Competing with Information Technology - Research Paper Example

College: Research Report on Competing with Information Technology Introduction This research report paper focuses on the goals of using information technology to support organizational strategy, as well as the application of the value chain model to identify competing opportunities using IT. Two organizations are compared and contrasted against each other; Apple Inc. iTunes music service and the Spotify music streaming service. This paper applies the value chain model and its various applications to ascertain how one corporation uses ICT to compete against each other. It also analyzes the economic prospects in offering these commodities to customers. The issues addressed include; various ways that Spotify music service uses IT to compete with iTunes music service and the technologies leveraged by the two corporations to enable competitive advantage. Industry and Competitors Most customers are mindful about the music delivery business and the effectiveness of each one of them. Because the music industry will exist into the foreseeable future, most music companies are developing strategies that will help them capture a larger share of the market among its rivals (Kusek et al. 82; Latham 4). This competition, however, has streamed down to only two main competitors existing in the market. These music services include the Apple iTunes and Spotify. These two music services experience large economies of scale and have a huge demand on a global scale. Both Apple iTunes and Spotify have pressed on with sweeping overhauls of their digital music services that allow fair competition. Apple iTunes has about 800 million customer accounts out of which 200 million customers are active buyers. Spotify, on the other hand began in Sweden and move into the United States in 2011. Spotify currently has about 15 million customers that subscribe through payments and 45 million customers that listen free, with advertising (Lester 49). There, however, exist various uncertainties as to how Spotify music service will match up to Apple iTunes. Value Chain of Apple’s Tunes Michael Porter’s value chain is applied in iTunes service in order to get an insight of the chain of activities involved before a valuable service is provided to the consumers. Apple iTunes is a service that comes in form of an online platform providing music distribution structures(O’Grady 112). The Value-chain model of iTunes’ primary activities is as follows 1. Content creation- the content is regulated by licensing agreement partnerships with various music labels.In this partnership, iTunes offer artists’ music to customers and for each download Apple is entitled a share in revenues. 2. Content management and Operations – the downloaded content is added into the store library, listed, and sorted. This step also involves a software program operation that allows the customer to access the iTunes software interface together with its associated features. 3. Distribution – customers freely access the iTunes database without many restrictions after downloading the iTunes software application. Most of the items in the iTunes software are, however, limited to iOS devices. This option suggests that most Apple products are not compatible with other smartphone operating systems. 4. Marketing sales – Apple uses a variety of marketing strategies to supplement their iTunes service. They also attract a much large audience as they offer download of music legally and at very affordable prices. The payment system involved supplements promotion of the music service. Apple also has various incentives such as offering the purchase of gift cards at special offers and offering a free weekly download for few songs. 5. Services – Apple ensures maintenance services for iTunes. Such services include various database updates and automatic software updates. These updates are always available for any customer services. They provide easy access to information that relate to information about their corporation. Value Chain of Spotify Through its value chain, Spotify has created an ecosystem that values the various players through nouvelle strategies (Roebuck 56). The different actors in the ecosystem include; (I) Consumers – for consumers, most songs are available in only one platform. Premium subscribers can access more than 15 million songs. Consumers can also share their music on social media. (II) Artists – Spotify has enabled artists to avail their music into the online platform. This platform has enabled many artists to gain prominence. Spotify has helped in the reduction of piracy which adds up more income for artists. (III) Advertisers and Social Networks – through its partnerships with social media as well as other companies, Spotify has co-branded with these companies and improved on its public image, as well as its partners. Advertisers have the ability to target a larger audience. In turn, there are incentives to advertisers as commercials generate revenues even from the streaming services. Spotify manages to coordinate activities between these two key players through fixated strategies. These strategies have led to its vast growth. Information Technology