Competition in the Mp3 Player Industry

Introduction:
Do you remember a time when Transistor Radios were the most technologically advanced form of listening to music? Or how about in 1984 when Sony introduced the Walkman? These are the key radios and handheld devices that led to the creation of the handheld CD player, and into the craze that is now the MP3 Player. Technology is a fast paced market. Much like Darwin used the term “Survival of the Fittest” to play upon natural selection and predominance, it can be found in the technology industry today. There are over 100 producers of the MP3 player, however, there are only about 7 key companies who stand a chance to rank as the top in the industry, a title currently held by Apple.
The invention of the portable Music Player or MP3 was brought on by a need. The need was to overcome the need for limited music space. Not to mention that there was a need to capitalize on the trend of consumers downloading music onto their computers. The first MP3 player was introduced in 1997 by SaeHan, and it was called the MPMan F10. In 1998 Diamond Multimedia came to market with the Rio PMP300. The success of this MP3 player in its first year is what led the investment into the MP3 player industry. However, in 2005 this company decided to shut down production after a 5% increase in revenues, due to the high level of competition that faced the market.
Key Problem/Issue:
The main problem and issue in this case is for Apple. Apple is obviously the industry leader when it comes to the MP3 Player, with their iPod, iPod Nano, and iPod Shuffle. However, the main problem is how will Apple continue to be the industry leader in the ever more competitive MP3 Player Market? Although Apple was not the first mover in the MP3 Industry they did however set a precedent on the MP3 Player and the attributes that should be associated with it. One advantage that I feel Apple has is that they are known for their quick product innovation and marketing.
Analysis:
Apple’s strategy in regards to the iPod is simple: quick product innovation and marketing. There were many trends that faced the MP3 industry, the pace of technology was key, people wanted smaller devices, larger memory storage, longer battery life, and something that was fashionable. Companies were competing on all of these trends to see who could come out with the smallest MP3 player that could do all of these things. Another major trend was the need to jumble all of the consumer handheld electronic products into one. This means taking the phone, camera, music, and PDA if applicable and merging these all into one common device that consumers can carry instead of lugging around separate devices.
Chief Economic Characteristics
I believe that Apple is dominating in the market of MP3 Players. Apple clearly has the upper hand on their core competitors Archos, Creative, Dell, iRiver, SanDisk, and Sony. Their growth rate is consistent; this is a faced paced industry where someone can go from the top to the bottom in a matter of the next big invention. In 2005 the iPod accounted for 32.3 percent of Apple’s total sales. I believe that the market in 2005 was at a growth. I believe that right now the market is still at a growth but gradually moving toward a mature state, just counting the MP3 player market, not including the all in one Iphone whose capabilities seem endless. Apple’s rivalry in global. They are competing with companies such as Archos who are headquartered in France and Creative who is out of Singapore. Especially when using the internet, anyone around the world can by an iPod.
As far as buyers are concerned, they do have a significant say in the industry and as a whole they are what shapes the innovations that the industry makes. However, individually power of buyers is weak. I believe that the biggest factor in this market is the power of substitutes. If someone does not like the iPod they can switch to a cell phone that can hold their music, or they can listen to the radio, or possibly a satellite radio. I believe that this is a well saturated market and the entry barriers will be extensive to try and get in. These 7 competitors hold the market share they all have the Patons, money, and technology to drive a newcomer out of business. I do not feel there is much threat in terms of mobility barriers. Sony was a latecomer when entering the MP3 player market, they have an advantage in the fact that they can see where other companies have succeeded and failed, however, I think that it might be too late to try and take over ground that is already occupied by one of the other competitors.
The main cause for industry change is the consumer and their need for technology. Consumers are now fast paced; they want everything in one device and want it to match their lifestyle and wardrobe. Innovation in terms of finding ways to have smaller devices with more memory and a longer battery were key when designing the MP3. To keep up with this pace suppliers need to keep that in mind and continue to work on improving.
I believe that the main competitive force for Apple is the threat of suppliers and substitutes. Apple has brand loyalty. However, rivalry is rapid in this industry. Everyone wants to get ahead and come out with a product that the consumer wants. Whereas one consumer may not sway a company the consumer market does, and they have spoken. Apple introduced the iPod in the aftermath of 911 with a price tag of $399! They were definitely going after a certain niche. I believe that if you are looking at Apple’s strategy when designing and implementing the iPod they went after differentiation and a niche strategy. In the beginning Apple targeted a certain group, technology savvy higher income people. These were people who wanted to make a statement by having an iPod. I’m sure that also having famous people drop your name and having U2 endorse your product had something to due with their instant success. It is clear that the driving force in this industry in technology innovation and who can not only be first to market but best to market.

