Nokia vs Apple Case Study

Nokia vs Apple Case Study The Board of Apple iTunes has requested a report that seeks to examine the key macro and micro environmental factors within the music download industry and provide significant information regarding the current threat of Nokia entering the music download market. Also, recent trends should be observed and a strategy has to be developed that will limit Nokias impact and protect Apples market share within Europe. In order to do so, we used significant instruments to analyse the market and we formulated a strategy accordingly. 2.1 Apples Mission Statement: Apple is committed to bringing the best personal computing experience to student, educators, creative professionals and condumers arounf the world through its innovative hardware, software and iternet offerings. Apple continious to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the online phone market this year with its revolutionary iPhone. 2.2 Apples strategy: Apple inc. is a vertically integrated company, manufacturing and supplying all hardware and software as well as its own operating systems. Apple Inc. chose this strategy so they could retain profit and ensure profit is not lost by financing other companys profit margins. The practice behind this theory is to heavily finance research and development and have have the necessary means of production to cover all areas of the business. Marketing and advertising are also a key component in Apple Inc.s strategy to have a better market position. 2.3 Apples market: To exactly define Apples market is nearly impossible as the company takes part in the multimedia download market by offering a wide range of services like music, ringtones, games, Podcasts and movies (most popular is their iTunes service) as well as having recently entered the mobile phone market with its new iPhone. The multimedia download market is described by Mintel as anything that can be copied from the Internet to a PC, other portable devices (mobile phones, PDA), game consoles or multimedia devices (Mintel, 2007). This includes music, video/television programmes, games, wallpapers, icons and ringtones. For our report we will focus on the music part which is of special interest to the Board of Apple iTunes although some consideration about the whole multimedia download market will have to be done, as Apple provides a variety of multimedia services and a reduction of the market to the music download market might be to narrow sometimes. Apple is not yet part of the mobile download market (unlike Nokia that has entered this market with its new Ovi service and the launch of its N-Series devices) as this market is strictly defined by Mintel as products that are downloaded to a mobile phone, including ongoing subscription purchases or single one-off downloads. These products include icons, wallpaper, ringtones, music, news or video clips, jokes and games. These services are for mobile phones only and similar items downloaded to a PC are excluded (Mintel, 2005) . The mobile phones market is being defined by Mintel as handset manufacturers and network service providers (Mintel, 2007). 3. Overview of the multimedia download market: This overview has been generated on the base of a Mintel report about uploading and downloading in the UK in 2007 and the figures provided only show the UK market. Since it can be assumed that the UK market does not differ dramatically from the Europeen market since network providers, third party providers and mobile manufacturers taking part in this market are accessed through the world wide web and therfore are also being used from Europeen customers, the facts given can be transformed to the Europeen market. The multimedia download market and especially the music download market is a fast changing and fast growing emergent market that is characterised by high fragmentation as more and more players such as mobile phone manufacturers, network- and third party providers enter the market. Market Size and Segmentation: The UK value for the download market in 2006 has increased 179% above 2002 to  £343 million and especially the growth of music downloads is acting as a main driver for the market and is overtaking mobile phone downloads that have been the largest segment of the market in the past. Mintel forecasts further expansion of the market between 2007 and 2009. Market Share: The multimedia download market is a highly fragmented market with many players, that is being dominated by Apple iTunes with nearly 80% market share. Third-party providers like Napster, MonsterMob, iTouch and Zed are also an imporant source of the market, although in the case of mobile downloads network providers are significant too. Key Points of the Internal Market Environment: An increasing desire of consumers to benefit from new technology can clearly be recognized and especially in the music download market, consumer interest has increased due to innovative product launches, such as the Apple iPod. Also, theres a trend for technology devices to blend functions that have been associated with only one product, as recent examples like the Apple iPhone or the freshly announced Google Gphone show. Key Points of the External Market Environment: The current lack of legislation regarding copyright issues, encourages people away from legal download services. A trend being recognized by Mintel is that ad-supported content is getting more and more accepted from customers as they are more willing to download from official sources if the content is free. The Future: Mintel predicts that rather being an add-on downloading will become an activity carried out on most devices. As a result mobile Internet surfing will increasingly become mass market! 4. Key factors to success for Apple: The companys wide and always up-to-date range of downloadable files. The companies fresh and exiting presentation of services and devices that delivers the attitude towards the customer that downloading is fun. Design and fashion have proved highly important for the company, as their products are being regarded as hip and stylish. The ease of use for its products and services. The companys innovative technologies. Strong branding that attracts new customers, keeps older ones and creates additional value. Highly effective advertising Many formal and informal cooperations with big multinational firms 5. PESTEL-Analysis: Economical aspects: Consumers currently feel very safe about their financial situation and about their prosper life. As a result to that, they are willing to spent more in fast moving goods and luxury. However, costs evole to be the most important factor for customers when it comes to purchasing a mobile phone and additional services as well as downloads. Socio-cultural aspects: Theres a trend in the mulimedia download market towards targeting younger consumer groups, since these groups show higher interest in downloading and are less restrictive towards new technologies. Despite this trend Apple have to consider that older consumer groups are usually wealthier than younger people and have more money to spent and it is also important for the furture