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Case analysis - Coursework Example

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The MP3 industry Name: Instructor: Task: Date: 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…
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Download file to see previous pages 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 ...Download file to see next pagesRead More
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