Recently, Toshiba has announced that it will stop developing HD DVD products and will drop out of the high-definition DVD market.  This was due to several recent changes in the market, mainly the decisions of several large media companies such as Walmart and Netflix to abandon HD for Blu-ray.  This situation is analogous to that of a network where two nodes (Toshiba’s HD DVD and Sony’s Blu-ray) carry the bulk of the power in the entire network.  In an ideal situation, both companies should start out with the same market available to them and thus the same number of customers.  However, as time goes on and the market is further developed, many of the customers will begin to prefer one product over another.  As one product gains more customers, the other product will have fewer options as to who they may sell their product to.

In this case, one of the reasons Toshiba is losing the war is because they did not manage to develop well in European and Asian markets.  Because they do not have as many potential consumers, they played the price card in an effort to keep up with Sony.  Unfortunately, in many cases, this may have caused them to lose money rather than increase their profit.  Dropping out of the high definition DVD market may have serious future setbacks for Toshiba, as the high definition format will quickly take momentum and render the older DVD format out-dated.

As can be seen from this recent development within the high definition DVD market, developing connections with a wide spectrum of markets can be much more important that simply selling their product at a lower price.  A larger market of potential consumers means more power in the industry.

http://www.cnn.com/2008/BUSINESS/02/19/toshiba.hdd/