The Competitive Environment of the iPod

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The Competitive Environment of the iPod Jonna
Heliskoski and Charlie Driver December 2006
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Foreword
The value of the competitive intelligence depends
on the ability to identify and analyse 1)
current and potential new competitors and 2)
current and potential changes in customer
needs. Competitive intelligence is 1) future
oriented 2) used to identify threats and
opportunities
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The Competitive Environment of the iPod The Table
of Contents

• PART 1 The Introduction
• Introduction
• History and development
• What is an iPod?
• Competition
• PART 2 The Analysis
• Competitive Environment
• Industry Market
• Customer Needs
• Technology Society
• Market Network
• PART 3 The Conclusions
• Future Predictions
• Recommendations

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The Competitive Environment of the iPod The Table
of Contents

• PART 1 The Introduction
• Introduction
• History and development
• What is an iPod?
• Competition
• PART 2 The Analysis
• Competitive Environment
• Industry Market
• Customer Needs
• Technology Society
• Market Network
• PART 3 The Conclusions
• Future Predictions
• Recommendations

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The Introduction History Of Portable Music
Sales
1985
1990
2000
1995
2005
1979
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The Introduction iPod And MP3 Phones
Million units
70
60
50
40
30
20
10
2005
2006
2003
2004
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The Introduction What Is an iPod?
It makes me one hell of a cool human being
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(No Transcript)
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The Introduction Competition
Product form
Product category
Generic competition
Budget competition
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The Introduction Competition
Microsoft Zune
Product form
Portable media device
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The Introduction Competition
Sandisk Sansa Sony Walkman Creative
Zen Archos Cowon iAudio iRiver Clix Meizu
miniplayer Mobiblu MPIO Q-BE Samsung Yepp Toshiba
Gigabeat Dell
Product category
Digital audio player
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The Introduction Competition
MP3 phones Motorola E398 Nokia 6230 Nokia N
series Sony Ericsson K700i LG U8110 LG
Chocolate Siemens SX1 Sharp GX15 Samsung
E800 Motorola RAZR Home stereos Portable
stereos Desktop computers
Generic competition
Home stereo, music playing devices, mobile phones
or desktop computers
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The Introduction Competition
Luxury goods Entertainment Holidays Gifts Hobbies
Budget competition
Entertainment, holidays, luxury goods, hobbies
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The Competitive Environment of the iPod The Table
of Contents

• PART 1 The Introduction
• Introduction
• History and development
• What is an iPod?
• Competition
• PART 2 The Analysis
• Competitive Environment
• Industry Market
• Customer Needs
• Technology Society
• Market Network
• PART 3 The Conclusions
• Future Predictions
• Recommendations

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The Analysis Competitive Environment

• INDUSTRY
• Structure
• Trends
• Attractiveness

Competitive Intelligence

• SOCIETY
• TECHNOLOGY
• Innovations
• Values
• Trends

• CUSTOMERS
• Behaviours
• Needs
• Trends

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The Analysis Industry Market
Entry barriers to the industry are relatively low
and mainly related to intellectual property. But
the cost of entry has decreased due to
availability and use of technology.
Intensity of rivalry is moderate. Market is
growing fast but is concentrated with one
dominant player. Due to the attractiveness of the
industry, it is likely that we will see new
players entering the market.
Potential Entrants
The bargaining power of the suppliers is low.
The componentry is simple and therefore there are
many suppliers.
The bargaining power of the buyers is very low.
In this consumer market the price
sensitivity is low. Also the brand loyalty and
the switching costs are high.
Threat of new entrants
Industry Competitors
Bargaining power of buyers
Bargaining power of suppliers
Buyers
Suppliers
Intensity of rivalry
Threat of substitutes
Substitutes
The threat of substitutes is increasing. The key
drivers are 1) increasing amount of consumer
usage, 2) diversity of usage and 3) fast changing
technology.
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The Analysis Industry Market
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The Analysis Industry Market
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The Analysis Customer Needs

• Basic need
• Music for commuting and during exercise
• Also encompasses all of the services that are
  offered a total entertainment package
• Common theme - stylish
• Complaints about the battery life, durability
• Changes In Customer Behaviour
• Not loyal to Apple
• 50 of all music is downloaded onto phones
• Like to have one device for phone and music

