Soundbuzz's Music Strategy for Asia-Pacific - Essay Example

Soundbuzz’s Music Strategy for Asia-Pacific  Name Course University Lecturer Date 1. Analyze Soundbuzz and its business strategy using Porter’s competitive forces model. Traditional Competitors The presence of rivalry from competitors from other companies is another factor that determines the level of competitiveness according to Porter’s competitive forces model. Soundbuzz was able to sustain its competitive advantage through innovation, for instance when it signed a digital deal with an internet provider so as to be able to provide its consumers with its services more effectively (Bartol). Alliances with internet service providers also provided Soundbuzz with the competitive edge that they needed to overcome their competitors and also to be able to come up with an alternative billing system for their customers. Diverting into the wireless device industry also was a technological innovation that Soundbuzz undertook to get a competitive edge over their rivals (Bartol). The competition between online and offline business is also a factor in the music and MP3 industry that Soundbuzz was trying to thrive in. It was the year 2000 that saw a decline in the overall purchase of Compact disks and MP3s due to the presence of websites offering free music downloads. It is thus sensible to say that Soundbuzz had competitors who were selling their music in CD format and thus this was also a case of the “Click and mortar versus brick and mortar” according to Porter’s competitive forces model (Jones and Hill, Strategic Management Theory: An Integrated Approach). The competitive strategy that Soundbuzz came up with the ensure that they dealt with the issue of Napster taking up most of their customers, was to link up with Hewlett Packard so as to be able to integrate their services with the products that Hewlett Packard were offering to their customers. This advertising strategy was aimed at ensuring that the level of competition that Soundbuzz had over their rivals was significantly high. The developing of a strong competitive strategy was one of the aims of Soundbuzz when they decided to sign an agreement with Motorola. This meant that apart from Motorola integrating the services of Soundbuzz with their products, the service could also be launched at an international level, giving them a competitive advantage over their rivals. This utilization of vertical integration served to pile the pressure on the competitors that Soundbuzz had and thus enabling them to charge higher prices while still managing to achieve higher profits (Jones and Hill, Strategic Management Theory: An Integrated Approach). New Market Entrant The threat of entry into this market by new competitors according to Porter’s competitive forces model is formed by the presence of attractive profits that Soundbuzz has been making and thus making the business profitable enough for other new entrants to want to venture into it (Jones and Hill, Strategic management: an integrated approach). The entrance of so many competitors in the market only serves to reduce profits as it was witnessed in Soundbuzz’s case where in 2000 they experienced a drop in profits owing to the technological bubble that made many new entrants enter the online music industry making the profits that the company was making to decrease. This will tend to make the market that this company is operating it to be a more competitive one such as in the perfect competition markets (Jones and Hill, Strategic management: an integrated approach). Substitute Product and Services The threat of substitute services to that which Soundbuzz offers is one of the competitive forces described in Porter’s competitive forces model. This is where the existence of other services which are out of the scope of the normal services which Soundbuzz has to offer, will tend to increase the propensity of its consumers to switch to these other services. For instance there was a technological bubble that led to other websites hosting free MP3 exchanges that most of the consumers opted for as compared to the pay-content that Soundbuzz was offering. This can also be linked to the relative price of the substitute source of music which happened to be free. In spite of Soundbuzz recording high internet traffic in terms of users, most of them were just interested in the free content and not the pay-content. The ease of substitution also presented the buyers and users of the service to be able to easily switch to other providers of the same service at a cheaper cost, which was basically free (Jones and Hill, Strategic management: an integrated approach). The fact that the buyers or the former subscribers of the services were capable of switching their costs to a service that is free is also another factor that affects competition in line with Porter’s competitive analysis of threat of substitute services which these websites hosting free content such as Napster were offering. The number of websites offering MP3 download services was also growing owing to the technological bubble, which developed competition for Soundbuzz. Basically, Soundbuzz faced the threat of substitution owing to the fact that there was an alternative service which was more appealing to the consumers in terms of price difference which posed as