1. When two incompatible technologies compete in marketplace, one usually becomes the dominant standard and the other fades away. Using the notion of network effects, discuss two reasons why such a winner-take-all market emerges. If you were the inventor of a new social networking website called FriendSpace, what would be two strategies if you would adopt to get network effects working in your favor and against the market leader, Facebook?
2. Sticksoft Corp., a hypothetical cement manufacturer wants to diversify into the hotels business because it has available cash reserves and its managers want to counter emerging threats due to a downturn in the cement market. Evaluate if Sticksoft has a compelling reason to enter the hotels industry. Also identify a better business for Sticksoft to diversify into and discuss why. Besides diversifying, what else can Sticksoft do with its surplus cash to help its shareholders manage their risks of investing in the cement business?