Emergent strategy: who will stop Apple’s dominance of the music delivery business? Introduction In this report we “chessman business” will tell you a bit more about Tunes a part of Apple Inc. In this rapport we will formulate a strategy tunes can follow for the next three to five years. In this report you will read parts about. The development of Tunes so far, Internal and external analysis of tunes and the advised strategy for tunes. By looking at the past, new strategies can be formulated.
And after evaluating the formulated trainees by looking at the pro’s and con’s of all the strategies. The best strategy for Tunes is chosen. We hope you enjoy reading this report and wish you good luck with implementing the new strategy. Sincerely, Chessman business Margaret Stet Vera Painting Ante De Verses Management summary Chapter 1: Summary of the case chapter one contains the summary of the case In which will be explained what the mayor issues are for this case. tunes is here defined as the main product in where the future will be discussed and Its position In the nowadays music Industry.
Chapter 2: the development of Tunes’ strategy The problem statement is defined in this chapter. Questions such as “what can Tunes do to stay ahead of their competitors? ” and “In what way are the music Off Chapter 3: Internal Analysis ere internal analysis of tunes takes a look at the value creation. The question “what IS the value of tunes for the consumers? ” is being discussed and the outcomes will be applied into the value chain. The value chain explains resources, competencies and ones where tunes lack. Also the competitive advantage of tunes is being discussed.
Chapter 4: External Analysis or give a good view on the macro-environment, the PESTLE is being used which is a ere often used method for analyzing the macro environment. The PESTLE contains the political, economic, social, technological, environmental and legal factors. Furthermore, Porter’s Five Forces Model is being used to understand where the power lies for tunes. It will help to understand the strengths for the SOOT in chapter 5. Chapter 5: The SOOT-Analysis For the SOOT-Analysis the strengths, weaknesses, opportunities and threats are the outcomes from previous chapters.
Chapter 6: -rows-Manta ere next step for this analysis is to think about the options that could be pursued. He external opportunities and threats are matched with internal strengths and Insaneness. The possible strategy are shared as the outcome of the TOWS. Several strategy’s are being discussed but the most suitable strategy is the combination of NT, which is because more streaming services are available, tunes should work on the availability of their products. Since tunes can only be used on mobile devices from Apple itself, they should make it available to other devices to expand their market.
Conclusion: Table of contents 1 . Summary of the case 2. The development of tunes strategy 2. 1. General challenges of tunes 2. . Problem statement 3. Internal analysis 3. 1 . tunes and its value for consumers 3. 2. Which resources and competencies does tunes has P. 9 3. 3. The competitive advantage into the four building blocks P. 10 4. External analysis 4. 1 . Macro environment P. 11 4. 2. Porters Five Forces Model p. 15 P. 16 5. The SOOT-Analysts 5. The -rows-Manta Conclusion bibliography p. 18 P. 20 p. 21 Since the upcoming of home music, it has undergone several mayor changes.
Home music has gone from the gramophone to music on the radio and now on computers and portable music devices like the pod. Now also the capacity and the speed of the ratable devices will be increased. Causes of these changes, recorded music and delivery music companies all over the Nor need to rethink their strategies. The three main areas they have to think of are; *Recorded music from the traditional record companies *Mobile telephones (a new revolution music delivery) *Broadband and the web (potential for new music delivery) In 2007 there were four major music producers who owned together 75% of the entire market.
