Business Competitive Strategies

Business Strategy
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Institution
Course
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BUSINESS STRATEGY
Question 1
The music industry value-chain is as follows;
Ultimate Supplier- Apple Inc
Digital Music- SanDisk
Microsoft New Zune mp3 Player
Sony BMG
Warner Music Group
Universal Music Group
Music Sharing- Napster and RIAA (Music Net, Press play)
MP3 players- Apple Inc. (iTunes and iPods_
1 (a): Porter’s Five Forces
Porter’s five forces are used to display the overall attractiveness of the music industry. They include; threat to entry-low, buyer power- High, the threat to substitute- Low, supplier power-low, and intra-Industry Rivalry/competition in the industry-high.
Threat to Entry
Threat of new entrants refers to the threat that new competitors pose to existing competitors in an industry. A profitable industry attracts many companies as they seek to obtain the profits. In the case of music entry, the threat of enrty is low because the size of Apple Inc ensures that it enjoys economies of scale. As a result, it is easier for the firm to handle major expenses associeted with the music industry. However, over time, the increased attractiveness of the Internet has made the economies of scale of the company to reduce. This is because independent artists and other record labels can now offer their products online at a cheap price. As a result, Google has emerged as a potential threat to Apple because it offers a software that powers majority of smartphones in the worldwide. This implies that if Google had the capability to develop digital market features similar to Apple’s iPods and iTunes, then it will enjoy more success just like Apple. Nevertheless, apart from Google, there is no threat of new entrants. This is beacuse Apple Inc has continously innovated and differentiate its products, which makes it tough for any potential entrant to manage.
Bargaining power of suppliers
The baragaining power of suppliers is dependent on the number of firms that the supplier works with. As a result, strong suppliers are likely to affect profitality through quality of products and their prices. In this regard, suppliers of digital content like music and movies have high bargaining power since the industry has many firms. However, in Apple’s case, iTunes and iPods enjoy a large segment of the market share. Consequently, iTunes and iPods alone generate a sinificant portion of the company’s total profit. Since suppliers always want to be associated with high profits, they usually have no option but to agree to the terms and conditions of Apple Inc.
Bargaining power of Buyers
Bargaining power of buyers refers to the pressure that customers can exert on a company so that it provides high quality products with low prices. This force affects the general competitive nature of the industry through profitability. In Apple’s case, buyers/customers have low bargaining power. This is becau...