Analyzing Apple’s Strategy using the Ansoff Matrix

The Apple Company’s purchase of Shazam, amounting to $ 400 million was announced in the month of December 2018, with the move having been approved of finally by the European Union  (Hennessy and Najjar 2017). The European Union cleared this move after conducting investigations and inquiries into this acquisition for over a period of several months, with a review of this purchase having been requested by numerous European countries such as Spain, France and Austria. The concern that was expressed by these countries was primarily over the fact as to how this merger or acquisition would influence the manner in which other well known music streaming services such as Deezer and Spotify for instance, and which are also headquartered in EU countries would fare if Shazam used a number of exclusive features in collaboration with Apple Music. It has recently been decided by the EU however, that this is unlikely to be the case. Upon thoroughly examining the music and user data of Shazam it was discovered by the EU panel that was looking into this matter that any acquisition on the part of Apple would not end up reducing competition in a market for digital music streaming (Hennessy and Najjar 2017). It is important to remember that Shazam does offer a number of vital advantages to a tech giant such as Apple. Apple Music presently has as many as fifty million subscribers to its services, and Shazam, which first came into existence in the year 1999 and which has become a household name over the years, has as many as 120 million active monthly users. These users have downloaded the app collectively more than a billion times, and have used it for identifying as many as fifteen billion songs. Apart from getting access to Shazam’s large user base, this acquisition also gives Apple all the audio recognition technology patents that Shazam is famous for. Such technology patents are coveted intellectual property for a tech giant like Apple, which is aiming to grow its digital music offerings rapidly with various features that its competitors lack, and which they can now never have. This assignment takes the form of a consultative report on the acquisition of Shazam by Apple. The report analyzes the strategy of the Apple Company right at the outset using the Ansoff Matrix, evaluates the strategy using suitability, feasibility and acceptability criteria, and concludes by discussing performance issues and problems associated with the deal. 

Evaluation of Apple’s Strategy using Suitability, Feasibility, and Acceptability Criteria

The Ansoff Matrix facilitates the analysis of a business strategy using four main caveats namely market penetration, product development, market development and diversification (Schawel and Billing 2018). When it comes to the market of music streaming, Apple had penetrated this market already through its division known as Apple Music. Product development and occurred by developing an app that users could subscribe to in order to access and download their favorite tunes as and when they wanted to (Gregson et al. 2015). The whole intention behind acquiring Shazam, was to not only conquer the Shazam company’s user base, but to also acquire its audio recognition technology patents, an acquisition that is sure to make Apple Music a supreme force in the music streaming industry. This strategic aim of Apple Music can be well understood through the caveat of market development. Apple intends on developing the music streaming services that were previously being offered by Shazam, in order to diversify and offer music streaming services that entail a combination of the features commonly associated with the Apple Music app but which also come with the audio recognition technology patents that Shazam was famous for (Hussain et al. 2017).

 Competitive Rivalry – When it comes to the international music streaming industry, Apple Music can literally be regarded as a hegemonic force that has succeeded in winning over customers in huge numbers. While Spotify and Deezer are two companies that had given Apple Music a considerable amount of competition for some years, the competition soon fizzled out, especially after Apple acquired Shazam, with Apple Music now gaining full access to the 120 million subscribers to Shazam music streaming services, over and above its own expansive customer base of 50 million subscribers. Competitive rivalry is therefore quite minimal if not negligible for Apple as far as the music streaming market is concerned (Prasad and Warrier 2016).

Bargaining Power of Suppliers – The Apple acquisition of Shazam is a move that gives the company full access to the audio recognition technology patents of the Shazam Company. This, as has been discussed earlier, is coveted intellectual property, the ownership of which allows Apple Music to be a force to be reckoned with in the music streaming industry, giving suppliers little or no bargaining power (Drucker 2017)

Bargaining Power of Customers – Apple Music already enjoyed a subscriber base of 50 million users prior to its acquisition of Shazam. After acquiring Shazam, Apple Music gains access to the 120 million active subscribers of Shazam music streaming services, thus gaining complete monopoly in the music streaming market worldwide. The bargaining power of customers as established by Porter is one that tends to be high when customers have different options to choose from. In this instance, the options are little or none, or inferior at best, giving music streaming lovers no choice but to subscribe to Apple Music for quality music streaming services (Gregson et al. 2017).