to meditate that the overall population is growing older. Technical aspects: The wide range of fast changing high-tech/high-quality download possibilities, encourages consumers to download but it also puts more pressure on competing firms, as they have to stay up-to-date with the newest technologies. Considerable developments in the mobile phone market (3G handsets becoming reality and expanded features available to the customer) will push the multimedia download market into new spheres and will open up great opportunities for Apple. Still, since Apple is taking part in a highly competitive market with new technologies arising and changing in a very fast rate product-life-cycles are short and companies have to invest strongly in RD in order to stay competitive and to fullfil the market demand. Legal aspects: Issues of copyrights and illegal downloads greatly affect the music download industry and are a major problem for active legal providers. A former lack of legislation in this area has encouraged consumers away from commercial downloading services and as a response to this, new technologies have been introduced that protect the copyright of owners and prevent customers to download and share files illegaly. Digital Rights Managment (DRM) was created to controll the number of copies that can be made from a download and although for the music industry there are many positive aspects to DRM, there are surely as many negative for the consumer. Therefore, some companies have already planned to open big portals on DRM-Free tracks, that will legally enable the consumer to download files without being limited to a certain number of computers, portable digital devices and CD burns for a reaonable price. Moreover DRM-Free tracks can be played on any MP3 capable device! Although Ap ple has already updated its offer with DRM-Free tracks, the choice for customers is still very limited, as Apple could only strike deals with EMI that allow them to offer DRM-Free tracks. Also, Apples DRM-Free tracks are more expensive than those of its competitiors which could become a major problem in the future, if the company doesnt adapt its pricing to the market. 6. Porters 5 Forces: Substitute products: A substitute product is not a direct alternative to the product a company is selling. For example, the new Sony Walkman media player is not a substitute for the iPod Touch, it is a competitor. However, a personal CD player or MP3 player could be if certain aspects of the market were to change, e.g. price and there was a high elasticity of demand. In the case of iTunes, with music there is a wide range of options for buying music and therefore are many substitutes within the music industry, for example tapes, CDs, vinyl and DVDs. All of these are easily accessible and just as convenient as downloading from the internet. The benefit which iTunes has is that you do not have to buy whole albums; you can download songs individually and at a fraction of the cost of a single song on another format. Also you are able to buy movies, TV shows, audio books and Podcasts, all available 24 hours a day, 7 days a week. Reports by Mintel have shown that sale price and the volume of sales is falling for non digital media, consequently as a result of internet downloading. Album sales are in dramatic decline; largely due to a boost in single downloads. High definition gaming and music channels have also deflected consumers away from buying into the music industry. However, for the future, it is likely that technological innovation will replace popular digital mediums and formats but we asume that this is not a very big threat for Apple, as the company has proved to always be up-to-date with the newest technologie and will do so in the future. The Threat of new Entrants: Already, there are hundreds of media downloading sites available to use on the internet. Some are legal and some are not. It is more difficult to block and put barriers up for illegal entrants into the market because they are not abiding by the law and therefore do not have patents, licences or the rights to distribute media, but still do. With legitimate start up companies, there are capital requirements, possible patents licences to obtain and ultimately the prospect of competing with already well established and reputable companies such as iTunes. Mintel predicts that there will be an influx of new companies willing to invest in the online downloading industry. A big threat for Apple constitutes the entrance of Amazon into the market. The company announced the launch of a new music download portal that offers a wide range of DRM-Free tracks to a reasonable price. Since there are many advantages to DRM-Free tracks, like the fact that users can legaly co py the files without being restricted to a certain number of copies, consumers are expected to highly welcome the new download store. Apple has to be aware of the fact, that it could loose both new and old customers by restricting them to Digital Rights Management tracks that can only be played on Apples iPod and not on any MP3 capable device, as it is the case with Amazon. Another threat of new entrants Apple has to face is, that the download industry is likely to change towards add-driven downloads, which means that customers wont have to pay for their downloads if they agree to watching adds. Google will launch its own mobile phone, the G-Phone. Googles strategy is to give its services for free to customers and than sell adds to pay for them. Apart from that, Nokias launch of the new Ovi Store together with its new N-Series will be the greates threat of new entrance as it will allow customers to directly download files to their mobile which Apples iPhone currently doesnt do. Bargaining Power Of Customers: Due to the vast range of direct alternatives and substitutes, iTunes needs to price competitively as well as maintaining reputation and range availability. Consumers are easily swayed to alternative products, especially the ease and free use of illegal downloading sites and therefore need to be drawn in to using legal downloading sites like iTunes. Consumers have great power due to their ability to buy from any one competitor in the music industry and can therefore potentially dictate prices by constantly buying from the cheapest company, thus forcing competitors to reduce prices. Obviously one customer would not make a difference, but collectively customers are strong. As for the Apple iPhone, it has to be considered that network providers have great power over the company, as they could decide not to sell the iPhone or put pressure on the company that forces them to pay a certain amount of their revenues to the provider. At the moment, Apple has rest ricted itself to one provider, O2, and therefore greatly depends on them selling the iPhone but this will surely change over time. Bargaining Power of Suppliers: Similarly to bargaining power of customers, there is the bargaining power of suppliers. iTunes have to submit to the requirements of the consumer market to be competitive, but on the other hand have the ability to bargain with their suppliers due to the size