Itunes Case Study

Table of Contents

1. Opening

1.1 Introduction and problem statement

1.2 Summary of the case

2. Internal analysis

2.1 Value chain

2.2 Four Building Blocks

3. External analysis

3.1 The 5 forces model

3.2 Issues in the macro-environment

4.SWOT

4.1 SWOT-table

4.2 Explanation

5.Decision-making

5.1 TOWS-matrix

5.2 3 Possible strategies for iTunes

5.3 Evaluation of strategies

5.4 Most suitable strategy for iTunes

6.Conclusion

6.1 Answer to the problem statement

6.2 Dilemma's while developing

Bibliography

1. Opening

1.1 Introduction and problem statement

In this first case of the module 'Strategic Management', the product 'iTunes' will be analysed. This is Apple's music delivery business and this product has developed over several years. In this case, the internal and external environment of iTunes will be analysed. Afterwards, 3 possible strategies for iTunes will be formulated and the problem statement will be answered.

To do the (desk-)research and analyse the case, a problem statement is divined:

Problem statement: How can iTunes keep their market share and adjust to the developments in the digital music industry?

Several sub-questions for further investigations are formulated as well:

Sub-questions:

1. What are the developments since 2008 in the music-industry (distribution)? And what is iTunes' market share today?

2. What is the overall philosophy and vision of Apple? Does iTunes or other Apple products have different philosophies and visions?

The development of iTunes' strategy

iTunes is the largest online music retailer in the world. iTunes is a free software programme for Mac and PC. With iTunes, the consumer can organize and play digital music and video's. It is not only a music and video player; it is also an online store for your computer, iPod touch, iPhone and iPad.

iTunes collects your complete media collection so it is very easy to find your music and video's. Another feature of iTunes is the iTunes store, where the consumer can buy music, movies and podcasts.

iTunes strategy has developed over the years. The first iTunes version is from 2001 and it started as a simple music player. Now, iTunes is a control centre for many types of media. Because of the change in the (digital) media (and especially music) industry, iTunes needs to change their strategy as well. It is a product of 'Apple', so the mission and vision of iTunes is similar as the mission and vision of Apple itself. Though the strategy needs to be reconsidered, when there are certain changes in the industry.

In 2001, the mission of iTunes was to 'give the consumer an easy way to organize and play music and video's on a mac OSX'. iTunes strategy was to make the application available for mac users so they could enjoy the software on their computer. The iPod and the application 'iTunes' were important parts of the 'Digital Hub' strategy of Apple in 2001. This strategy was building around the 'digital lifestyle era' that Steve Jobs predicted.

Not only several developments in the media industry caused the change in iTunes strategy, also the way that Apple produced their products and adjust the total strategy over the past 10 years, changed.

iTunes gained a lot of users in the past ten years and several new products, adjustments, services and applications are available now, for iTunes or in combination with iTunes. iTunes' new strategy is to innovate, create, co-operate and to cross several media (Apple) products and applications.

iTunes mission and vision will be explained in the first chapter of this case.

General challenges that iTunes is facing

The music industry has changed a lot in the past few years and iTunes is an example of the changes. iTunes makes it easy for users to buy songs digitally and listen to them whenever they want. This is what has made iTunes so successful. Just like every other company, iTunes is also facing with some general challenges. One of the challenges is the illegal downloading of music. It is very easy for anybody to download music illegal and not pay a single cent for it. This is a great challenge iTunes needs to deal with. They have to convince customers why it's better to buy music from iTunes than to download it for free.

Another general challenge iTunes is facing is the very strong and upcoming competition. The two largest competitors are Google Music and Spotify. Google Music is similar to iTunes. Google Music has recently been launched; 3 months ago. It enables people to buy music from the Android Market store and listen to them wherever they want on the personal computer, laptop, mobile device or tablet. Google Music is still very new and not really known by a wide range of people. Mostly because the service is only available in the United States as it is for now. They will expand it to more countries in the future.

Another big competitor is Spotify. This is a music service, which is a free service, if the user doesn't listen a lot of music. Spotify lets you find music and save it on a playlist that you can play on a lot digital devices. Everyone can listen one track for five times in a month for free. If you want to listen a track more than five times, it's possible to pay a small fee per month to listen to all the music that Spotify delivers. The only downside to Spotify is that they don't have deals with all record companies. Although they do have deals with a lot of labels, including some big ones, so there is a lot of music to choose