Competition in the Mp3 Player Industry

Introduction:

Do you remember a time when Transistor Radios were the most technologically advanced form of listening to music? Or how about in 1984 when Sony introduced the Walkman? These are the key radios and handheld devices that led to the creation of the handheld CD player, and into the craze that is now the MP3 Player. Technology is a fast paced market. Much like Darwin used the term “Survival of the Fittest” to play upon natural selection and predominance, it can be found in the technology industry today. There are over 100 producers of the MP3 player, however, there are only about 7 key companies who stand a chance to rank as the top in the industry, a title currently held by Apple.

The invention of the portable Music Player or MP3 was brought on by a need. The need was to overcome the need for limited music space. Not to mention that there was a need to capitalize on the trend of consumers downloading music onto their computers. The first MP3 player was introduced in 1997 by SaeHan, and it was called the MPMan F10. In 1998 Diamond Multimedia came to market with the Rio PMP300. The success of this MP3 player in its first year is what led the investment into the MP3 player industry. However, in 2005 this company decided to shut down production after a 5% increase in revenues, due to the high level of competition that faced the market.

Key Problem/Issue:

The main problem and issue in this case is for Apple. Apple is obviously the industry leader when it comes to the MP3 Player, with their iPod, iPod Nano, and iPod Shuffle. However, the main problem is how will Apple continue to be the industry leader in the ever more competitive MP3 Player Market? Although Apple was not the first mover in the MP3 Industry they did however set a precedent on the MP3 Player and the attributes that should be associated with it. One advantage that I feel Apple has is that they are known for their quick product innovation and marketing.

Analysis:

Apple’s strategy in regards to the iPod is simple: quick product innovation and marketing. There were many trends that faced the MP3 industry, the pace of technology was key, people wanted smaller devices, larger memory storage, longer battery life, and something that was fashionable. Companies were competing on all of these trends to see who could come out with the smallest MP3 player that could do all of these things. Another major trend was the need to jumble all of the consumer handheld electronic products into one. This means taking the phone, camera, music, and PDA if applicable and merging these all into one common device that consumers can carry instead of lugging around separate devices.

Chief Economic Characteristics

I believe that Apple is dominating in the market of MP3 Players. Apple clearly has the upper hand on their core competitors Archos, Creative, Dell, iRiver, SanDisk, and Sony. Their growth rate is consistent; this is a faced paced industry where someone can go from the top to the bottom in a matter of the next big invention. In 2005 the iPod accounted for 32.3 percent of Apple’s total sales. I believe that the market in 2005 was at a growth. I believe that right now the market is still at a growth but gradually moving toward a mature state, just counting the MP3 player market, not including the all in one Iphone whose capabilities seem endless. Apple’s rivalry in global. They are competing with companies such as Archos who are headquartered in France and Creative who is out of Singapore. Especially when using the internet, anyone around the world can by an iPod.

As far as buyers are concerned, they do have a significant say in the industry and as a whole they are what shapes the innovations that the industry makes. However, individually power of buyers is weak. I believe that the biggest factor in this market is the power of substitutes. If someone does not like the iPod they can switch to a cell phone that can hold their music, or they can listen to the radio, or possibly a satellite radio. I believe that this is a well saturated market and the entry barriers will be extensive to try and get in. These 7 competitors hold the market share they all have the Patons, money, and technology to drive a newcomer out of business. I do not feel there is much threat in terms of mobility barriers. Sony was a latecomer when entering the MP3 player market, they have an advantage in the fact that they can see where other companies have succeeded and failed, however, I think that it might be too late to try and take over ground that is already occupied by one of the other competitors.

The main cause for industry change is the consumer and their need for technology. Consumers are now fast paced; they want everything in one device and want it to match