And in spite of the amount they owned of the market, they still all had trouble with their profitability. The fact that they had profit problems seemed really reprising. But the reason was really clear. One of the main reasons the companies Newer losing money, was because selling music via the Internet became more popular than buying CDC in a store. Furthermore, the profit margins of CD sails were higher than those of the online sails. ere four big companies have three mayor competitive advantages. Those advantages are, recording contracts, high promotional barriers and record sales through retail stores. O make more money, the record companies needed to find other ways to add value. For example they start interfering with concerts of their artists. They make money from promotion, concerts, merchandise and other forms of branding. Basically; the music company starts to work on other parts of the industry and extends their value chain. Moreover, one of the other things music companies do to extend their value chain is to offer online music services. Online music delivery can take place in different ways. For example; *Internet site sell Cad’s. These sites are supplied by the Big Five. Independent music companies setup their own small sites “digital Jukeboxes” * Underground site distribute illegal music from the big four. They do not pay royalties o the Big Four. Downloading is for free. Method to stop the illegal downloading. There for they developed a pirate proof Internet system. It was called the Digital Rights Management. When tunes was introduced, and tunes signed a deal with all the leading record companies. It was made possible for consumers to download illegal music for a payment and without getting in trouble with the DRUM. ?? Furthermore, there is music provided for mobile phones.
Currently, the most used devices for playing music are still MPH, MPH and Pod’s. But the use of mobile phones IS more in up coming these days. As for the music delivery companies, they still need to come up with new methods of music delivery. Apple still dominates the music delivery market with their Pod’s and Tunes. In 2008 there were two threats for Tunes. These were Google and broadband. Roadbeds was a new technology, which made things like downloading and uploading much faster. Also Google wanted to interfere with a new software and service platform. This way Google wanted to force a change in the industry.
But this did not work yet since the strong position Apple with Tunes has. (Module book, strategic management in the media) 2. The development of tunes’ strategy Tunes started out in 2000 as Sounding PM. This was a program used for ripping :ad’s. In 2001 Steve Jobs officially introduced tunes to the world. New about tunes Nas that it was for free. This was a big shock to the music industry because for example Sounding PM costs $40. This fact made tunes leave all their competitors behind. Over the years tunes needed to keep developing itself to stay ahead of the competition.
Tunes continually invests in research and development, advertising and marketing. Tunes and Apple believe this is very important for the sale and development of the cosmologies and innovative products they make. Currently tunes is still developing. They are expanding their platform by delivering content from third parties through the tunes store. The contents they sell are no longer Just music but also e-books, television shows and films. Furthermore, another change is that tunes is also available now for Windows based computers, instead of lust for Mac. Tunes also starts with an educational platform.
This platform is called tunes U. It allows students and teachers to share their educational media online. Schools, teachers and or students can buy this platform. Files shareholder, 2012) 2. 1 General challenges of tunes Competition At this moment one of the two main challenges of tunes is their competition. Tunes is a really innovative company and is always coming up with new techniques and does and come up with their own additions to the “tunes concept”. With these little differences and additional options, they try to compete with tunes and try to become better and bigger.
This means tunes needs to keep their company up to date and keep being innovative to satisfy the needs of the costumers. Illegal downloading (piracy) ere other big challenge for tunes is piracy. In the last few years, tunes all ready Nortek on this problem. They now work together with the BAS, which is an organization that works on the prevention of piracy. Together they try to report as much illegal downloading as possible. This way the pirates can be punished. But still illegal downloading costs the music downloading industry around 11 billion dollar per year.
Now the big challenge is how to reduce the losses as much as possible. BIBS, 2012) (Apple, 2012) (Apple, 2007) 2. 2 Problem statement How can tunes keep up with the changing music industry and the competitors in the ext 3-5 years? Sub questions * What can tunes do to stay ahead of their competitors? * In what way are the music consuming methods changing? * How can tunes keep up with the fast changing music consuming methods? How can tunes gain its value for their consumers? ere internal analysis of tunes takes a look at the value creation of tunes, what is the value of tunes for the consumers?
The outcomes will be applied into the value Chain. Next to that, the analysis explains the resources and the competencies and the ones which tunes still lack. The last part of this chapter is about the competitive advantage. 3. 1 tunes and its value for the consumers Apple created a legal affordable purchasing system for digital content. The latest ‘erosion of the software is tunes 10. 7 tunes has integrated an store. This store has several departments like the bookstore and the App store where the consumers can purchase applications and electronic books and of course the purchase of music in the ‘Store.
