Case Study:
A. In exploring the threat of new entrants, Napster ensured that it music streaming services required high technical know-how which made develop a competitive edge over its competitors. Napster also publicized its services whereby within the first six months of its launching, the company had over twenty million subscribers due to the company's intensive marketing. In reference to bargaining power of vendors, the company ensured that there was vendor competition which ensured that vendors produced high quality services at competitive costs. The company had various vendors who all competed against each other to be the main company vendors and or suppliers. In reference to customer bargaining powers the company ensured that it has a buyer price sensitivity which was crucial to the customers. In reference to rivalry from other firms, the company ensured that it had loyal customers and cutting edge technology. When it comes to power of substitutes it ensured that its services were available to all music genres. In case of value creation Napster ensured that it incorporated cutting edge technology which increased its value.
B. In reference to Porter's diamond model, in explaining in explaining why US is a strong base for a music firm, there are factor conditions that make the US a landmine for music firms. Under factor conditions, the US has infrastructure and specialized resources that are specifically mandated for the music industry. Under demand conditions, the US has a large population whereby the home market enables music companies to have higher returns and higher innovations. The large home market enables the music firms to have high sales and in return pressure the music firms to have constant innovations to satisfy the customer needs. Additionally, the US has other related and supporting industries whose input is essential for innovation to music firms. Subsequently, US music companies have firm strategies and structure and intense competition which make them achieve success in their course of business. The US government also has stringent regulations that seek to protect music firms from copyright infringement. Additionally, there are also chance events which help the companies have competitive edge over others.
C. The article states that the music recording industry in the US grew for the first time in 2015 since 2011. This was attributed to streaming services which brought in $2.4 billion in sales. According to Porters diamond model, this can be attributed to US infrastructure and home market which enabled the music industry to record improved sales in 2015. Innovations from related industries can also be attributed to the rise of music industry in the US("Apple's ITunes Overtaken by Streaming Music Services in Sales", 2016).
References:
Apple's ITunes Overtaken by Streaming Music Services in Sales, (2016). Bloomberg.com.
Retrieved 28 June 2016, from
https://www.bloomberg.com/news/articles/2016-03-22/apple-s-itunes-overtaken-by-streaming-music-services-in-sales