and reputation of the company, thus they are a supplier and a customer. Due to the volume of sales that iTunes have, it would be foolish for companies such as SonyBMG, Universal, Warner and EMI to not compromise on the costs and rights to distribute their music, as their success in the music download market highly depends on the successful distribution of their music, mainly through Apple. This fact clearly limits the bargaining power of suppliers to a certain degree, although Apple has to consider that without their music iTunes could not function as efficiently as the market demands. Therefore a compromise must arise that suits both companies, a possible agreement could be initial fees plus percen tage of sales. Intensity of Rivalry: Although the amount of companies operating in the music download market is pretty high, Apple is the clear market leader. Still the multimedia download market is a market in its growth phase with fast changing technologies and many new companies entering the market. At the moment, it seems very unlikely that a company could seriously threaten Apples market position but the company has to be aware of the fact that there are other big multinational companies trying to enter the market with new technologies and ways of offering their services. 7. The Industry Life Cycle: The multimedia download market is a market in its growth phase that is being stimulated by an increasing desire of customers to benefit from multimedia technology and services. Technical innovations are leading to an increasing number of consumers seeking to interact through the internet and to download their music. The market value of the music download market has shown very strong and is going to rise even more in the future as customers familiarise themselves more and more with the internet and are increasingly aware of innovative technologies. Especially the youth segment pays great interest to the digital download of music and holds out good prospects for long-term growth. At the same time more and more firms are entering the music download market and prices for technology and services are expected to fall. Add-driven content services and the entrance of firms offering download services from online portals directly to the mobile will bring new perspectives into the market and co nstitute a threat and a opportunity at the same time. 8. Four Links Model Lynch: Informal co-operative links: Google: There are many informal ties that form the alliance between Google and iTunes. The reasoning for the alliance has long been speculated and many believe it is to overthrow the dominant leader in the market; Microsoft. With Google developing an Office type package and Apple inc. already having an operating system well established, an alliance could be the key to outsmarting Microsoft and decrease their market share. The main features that form the alliance are as follows: Google currently have a video application that has been made available for users to browse freely but cannot download from. Therefore a link to the iTunes website where consumers can download the video can be made available. The link is perfect because customers can view on Google Video and then download from iTunes if they wish. iTunes can be integrated into the Google toolbar or software pack. Also, Google have a sponsored search for the iTunes website where users are directed to the iTunes website and a sma ll fee is provided to Google from the company for the service. CEO of Google Eric Schmidt is currently sitting on the board of Directors for Apple inc. due to the past possible development of the Google iPhone, but this development never really took off. However, he has said recently that Apple and Google are doing more and more things together and there is a possible tablet style personal computer on the horizon. We have similar goals and similar competitors. Though there is no formal agreement or alliance yet. Starbucks: Currently only available in the USA, when in a Starbucks Coffee Shop, any iPod touch, iPhone or PC with iTunes on can connect to the iTunes website for free. There is a Starbucks option on the webpage that can allow you to see the current song that is playing and also the last 10 tracks played. Songs can be previewed and downloaded and will automatically sync to your PC when next connected. This is convenient for the customer and benefits both Starbucks and Apple. Formal co-operative links: Nike: Bringing sports and music together, Apple and Nike have produced the Nike+iPod which is designed to give the ultimate workout experience. In order to benefit from this, the customer must own a pair of Nike+ trainers (Nike+Air Zoom Moire), an iPod and the Nike+iPod sport kit which is what connects the trainers to the iPod. It is connected via wireless receivers. The idea was realised when Apple CEO Steve Jobs conducted research that showed 50% of the 50 million who bought iPods last year used them during a workout. Both companies define their core markets by lifestyle, (Kraft, 2006). Nikes target audience a sports culture and for Apples target audience it is the creativity culture. Both have come together to create a new profile, thus being the lifestyle and technology that has founded the partnership. The two huge brands have come together to create a fusion brand that will attract massive attention. Coca-Cola: Coca-Cola and iTunes teamed up to promote the release of a coke branded music website that had iTunes services integrated into the website. The website would be available across Europe and allow viewers to see the latest up and coming artists and to download podcasts from iTunes. Were excited to announce this partnership with AppleTogether we are creating a unique and exciting platform that gives young people a voice and allows them to refresh their music experience every day. (Dominique Reiniche, president of Coca-Cola European Union Group, 2006) 70 million free songs would be downloaded from iTunes in the promotion due to special codes printed on coke bottles. The strategic decision was made by Coca-Cola to join with iTunes because of the failure of its own digital downloading website MyCokeMusic, which lost out to iTunes quite badly. The alliance means that Coca-Cola can sell music but it is only iPod compatible due to DRM restrictive measures. Network Operators:Apples strategy was potentially to play the network operators off each other to ensure they got the best deal possible. Apple decided to go for the biggest operators in each of the countrys that they were supplying the phone in: UK O2; France Orange; Germany T-Mobile. O2 secured their deal by offering 40% of any revenues made from the iPhone and possibly more in commission and other areas. The tactics employed have left Apple highly unfavourable with other Network operators. (Wray, 2007) Complementors: It is the complementors who add the value to a company without there actually being agreements or strict negotiations. Companies such as SonyBMG, EMI, Universal and Warner all benefit iTunes because obviously if it wasnt for these companies iTunes would not function as well as it does and would not generate anywhere near the amount of money that it currently does. Ultimately, Steve Jobs listened to the concerns that music companies had regarding illegal downloading, piracy etc. He came up with the idea for iTunes and this was basically an external source for music companies to make money in the digital downloading industry with minimal effort. It wasnt strictly a way of how it would help Apple, but how it would help the music producers and the industry. Therefore the collaboration of iTunes with the big players in the music industry complemented each other. 