Roku: Examined in Terms of Knee's Competitive Advantage
Roku refers to a particular form of device known as a set-top box or streaming device which allows your television to be connected to Internet video. Roku is a device which allows Internet video to be played on one's television: this gadget has been relevant as a result of recent years: "The technology to bring Internet video to TV has been around since the 1990s, but until the past few years, it didn't have much impact because there wasn't much Internet video worth watching. Now nearly all mainstream movies and TV shows are available on Internet services like Amazon Instant Video, Apple's iTunes Store, Google Play, and Netflix. You can also stream music with services like Pandora, iHeartRadio, and Spotify."
Roku is one of these devices that competes among others available and which needs an Internet connection of a minimum of 1.5 megabits per second and can generally connect to WiFi networks. Roku allows you to stream with a remote: there are free channels available along with some which require a monthly subscription fee. Roku allows the user to search across major video-on-demand channels, allowing one to find a show which might be cheaper on other channels.
When examining the phenomenon of Roku in terms of Knee's theory of competitive advantage, it becomes clear that Roku has both advantages and disadvantages in this regard. Knee first introduces the concept of economies of scale when it comes to the theory of competitive advantage. Economies of scale refer simply to the ability to do things more effectively with increasing size or the speed of a given operation. Economies of scale generally co-exist with fixed capital, thus, lowering the per unit of production as the design capacity is able to bolster forward: thus with a form of retail distribution of Roku, this means that increasing the speed of operations and the rate at which orders are completed means that both the cost of fixed and working capital both become lowered. One of the major advantages and part of the appeal of Roku is the fact that it allows individuals to enjoy a fixed cost. This is a major competitive advantage of the service at large and is a major reason why so many people consider using Roku (or a comparable service). Customers state often that they generally start to resent paying for cable when there are so many channels that they never watch. The fixed cost of Roku is a one- time payment which covers the cost of the box, as opposed to the continuing cost of cable. Even so, Roku has struggled to gain access to more American homes, despite this major and overwhelming benefit.
One thing that Knee describes in terms of competitive advantage that Roku can only share a small part of is the phenomenon of "network effect." In this manner, "the term network effect refers to businesses where the number of customers in itself increases the value of the service provided. An iconic example of a network effects business is eBay. The more users, the more attractive eBay is as a destination to list items for sale, the more attractive eBay is as a place to go shopping. Before the Internet, classified sections of dominant newspapers exhibited the same characteristics.
While this is not actually the situation with Roku, there is a point of overlap. Because Roku has some pretty formidable competitors such as Apple and Amazon, increased popularity does have a type of network effect in that the bolstered popularity means that the more popular Roku is, the more likely it is that consumers will view it as valuable. Being the favorite of the majority means that the perceived value of the device is raised.
Thus, the traditional network effect dictates that the more users a service or item possesses, the more valuable it is to all participants. The increased popularity of Roku in this regard means that the value and the perceived worth is increased, which can also cause a boost in the items overall popularity.
Thus, while an individual user won't have a foreseeable increased benefit from more users as the network effect is more palpable on eBay, there will in fact be an element of imagined increased value: the popularity of Roku will make it seem more valuable and beneficial to the average user, thus, making the overall experience seem more positive, even if this is just occurring within the mental state of the person. Engaging in more discussions and frank conversations with one's customers or one's target market can help one to illuminate the perceived value of the product.
This is important because the perceived value of the item is the maximum of what a customer is willing to pay for it; thus it would be in the best interest of Roku or really any company to bolster the perceived value as much as possible, within reason.
Very simply, the phrase "Customer Captivity" refers to the process by which customers are connected to the service or product. Knee refers to strong connections as "addictions" but that is just a direct way of saying that the more a customer is connected to an item, the higher the level of captivity. Ultimately, customer captivity is connected to habit, something that Roku will be able to build up with increased use throughout homes in America just naturally: "Habit is instilled and reinforced over time, and the more frequent and regular the usage, the more automatic the purchasing behavior, the more ingrained the habit becomes.
There's no searching costs when using Roku, and the switching cost would be incurred if one wanted to stop using Roku and move to a new device, such as Apple TV. The additional costs incurred are for paying for channels and services which are available on Roku, but which aren't free.
When it comes to cost, the markets aren't as attached to ingenious ideas. Proprietary cost refers to investing in a rapidly changing environment and receiving a patent, as Knee explains it. This is not relevant when it comes to Roku.
Considering the add-on costs for the user is essential when it comes to pricing Roku. "Even assuming you do Netflix, Hulu and Amazon Prime, you'll be paying roughly $35 in monthly fees, plus whatever you rent (although you shouldn't need to if you've got the three above). Add in the cost of the box, and you'll probably have it paid for within two to three months."
One of the corollaries of these costs and savings is that they will make live broadcast much tougher to access, one of the more profound downsides of Roku in general. However, aside from trouble accessing live broadcasts, the rest of what's available in terms of Internet shows and channels is accessible and waiting to be used on Roku. Government protection and guidance is generally a non-issue here.
Roku has a harder time at establishing a more competitive advantage because of the notion of worth and the nature of its competitors. Apple and Amazon have already had decades to establish their worth and trust with their consumers; in that sense Roku is like the new kid on the block, attempting to establish value and trust with a consumer base that has never heard of them.
Part of the manner in which Roku will be able to maintain a higher competitive value is by increasing their perceived value as much as possible: this connects to the issue of performance, reliability, benefit and ease of access.
Bannon, A.L. Can Roku Save You Money? Retrieved from Quibly.com, 2013.
Provides a brief overview of what Roku is, how it works and what it has to offer customers, particularly in comparison with similar products and looks at the issue of price with Roku.
Finne, S. The Retail Value Chain. Philadelphia, Kogan Page Publishers, 2009.
This book takes a look at the history of the retail value chain and the history of established and perceived value in the consumer market.
Knee, J.A. The Curse of the Mogul. New York: Portfolio, 2009.
This book examines the age of Big Media and the myth that content is king. The authors make a new compelling argument of how to judge the success and growth of a company via the consistency of generating superior profits and works to debunk the myth of the mogul.
Leonard, B. Connecting America. New York: DIANE Publishing, 2010.
This book provides a strong overview as to how Roku fits into the international broadband plan in America.
Ojugo, C. Practical Food and Beverage Cost Control. Clifton Park, Cengage Learning.
This book looks at the costs connected primarily to food and beverages but also provides strong background for the relationship between popularity and price and the perceived value of a product.
Oliver, R.L. Satisfaction: A Behavioral Perspective on the Consumer. Armonk, Sharpe Publishing, 2010.
This text looks at the connection between the causes and consequences of consumer satisfaction and behavior, while applying those findings…