This article develops a framework, including a 2 × 2 matrix, to help guide firms in deciding when to design their products to be integral, modular-in-production, modular-in-use with a focus on selling cartridges, or modular-in-use with a focus on promoting numerous apps. Three key factors are as follows: the level of user heterogeneity, the disparity across components in frequency of updating, and the modularity/integrality penalty.
Revenue-sharing contracts have been heavily researched and promoted in the academic literature. However, despite some well-documented examples (e.g., the way Blockbuster and film studios were able to increase availability of the latest video releases in rental shops through a revenue-sharing contract), they seem to be much less prevalent in practice. A possible reason for this gap between theory and practice is that most academic research has focused on two-party contracts involving only one buyer and one supplier, while in reality, most supply chains consist of multiple stages. When there are several stages in the chain--as is the case for many extended, global supply chains--the traditional revenue-sharing contract is no longer optimal for the two contracting parties, as every other participant in the chain is able to leverage the revenue-sharing contract to its own advantage. Put another way, a revenue sharing contract between only two parties is not incentive-compatible across all participants. Accordingly, we suggest that a revenue-sharing contract should involve all the supply chain partners, and propose a spanning revenue-sharing contract that accomplishes coordination and incentive-compatibility across the same.
The transistor has been called the most important invention of the 20th century because it is the basic building block for microprocessors and other integrated circuits. Over 20 years ago, Intel founders Noyce and Moore predicted continued exponential growth of the electronics industry, based on industry's ability to make cheaper and smaller transistors at a learning rate of 70%. The case traces what has since happened, comparing and contrasting the learning rate for transistors with that for automobiles, and exploring which form of Moore's Law holds for Intel's chips and for DRAM. Students should get a feel for how learning curve principles might be useful in setting company strategy or predicting industry growth.
Sun's strategy is to identify 2-3 key leading edge differentiators for its products and standardize elsewhere, leading it to outsource the bulk of its manufacturing. Issues surrounding this strategy include: 1) selecting responsibilities within the purchasing function; 2) organizing and assigning responsibilities within the purchasing function; 3) developing long-term relationships with suppliers; and 4) developing management tools that appropriately motivate suppliers. In particular, the "Scorecard" that Sun uses as a supplier management tool is presented.