9. SWOT-Analyses: Strengths: Apple is the clear market leader in the music downloadand steady financial performance. Revenues have grown from $5,742 million in 2002 to $19,315 million in 2006 and the companys net profit has increased from $65 million in 2002 to $1,989 million in 2006 (Datamonitor, 2007). Steady financial growth shows the good financial state of the company and builds the base for future growth and expansion. Also, the company has a very strong branding and enjoys a high level of brand recognition and brand awarness that allows the company to differentiate its offers and stimulate sales. Another strengths of the company is defined by its successful distribution of the iPod and its software iTunes. With every iPod sold, the consumer automaticaly installs iTunes on his pc, as it is only possible to download music from Apples original software to an iPod. Moreover, Apple procucts are being considered as hip, stylish and fashionable which is increasingly becoming important for consumers. F urthermore, Apple devices and software attract customers for their convinience, their ease of use and for always being up-to-date with the newest technology. Apple has also collaborated with large brand companies like Nike, Starbucks, CocaCola and Google,which has had beneficial impacts on both Apple and their partners and has created a new profile, e.g. linking sports and music culture. Weaknesses: First off all there is to say that although the interconnection between the iPod/iPhone and iTunes has been a key factor to Apples success this restriction could become a problem in the future, as more and more customers are looking for devices and online portals that allow them to download MP3s to any MP3 capable device. Moreover, Apple has only a very limited offer of DRM-Free tracks on iTunes, which can be defined as a strong weakness since an increasing number of customers fancy DRM-Free downloads. Another weakness for Apple lies in its pricing, especially for its iPhone. A Mintel research about the mobile phone market in the UK defined pricing and costs to be the most important factor when it comes to purchasing a phone (Mintel, 2007). Also, the iPhone currently doesnt allow the costumer to directly download files to the mobile, which, compared to the new Nokia N-Series, is a enormous weakness, since it could prevent customers to buy the Apple device and go for the N okia handset instead. This could lead to a loss of Apples market share to its competitor Nokia. Also, technically, the iPhone isnt quiet as good as its competitor the Nokia N95, as it runs on a slower mobile data service and comes only with a 2 Megapixel camera. Another weakness for Apple is, that theyve only chosen one operator in each country where the iPhone is available and thus has restricted the consumers choice of network operators. Threats: The comanys biggest threat probably constitutes the entrance of Nokia into the digital download market. By providing the opportunity to directly download files to a handset device, Nokia could gain some of Apples a market share in the digital download market, since customers are increasingly fancying mobile downloads that dont restrict them to a bulky pc or laptop. The mobile download market is one of the most opportunity-rich markets the world has ever seen, as Nokias Chief Executive Olli-Pekka Kallasvuo states (Halper,2007), and if Apple doesnt catch up fast on this opportunity it is running risk to loose its superiour market position to Nokia. Another threat for Apple constitutes the launch of online portals that are specialized in marketing DRM-Free tracks. More and more customers are looking for music that doesnt restrict them to a certain number of copies or to a special device as it is the case with iTunes and the iPod. Although Apple is currently trying to improve it s choice of DRM-Free tracks, it still lacks the greater choice and lower price of companies such as Amazon which could lead to custmers switching over from Apple to those in terms of DRM more convinincing sites. Also the threat of illegal download sites would have an negative impact, due to the availability of free digital content that could sway customers away from Apples iTunes. Opportunities: Although currently especially the youth customer segment is seen as the major target group for downloading, as these customers seem to be less restrictive towards new technologies, providing more substantial and sophisticated products and services for older and wealthier people could proof very profitable for Apple. With the launch of its iPhone Apple has already done an important move into the mobile phone market that might allow the company to challenge its biggest threat Nokia on their home market. As more and more customers are increasingly becoming aware of innovative techologies and of the benefits arising out of Internet downloading Apple should now take advantage of the great opportunities arising from the fast growing mobile phone download market by making its services directly downloadable to its iPhone as its rival Nokia has already done. Also, the upcoming change in the digital download industry towards ad-supported content could be an opportunity for Apple , if the company manages to strike advertising deals with companies that allow Apple to offer services for free to customers who agree to watching ads. This could bring a whole new bunch of customers to the company. Although these customers wont have to pay for the add-supported services, they will probably buy an iPod or an iPhone or another Apple hardware device. 10. 1 About Nokia: Although having its origins in the wood-pulp industry the finnish handset manufacturer Nokia has become a global leader in the manufacturing of mobiles and mobile networks and is now the market leader in the mobile phone market with 36% of the worlds market share. In 2006 the company sold 290 million units and therefore it sells more phones than its three nearest competitors combined. More recently the company has made a move into the mobile download market, which was considered by Nokias president and chief executive Olli-Pekka Kallasvuo to be one of the opportunity- rich markets of all time (Fildes, 2007), by launching its new multimedia online portal Ovi, which consists of the three components Nokia Music Store, N-Gage Service and Nokia Maps and acts as gateway for consumers to Nokia services. The company has done this as an answer to the announcement of Apple that it would launch a new iphone and therefore enter the mobile phone market, which constitutes a serious threat to the f innish handset manufacturer in its home market. Nokia is now going from a purely hardware-driven company to the service sector and is becoming a player in the multimedia solutions market. 