Innovations of Both Companies Up to date, Apple is still regarded as the most innovative company globally (Sanjek 89). Applehas developed various products such as the iPad, iPod, iPhone and other well-reviewed computers. Apple revolutionized the computing, music and phone categories with its breakthrough products. Apple has also inspired a group of technological companies worldwide. Apple is recently pushing a new service known as the Apple Pay through the contactless payment system. This service is set to revolutionize various payment systems in the global market (Latham 3). Spotify revolutionized the market for digital music. It made a tremendous step in the digital music innovation. Spotify makes it easy for a user to stream any song on any device from a 15 million song platform (Roebuck 71). The company has also integrated the social media to allow sharing of music. It allows registered users to integrate their accounts with Twitter and Facebook accounts. When a user integrates his or her Spotify account with other social media sites, they can have unlimited access to their friend’s music playlists. This utilization of social media continues to increase popularity and puts Spotify into the limelight t(Lester 63). Impact of Spotify’s IT Innovation on the industry For a number of years, streaming and sharing legally copyrighted music in an online platform remained a serious issue until Spotify bridged the gap. Spotify gained the market by offering online music streaming facilities that served as an alternative to pirating music(Roebuck 77). Spotify has changed the game in the music industry through live streaming. Spotify allows its registered users to listen freely, stream and share music to their mobile gadgets and computers. Along with its social media incorporation, users can access and listen to their friends’ favorite playlists. Apple’s Reaction and Forecast In an effort to rival Spotify, Apple is teaming up with Beats, a streaming music service and the maker of hip headphones. Apple is currently working with Beats software engineers, as well as executives to enable it present a subscription streaming service. This partnership is also establishing an enhanced iTunes Radio that will be tailored to customers in regional and international markets. With the alleged 800 million accounts, Apple is undeniably the leading corporation in providing online music sales (O’Grady 143). This situation, however, is changing as sales are declining and music streaming is booming. Spotify is slowly gaining the market as it has almost 15 million active subscription customers and has paid various entertainment artists over two billion dollars. To take on Spotify, Apple is also devising various iTunes visual and programmatic upgrades in addition to giving artists more control over the music. Artists can now enjoy direct access to upload their music as app developers do. Apple also chooses to offer various artists increasing valuable analytics with regards to their music. Market analysts have suggested that an iTunes streaming service that generates both data for artists and ample revenue may threaten Spotify’s dominance in the market. Streaming music service is particularly lucrative because live music provides an opportunity for middle-class musicians to earn a living(Sanjek 89). Concluding Paragraph With much competition between the two service companies, Apple iTunes and Spotify, there are incentives in which both companies can expand their share of market. By choosing to indulge in streaming services, Apple will improve on its revenues as well as services offered to the consumers. Artists will also benefit; both top paid and middle class earners. Artists will also have exclusive control over their music. This option acts as an incentive to record labels that are interested in music sovereignty (Brynjolfsson and Hitt, 24). Spotify should choose to invest on its advertising strategies to ensure that their product brand grows. It has a great market and revenue potential if it paid off more than two billion dollars in revenues to artists. Spotify should also layout various revised marketing strategies and objectives that it will use to penetrate deep into the market. Works Cited Kusek, David, Gerd Leonhard, and Susan G. Lindsay.The Future of Music: Manifesto for the Digital Music Revolution. Boston: Berklee Press, 2005. Lester, David. How They Started Digital: How 25 Good Ideas Became Spectacular Digital Businesses. Richmond: Crimson Publishing, 2012. OGrady, Jason D. Apple Inc. Westport, Conn: Greenwood Press, 2009. Roebuck, Kevin. Spotify: High-impact Strategies - What You Need to Know: Definitions, Adoptions, Impact, Benefits, Maturity, Vendors. Dayboro: Emereo Pub, 2012. Sanjek, Russell. American Popular Music and Its Business: The First Four Hundred Years. New York: Oxford University Press, 1988. Brynjolfsson, Erik., and Hitt, Lorin. Beyond Computation: Information Technology, Organizational Transformation and Business Performance. Journal of Economic Perspectives, 14(2000): 23-48. Latham, Ann. An Evaluation of the Impact of Information and Communication Technologies: Two Case Study Examples. International Business Research, 4.3(2011): 3-7. Read More