Apple Case Study

The bargaining power of suppliers is relatively medium. Apple's dependency on music and film

suppliers for offering their services has brought NBC supply Apple with it. Now, research has shown

that NBC threatened not to renew the contract for supplying anymore. This would result in

increasing the price for one episode from $1,99 to $4,99. With the success of Apple, some suppliers

have pointed out to wanting to decrease innovative company's dominance in the market. Not to ruin

the game, but Walt Disney and ABC are now suppliers for iTunes and have reached a strong market

position because of that. This leads to suppliers craving for an opportunity to work for a leading

digital music industry like iTunes and the fact that consumers tend to purchase more music online

(Kilmer, 2010).

In the graph below, it is shown that Apple paid about $11 million to its music suppliers in 2010. Next

to that, it is also shown that Apple has paid $2 million in 2010 to developers (of Apps). Since Apple

has paid $2 million in 31 months for developers and $2 million in 34 months for their music suppliers,

it can concluded that there is more invested in App development and supply in a shorter time.

So, Apple is dependent on its music and App supply for which they are willing to pay a lot of money

for it. But a fact is that Apple is dominant in the digital music industry with a market share of 66.2% in

2010, which makes it attractive for suppliers to retail with Apple's iTunes (Knowledge, 2011; West,

2007).

The rivalry

The rivalry in the digital music service is very high. Due to low barriers, there are many competitors

which lead to competing for the same market share. Therefore, companies within the digital music

industry need to differentiate themselves from the competition to stand out and win market share.

Apple has succeeded in that industry by ruling a dominant position in the market. Meanwhile there

are competitors like Amazon MP3 that is gaining brand awareness and starts to form a threat for

iTunes.

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