10.2 Nokias Mission Statement: Nokia focuses on bringing people together by providing consumers with human technology that fulfills peoples need to communicate and share. Nokia aims to provide technology that is intuitive, beautiful and a joy to use. The companys strategy relies on growing, transforming and building its business to ensure its future success and it sees the internet as its main quest, due to the continously changing communications industry with the internet at the center of this transformation. The companys vision is a world where everyone can be connected. 10.3 Nokias new N-Series compared to Apples iPhone: Nokia has launched its new N-Series which consists of the totally new N81 device and an upgrated version of its flagship N95. The N81 is a music-orienated handset which enabels the consumer to directly download songs from the Nokia Music Store to the mobile. This opportunity makes the handset superior to Apples new Iphone as consumers no longer rely on a PC or iPod but can directly download their files to the mobile. The N81 has a 8GB memory with the capacity to store 6000 music tracks, which is about the same as the new Iphone, and it uses a 3G connectivity. The Apple iPhone uses a slow mobile data service called EDGE and that makes it about four times slower than the N81. The new N81 will cost about EUR 360 and is therefore slightly cheaper than the Apple iPhone which comes about EUR 399. The upgrated version of Nokias flagship N95 is being marketed as a multimedia device and could take on the highly praised iPhone. It comes with 8 GB of storage, a 2.8 inch screen and 3G connectivi ty and will feature a 5 Megapixel camera, which is a lot, compared to the rather dissapointing 2 Megapixel camera of the iPhone. The N95 costs about EUR 419 and is therefor sligthly more expensive than the iPhone. Technically the Nokia N-series appears to be better than the Apple iPhone since it offers a faster connectivity and a better camera but what makes it really superior to the iPhone is the fact, that the consumer can download files from the Nokia Music Store directly to the mobile. Still the highly anticipated iPhone looks more fashionable and its got the greater consumer attention since many costumers are already familiar with the Apple iPod and Apple iTunes and cant wait for the

Kass and Genetic Technology :: essays research papers

Unregulated Genetic Technology Threatens to Dehumanize Society When James Watson and Francis Crick discovered the structure of DNA in 1959, they could not have known that their discovery would one day lead to the possibility of a human factory that is equipped with the capabilities to mass produce perfectly designed, immortal human beings on a laboratory assembly line. Of course, this human factory is not yet possible; genetic technology is still in its infancy, and scientists are forced to spend their days unlocking the secret of human genetics in hopes of uncovering cures for diseases, alleviating suffering, and prolonging life. In the midst of their noble work, scientists still dream of a world—a utopia—inhabited by flawless individuals who have forgotten death and never known suffering. What would become of society if such a utopia existed? How will human life be altered? Leon Kass, in Life, Liberty and the Defense of Dignity: The Challenge for Bioethics, acknowledges genetics technology’s greatness, and applauds it for its invaluable, benevolent contributions to mankind. However, Kass argues that if left to their devises and ambitions, geneticists—with the power of their technology—will steal away society’s most precious asset; genetic technology will rob society of its humanity. Genetic technology can, and will, achieve great things, but unless it is regulated and controlled, the losses will be catastrophic and the costs will far exceed the benefits. The age of genetic technology has arrived. Thanks to genetic technological advancements, medical practitioners, with the help of genetic profiling, will be able to better diagnose patients and design individual tailored treatments; doctors will be able to discern which medications and treatments will be most beneficial and produce the fewest adverse side effects. Rationally designed vaccines have been created to provide optimal protection against infections. Food scientists have hopes of genetically altering crops to increase food production, and therefore mitigate global hunger. Law enforcement officers find that their job is made easier through the advancement of forensics; forensics is yet another contribution of genetic technology. Doctors have the ability to identify â€Å"high-risk† babies before they are born, which enables them to be better prepared in the delivery room. Additionally, oncologists are able to improve survival rates of cancer patients by administering ge netically engineered changes in malignant tumors; these changes result in an increased immune response by the individual. With more than fifty years of research, and billions of dollars, scientists have uncovered methods to improve and prolong human life and the possibilities offered by gene therapy and genetic technology are increasing daily.

Pets.com Case Analysis Essay

INTRODUCTION In this report I will analyse Pets.com’s short lived success as America’s number one online supplier of pet foods supplies and accessories. I will also identify what actually went wrong and present a refreshed offensive marketing strategy to the board of the company. It was unbelievable how a public listed company led by some of the world’s best business executives, draped by all the funds that any company in the world would envy, partnered with the world’s number one e-commerce company and became America’s pet industry icon can lose everything in less than two years after its first introduction. In my opinion some of the major factors that contributed to Pets.com failure were: 1. Bad strategic decisions made by the previous leadership including underestimating the cost of operations and overspending on marketing. The management was so obsessed grabbing the market share but at the same time losing their focus altogether on their actual goal and objectives, which is generating revenue for the company and become profitable to ensure sustainability. 2. Despite its success in building brand recognition, Pets.com overestimated the market trend and power of the internet. They were also overconfident in estimating the market real potential and risk due very shallow and weak market research. When everyone was rushing to jump onto the internet e-commerce guaranteed-for-success bandwagon, Pets.com did not realize pet business was not that simple but in fact more complicated compared to selling books and clothes online. After all the costly marketing promotions and advertisements, overnight popularity, having the most complete online product offerings and latest technology at their disposal, still in the end Pets.com failed to show much added value and differentiators in the eyes of the customers. 