Ipod Vs Cell Phone

This recommends that Apple develop a mobile music device competing against the cell phone companies by providing a product at a competitive price, with technological superiority and partnering with the leading mobile carrier, Cingular.

Background

By April 2006, Apple had sold 50 million iPod digital music players and one billion digital songs through its iTunes. It is however facing increasing competition, not only from traditional PC-based companies and consumer electronics firms but also from companies in the mobile phone business who are providing more and more phone based mp3 player options to consumers.

Recommendation

Apple should enter into the creation of the iPhone. In contrast to the Motorola ROKR, the iPhone should implement mobile phone functionality into the iPod rather than implementing an iPod feature into a phone with the capability of purchasing music from iTunes directly from the device.

By implementing the mobile phone platform into the already successful and established iPod brand, Apple will be able to carry over its competitive advantage in the digital music sector into the mobile phone industry.

By using the mobile phone platform, Apple will be able to expand beyond digital music products into video, communication, and portable computing products.

Basis for Recommendation

Apple is a market leader in the digital music industry in terms of technology, quality and image. It is also very superior in technological innovation. As such, it also maintains financial strength (25% profit margin on the iPods) as well as marketing strengths.

The current trend with digital music is leading towards cellular devices being used as music players reducing the number of devices a consumer must carry. In order for Apple to maintain its position as the leader of mobile media, the company must effectively enter the cellular market as an independent competitor to present Original Equipment Manufacturers such as Motorola and Nokia.

The current major setback of Apple in the mobile realm is the lack of mobile access to the iTunes store (the current leader in digital music purchases) so having the iTunes store as a feature of the iPhone would be a major draw of such a device. The iPhone needs a mobile iTunes store specifically designed for the phone that will also allow for synchronization with the individuals computer.

Furthermore, Apple should create a partnership with Cingular because Apple already has an established relationship with Cingular from its past dealings with the cellular carrier regarding the Motorola Rokr and because as a cellular provider it holds the largest market share in the industry.

By sticking with one network provider, Apple could negotiate the best financial reward in exchange for exclusivity.

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