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Apple Computer Inc: Ipods And Itunes


1.1 Background

Apple Computer Inc. is an American multinational company that designs and markets different types of consumer electronic, personal Software's and computers. The company also designs and markets the portable music players, the related accessories, services, and some online marketing of the television shows. This company operates primarily in the European, American and Japanese company. Their headquarters are located in California and Cupertino with about 14800 employees (Biersdorfer & Pogue, 2009). This company has recorded revenues of close to $ 13,931 million during the fiscal year, a recorded increase of 68% from the previous years. The increase in the revenues of the company was due to the elevation of sales of the iPod. The mission of this company is to be the best personal computer marketer in the world alongside the OS X, the life and the professional software. This company has close to 300 retail stores within 10 different countries, with an online store where they conduct the sale of software products. In Japan, Hong Kong the Apple Company has only the online store without any retail stores.

1.2 Aim

The purpose of this report is to review the status quo of contemporary music recording industry and the situation of development concerning Apple Inc.'s involvement in music recording industry and analyze the evolution of music industry and Apple's strategy related to this industry including the PESTEL and Porter's five forces model analysis of music industry analysis, value chain analysis of music industry, Apple Inc.'s main competitor- Napster's strategy, Apple's strategy and its stakeholders and the opportunities and threat that Apple will be met and confronted.

1.3 Scope

The scope of this report covers the trends of the emerging markets, the PESTEL analysis to give the framework on the external environment aspects, as well as the strategies adopted by the company to survive in the competitive environment. The report also gives information on the opportunities and threats, and the recommendations for survival.

Discussion and analysis

Pestel analysis on Apple Computer Inc.

The PESTEL analysis shows the framework of the Macro environment aspects, which summarizes the implications of the external environment, which could directly affect the Apple iTunes with the different markets across their international locations.

The Political and Legal Issues

In the past 10 years, there have been rules set to guard the illegal downloading of music. The big recording companies such as Sony BMG, Warner and the Vivendi companies have gone ahead to develop their own pirate proof internet system to distribute their own music known as the Digital Rights Management. However, in 2002, the Apple computer made a deal with these recording companies to allow the customers to download the music for frees using the iTunes. However, there is the difference in the music copyrights in different countries. For instance, the European copyright is not the same as the US copyright due to the variations in the laws, as the European legislation has not been coordinated to fit the current needs. Furthermore, the different legal environments have led to the variations in the market in relation to the selling of digital goods online. In addition, it takes a longer time for the iTunes products to arrive and spread with the European market, therefore it is difficult to manage the entry of the products to the market (Biersdorfer & Pogue, 2008). Most of the countries are against the iTunes more than the music privacy. For instance, the Scandinavian countries have consumer groups that follow the Norway's fight for the smooth operation of the iTunes in these countries.

Economic Issues

Apple is not the market leader within the computer industry, with its wide distribution stores globally. It has only around 7% of the market share with many competitors such as Dell, HP and Lenovo. Due to the existing economic crisis in Hong Kong, there is a high inflation rate in the country and therefore; most of the people will give it a second thought before they purchase expensive products from iTunes such as the Mac book. However, despite the increase in the inflation rate, there is also an increase in the level of income, increasing the willingness of the public to purchase the products from Apple Company. The rate of unemployment in Denmark is low, with a percentage of 2.1% in the previous year. The GDP growth is 0.3% per capital. The rate of inflation in this country has also declined compared to other European countries. Denmark has a highly and efficiently developed welfare safety that ensures that all its citizens receive their tax refund on health care and the unemployment insurance for the unemployed.

The Social Cultural Issues

The EU has 27 members since 2000 to 2010, and the total populations growing from around 483 millions to close to 495 millions, Denmark have a population close to 5.4 million, with a higher density. The country has the smallest income inequality with a coefficient score of 24.4. Social cultural factors have influenced the marketing of the iPhones.

Technology and Information Environment

Apple Company has many software programs such as the iWorks, IOS and the photo booth. These software programs have been designed specifically for use with the Mac computers, giving the Apple Company a comparative advantage. In addition, the Apple Company is using the advanced technological tools to develop multifunctional products to fit to the current market demands. Furthermore, the company has also made it its mandate to improve the existing programs to fit to the current needs and hence become more marketable in the current market.

Music industry analysis using the porter's five forces

Current Rivalry to the Company

The apple company faces a strong competition on market because the music industry has a low switching cost. The main competition of the company is the IBM, HP and Toshiba companies. The other competitors at the multimedia solutions category are the Napster and the Kazaa companies. However, due to the legal and illegal privacy issues, these companies died leaving Apple Company as the leader in the category of multimedia solutions. The Apple TV faces strong competition from the Amazon Unbox, the Cinema Now and the movie link among other prominent companies. For their iPhone product, it faces competition from Motorola, Palm and the Blackberry companies. In relation to the PC industries, the pricing of the different products has faced stiff competition, therefore warranting for the cost cutting processes designed to cover the decreasing profit margins. For instance, dell has been able to use this application of cost cutting to manage its products, making it more difficult for the Apple Company as it poses threat.

The Threat of New Entrants

The threat of new entrants to the market is a factor. Due to the creation of strong brand name with products such as iPod and iTunes has made it difficult for the new entrants to fit into the market. However, although it is difficult for the new companies to make a name, there is a possibility for the streaming audios with the Verizon being on demand online and as the function like the iTunes and totally fits to the market with the presence of disruptive technology such as Google within the entertainment industry.

