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Strategic Management module assignment case 1 (iTunes)

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Strategic Management

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NHL Stenden Hogeschool (NHL)

The aim of this strategic process was to develop a strategy for iTunes to ensure the high position in the music industry. This report came up with three strategies that could create a competitive strategy for Apple’s iTunes.

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3/7/2014

STENDEN
UNIVERSITY CASE REPORT 1

| Daphne Bennink, Linda van Duijvenvoorde, Robin van Rossum,
Boyan de Boer and Chloë Karsseboom

, Case reports 1
Apple’s Music Delivery Business – iTunes

Commissioned by Stenden University Leeuwarden
Media and Entertainment Management

Module: Strategic Management in the Media
Tutor: Fan Ding
Submission date: 07-03-2014

Authors:
Daphne Bennink 208728
Linda van Duijvenvoorde 236454
Robin van Rossum 218634
Boyan de Boer 225878
Chloë Karsseboom 203955

1

,Preface
This strategic proposal is written by Strategy Consulting, commissioned by Stenden University
Leeuwarden. The aim of this strategic process was to develop a strategy for iTunes to ensure the
high position in the music industry. Strategy Consulting came up with three strategies that could
create a competitive strategy for Apple’s iTunes.

By means of this preface we want to thank some people who were helping us during this process.
Our word of thanks goes to Fan Ding in the first place, who helped us these four weeks and clarified
some issues in regard to this strategic process. Furthermore we want to thank Ronald Dikkeboom for
the lectures he gave us with a lot of information. Finally, we want to thank the second sources we
used for this process. Without these sources it would have been more difficult to come up with a
strategic plan for iTunes.

Daphne Bennink, Linda van Duijvenvoorde, Robin van Rossum, Boyan de Boer and Chloë
Karsseboom

2

,Management summary

ITunes is facing a few challenges. The key challenges are the competitors, piracy and the fact that
iTunes only syncs with Apple devices. iTunes has a good position in the market but with the key
challenges they need to ensure their good position. The problem statement is therefore: Which
strategy can iTunes use to ensure their good position in the music industry in the next 3 to 5 years?

In the internal analysis the resources and capabilities of iTunes were analyzed in order to come up
with the competencies of iTunes. The core competency of iTunes turned out to be innovation. This
way the products keep interesting the consumer. Another competency of iTunes is the fact that
iTunes doesn’t give full visibility about their product innovation, which means that it is very hard for
competitors to imitate.

iTunes creates value for their customers by fulfilling their needs. iTunes does this by aggregating the
recorded music from different label companies. Then they distribute this music on their software,
which can be used on among others on Apple devices. iTunes also creates value for their buyers and
potential buyers by offering safe and legal access to music they like. Buyers don’t have to buy an
entire album anymore, iTunes made the ability to choose.

The music industry is a fast changing industry. To increase the value of their products, Apple follows
a continuous innovation strategy. It is important that iTunes is also up to date. Therefore, iTunes
periodically provides updates. Considering the number of updates iTunes is very innovative.
Furthermore, iTunes provides the highest quality music to its customer. The high quality of iTunes is
a competitive advantage for iTunes compared to the competitor.

iTunes is not linked to social media. The biggest competitor, Spotify, has been linked to social media.
This way, consumers can look at what their friends are listening to. Which made Spotify very
popular.

Because importing CD’s is very interesting, due to a tax mechanism, iTunes has to encounter that in
their price strategic. They have to make streaming/downloading interesting for their target group.
Itunes is the market leader in the music sector. The revenues of the music industry will fall, but the
revenues of digital media in the music industry will increase. Still music lovers are not interested in
downloading. They feel more sense of purchase if they buy a CD. Music online is getting more social.

The music industry has ended up in a downturn, because of technological advances, the Smartphone
industry and the disappearing of record stores. Challenges in the music industry are the libraries
such as Spotify and iTunes. People are living in a world where everyone can just download whatever
they want. The rise of iTunes was not bad for the copyright agencies to prevent piracy.

With regard to the important perspectives of iTunes, the number of competitors is not really big
nowadays. The intensity of rivalry among new entrants is also little, with only Spotify. The bargaining
power of suppliers, like record labels and artists, are low, because every track on iTunes is not very
profitable for others. This is also the same with the buyers. The closeness of substitutes, like
YouTube, are big.

3

, Table of contents

Inhoud
Preface .................................................................................................................................................... 2
Management summary........................................................................................................................... 3
Table of contents .................................................................................................................................... 4
Opening ................................................................................................................................................... 6
Summary of case 1: Emergent strategy: who will stop Apple’s dominance of the music delivery
business? ............................................................................................................................................ 6
Strategy of iTunes so far ..................................................................................................................... 7
General challenges iTunes .................................................................................................................. 7
Problem statement and sub-questions .................................................................................................. 8
Problem statement ............................................................................................................................. 8
Sub-questions ..................................................................................................................................... 8
Internal analysis ...................................................................................................................................... 9
Resources, capabilities and competencies .......................................................................................... 9
Creating value ................................................................................................................................... 10
Competitive advantages............................................................................................................... 11
External analysis.................................................................................................................................... 13
Trends and developments in the music industry ............................................................................. 13
Important perspectives of iTunes ..................................................................................................... 13
Macro-environment of iTunes .......................................................................................................... 14
Influence of the strategic decision-making ...................................................................................... 15
SWOT analysis ....................................................................................................................................... 16
Decision-making .................................................................................................................................... 17
TOWS Matrix..................................................................................................................................... 17
Evaluation strategies ........................................................................................................................ 18
Connect iTunes with social media .................................................................................................... 18
Strategy pros and cons ..................................................................................................................... 18
Connect iTunes with social media .................................................................................................... 18
Strategy choice ................................................................................................................................. 19
Conclusion ............................................................................................................................................. 20
Bibliography .......................................................................................................................................... 21
Appendices ....................................................................................................................................... 25
Appendix 2.1 ..................................................................................................................................... 25

4

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