competition to the company, and thus warranting a change in business strategy by adopting a new business model, other than the one they were using at that moment of drop in sales. Customers The market of outputs which is also the bargaining power that the customers have is also a factor of competitiveness within the market according to Porter’s competitive forces model (Bartol). In the case of Soundbuzz, the customers applied pressure to Soundbuzz by defecting to the Napster website that hosted free music downloads. According to Porter, this is capable of affecting the sensitivity that the customers have on the prices that the respective companies charge for their services. The uniqueness of the services that Soundbuzz was offering was enhanced by them signing a deal with Motorola and also by merging with Hewlett Packard, which served to heap the pressure on their competitors. Suppliers The market of inputs which is the bargaining power of the suppliers is also defined in Porter’s competitive forces as being capable of having power over an organization or a firm (David). Luckily enough, Soundbuzz is a provider of internet services as well as merging with other internet services which makes them have fewer suppliers. This has made them increase their levels of profits which they would not have otherwise achieved, if they relied on internet service providers. Also, the merger that they have with Hewlett Packard ensures that they do not have to have hardware suppliers since the merger enables them to rely on the hardware that Hewlett Packard supplies to its customers which have the Soundbuzz software pre-installed. 2. What strategies did Soundbuzz develop for dealing with competitive forces? Soundbuzz had to come up with a couple of strategies to enable it have a competitive edge over their rivals. These strategies were formulated to ensure that it dealt with the competitive forces that were around them in the market that they were operating in. One of the strategies that Soundbuzz under took was to change its business model to one that enabled them to aggregate with other record label companies to be able to provide a technical platform that will enable them to manage content on other models. Alliances that Soundbuzz made with internet service providers aided the firm in ensuring that they dealt with the fierce rivalry that they were facing from such companies such as Napster. To mitigate on the competitive force of entry by new competitors, Soundbuzz was pushed to merge with Hewlett Packard so as to ensure that they had their service pre-installed in their hardware (Hewlett Packard) that they sold leaving the customers with no alternative but to be loyal to their brand. To deal with the threat of substitute services, Soundbuzz introduced music videos on to the list of the services that they provided which enabled them to have a competitive edge over their rivals and also to expand their service base. Signing a deal with Motorola was also a strategy that was aimed at ensuring that they reduced the pressure from suppliers, especially from hardware suppliers since they were able to have their services included in the devices that Motorola provided their consumers with. 3. What are the critical elements for an online music service? There are some elements that are very critical for a company, firm or individual to successfully carry out an online music service. The most important element for the provision of this type of service is probably the provision of an internet connection that is fast enough to allow downloads and uploads for instance a broadband connection. A fast internet connection or the presence of a reliable server will ensure that an online music service never disappoints its consumers by fluctuations in the connections or even slow connections that would make the download experience a burden. Another important element of an online music service that is very critical is the presence of a billing system that is reliable and secure, so as to be able allow the consumers to pay for the services offered, while at the same time be protected from online credit card fraud or any other form of fraud. Another important element of the online music service is having the legal right to conduct their business. This legal right has to be achieved from various record labels and recording artists, who might be represented by certain organizations for example a music society of sorts to ensure that such companies do not encourage piracy. Finally, an online music service has to have staff that has the technical know how to be able to deal with this type of business that is technical in terms of the technology required to run such a service. An online music service that does not have the required staff that is qualified to deal with any technical problems that might arise is doomed to fail in its ultimate quest of service delivery while aiming to make a profit. Bibliography Bartol, Kathryn. Management Foundations: A Pacific Rim Focus. New York: McGraw-Hill, 2005. David, Fred R. Strategic management: concepts and cases. Chicago: Pearson Prentice Hall, 2009. Jones, Gareth and Charles Hill. Strategic Management Theory: An Integrated Approach. New York: Cengage Learning, 2009. —. Strategic management: an integrated approach. California: Houghton Mifflin, 2007. Read More