The Advantages Of Proprietary Products Over Open Source Products

1498 words - 6 pages

1. There are several advantages to proprietary products over open source products: better quality control issues in creating products; a firmer control over the licensing, either the technology the product is based on or what material (music in this case) can be used with the proprietary device; the potential to build brand loyalty (for example Sony memory cards only work in their products, if you’ve already bought these cards you could be more likely to purchase additional Sony products in the future); pricing – companies could possibly charge a premium price for their proprietary products as there could be few to no competitors in a specific market space; vertical markets (if Sony is providing the device, memory card and music the majority of revenues are staying in-house); and proprietary products could potentially create barriers to entry.

I think a benefit to the proprietary product model is either when a company is the first entrant into a new market or if a company is introducing a product that is incredibly more innovative than any other competitor’s product being sold in the marketplace. A proprietary device will allow the company to better control all aspects of the marketing chain: pricing, promotion, product and promotion to further ensure the viability of the product as a new entrant.

Could this force the company to continuous innovate to prevent the products from entering a mature market? You have to give the customers reason to upgrade. I think that is why Apple has been so successful – by releasing an updated proprietary product every year (iPhone and iPod). This strategy has allowed them to stay ahead of their competitors, forcing the competitors to chase them and also continuously bring new products to the market. I could envision this causing their competitors to have increased costs of trying to match Apple’s technology and continue to bring new products to the market – possibly before the old product has paid off for the firm.

c. I think it depends on the consulting firm’s market segment. A consulting firm needs to actively market its consultants’ expertise to attract clients. One form of promoting said expertise is by publishing journal articles and contributing to published books. This disclosure of “intellectual property” will position the consulting firm’s consultants as subject matter experts on a particular topic. One assumes that potential clients will read these publications and seek out this particular consulting firm due to the particular level of expertise their consultants demonstrate. The inherent risk is that competitors would also have access to this material and can co-opt this knowledge to improve their own consulting services and knowledge base.

Alternatively, there are benefits to keeping your intellectual property behind your corporate firewall, as it would be difficult for the competitors to know your corporate strategy and the expertise you were potentially providing to clients. The...

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