Performance Issues and Problems Associated with the Acquisition of Shazam

Threat of Substitution – The music streaming services offered by the Apple Company upon the acquisition of Shazam is likely to keep the threat of substitution at an all time low. This is because the acquisition gives Apple access to the audio recognition technology patents of Shazam which are not easy to substitute or replace (Prasad and Warrier 2016).

Threat of New Entry – While the music streaming industry is always in a constant process of change and development due to innovations taking place every now and then, the threat of any new entry or competition to Apple Music, especially after its acquisition of Shazam, is unlikely. While rivals and competitors can come up with new variations of music streaming services, they are likely to lack the technological advancements that Apple will use to give its music streaming services large-scale appeal for several years to come (Hernandez and Pederson 2017). 

Political – Companies in Europe are affected by legislation at the both the EU level as well as at the national level. The European Union tends to be quite similar to that of a confederation, that is a place where policy areas tend to be federalized into several common institutions that are capable of drafting laws. Unlike most states, the European Union does not however control defense policy, foreign policy, or any direct taxation policy. Such areas to be those that are confined to being directly controlled by EU member states. A little bit of structured coordination and cooperation are however, known to take place in these areas. There are strong and flexible legislations therefore in the European Union that will provide Apple Music with a stable political environment in which to conduct business in (Beetz et al. 2017).

Economic – A single market has been established in the European Union across the territories of each and every one of its members. Seventeen of the EU member states have joined a single monetary union that is known as Euro-zone. This union makes use of the Euro as an individual or single form of currency. Cohesion funds and structural funds support developmental activities and undertakings in several of the underdeveloped parts of the European Union. There are limited financial liabilities in the European Union therefore, that are likely to hinder the business expansion and growth plans of Apple Music, upon its acquisition of Shazam (Greenwood 2016).

Social – A major change in demographics in the European Union, which is likely to influence the demand for products is a rising population comprising mostly of people who are above forty five years of age, while a considerable decline can be detected at the same time when it comes to people who belong to younger age groups. There is a rise in the European Union in one person households, that is, households where there are no children, while a simultaneous rise can be detected in dual income families. Most people tend to live alone of their own volition, either through bereavement or through divorce. The free and unrestricted mobility of workers in the European Union is something that has facilitated the growth of what is termed as sub cultures. Music is something that people are likely to take recourse to a lot more when living in solitude. Apple Music upon its acquisition of Shazam is therefore certain to find many takers for its music streaming services in the European Union (Drucker 2017).

Competitive Rivalry

Technological – Policy priorities in most of the new EU member states are those that are being devoted increasingly to research and development, with innovation being regarded as a key driver of growth and productivity. Innovation and imitation tend to be used as means of technological development in the European Union. Most EU countries are those that are highly developed and have access to the latest technology. The science based manufacturing industry in the European Union has witnessed an increase in recent years, leading to a high growth in intra-industrial trade among the various countries of the European Union. A few of the best technical institutes across the globe are present in Europe. There are excellent technological developments and advancements in the European Union that Apple can take recourse to in order to promote and provide music streaming services to a wide audience in the EU member states (Gregson et al. 2015).

Environmental – When it comes to the environment there are five important factors that are of major concern in the European Union. These are pollution control, the combating of global warming, conservation of energy as well as other scarce resources, use of ingredients and components that are environment friendly and the use of non-wasteful and recyclable packaging material. Apple can get to carry out its business in a natural environment that is mostly free from pollutants.

Legal – Governing institutions in the European Union are empowered by treaties. Law in the European Union is known to exist at two different levels, namely, as directives that are binding only through enactment of laws within EU member states in line with the directives and as regulations which are binding on the EU member states only. Competition policy plays an important role in encouraging the growth of competition within the European Union, and removes restrictive practices as well as anti-competitive activities. There are sound legal practices and laws that Apple can fall back on in order to carry out its music streaming business in a legally acceptable manner, upon acquisition of Shazam in the European Union (Barnard and Peers 2017).

Opportunities – The sound political, legal and socio-economic environment that prevails in the European Union, is one that is likely to provide the Apple Company with the ambience that it needs to grow and expand its business in this part of the world, and thrive upon doing so.

Threats – There are few or no threats to the Apple Company, upon its acquisition of Shazam, given that it now has access to the audio recognition technology patents of Shazam, in addition to its 120 million subscriber base, giving it full monopoly and control over music streaming services in the European Union. 