3. Completely ignored the power of traditional brick and mortar business model. Pets.com failed to understand their rivals strengths and weaknesses well. Better customer care, satisfying personal shopping experience and fast  delivery are some of the advantages physical stores had over online pet portals. Pet owners appreciation of these traditional values affected typical pet-owners’ readiness and willingness to completely abandon their friendly and trusted around-the-corner neighbourhood pet store. COMPETITOR ANALYSIS The previous company did not bring up a good proposal in opposing its competitors. It was so obvious that they ignored the fact that traditional pet store was very much controlling the pet food and supplies market. Underestimating the strengths and advantage of their more traditional brickand-mortar based rivals like Petstore, Petsmart and Petopia was the first biggest mistake they had done. Competitor Analysis  Petopia.com 1. Heavily funded by Petco, market leader in pets accessories and supplies industry 2. Well established physical stores plus e-commerce business model 3. Leverage on Petco’s good and well known reputation as supplier of quality pet products and its commitment to animal care. 4. Petopia will gain invaluable access to Petco’s extensive network of chain stores which both companies can cross-promote each other: a. Have nationwide coverage with 465 chain stores all over US b. Strong international presence with 100 stores globally 5. Potential Pes.com future international expansion thru strategic alliance with another major investor Groupe Arnault (linked to renowned LVHM Moet Henessey Loius Vuitton) PetSmart.com 1. Already a successful brick and mortar business on its own right. Considered as Petco’s main brick and mortar competitor 2. Joint venture with e-commerce entrepreneur Bill Gross of Idealab become direct competition to Pets.com-Amazon’s team up. 3. Well established physical stores plus e-commerce business model 4. Strong back-end warehouse and delivery systems with already 500 stores nationwide and 100 outside US. 5. Strong brand name, marketing clout, close vendor relationships and  efficient product portfolios and fulfilment systems that would greatly benefit their online business. Petstore.com 1. Funded by venture capital firm Battery Ventures 2. Rely entirely on the power of e-commerce. Work on the same business model as Pets.com, establish a leadership position with ‘category killer’ domain name 3. Just like Pets.com, Petstore relied heavily on advertising and promotions 4. No physical store establishment At the end of the day, after the big dotcom bubble burst, only Petopia (now owned by Petco) and PetSmart survived. Petstore and Pets.com itself succumbed to the dotcom bubble burst. Two most obvious factors that set apart the two victors and losers are: 1. PetSmart and Petopia had a strong back-end warehouse backing and chains of physical stores that in the end reduce distribution costs, storage, ensure satisfactory delivery period and value-add traditional shopping experience and satisfaction. Unlike the two, Pets.com and Petstore.com relied entirely on the internet of which later compromised basic pet owners’ needs and customer satisfaction. 2. Pets.com and Petstore relied heavily on funding from venture capital firms while Petopia and PetrSmart already have strong infrastructures and customer network they can always depend on if anything goes wrong over the internet. This proves deadly when Pets.com failed to gain enough added capital injection to save them from becoming dotcom bubble’s biggest casualty. It is very important for us to re-align our goal and strategically repositions ourselves in this industry. The following SWOT analysis shall analyses our key strengths and weaknesses. Pets.com’s SWOT Analysis STRENGTH 1. Huge cash to spend. Heavily funded. Backed by Amazon.com. 2. Direct access to Amazon.com’s network resources and e-commerce skills and expertise, so technology skills and know-how is not an issue. 3. Strategic alliance with Yahoo!, GO.com (Disney), Discovery TV network (Animal Planet) and association with the American Veterinar Medical Foundation can be a very strong network positioning strategy. 4. Pets.com is the most recognizable domain name, highly visible website with most comprehensive website content and best design. Pets.com website is so popular in the internet and mainstream media that at one time becomes the most visited pet supplies website in the world. 5. Most competitive price and service offerings (plus free delivery). Able to offer quality products of which becoming today’s key plus factor to the passionate middle-class and high income pet owners. 6. Largest stock keeping units (SKUs) in America to ensure reliable supply and on time delivery to customers. WEAKNESS 1. Competitors offer similar products. Pets.com still could not find key market differentiator. 2. Huge expectation on online marketing and promotion. Specialized team to maintain up-todate and latest website content and information may incur increasing administration costs. 3. Pets.com have weak brand name as compared to more established rivals. 4. Pets.com don’t have physical stores presence nationwide and globally. 5. Reliability and security on the internet can halt and even destroy online business almost overnight. 6. High transportation costs and insurance liability due to free delivery policy to customers regardless location 7. Geographical factors, warehouse location and distance may result to 2-3 days for orders to reach American homes OPPORTUNITIES 1. Pets.com can leverage further on Amazon’s full potential-market penetration and trustworthy e-commerce reputation 2. Can take full advantage on average American pet owners passion and spending habits on pet food and supplies 3. The right time to tap into the world’s fast growing and lucrative national and international markets. 4. Can take advantage on the fact that most trusted and high quality pet foods are produced in the US 5. Can take advantage on average American pet owners’ hectic lifestyle. Promote cost and time saving. 6. Average American pet owners are economically stable. Price is not a big issue. 