Strengths-S
1. Used unique and creative television and magazine ads.
2. Brand Alliances: BMW, HP, Motorola, U2, Nike. Weaknesses-W
1. Smudges on back of player interface.

Opportunities-O
1. Advancements in Technology
2. Branding with Celebrities
3. Cross promoting with other industries(Nike)
4. Green Movement. SO Strategies
1. Team with Sirius to allow users to listen to live NASCAR and talk shows, as well as their favorite comedian. WO Strategies
1. Come up with a case/cover that is environmentally friendly, smudge proof, and cost efficient.
Threats-T
1. Too many competitors
2. High rivalry among competitors. ST Strategies
1. Incorporate ads that heighten awareness of achievements that Apple has done in regards to the environment. WT Strategies
1. Learn from competitor’s mistakes and triumphs and take their achievements and spin them to work for your company.

Alternative Courses of Action:
Since this case was written Apple has already taken many alternative courses of action. I think that product differentiation is Apple’s selling point. Apple needs to look at other markets and cross promote. My favorite strategy that Apple has introduced as been Nike + itunes. I am a huge fan of working out so I feel that incorporating the ipod Nano with Nike running shoes and apparel was brilliant. What is a common response to the question “what is the one thing you must have when you work-out or run?” Music! Music is the driving force behind stopping at a mile or being able to push it to 2 miles.
Another alternative can be to incorporate the ipod and itunes with Nintendo Wii. Nintendo is not in the MP3 market, they are in the gaming market. Being able to team up with them and work with Wii-Fit could coincide with Nike+, which would all center on one dominant factor the Apple iPod.
One alternative that I would like to see would be to partner with or possibly take over a satellite radio company. For instance Sirius, Sirius Satellite Radio is built into every Jeep. To team up with them and have iPod ready cars would be an extremely successful collaboration. People can already download their favorite stand up comedians, Disney movies, but how great would it be to plug into your iPod and hear the NASCAR race?
Apple iPod has already invented the ipod Touch which is everything you could possibly want at your fingertips. The iPod Touch is a music player, camcorder, camera, storage device, and mobile computer all in one.
Recommendations:
I believe that Apple is on the right track with their product innovations. I would recommend that Apple now try and venture into the gaming industry with Nintendo. The Wii is becoming a popular gaming system. I believe that if Apple could tap into this market with iTunes and their iPod then the possibilities would be endless. There are dance games, Wii-FIT, and many other games which could take the live video from your iPod and transport it to the Consol to make like you are the actual lead singer or drummer of your favorite band.
Implementation:
I believe for Apple to successfully integrate into the gaming industry with Nintendo there must be common ground. I think the first part of implementation would be to test the product see if all of the possibilities can be accomplished through the two companies. This is a mutually beneficial implementation; both companies will win in the end. I have not heard of any other MP3 company merging with the gaming industry. Many games already have such great music that is played with them; however in this case the consumer gets to pick which song they would like to hear when playing the game. Putting the power to decide in the palms of consumers is key to what makes a business successful. This will make consumers feel as if they have a choice and that they can customize their game to fit their musical preference, whether it is Country, Rock, or Rap it won’t matter because it’s all customers driven.