Strategies to Fight Ad-sponsored Rivals

Ramon  Casadesus-Masanell; Feng  Zhu

Abstract

We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed-business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.

Citation:

Casadesus-Masanell, Ramon, and Feng Zhu. "Strategies to Fight Ad-sponsored Rivals." Management Science 56, no. 9 (September 2010): 1484–1499.

More from these Authors

Supplement | HBS Case Collection | October 2019

Airbus vs. Boeing (G): The Dreamliner Takes to the Skies (2011)

Ramon Casadesus-Masanell and Karen Elterman

This case describes the first commercial flight of Boeing's 787 Dreamliner in 2011, three years after originally planned, as well as the first commercial flight of Airbus's superjumbo, the A380, in 2007. It also describes the companies' current endeavors in 2011, including Airbus's work on the A350 and A320neo and Boeing's development of the 737 MAX

Keywords: Product Development; Air Transportation; Projects; Competition; Air Transportation Industry; Manufacturing Industry;

Citation:
Casadesus-Masanell, Ramon, and Karen Elterman. "Airbus vs. Boeing (G): The Dreamliner Takes to the Skies (2011)." Harvard Business School Supplement 720-382, October 2019. View Details

Cite View Details Related
Supplement | HBS Case Collection | October 2019

Airbus vs. Boeing (H): Wing Cracks and Battery Fires (2013)

Ramon Casadesus-Masanell and Karen Elterman

This case describes an issue with the batteries of Boeing’s 787 Dreamliner planes overheating and sometimes catching fire in 2013. The planes were grounded for several months until Boeing introduced new safety measures. The case also discusses a problem with cracks on the wings of Airbus’s A380 superjumbo, which required the company to make a costly fix to a particular wing component.

Keywords: Product Development; Air Transportation; Projects; Competition; Safety; Manufacturing Industry; Air Transportation Industry; United States; Europe;

Citation:
Casadesus-Masanell, Ramon, and Karen Elterman. "Airbus vs. Boeing (H): Wing Cracks and Battery Fires (2013)." Harvard Business School Supplement 720-383, October 2019. View Details

Cite View Details Related
Supplement | HBS Case Collection | October 2019

Airbus vs. Boeing (I): Airbus Introduces the A350 (2015)

Ramon Casadesus-Masanell and Karen Elterman

This case describes the introduction of Airbus’s A350XWB (Xtra Wide Body) in 2015. It also describes Airbus and Boeing’s current endeavors in 2015, including Airbus’s development of the A330neo, Boeing’s work on the 737 MAX, and Boeing’s announcement of the 777X.

Keywords: Manufacturing Industry; Air Transportation Industry;

Citation:
Casadesus-Masanell, Ramon, and Karen Elterman. "Airbus vs. Boeing (I): Airbus Introduces the A350 (2015)." Harvard Business School Supplement 720-384, October 2019. View Details

Cite View Details Related

Faculty & Research

Strategies to Fight Ad-sponsored Rivals

Abstract

Citation:

About the Authors

More from these Authors