Apple's Digital Music Player Market

Executive Summary

There are two main key issues when dealing with Apple's digital music player market. The first issue consists of Apple maintaining its digital music player market share. The second issue pertains to whether or not Apple has a niche music player by not licensing its technology. Apple has a substantial market share consisting of 60% of the digital music player market when only 11% of the U.S. population owns digital devices. In order for Apple to maintain its major role in the digital player market it must consistently maintain its innovativeness over other digital music players in the industry. Apple not licensing their technology and creating a niche music player could hurt them in a market where consumers may want to use their device to its full potential.

Analysis

When analyzing the Apple industry on of the main tools that was used was the five forces analysis. The first force looked at was the barrier to entry, in which capital, brand loyalty and economies of scale were the main components. In an industry where technology plays such a major role capital is a must in order to stay innovative and ahead of the competition in the research and development department. Capital is also needed because there are so many major names in the music player industry already that a major advertising campaign as well as some type of niche in the market to set you apart would be needed. When it comes to brand loyalty, companies like Apple, Dell, Creative Labs, iRiver, RCA and SanDisk already play a major role by producing music players that are reliable and cost efficient depending on the technology that you are looking for in a music player. Economies of scale would play a major role in deciding whether or not to enter the music player market because Apple controls 60 percent of the music player market in which only 11 percent of the population owns a player. This would make one believe that since Apple owns such a major percentage of the market that they have sold enough of their products that economies of scale doesn't really pertain to them. In order for you to get to the point where you can sell your product at low enough prices to compete you would have to sale a large amount and with only 40 percent of the market open to smaller less technological companies this would be a difficult task.

The second force that was used to analyze the industry was substitutes. The only major substitutes to digital music players such as the iPod are portable compact disc players. Compact disc players were a great leap of technology when they were first brought to market in the early 1980's such as digital music players of today. Compact disc players are very inexpensive but can be somewhat bulky when compared to digital music players. The major problems when talking about the compact disc player industry are compact discs that contain music may become scratched rendering them useless, also in many cases after thorough use the optical eye that reads the discs may become broken or scratched from dust that causes the player to skip songs or not be useable at all. Each compact disc can only hold a certain number of songs limiting the songs you can listen to at one sitting which also leaves you carrying around bulky cases of discs if you want to listen to more than one certain compact disc.

The third force used was the supplier power force. The suppliers of the technology used to create the digital music players play a major role in the industry. There are only certain suppliers that create the memory used in players as well as the different technologies that different companies use to get ahead of competition and create a competitive advantage. The suppliers are crucial to the advancement of each player in the industry as well as the price of the product.

The buyer power force was the fourth force used to analyze the digital music player industry. When talking about major players in the buyer role of digital music players there are 4 major components. The four major players are consumers, retailers, the auto industry and educational institutions. Of the four, retailers would be the largest segment of buyers. Although consumers are a major player, many consumers purchase their digital music players through retailers at either online sites or retail outlets. When it comes to purchasing digital music players almost every major retail outlet sales them and have a wide variety of players on display in different colors, sizes, shapes, prices and name brand. Many automobile manufacturers as well as educational institutions are incorporating digital music players into their products. Automobiles are now coming equipped with plugs and Bluetooth that allow you to hook you music player into the car and listen to it and control it through your radio in the car. Many educational institutions are allowing students to download videos of class lectures or notes from the teacher and put them on players that have the capabilities, allowing them to watch the lectures or listen to the notes at their leisure.

The fifth force is rivalry which is price competition, market share competition and retaliation. Price competition plays a role in larger digital music players that have a niche to try and set them apart from their competition. The more technological the player the higher the price, the problem is other companies may use identical technology but may price their product lower than yours to try and under cut your profits and take over a percentage of market share. Market share is very intense when it comes to rivalry dealing with the 40 percent of market share that Apple doesn't control. There are seven major players competing for the 40 percent market share in the music player industry. These seven players have established brands, quality and the capital needed to compete against each other and any other company that may decide to try and get into the market. Retaliation may occur when a smaller company uses technology to try and compete or put themselves ahead of a major company. Since they usually don't have the capital