the engineers and product
development AMPEX failed after being first in the industry.

8.2 JVC - One of the winners

1. Business Focus

Commercializing the product for the mass market.

Continuous developing.
2. Adaptability

Top management always close to the engineers and monitoring the development.
3. Organizational Cohesion

Good organizational structure.

Developing VHS instead of BETAMAX.

4. Entrepreneurial Culture

Good Management Focus in commercializing the products.

Launching the VHS with better quality and cost more than BETAMAX.
5. Sense of Integrity

The top management play a vital role in JVC product development and their believe in the
engineers.
6. Hands on Top Management

Top management and Governmental agencies (MITI) continuous support.

Continuous development .

9. Egg models:
9.1 Ampex Egg model:
Ampex is the first electronic company in the market who implemented VTR design. In early
1962, Ampex is able to produce 75% of television recorders in the consumer market. The
decided to reduce on VTR revenues and concentrated on consumer audio production, computer
peripheral. The company gave more importance and their top priority to studio equipment market.
But soon new pioneers emerge in the market and Ampex could not sustain in the market. Three
Japanese companies Madsushita, JVC and Sony concentrated on new applications of consumer
electronics. Soon the three companies became the pioneers in the technology.

9.2 JVC Egg Model:

JVC Japanese Company, like Sony aiming at the market for many years. JVC in secret on VHS
and soon adapted U-Matic standard for the audio-visual market and launched a new R&D project
after five years. JVC is the first to announce the design of a two-headed VTR with 20 engineers
from NHK Yuma Shiraishi, the manager. The company is the first to market its product with
little tape as less as possible with low picture quality. The companys first prototype used inch
tape which recorded only for one hour with poor picture quality. The company had a good
management skills and implemented new ideas into the technology and concentrated on the
consumers interests and modified the technical difficulties and solved the issues with matrix as a
roadmap for the project and used to get top management.

10. Conclusion
Why Japanese companies made success in the market? The Japanese government has been very
supportive which led to the development of VCR industry in Japan and make it a profitable one.
Meanwhile the American companies make the first entrance but they didnt develop themselves
or maybe found it difficult to launch the product into the market, also the American companies
could underestimate the Japanese, on the same American doesnt want to share information with
others.
The oil crises and Vietnam War exhausted the US economy which could be one of the reason
why American drift away from the market. Also the Ampex high cost of the machine reach to
50,000 USD. One other reason could be low labor cost in Far East or the American had a lot of
fun with drugs and alcohol during 1970s.
After a technology becomes mature, the products become gradually standardized and the
products are less unique and customized.
What lesion learned? Development always Management
Development and innovation always the key factor in each industry, with VCR industry it
doesnt matter to be the first into the market but the first to innovation and develop the product.
Although from JVC we should learn the managing skills are foremost important and leads to the
success. Relying on particular standardized model the company leads to better procedure in the
innovation world.