7. Develop own brand name and proprietary products THREAT 1. There will always be a better competitors’ website content and offerings 2. Don’t underestimate internet capabilities-consider problems at remote sites and countryside 3. Simpler user-friendly blogs, mobile applications and smartphones can replace website 4. Increasing transportation and shipping costs 5. Transportation risk-lost and damage 6. Internet customer bad experience, unfavourable comments and reviews can sabotage any 3  online business that is not ready and fully prepared 7.Growing e-commerce safety concerns can influence internet users to just browse and shop at competitor’s outlet 8. Competitors physical stores at almost US neighbourhoods-providing more human approach (touch and feel) and faster delivery time 9. Hard habit to break-still many pet owners prefer visit local neighbourhood stores than buying online 10. Competition by any brick and mortar neighbourhood establishment Pet supplies are not books. People only order pizzas online-Amazon.com strategy may not work at certain environment and condition. Pets.com need to show better  value-add and pull-factor. SEGMENTATION ANALYSIS Pets.com have the best products to offer and the technology to drive this online business model to success, but in the end not understanding the consumer’s real needs, behaviour and spending habits can prove vital to the company’s survival and relevancy. According to study reports by The NPD Group, Inc. and Media Metrix (NASDAQ: MMXI), 75% of pet owners who access the Internet are aware of online pet stores, up from 55% in September 1999. Twenty-seven percent have shopped at an online pet store, while 14% made an actual purchased at an online pet store. Study confirms that almost three times as many pet owners become aware of online pet stores from television advertising compared to last year, while fewer are learning about sites from surfing the Web. Though television advertising in the category is growing, consumers are still more likely to find out about pet e-tailers from some online source, such as clicking on a banner ad or direct link from another site. The good news for marketers is that while category penetration is still low, customer satisfaction is high. Among the 14% who have purchased, a whopping 97% of them are satisfied with their buying experience. More than two-thirds reported being very satisfied (68%), up from just over one-half in September of 1999 (53%). The majority of consumers who have shopped at pet store sites said they are likely to shop again in the next three months (59%), and half would make a purchase sometime in the future (49%). Not surprisingly, those consumers who are very satisfied with their buying experiences at online pet stores in general are much more likely to make a purchase in the future than those who have not. The Pet Industry In 1998, pet industry is a US53billion a year marketplace. Worldwide estimates run about $51 billion, and growing at a rate of about 15 percent a  year. By the end of 2004, online pet-product sales alone should total more than $4.5 billion. Pet food, accessories and supplies tops US household shopping list with Pets leading with USD23 billion a year, Toys US21billion a year. Music recording US13 billion a year and Retail books at US 12 billion a year. Expert prediction is the pet industry may grow to US28billion a year business by 2001. 1. 60% of American households own at least one pet and 40% own more than one pet. Statistics in 1999 shows 53 million are dogs and 59 million are cats. 2. American families with children age 5-15 likely to own pets and families with children younger than 18 will grow over the next several years 3. Even though online shopping for pet foods and supplies are still new to the consumers, nearly 30% of internet users purchase online pet products. Pet owning households wealthier than average thus able to spend more on pets (65% household earning US60000 or more are pet owners). Almost two-thirds of all American households have at least one pet, and that translates into an estimated $23 billion a year in pet expenditures in the U.S. alone. 4. Veterinary,boarding,grooming,training yielded higher margins. 5. Most pet owners buy on impulse during regular shopping trips and they are less price sensitive 6. US pet owners sought veterinary care at least once a year of which 92% are on dogs and 78% on cats care. Between 1991-1999 US vet expenditure grew 9.5% annually 7. By mid 1990s supermarket pet food began losing market share amid growing concern for pet welfare and nutrition. Non-premium low nutrient levels supermarket brands hold 55% of market share mostly thru grocery and convenience stores. They anyhow demonstrate slow annual growth and small gross margins. Premium levels on the other hand promote healthier diet but risk restricted distribution. From 19940-1999 they contributed to 18% annual growth and own 25% of market share. 8. Supermarkets prefer to stock profitable goods but they face problem with space to store bulks. Pet supply stores on the other hand have the storage advantage. Despite that brick-and-mortar margin still low between 2-4%. 9. Internet and retail commerce trends shows estimated 97 million households are using internet worldwide. By 1998-60% households on internet at least once a day compare 35% year before. Surfing the internet has become part of part of daily American life. In 1998 internet companies in the US generated USD301.4 billion revenues from the internet and internet commerce alone contributed 1/3 of total revenue equals to USD101.9 billion 10. Even though pets product online just started in 1999, survey shows high level of satisfaction among online shoppers. More than half of 30% internet users purchase online pet products, more than half very satisfied. Survey shows: a. 68% are females b. 40% bought toys for pets online c. 30% bought foods/treats d. 26% non-food accessories e. 17% health products 11. The main reasons why they buy online was convenience but experts claim it is limited to small market only and it is also outweighed by higher costs and longer waits. THE MARKETING OFFENSIVE When more than one company offers the same kind of product, each company only receives a percentage of all sales of that kind of product. This percentage is called a â€Å"market share,† and any effort to take some of the market share away from one company and bring it to another is called an offensive marketing plan. Marketing is all about building relationships. It’s about educating (and maybe even entertaining) your customer. While we must not deny the growing influence of the internet, Pets.com must not underestimate the power of traditional pet business model. Alternative strategies that could improve Pets.com: 1. Decrease the advertising and marketing budgets a. This will create opportunity to relocate funds elsewhere such people development and customer care b. Ability to make-up for low sales volume c. Wasting less money on expensive marketing promotions 2. Open warehouses and brick-and-mortar establishments to increase distribution a. Ability to ship products in shorter distances to reduce transportation costs and risks b. Provide faster delivery time may increase competitive advantage c. More readily available products for easier delivery or for exchanges 3. Redo pricing structure for more competitive prices a. Make profits on the product not on the inflated shipping costs b. Pets.com can offer ‘free shipping’ promotions without selling at price below costs c. Consumer’s assurance on Pets.com product quality will keep existing customers and introduce new ones. Customer satisfaction leads to customer loyalty. 4. Invest the use of new media such social networking and blogs. This may attract younger generation of pet owners 5. Introduce subscription and loyalty program. Other than improving customer retention it can also be used qualification tools to offer free delivery or charge based on geographical location and distance. 