The Bargaining Power of the Suppliers

The bargain power of the suppliers also is another factor. There are two different suppliers for the Operating Systems memory chips and the microprocessors, disk drives and the keyboards for the computers. However, the pricing and the quality adjustments of the Apple products makes their products more attractive in the market. Furthermore, due to the illegal downloads of music online, the big recording companies have realized the essence and the importance of the development of the internet tools to protect the distribution of their own music, known as the Digital Rights management. In 2002, the Apple Company made a deal with four recording companies that they allow the customers to download their music legally with the payment of the iTunes. The four music production companies have a competitive advantage in the recording contracts, the existence of elevated promotional barriers and on the recorded sales through the retail stores.

The Bargaining Power from the Buyers

On analysis of other music sellers like the Sony, Apple iTunes and the Napter, these companies are still making high sales. This has a direct implication that the bargaining power from the buyers is on the higher side. The applets products like the iPods, the iPhones and the Mac book and their concepts have attracted a large number of customers with the intention of purchasing these products. Furthermore, the development of the Apple iTunes has perfected the match of their productions as the ITunes Music offer other beneficial options to the buyers such as the trial offers before the purchase of the products during the recent years, the digital productions with different fulfilling market share has increased significantly in their numbers. However, with the recent developments, most of the customers have become very selective and specific with their needs. The Apple Company has worked hard to ensure that their products suit the needs and the variations in the taste of the different customers.

The Threat from the Substitutes

The presence of the production substitutes has down the attractiveness and the profit abilities existing within the music industry. For instance, the digital music industry has several firms such as the Apple, the IRIVER, the RIO and the RCA. There are also other firms that offer downloads of songs in MP3 formats. In comparison the iPhone, Sony Ericsson and the Nokia, these companies also provide music with inbuilt video delivery systems. The presence of the mobile phones can be a new revolution within the music industry.

Value chain and trends within the market

The music industry has low switching cost in the market. There is growing number of competitors; however, there is a decrease in the number of new entrants to the market. Apple Inc. provides the contribution to the technological world, through the manufacturing of tools that advances the minds of all the human kind. This company leads in the digital music revolution in its iPods and the iTunes online stores. Furthermore, the Apple Company has reinvented the mobile phones with the revolutionary iPhones and the apple stores, with its introduction of the magical iPod. This magical iPod is the defining mobile media and different computer devices. Apple Company manages its business based on their geographical locations. In 2006, iPods was the best selling product of this company, although it has lost its market steadily in the past six years. The drop could be attributed to the rising new independent labels due to the emergence of different company's and the upcoming of the new independent labels. There is a possibility for the streaming audios with the Verizon being on demand online and as the function like the iTunes and totally fits to the market with the presence of disruptive technology such as Google within the entertainment industry.

The meaning of the underpinning economics

The Apple Company depends on the export of their products to other countries. The rate of unemployment in Denmark is low, with a percentage of 2.1% in the previous year. The GDP growth is 0.3% per capital. The European country is the major export market for Apple Inc. products, with Denmark as one of the major exporter. The country has the smallest income inequality with a coefficient score of 24.4. Social cultural factors have influenced the marketing of the iPhones. The rate of inflation in this country has also declined compared to other European countries. Denmark has a highly and efficiently developed welfare safety that ensures that all its citizens receive their tax refund on healthcare and the unemployment insurance for the unemployed.

Napster's strategy and how it evolved

Due to the existing difficulties in finding music that can be downloadable on the internet, Shawn developed a computer program that could allow and change the way people share music online. The Napster program allows the computers to link up and gives a possibility of trading music over the internet. This computer program was made available free on the Internet as the program acted as a central hub, whereby a P2P network could allow the users to exchange files without any problem. The exchanged files passed to the next computer using the Napster centralized server although no copies of the music files were saved on the Napster computers. Although the Napster software made it possible to download music it was difficult for the people who were technologically inclined to download music. Due to increasing use of the program, there were several complains in the US for the excessive use of the internet by the students transferring the music. The program was then sold to the privacy policy companies and several other programs were developed.

Apple strategy

Corporate level strategy

The company's corporate strategy has leveraged its abilities through designing and development of their personal operating system, software application technologies and hardware, to provide to the customers all over the world with compelling current products and the solutions with excellent ease in their use. The products also have seaming less integrations and innovative industrial designs of their products to fit to the current needs. Apple Company designs and manufactures personal computers as well as their related software and services assisting in the networking solutions. This company also designs and develops market line products such as portable musical payers alongside other related accessories and services inclusive of the online distribution of the third party music. The company has maintained hiring high-qualified staff to run their businesses. The company has also improved its distribution services through the opening of different distribution capabilities through the opening of the retail stores in the US and in different countries. For instance, the company has 124 stores, with the staff selecting the third party stores with the company to facilitate the improvement of the companies buying experiences through the reseller locations located globally.

Business strategy

The company sells its products worldwide through its online stores, retail stores and through their direct sale forces through the third party whole sellers and the retail shops. To survive in the market, the company also sells a wide variety of the third party products, which are compatible to different computer printers and the printing suppliers, and a variety of the external storage devices. The Apple Company participates in highly competitive markets inclusive of the design of the personal computers, which have Macintosh computer and the consumer electronics with their iPod line of their digital music players and online iTunes Music stores. The company is also a widely recognized innovator in the personal computer and electronic markets and leaders within the emerging markets for its distribution of their digital contents that are highly competitive subject to aggressive pricing for their products with increased competition. For the successful development of the products, the company has utilized a variety of the existing direct and the indirect distribution channels. This is because the company has a belief in the sales of the innovative and the diversified products. The diversity of these products is enhanced by the highly qualified sales persons who have the mandate of conveying unique digital lifestyle available on the Macintosh computers with windows platforms and network services. The company has high quality, quantity after sales support experiences that is critical for attracting and retaining customers. Furthermore, to ensure that their high-quality buying experience for its products with services and the education is emphasized.