I liked the following sections. Nice thesis.
5.4.1 Cost Leadership and DifferentiationThe cost leadership strategy explains when successful competition is achieved
through low costs and prices. This strategy is usually used in firms that have highvolume,
homogeneous goods, which are mass-marketed to consumers. Consumers
perceive value to be based on lower prices for the same product. The uniform pricing
strategy is a good example of when “one-size-fits-all” music pricing can be used as a
strategic advantage. Customers value the low cost of the good, as well as the
reliability of static or decreasing prices.
The differentiation strategy focuses on marketing products that are considered unique
and valuable. Firms target specific customers that are willing to pay a premium price
for these goods. The price can be based on the product itself, the way that it is
distributed, or the way it is marketed (Porter, 1998, p. 14). The challenge of marketing
a differentiated good is identifying unique attributes, such as quality, sophistication,
prestige or luxury. Tiered pricing is an example of when less emphasis is placed on
the cost of the good, while more is placed on its value. If the value of the good is
identified and emphasized, the consumer will be more willing to pay higher prices.
6 ConclusionsOver the last forty years, music format preferences have changed from cassette tapes,
to compact discs, to downloadable music. Music downloading is a recent
phenomenon, joining the worlds of artistic development and technological innovation.
Due to the changing consumer demand towards downloadable music, it has become
increasingly difficult for companies to profit from selling physical music formats.
Finding ways to improving strategic business models is a very important for music
development and distribution companies.
6.1 Main Findings SummarizedThe research question of this thesis asked how the changing demand for
downloadable music influenced the strategic business models of firms. In order to
answer this question, one had to begin by identifying the companies that currently
supplied the demand for music. Recording companies, music retailers and companies
that sell portable music players have the greatest influence on the music market. Their
supply chains showed how dependant the companies are on one another to create and
deliver music to consumers.
To gain deeper insight into the music market, the thesis then analysed the external
environment of recording companies and music retailers. By evaluating
microenvironment factors, it was found that recording companies and music retailers
had opposing results when assessing market entry barriers, supplier bargaining power,
and buyer bargaining power. However, these companies faced similar
macroenvironment factors, such as copyright law, digital protection software, profit
from legal music downloading, and competing entertainment outlets.
After completing the analysis, the thesis highlighted four different strategies used to
increase companies’ competitive advantage: alliances and networks, product
diversification, product and service distribution, and profit maximisation.
6.2 Questions for the FutureNow that one is aware of the numerous strategies music development and distribution
companies use to maintain market share, what does the future hold for the music
industry? Will companies’ strategies successfully convince customers to buy their
products and services? Will recording companies ever regain their status as an
essential element in music production, or will their services become obsolete? Will
new online music retailers maintain consumer interests in the long-term?
Or is paying
for downloadable music merely a passing trend when so many free options are
available to consumers? (
- ITTO) Only time will tell which strategies and companies will
succeed.