If we look at the wider scope can we find another
way to meet these needs?
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The Analysis Technology Society

• Changes In Technology
• Mobile wireless technologies
• Multimedia
• Convergence
• Social software
• Sharing downloading
• Changes In Society
• Sociality communication
• Speed of adaptation

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The Analysis Market Network
entertainment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment
The Phones
The Entertainment
The Data Management
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The Competitive Environment of the iPod The Table
of Contents

• PART 1 The Introduction
• Introduction
• History and development
• What is an iPod?
• Competition
• PART 2 The Analysis
• Competitive Environment
• Industry Market
• Customer Needs
• Technology Society
• Market Network
• PART 3 The Conclusions
• Future Predictions
• Recommendations

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The Conclusions Future Predictions
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The Conclusions Future Predictions
entertainment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment entertainment,
entertainment entertainment, entertainment enterta
inment, entertainment entertainment,
entertainment entertainment, entertainment
entertainment entertainment entertainment enterta
inment entertainment entertainment entertainment e
ntertainment

• Predictions
• There are going to be three markets,
• created around different customer needs.
• iPod and Zune are going to enter the mobile
  phone market,
• forcing the mobile phone industry to revise
  their strategies.
• The convergence will continue,
• increasing the influence of the content
  providers.

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The Conclusions Recommendations

• Apple should
• Create a blue ocean by combining
• their core competence of integrating the mobile
  device (iPod) with high quality content services
  (iTunes) with
• the key features of the mobile phones - the
  communication and connectivity (3G)
• Lifestyle of unlimited entertainment
  communication
• Look out for
• Microsoft, Palm etc. who could threaten their
  position by creating a new market around the need
  of data management device synergy.
• Implement
• Competitive intelligence

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Thank You For Your Attention
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iPOD Market Today Analysis Using Five
Competitive Forces Evaluation Of Determinants
This slide will not be shown

• Entry Barriers
• Economies of scale Moderate
• Initial investments and fixed cost - High
• Brand loyalty of customers - Moderate
• Switching costs - Low
• Access to distribution - High
• Cost advantage due
• - access to inputs High
• - proprietary learning curve - High
• Protected intellectual property - High
• Expected retaliation - Low

• Rivalry Determinants
• Industry growth Moderate
• Fixed costs / value added - Low
• Product differences - High
• Brand identity - Low
• Switching costs- Low
• Concentration and balance - High
• Diversity of competitors High
• Corporate stakes Moderate
• Exit barriers - Low

Potential Entrants

• Determinants of Buyer Power
• Bargaining Leverage
• Buyer concentration Low
• Buyer volume - Low
• Buyer switching costs relative to firm
• switching costs - Low
• Buyer information - High
• Ability to backward integrate - Low
• Substitute products High
• Price Sensitivity
• Price sensitivity - Low
• Product differences High
• Brand loyalty Low

Threat of new entrants

• Determinants of Supplier Power
• Differentiation of inputs Low
• Switching costs of suppliers - Low
• Presence of substitute inputs - Low
• Supplier concentration - Low
• Importance of volume to supplier - High
• Impact of inputs on cost or differentiation -
  High
• Threat of forward integration relative to
  threat
• of backward integr. by firms in the industry -
  High

Industry Competitors
Bargaining power of buyers
Bargaining power of suppliers
Buyers
Suppliers
Intensity of rivalry
Threat of substitutes
Substitutes

• The Core Product
• Samsung media processor, NAND flash memory
  chips
• Audible Technology for downloading audible
  versions of books etc.
• Synaptics makes the click wheel
• SigmaTel, PortalPlayer Chips and processors
• The Accessories
• Digital Lifestyle Outfitters accessories
• XtremeMac accessories
• Griffin Technology accessories
• over 3,000 iPod accessories available

• Determinants of Substitution Threat
• Brand loyalty High
• Close customer relationship - Low
• Switching costs- Low
• Buyer propensity to substitute - Moderate
• Current trends High
• Relative price performance of substitutes - High