1. Segment Zero Rev: Sep, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH

2. Contents 1Segment Zero 2Pareto Principle and Long tail 3Real Application in Market

3. 3 Segment Zero (1/2) ■Segment Zero –Definition: Low-end market requiring low-end technology –Stated by Andrew Grove in an Winter 1999 Leader to Leader Journal ■Technology Improvement & Customer Requirements –Customers expect to have products with better performance –Over time, technologies improve faster than the expectations of the mass market

4. 4 Segment Zero (2/2) ■Rebuilding the Segment Pyramids (Intel) The Way It Was Small population, High margins Narrower & More profitable PC costing less than $1,000 Huge population, Low margins Someone requiring a low performance, limited features and application was never included Intel’s market The Way It Is “Segment Zero” Segment Zero has been neglected  Low-end versions of the technology can earn margins

5. 5 Pareto Principle and Long Tail ■Pareto Principle –Suggested by a business-management consultant Joseph Juran –Named after an Italian economist Vilfredo Pareto He observed in 1906 that 80% of the land in Italy was owned by 20% of the population He developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas –80-20 rule, Law of the vital few, Principle of factor sparsity –For many events, roughly 80% of the effects come from 20% of causes ■Long Tail –Large number of occurrences far from the "head“ or central part of a distribution of popularities –Popularized by Chris Anderson in an October 2004 Wired magazine article –20% of a population which draws long tail in the graph expression of the Pareto Principle –Intention to ignore the long tail  Economic meaning the long tail has

6. 6 Real Application in Market – Segment Zero ■Galaxy Families (2011) S2 LTE Y W M Pro Low-End CPU: 823Mhz ~ 1.4GHz Single Core Network: HSPA+ Display: 2.66’~3.7’ TFT LCD Camera: 2~5 million pixel Ram: 512MB~1GB Etc.: Qwerty keypad High-End CPU: 1.5GHz Dual Core Network: LTE / HSPA+ Display: 4.5’ SuperAmoled+ Camera: 8 million pixel Ram: 1GB Etc.: Full HD 1080p

7. 7 Real Application in Market – Long Tail ■Amazon.com –Offline bookstore: Limitation of display space  Only focusing on the 20% of best sellers –Amazon.com: No limitation of space  Offering all kinds of books  Welcomed by the customers in the “Long Tail” IT Development Existing offline bookstore’s Target Amazon.com’s Target