Tunes allows the consumer to download music, videos, games, books, bedposts, films and applications. The consumers can download the digital music for only $0,69, $0,99 or $1,29 a song. He software tunes can be downloaded for free. The software is easily to download and is available for both Mac and Windows operating systems. Looking at the smartened industry the tunes software can only be used by ISO operating systems :phone). Android, Windows, RIMS and other operating systems cannot use the mostly available for Apple consumers. He programmer has a lot of opportunities for their users like airplay, home sharing, Nerveless music and genius mixes (Apple, 2011). The user can store and distribute the legal digital music they like. The user can download the songs they like, and mix them Jp in the library so the users can play the song they like. ere latest version of tunes 10 also added Ping to their devices. Ping is a social network based around the music. The product became a failure and was removed from tunes by September 30 in 2012 (Mastication, 2012). The new gadgets of tunes are cloud and match.
With cloud the newly downloaded digital music will automatically be available on all the ISO products the consumer uses and match makes sure that the consumer can collect all the music in the cloud. Even the music Inch is not purchased at tunes. All the music in tunes will be available on the ISO routs of the consumers with these two programs. In 2009 Apple removed the digital rights management (copy protection software) of all the music from the majors in the music industry. Without these DRUM, tunes can offer the music in higher quality to their customers and the customer can now actually own the song and share it with others.
Major MME already started with removing the DRUM rights in 2007. The music which is downloaded before 2009 can be upgraded for $0,30 a song to the newest version without DRUM (Apple, 2009). ere content tunes delivers to the consumers is legal. This means that Apple is eying the content first from third parties. Apple pays extensive fees to gain the rights to audio and video content. For every download from tunes, Apple has to pay royalties to the producers and the artist of the content. For example a song which can be bought for $0,99, Apple keeps $0,65 and has to share$O,34 with the producers and artists (Newsletter, 2012) (Apple, 2011).
Apple also has to pay fees to the developers of the products. Apple developed in 2012 new software for tunes called ;Mastered for tunes”. This program is especially made for the record studios. It is a mastering software program o boost quality for the audio files. The consumers wants to have high quality and better sound in their digital content. With this program the producers are bringing back the dynamic in the songs like they do on CD. Red Hot Chili Peppers started with doing this in 2011, big artists like Bruce Springiness and Coldly followed the example.
Tunes developed with this software a new advantage for the user by getting the high quality and dynamic back into the digital music (Nipper, 2012) :cataracts, 2011). Ninth the innovation and the newest technique, tunes can offer more and better services to the customers. With the upcoming smartened industry Apple introduced the App Store where the consumer can download applications designed for the ISO Pilfer, 2012). Source: (Eddie, 2012) or keep up to date with the newest music, books, films etc. tunes has to update itself regularly to keep the high quality service for the users.
Also the software is updated a lot, the latest version of tunes is 10. 7, and the company is busy to develop tunes 11 Inch is planned to be delivered in November (Pepper, 2012). ere value chain of tunes – Developing new versions of tunes Develop new tools User friendly / simplified design Simple user interface Mastering for tunes I – Contracts with third parties for the delivering of content Digitized the content Package the content Link the products to the purchase system ;Label the content into categories like genre, artists, new etc.
Up-date new content (new songs, books, films etc. ) Present the content with information and pictures of the products I – Discounts and sales tunes offers legal products Apple pays royalties to the producers and artists tunes is only available for the phone no other operating systems tunes is available for both Mac and Windows operating systems for laptops and Mixing up content the consumer wants Music without DRUM I – Help section for F. A. Q. For other questions you can send an e-mail cloud and match automatically send new content to the other products.
The user owns the song so they can distribute it to the other Apple products User friendly I 3. 2. Which resources and competencies does tunes has? One of the resources of Apple is their patent on tunes, the thunderstorm and the tunes user interface. Apple started in 2004 with the request of getting patent on tunes and the thunderstorm which was granted to Apple in 2010. In 2012 Apple got another patent especially for their user interface (Purchaser, 2012) (Campbell, 2012). Campbell said in an article at philanderer. Mom the following: ; Apple on Tuesday was awarded a long-awaited patent regarding the user interface of the tunes Store that incorporates past applications covering how a user browses, searches for and purchases content”(Campbell, 2012). Ninth these patents Apple will make it harder for the competition to keep up with their advantage and challenging them in keep going forward. tunes is a business unit of Apple Inc. In compare with their competitors Apple is pending much less money to their research and development department (Dialing, 2011).
