Five Forces in Mp3 Player Industry

Topics: Digital audio player, MP3, Economics terminology Pages: 2 (465 words) Published: October 16, 2008
Five Forces Analysis on the MP3 Player industry:
Competition amongst sellers of MP3 Players: There are over 100 manufacturers of MP3 players, which all offer a similar product, so rivalry is generally strong in the industry. Differentiation by branding is very important and a constant launch of fresh actions is required to improve market standing (e.g. by introducing new products or adding new technical features to improve user friendliness). Apple is currently the dominant market leader (market share ca. 65-80 %) and follows a powerful competitive strategy. However, this increases the competitive pressures on the rivals of Apple, which are fighting to win a bigger stake in the growing market by winning new customers, expanding to new regions and taking away market shares from Apple. Threat of new entrants: The entry barriers in the MP3 industry are high. Consumers have strong brand preferences and a high degree of loyalty (e.g. iPod-users). Moreover, complementary online stores (e.g. Apple`s iTunes, Sony`s Connect) create “lock-in effects”. As a consequence, switching costs for customers are considerable and persuading them of a new brand will be very expensive. However, the technological knowledge required for manufacturing MP3 players is widespread, so that companies adding MP3 technology to other technologies in one single electronic device will increasingly threaten the industry in the future. Threat of substitute products: For a foreseeable future, MP3 technology will not be replaced by another technology used for portable music players. Nevertheless, there is an increasing trend of integrating MP3 technology together with other technologies in one single electronic device. Hence, there is a legitimate threat that mobile phones (such as the iPhone) or PDAs, which include an MP3 player, will substitute a part of the current MP3 player market. Bargaining power of suppliers: Most parts of an MP3 player are easily available and suppliers do not have too much...
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