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400Millions (2001)
700Millions (2003)
Main Companies Involved in
music industry
Sony Corporation
Amazon.com
Mp3.com
Napster
Competitive forces
The impact on competitive rivalry
The impact on barrier to entry
The impact on buyer bargaining power
The impact on supplier bargaining power
The impact on seller-supplier collaboration
The impact on competitive
rivalry
•There is wide geographic market, so
the rivalry among competitors become
increased.
•Elimination of Geographical protection
of distance.
•Freshly launched E. commerce
strategies among competitors.
The impact on barrier to entry
Low barrier to entry in e. commerce. As
internet is easier source to expand markets.
Easy availability of software for making
websites.
Only barrier is to create awareness and
increase traffic on websites.
The impact on buyer bargaining
power
Info about competing products and brands.
Websites provide 24*7 facility.
Facility to manufacturer. Wholesale, retailer
to buy and approach desirable vendors.
Person who has knowledge of market,
product, quality and who is price conscious
has higher bargaining power.
The impact on supplier bargaining
power.
Facility to organization to reach the best
supplier by increasing efficiency and
reducing cost.
Facility to indentify foreign supplier &
then involved him in supply chain.
Supplier have wide access to buyers in
online business.
Eliminating difficult process of E-mail
and Fax,
The impact on seller-supplier
collaboration
Effective relationship between supplier and
seller & easy access.
Company will continue buying , if a seller
provides best values.
Collaboration of inbound logistics.
Other strategy-shaping features of
internet technology
The internet is a force globalizing
competition and expending the
geographic arena in which firms have a
market presence. A company’s Web store
is open to buyers all over the world.
E-commerce
Language
Shipping expense
Best Suppliers
Other strategy-shaping features of
internet technology
Internet and PC technology are advancing at
uncertain speeds and in unexpected
directions. A few years ago , Both Intel and
Microsoft were focusing all their energies on
boosting the performance and capabilities of
PCs and expanding the role of PCs as a
multifunctional appliance in both business
and households.
Iomega’s Zip
Hard Drives
Broadband
Other strategy-shaping features of
internet technology
400Millions (2001)
700Millions (2003)
Main Companies Involved in
music industry
Sony Corporation
Amazon.com
Mp3.com
Napster
Sony Corporation
Founded in 1946 in Japan
It was most comprehensive
entertainment company in the world.
It was leading Manufacturer of Audio,
Video, communication and technology
products for consumer and professional
markets.
It was leading Music industry in united
states.
Music listening was revolutionized by
Sony by introducing a pocket size
Walkman.
The Mp3 Threat to Sony
Mp3 offers no anti-privacy protection.
It compress digital audio information to
portable size.
It was offering free Mp3 music files and
software that can run those files easily.
Sony’s Reaction to Mp3
Sony started distribution of music on
internet before this they were trading in only
CD’s and record labels.
They reduce their prices from $9 to $2.60.
They introduced copyright management
technologies.
Amazon.com
They started their business in 1995 with
internet book selling.
Customer entering in Amazon.com can
order books and other products, purchase
gifts, browse highlighted selections and can
check their order’s status.
It expands its product offerings to music
stores in 1998. In third quarter of 1998
Amazon.com became the number 1 online
seller of online Music.
Now they are holding 20% of market share.
Mp3.com
It was a revolutionary approach to the
promotion and distribution of music.
It uses internet and file formats that makes
the music files smaller.
It is a free source for customer to download
their desired music files.
In January 2000, the major recording
companies sued Mp3.com for violation of
copyrights.
NAPSTER
It is a world’s leading file sharing
community. Its software applications enable
users to locate and share media files.
It allowed anyone to reach out to any other
computer and get files from it.
Users can log on to central directory and
identify the song they wanted.
RIAA claimed that Napster harmed the
industry by slowing CD sales.
Case Study
Question No.1
2 Types of Appeals
Functional
Emotional
Functional
Allthe functions that a business is
providing to attract its customer
Emotional
RECORDING
Own recording studios. Traditionally
companies have their own studios where
they record music of any artist and then
make copies of that music in different
formats e.g. CDs and DVDs.
May outsource this link.
MANUFACTURING
RETAILING
Major labels and internet superstores e.g.
Amazon.com is performing this type of
retailing activities.
Short industry value chain due to
internet
Powerful supply chain management. Sony
has its own powerful distribution network
and it has its own outlets. From where
customers can get easy access to any type
of music in short span of time.
Checking material inventory through soft
wares. Different software are made that are
involved in checking the demand and
supply requirements of music.
Contd.
Just in time delivery direct to consumer. On
internet customer can surf its desired music
and can download it within no time.
product performance system. Companies
always collect feedback from customers to
check their performance status. If they
found any deficiency in process then they
can try to overcome that problem.
Ethical background of internet music
Free internet distribution of music is
unethical activity. Because companies have
to pay royalties.
Parent company doesn't get its profit due to
free distribution. Due to free distribution
their sales decreases and sales have
ultimate impact on profit. When company
will pay low margin to artists than they will
shift to other competitors.
Question No.5
1 . Distribution Channel