The Competitive Environment of the iPod Jonna Heliskoski and Charlie Driver December 2006

The Competitive Environment of the iPodThe Competitive Environment of the iPod

Jonna Heliskoski and Charlie DriverJonna Heliskoski and Charlie DriverDecember 2006December 2006

ForewordForeword

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

The Competitive Environment of the iPodThe 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

The Competitive Environment of the iPodThe 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

Sales

1979 1985 1990 20001995 2005

The IntroductionHistory Of Portable Music

10

20

30

40

50

60

70

20052004 20062003

Million units

The IntroductioniPod And MP3 Phones

“It makes me one hell of a cool human being”

The IntroductionWhat Is an iPod?

Product form

Product category

Generic competition

Budget competition

The IntroductionCompetition

Microsoft Zune

Product form

Portable media device

The IntroductionCompetition

Sandisk SansaSony WalkmanCreative Zen

ArchosCowon iAudioiRiver ClixMeizu miniplayerMobibluMPIOQ-BESamsung YeppToshiba GigabeatDell

Product category

Digital audio player

The IntroductionCompetition

MP3 phones

Motorola E398Nokia 6230Nokia N seriesSony Ericsson K700iLG U8110LG ChocolateSiemens SX1Sharp GX15Samsung E800Motorola RAZR

Home stereosPortable stereosDesktop computers

Generic competition

Home stereo, music playing devices, mobile phones or desktop computers

The IntroductionCompetition

Luxury goodsEntertainmentHolidaysGiftsHobbies

Budget competition

Entertainment, holidays, luxury goods, hobbies

The IntroductionCompetition

The Competitive Environment of the iPodThe 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

INDUSTRY➢ Structure➢ Trends➢ Attractiveness

CUSTOMERS➢ Behaviours➢ Needs➢ Trends

SOCIETY &TECHNOLOGY➢ Innovations➢ Values➢ Trends

Competitive Intelligence

PRODUCT DEVELOPMENTOPPORTUNITIES

NEW ENTRANTS

NEW SUBSTITUTES

The AnalysisCompetitive Environment

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.

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.

The threat of substitutes is increasing.The key drivers are

1) increasing amount of consumer usage,2) diversity of usage and3) fast changing technology.

The threat of substitutes is increasing.The key drivers are

1) increasing amount of consumer usage,2) diversity of usage and3) fast changing technology.

Entry barriers to the industry arerelatively low and mainly related tointellectual property. But the costof entry has decreased due to availabilityand use of technology.

Entry barriers to the industry arerelatively low and mainly related tointellectual property. But the costof entry has decreased due to availabilityand use of technology.

The bargaining power of the suppliers is low. The componentry is simple and therefore there are many suppliers.

The bargaining power of the suppliers is low. The componentry is simple and therefore there are many suppliers.

The bargaining power of the buyersis very low. In this consumer market the

price sensitivity is low. Also the brand loyalty and the switching costs are high.

The bargaining power of the buyersis very low. In this consumer market the

price sensitivity is low. Also the brand loyalty and the switching costs are high.

IndustryCompetitors

Intensity ofrivalry

PotentialEntrants

Suppliers Buyers

Substitutes

Threat of new entrants

Threat of substitutes

Bargaining powerof buyers

Bargaining powerof suppliers

The AnalysisIndustry & Market

17

iPodiPod80%80%

20%20%

10 millionThe stand-alone

MP3/MP4s players

The AnalysisIndustry & Market

18

48 millionMobile Phones with MP3/MP4 players

iPodiPod80%80%

20%20%

10 millionThe stand-alone

MP3/MP4s players

The Mobile Phone Industry The MP3sIndustry

The Market

The AnalysisIndustry & Market

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 scopecan we find another way to meet these needs?

The AnalysisCustomer Needs

20

Changes In Technology

Mobile & wireless technologies Multimedia Convergence Social software Sharing & downloading

Changes In Society Sociality & communication Speed of adaptation IP Rights

The AnalysisTechnology & Society

The Phones The EntertainmentThe Data Management

entertainmententertainmententertainmententertainmententertainmententertainment

entertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainment

The AnalysisMarket Network

The Competitive Environment of the iPodThe 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

The ConclusionsFuture Predictions

Wednesday, November 22, 2006

Palm CEO brushes off Apple cell phone threat

By AppleInsider Staff

Palm chief executive Ed Colligan doesn't plan on losing any sleep over rumors that iPod maker Apple Computer is on the verge of breaching the cell phone market with a new handset device.

Responding to questions at a Churchill Club breakfast gathering last Thursday, Colligan reportedly “laughed off the idea" that the Cupertino, California based company would experience any immediate success in delivering a device to the fastidious smart phone market.

"We've learned and struggled for a few years here figuring out how to make a decent phone,'' he said. "PC guys are not going to just figure this out. They're not going to just walk in.''Asked what to expect if Apple indeed were to deliver an iPod phone to market, Colligan theorized the device would likely employ WiFi and be sold through the company's retail chain rather than carriers like Verizon or Cingular.

Over the course of the last month, Apple is reported to have released its first mobile handset to contract manufacturers while it continues to work feverishly on a second device with additional collaborative capabilities.

entertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainmententertainment, entertainment

entertainmententertainmententertainmententertainmententertainmententertainmententertainmententertainment

The ConclusionsFuture Predictions

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.

The ConclusionsRecommendations

Apple should

Create a blue ocean by combining

1. their core competence of integrating the mobile device (iPod) with high quality content services (iTunes) with

2. 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

Thank You For Your AttentionThank You For Your Attention

IndustryCompetitors

Intensity ofrivalry

PotentialEntrants

Suppliers Buyers

Substitutes

Threat of new entrants

Threat of substitutes

Bargaining powerof buyers

Bargaining powerof suppliers

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

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

Determinants of Buyer PowerBargaining 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 – HighPrice Sensitivity Price sensitivity - Low Product differences – High Brand loyalty – Low

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

iPOD Market Today Analysis Using Five Competitive Forces – Evaluation Of Determinants

Determinant strengthens the force

Determinant weakens the force:

Determinant has neutral effect on the force:

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: accessoriesover 3,000 iPod accessories available

This slide will not be shown