The MP3 Player Industry 1. What are the dominant strategy-shaping economic and competitive characteristics of MP3 industry? The article of Louis Marino was talking about the MP3 player industry in 2005 and not about MP3 music industry. Thus, I will be talking about the MP3 player industry…
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Second, the industry has been dominated by Apple because the company garners from 65 to 80 percent of the market share. Third, technological leadership appears to be a major determinant of who leads in the industry. Marino pointed out that “MP3 player manufacturers were continuously working to develop players that were physically smaller, with larger storage capacity, a longer batter life, and a simpler user interface” (p. 2). Fourth, electronic devices have been converging. As pointed out by Marino, “ combinations of cameras, MP3s, personal digital assistants (PDAs), and even cell phones were becoming abundantly popular” (p. 3). This means that even the MP3 player industry can disappear with the emergence of a product the combines the cellular phone, MP3 player, camera and personal digital assistants. In view of this, it can be asserted that the basic competition in the MP3 player industry is a fast, seamless, efficient and excellent transformation of each MP3 player firm into a firm producing a product that integrates the features of a camera, cellular phone, MP3 player, personal digital assistant and other electronic equipment into a single device. For instance, one device that has been integrated recently into such a device is the GPS locator or the device that identifies one’s exact location on earth in terms of latitude and longitude. Varian (2010, p. 523) defines a dominant strategy as the “one optimal choice of strategy for each player no matter what the other player does.” Varian (2010, p. 523) elaborated that “if there is a dominant strategy for each player in some game, then we would predict that it would be the equilibrium outcome of the game.” Varian (2010, p. 536) said “a dominant strategy equilibrium is a set of choices for which each player’s choices are optimal regardless of what the other players choose.” Similar with the Varian (2010) definition, a popular definition of dominant strategy is by Michael Shor. According to Shor (2006a), “A strategy is dominant if, regardless of what any players do, the strategy earns a larger payoff than any other. Hence, a strategy is dominant if it always better than any other strategy, for any profile of other players actions. Depending on whether “better” is defined with weak or strict inequalities, the strategy is termed strictly dominant or weakly dominant. If one strategy is dominant, then all others are dominated.” In general, the dominant strategy can be a Nash equilibrium. According to Shor (2006b), Nash equilibrium “is a set of strategies, one for each player, such that no player has incentive to unilaterally change her action.” Among several possible dominant strategies, a Nash equilibrium is one possible dominant strategy in the MP3 Player industry. 2. 5 Forces of the music player industry and which one is the strongest? The idea of five forces shaping the industry came from Porter (1985). According to Porter (1985, p. 5), the five forces any industry are rivalry among firms, bargaining power of buyers, threat of new entrants, bargaining power of suppliers and threat of substitute products or services. Like in any other industry, the same five forces are shaping the MP3 player industry although Hunger and Wheelen (2011) has identified a sixth which consists of the other stakeholders. According to Hunger and Wheelen (2011), these other stakeholders include governments, local communities and groups that can influence
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