T207 1st EditionLecture 2Outline of Last Lecture I. Distribution of Signal or Media in TelecommunicationsII. Basic TelecommunicationsIII. Miscellaneous TelecommunicationsIV. Internet TelecommunicationsOutline of Current Lecture V. Basic Business Brief TipsVI. Telegraph: History & Business ModelCurrent Lecture- Basic Business Brief Tipso The Company’s Business Model Profits=Revenues-Costs Does it change over the course of time? Does it require complimentary goods?- Example: Xbox console and gameso The Competitors Direct vs. indirect Degree of substitutability Each competitor will have different strategieso Customers(the real battleground) Demographics Psychographics- Culture, attitude, style, values, beliefs, etc.- Previous purchaseso The Legal Issues Intellectual property- Patents, copyrights, trademarks, trade secrets, etc. Competition regulation- Some markets have to be regulated Torts- Privacy, publicity, product consequences, etc.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o The Cultural Issues Attitudes towards products and competitor’s products Cultural integration Cultural consequences Example: For Facebook the 55+ demographic is growingo The Technological Issues Evolution of product- Cost dynamics- Functionality and quality Adoption patterns Complimentary products- Their evolution- Telegraph: History & Business Modelo Could only send stuff by Pony Express, postal service, and trains Could only send via normal transportation mode News was costly With the telegraph messages could be sent at the speed of lighto Needed other things to be successful before the telegraph could take off Batteries had to be invented first There was a growing knowledge of electricity and things through wireso Samuel Morse took 5 years to really get the telegraph polished Started to try and make it known by attempting to convince the US government to fund it After 3 years they funded 40 miles of these wireso To Function? Needs interconnected wires Value is dependent on the cost of sending it in a traditional way vs. using this new wayo Important Definitions Externality-a cost or benefit that results from an activity or transaction and that affects an otherwise uninvolved party who did not choose to incur that cost or benefit- Example: a company doesn’t pay for the negative outputs o Putting regulations on it causes them to internalize what they are doing- Can have both positive and negative externalities Network effect-the effect that one user of a good or service has on the value of that product to other people- When present the value of a product or service is dependent on the number of others using it Economies of scale-the cost advantages that enterprises obtain due to size, with cost perunit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as wello Telegraph Business Model Competitors- US postal service was its main competitoro Wasn’t bound by any sort of issues like the telegraph was o Cheaper to send messages via the postal service even though it took longero Everyone was already using the postal service and transportation was increasing Customers- Military- Newspapers- Bankso Transmitted loan and stock numbers- Businesseso They were all growingo Lowered coordination costso Regional companies started popping up Legal, Cultural, and Technological Issues- Patento Used it to control the rollout of technologyo When it was up, companies started popping up- There was no interconnectibilityo People weren’t sure if messages were being delivered properly- Larger telegraph companies started to buy up the smaller oneso Economies of scale took placeo Western Union Rose up in the North Did great business during the Civil War Anywhere troops went they set up wire lines Southern Telegraph companies started to fail- The telegraph technology was increasingo It was getting more efficiento Natural Monopoly in telegraph Western Union entered into exclusivity agreements Made a partner in the associated press Early abuse of market powerso Exclusivity of news was part of the telegraph And later the associated presso Patent was granted in 1840 Western Union achieved national monopoly in 1866o No antitrust regulation at this time The telegraph necessitates the rise of competition