Ques 1. How sustainable is Apple’s competitive position in MP3 players?
Ans 1. Apple’s iPod was first introduced in 2001 and because of the innovative design strategy of Apple; iPod soon became one of the most successful products in terms of revenue and popularity. It is a also important to note that strategy of launching iPod and other subsequent new products were very much in synchronization with the ‘Digital Hub’ strategy. Analyzing the industrial environment based on Porter’s 5 force model we get:
1. Intensity of Rivalry:
Apple faced competition from other iPod players such as Zune (Microsoft), San Disk, Creative and Samsung. However despite these companies having more or less the same hardware had less than 10% of the market share because of the launch of iTunes.
Within the industry the intensity of rivalry was high though Apple was vey ahead of it competitors even when it was charging a premium price which was $50 to $100 higher than the ASP of other iPods.
Hence INTENSITY OF RIVALRY IS MODERATE & IS RISING WITH THE ENTRY OF PLAYERS SUCH AS MICROSOFT.
2. Threat of Substitute Product:-
Substitutes of iPod included Free Internet radio sites, other online music streaming sites. However mobile segment was fast emerging as a big substitute of MP3 players. As a result Apple faced very stiff competition from these rivals. Though Apple responded well with launch of iPhone and Lala.com (music streaming site), yet the threat of other substitutes is pretty high and Apple will find it difficult to have a sustainable position in MP3 players.
The launch of iTunes Desktop software and iTunes Music Store was very instrumental in helping the growth of iPod. The sales of iPod shot up by 6 times after the launch of iTunes store.
Fairplay enabled Apple to have a strong hold on those songs that were encompassed within the FairPlay i.e. No other MP3 player can play these songs.
Apple had also launched iPod accessories such as...