PESTEL Analysis of the MP3 Industry - Coursework Example

? The MP3 industry Task: The MP3 industry It is crucial to highlight that micro and macro environmental analyses comprise PESTEL analysis. In terms of micro-analysis, it is crucial to regard the perspectives of customers, suppliers, employees and competitors. To begin with, micro-analysis of environment also relates to five-porter forces model. This is because the porter model deals with internal rival, threat of entry, supplier power, buyer power and the aspect of substitute product. The porter five forces model will evaluate the intensity and level of competition from five perspectives. To begin with, it is crucial to examine the threat of emergence into the MP3 industry. The threat of entry expresses a medium possibility since the cost of production is moderate. For instance, the cost of packaging, of iRiver, is ?69 and the entity can sell the same at ?163. This suggests that it may stimulate new rivals into entering the market because the cost of producing mp3 products is meager. In addition, there is a considerable product margin that attracts new competitors. IFPI issued reports of a speculated increase in demand of music in mobile phones and the internet. This may swap physical formats of storing musical information such as CD’s and DVD in the succeeding years. In turn, many companies would wish to enter the market and pose market share threat to existing companies. For instance, the Microsoft Company has launched an MP3 product that is known as Zune. Such a product may be a competitive rival with the Apple Company products such as iPod. However, such an entry might be constrained with the difficulty of gaining market share. The Apple Company is reigning as the market leader because they face economies of scale that prohibits new entrants from the market. Sales of iPods make a figure of over 10 million and a considerable margin cost. It is crucial to highlight that there are only seven dominant companies in the MP3 industry. This is in spite of the idea that there are over 100 companies that participate in the production and sale of MP3 products. This is a manifestation of economies of scale that bar competitors from accessing the market. Additionally, the concept of differentiated products makes existing companies indispensable. For instance, the Apples’ iPod Nano has superb features such as the ability for easy downloads of songs. It becomes difficult for new entrants to have products that can overcome the customer belief in the existing companies. The second component of the five porter model pertains to buyer’s bargaining power. There are several quality products that place the customer in a tricky choice scenario for the most appealing model. In addition, these models follow price setters such as Apple in delivering pricey products. For instance, Apples’ products go at steep prices of $ 299. This makes the consumer to lose their bargaining power because several customers would be willing to purchase the music players without consideration of their prices. In this perspective, the customers possess a low bargaining power. Another feature that presents, in the MP3 player industry, pertains to consideration of brands over price. This suggests product differentiation that sets high prices for its products. Companies such as Apple set steep prices and establish high switching costs to other brands. This further cuts down on the customer bargaining power as a considerable number would be willing to purchase due to the high utility that the products present. In the end, customers purchase products because of their superb features and attractive appearance. Additionally, there is the threat of substitute products. The digital products have distinct features that place them at a platform whereby they cannot easily be replaced by other products. This creates a medium threat of substitute from other products. Besides, the digital music products possess notable advantages for customers. For instance, the iPods possess a high quality stereo sound that gives them an edge over other players. Customers can experience the quality sounds that just match the quality of CD’s in their players. In addition, the ability of internet downloads cuts down on the price of songs. Relatively, the cost of downloading songs from platforms such as iTunes is low. This cost is lower than the price of purchasing music CD’s and albums. This makes the integrated music players popular models of experiencing the modern life. However, there is the threat from integrated mobile handsets. The mobile handsets share almost similar features with the MP3 players. On the other end, the mobile phones possess an edge over digital music players since they enable communication. In the recent age, Google collaborations and the Samsung Company have released Android-powered phones that possess superb features such as internet-enabled music downloads. In addition, Nokia gadgets such as Nokia N91 have high memory drives of 4GB and removable memory cards. Music phones possess GPRS systems that allow the retrieval of songs from the internet. Many experts project that phones’ innovation will threaten the sales of MP players. The only rescue for digital music players pertains to the idea that high income customers prefer possessing different types of gadgets simultaneously. However, they would prioritize the purchase of phones over the digital music players. An additional force that is bound to affect the industry pertains to the supplier power. The suppliers possess a considerable strength in the industry since a notable number of suppliers are from the Asian region. Given that the suppliers tend to concentrate in one region, they have considerable influence over the prices of their products at the expense of mostly USA’s and European countries. The supplies consist of hard disks, flash memory, semiconductors and minor components of the digital music systems. China forms a principal supplier of MP3 building components because they offer lower costs. All the same, the suppliers possess a considerable power of price bargain. The demand and sales of digital music players has grown dramatically, and this made suppliers overestimate the need for products such as memory chips. This was a direct loss to bargaining power as the suppliers strove to clear their stock. In the Porter’s model, internal rivalry forms the last point for consideration. The industry has several players that strive to gain the single market of digital music. This aspect reveals in the high quality products that the respective companies have to update regularly. Lack of innovation and constant products’ updates makes give gadgets obsolete in the high competitive market. In spite of the high competition, there are only seven dominant companies in the market. This comprises entities such as Apple and Sony Companies. This is because these companies set stringent standards for products. For instance, Archos Company produced the Gmini XS 202 that could accumulate up to 10, 000 songs. It also possesses multiplayer ability in terms of VLC and WMA media players. In addition, the product can easily sync with a computer in transferring playlists and songs into the player. In terms of PESTEL analysis, the MP3 product industry face varied factors. Politically, the industry faces limited factors and scenarios. This is because the digital music products are not communication gadgets. Their entertainment value makes them more socially than politically significant. However, the issue of core Asia supply base makes the particular countries gain political significance in bargaining scenarios such as environmental debates. In terms of social aspects, the MP3 products have transformed social interactions and behavior. The MP3 industry has released integrated products that possess several functions over music playing. MP3 players have integrated into everyday life. This diverts them from their functional attributes to become status yardsticks and fashion statements. In addition, the models have to possess less weight, varied colors and designer shapes (William & Pride 2008, p. 209). The Apple products have gained a likening for their simplicity and significance. In terms of economic aspects, the industry faces intense factors. The world is recovering from a recession and financial meltdowns that have cut into consumer spending. In such instances, customers face the compulsion of cutting down on their luxury spending in order to spare their income for basic commodities such as the highly priced foods. Technically, the industry faces limited factors since technology provides the platform for easy innovation of products. Secondly, it is crucial to consider a strategic implementation for competitive advantage. This is effective for generating future options. To begin with, the industry faces the threat of a bargaining power to suppliers. This concerns the idea that major suppliers come from the Asia region. It is a possibility that the supplier base will cut down on the quantity of their supplies since they had overestimated the demand for the same. In this sense, the industry players should engage in contracts that will ensure perpetual supplies. For instance, Apple had long contracts with top suppliers such as Toshiba in delivering constant supplies. In addition, the industry has to adopt product differentiation that will distinguish their functionality. In addition, the industry should engage marketers that would strive to build the brands of different MP3 products. This would make customers consider the social perspectives over than the functional perspectives of the digital music players. In this sense, products that connote social significance would attain sales in spite of the innovation of smart phones. Bibliography Pride, W, Ferrell, O, 2010, Foundations of marketing, Cengage Learning, Mason. Read More