6. Improve Pets.com brand name. Association with Amazon and Animal Planet may prove very useful in attracting loyal fans. 7. Collaboration with vets and animal clinics promoted as local distributors can reduce delivery time and stock availability. 8. Identify specific target groups. For example individual consumers will more readily use products used by government facilities and pet care professionals. CONCLUSION The failure of Pets.com was not because the online business model. In fact it was more to mismanagement of funds, business planning based only on short term analysis, poor market understanding and research, underestimating  traditional rivals and overestimating the power of internet. It was a classic case of bad strategy. The failure to face the challenge. â€Å"If you fail to identify and analyse the obstacles, you don’t have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen.† Pets.com was an early entry in the immature online shopping industry and was uncertain whether a substantial market niche even existed. No independent market research preceded the launch of Pets.com. Instead, the management chose a â€Å"land grab† strategy focused on increasing its market share then finding ways to make a profit. The â€Å"land grab† strategy presupposes that your market is large enough or will grow fast enough so that revenue allows a profit before seed money runs out. Pets.com wished that it would magically become profitable while it waited for the market to mature. During its first fiscal year (February to September 1999) Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. It failed to realize its problem would not be gaining market share, but generating revenue to sustain it until it could place adequate resources into market share focused strategies. Mistaking goals for strategy. â€Å"Create the conditions that will make the push effective, to have a strategy worthy of the effort called upon.†Ã‚  When the company did turn its focus to its business model, it created unrealistic conditions in which to operate effectively. For example, Pets.com offered a guaranteed $4.95 shipping to anywhere in the United States. Unfortunately, Pets.com initially only had one distribution warehouse in California and every shipment to the East Coast cost more than $4.95 and therefore shipped at a loss. It lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for approximately 1/3rd the price it paid to obtain the products. During its second fiscal year the company continued to sell merchandise for approximately 27% less than cost. The company had it sites on being the number one online pet supplier but failed to leverage key strengths to build on other than a very costly push for brand recogn ition. Bad strategic objectives. â€Å"A scrambled mess of things to accomplish—a dog’s dinner of goals. A long list of things to do, often mislabeled as strategies or objectives, is not a strategy†¦Good strategy, in contrast, works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.† As I researched Pet.com history, I was amazed by the number of â€Å"strategies† the leadership claimed. Not all inclusive, CEO Julie Wainright and executives focused on numerous initiatives in an attempt to stand out from the competition. 1. Strive to offer a huge variety of product offerings; it listed more stock keeping units than any other online pet supplier 2. Offer abundant editorial advice from veterinarians, animal lawyers, breeders, scientists, and pet experts 3. Extend its brand offline in the Pets.com print magazine 4. Develop and offer its own proprietary brand of Pets.com pet supplies 5. Acquire a key competitor, Petstore.com 6. Create alliances to allow Pets.com to offer animal health insurance, be the featured petstore on the Yahoo! link to pet health advice, be a part of the Go.com (Disney) network, and establish charitable foundations. These all seem like good objectives, if focused on one at a time. They also seem like objectives fueled by capital but not sustained by revenues. The management of the company appeared so focused on several objectives that it never developed a solid business model focused on being profitable and generating sustainable returns. Fluff – â€Å"Superficial abstraction†¦designed to mask the absence of thought.† According to analyst Jacques Chevron, â€Å"Pets.com failed to give its prospective customers a reason for its existence. Its tongue-in-cheek advertising claim (â€Å"Because pets don’t drive†) seemed like an  admission of its lack of a reason for being.† Pets.com seemed focused on being the most comprehensive site for pet owners that it failed to be  successful in any of its objectives. While it continued to claim it was the one-stop site for all pet needs, it never established a reputation as being good at anything other than advertising. Bibliography 1. Pets.com: Rise and Decline of a Pet Supply Retailer by Dr Omar Merlo 2. The Rise and Fall of Pets.com: †Because Pets Can’t Buy† by Cara L.O Peters (University of Georgia) and Marilyn J. Okleshen (Minnesota State University) 3. Pets.com failure and its causes http://my-espace09.blogspot.com/2009/01/petscom-failureand-its-causes.html 4. Pet & Pet Supplies Stores Industry Statistics Research Report – Anything Research 2010. 5. US Pet Market Outlook – Packaged Facts 2009.

Case Study Peer Review For Conflict Resolution - 1281 Words

Case Analysis: Peer Review for Conflict Resolution Synopsis Toyota is the leading motor vehicle manufacturer in the world today. The company is known particularly for manufacturing a wide range of high quality cars attracting a spirited competition from other globally established competitors like General Motor (GM), Ford, Hyundai, Volkswagen and Nissan. In 2009 Toyota encountered a public backlash after the discovery of a potentially catastrophic engineering defect among its brand of automobiles including its best-selling Corolla and Camry models. This led to a massive and global recall of approximately 10 million units a year later. The engineering defect caused the models to accelerate out of control and put their drivers and other†¦show more content†¦Nonetheless paying the fine means admitting liability. This is likely to have a damaging effect on the reputation of Toyota not to mention the decline in sales that may result. In addition since the admission of liability implies consumer fraud, Toyota is apprehensive of the civil lawsuits that might follow running into possibly billions of dollars. Analysis of alternatives Toyota can pay the fine and admit liability hoping that this will not affect its reputation, especially with the government that is part of the stakeholder in the company. However, the company must be prepared for consumer fraud lawsuits that may follow afterwards. If the company assumed a shareholder model to CSR, it would avoid this option and possibly remain reactive and defensive fighting all the way to the courts. Alternatively Toyota can still project a shareholder model to CSR but assume a proactive role in trying to solve the problem. Apparently this seems to be the approach that Toyota has settled for. 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