Essay About Apples Dependency And Bargaining Power Of Suppliers

Apple Case Study
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The bargaining power of suppliers is relatively medium. Apples 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 companys 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 Apples 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.