To keep up with the rapidly technological advances in the industry Apple increased its spending in research and development up to $2. 4 billion in 2011, while they invested 1. 1 billion in 2009 which was only percent of their revenue over the full year (Apple, 2011). Tunes has contracts with third parties to offer their digital content into the store. Apple pays extensive fees to gain the rights to video and audio content. These contracts are based short-term which means that there is no guarantee to continue he contracts into the future of tunes (Apple, 2011).
Tunes delivers legal music at reasonable prices with easy access for the users. Tunes satisfies the needs of the users by delivering the content any time that is convenient for the user. The need of listening and using tunes at the users own time. One of the core competencies of tunes are its ;coolness” design and user interfaces. ere designs and interfaces are highly respected by tunes users. The software is simplified and user friendly. Apple is delivering an unique experience to the users by their outstanding user interfaces. Integration with social media.
Tunes tried to do this with Ping, a social network place based around tunes music, but failed. In September 2012 tunes quit the service. In compare with their rival Spottily, tunes misses the integration. On Backbone and other social media songs from Spottily are shared with the social media users. You can like and share the songs (Former, 2011) (Musicality, 20120). 3. 3 The competitive advantage into the four building blocks Superior quality Tunes is the gateway to digital content. The quality of tunes is that the users can buy their own content and use it any time they want.
Nowadays the users can own the songs, because the big three gave tunes the opportunity to sell the songs Introit DRUM rights. Without these rights the user can own the digital music and the songs are in higher quality. With the newest technique of mastering for tunes, record companies can record the song especially for tunes which brings back the dynamic in the digital music (Apple, 2011)(Nipper, 2012) ere superior efficiency ere superior efficiency is the buying and owning of legal music for a small amount of money. The user can distribute their content amongst the different Apple products he user has.
The user can mix up their content in the library and set up their own list on songs. The program is simplified, user friendly and easy to use (Apple, 2011). Superior customer responsiveness Tunes has a wide range of support services which can be a bit confusing for the user because of the information overload. The support is divided into the different parts like the products, video tutorials, manuals, technical specifications, communities, downloads, Apple ID and the customers can contact the Apple support. In the Apple support you can contact a specialist for you questions. The support device helps the customer in their own language.
For new tunes updates the program sakes the user if the program can update itself (Apple. Com, 2012). Superior innovation Tunes was one of the first programs selling digital music for a small amount of money. Tunes is having an integral part in which the programs cloud and ‘Match can synchronize the digital music to any apple product of the user. Without the DRUM rights it is possible to distribute the digital music (Apple, 2009)(Apple, 2011). With the upcoming smartened industry tunes also offers applications which are nowadays he primary driver of the revenues (Eddie, 2011).
Competitive advantage Tunes has a tremendous amount of innovative features like, cloud, ‘Match and Applications while the company does not invest a big amount of money into their R&D section in compare with the revenue the company gains. Even though Apple still has the biggest market share. The legal music, simplified design and user 4. External analysis 4. 1 . MACRO environment or give a good view on the macro environment, the method used to analyses the macro environment is PESTLE, created by Michael E. Porter. (Porter, 2008)
Political factors: -International relations: International relations can influence the contracts between parties, in a good way, but also in a bad way. China for instance blocked tunes Store, caused by the bad relationship between America and China. (SMS. Com, 2008) Economic Factors: Depression: Worldwide there has been a depression in the economy. This means a period of drastic decline in the international economy, with a lot of unemployment. Consumers have stopped buying products that aren’t that necessary to have since they are too expensive. Cad’s also make part in this category.