Bargaining Power of Suppliers and Customers

The Apple Company has a significant human resource base serving it in the USA and other parts of the world where it runs its operations. The Apple workforce is one that places a great deal of emphasis on innovation, and on collaborative methods of working, in order to offer uniquely designed and positioned technological products and services for customers. Apple looks into the wellbeing of its employees by focusing on their safety needs and financial needs, with high wages being offered for all employees, skilled or otherwise (Khan et al. 2015).

The Apple Company maintains a steady and valuable cash flow in order to meet operation expenses and short term obligations. Components of current liabilities and current assets are regularly maintained and ratio analysis is also carried out to ensure good flow of funds. Networking capital is what is primarily used by Apple Inc in order to keep its balance sheet organized and strong. Capital is determined by subtracting current assets minus the current liabilities that the company has (Lessambo 2018).

Inbound Logistics – Apple has the manpower and the financial resources that are needed to ensure the quick transport, storage as well as delivery of goods or technological materials that are needed for it to run its music streaming business with success (Hernandez and Pederson 2017).

Operations – Apple has been offering music streaming services for quite some time now as Apple Music, with as many as 50 million users signing up for its music streaming services. The company is therefore well equipped to carry out operations pertaining to music streaming services upon acquisition of Shazam, especially now that it has access to audio recognition technology patents that will give such music streaming services a unique form and appeal (Hernandez and Pederson 2017).

Outbound Logistics – Apple possesses the human, technological and financial resources that need to be deployed for storing, transporting and distributing music streaming services upon its acquisition of Shazam. Since this is music that people are essentially going to download and listen to, Apple has the necessary technological infrastructure to run outbound logistical operations with success (Hernandez and Pederson 2015).

Marketing and Sales – Apple will take recourse to marketing the music streaming services upon the acquisition of Shazam on its personal website, as well as on various marketing platforms online, with special emphasis being laid on social media platforms because of their wide user base. By carrying out marketing and sales activities on social media, the Apple Company will be sure to reach out to a wide customer base in no time at all (Hennesy and Najjar 2017).

Threat of Substitution and New Entry

Service – Apple customer care centers and showrooms exist in many different parts of the EU member states, which customers of the Apple music streaming services can visit in order to get their queries resolved (Clarke and Boersma 2017).

The distinct competencies of the Apple Company are therefore its man-power, financial resource base and technological infrastructure that it can put to use to offer and promote its music streaming services to an expansive customer base, after its acquisition of Shazam (Hennesy and Najjar 2017).

Value – Apple Music with the help of the audio recognition technology patents of Shazam, can offer music streaming services that are far more technologically advanced that the music streaming services made available by any other company thus far, thereby establishing full value for its services (Clarke and Boersma 2017). 

Rarity – Apple Music controls rare resources in the form of the audio recognition technology patents that it acquired upon its acquisition of Shazam, setting apart its music streaming services from that of similar services offered by other companies. Apple is thus offering something that is rare and valuable, and which is going to be difficult to substitute or imitate (Drucker 2017). 

Organization – The Apple Company has the proper organization and infrastructure, including financial resources and human resources that are needed in order to offer high quality music streaming services for customers, and having enough competitive advantage in the international music streaming industry (Greenwood 2016).

The core competencies of the Apple Company are therefore value of music streaming services and proper organization to execute such services. 

Strengths – Apple has the unique ability to develop and to design proprietary hardware and software applications as well as services. It is a powerful brand that is serviced by strong marketing and advertising capabilities. The Apple products are innovative in nature and are characterized by high tech designs, setting them apart in the market for technological products (Adolph and Greenwood 2015).

Weaknesses – Many Apple products and applications tend to be incompatible with third party software. Given the innovative nature of its business, consumer expectations with regard to Apple products and services always tend to be sky high (Adolph and Greenwood 2015).

Opportunities – Given the advancement in technology in today’s day and age there is plenty of scope for the Apple Company to expand its business operations by producing innovative well designed technological products that cater to the masses (Adolph and Greenwood 2015).

Political, Economic, Social, Technological, Environmental and Legal Factors

Threats – The two areas in which the Apple Company is seen to face a significant amount of threat is in the domain of Smart Phone production and Laptop competition, domains where the company faces stiff competition from Android and Dell, among others (Adolph and Greenwood 2015).

Strengths/Opportunities (SO) – Apple can make use of its innovative ways of manufacturing technological gadgets and high tech designs and technological software to come up with products and services in the market that are truly unique in nature, and which are certain to capture the attention and interest of a wide customer base (Caffarra and Latham 2018).

Strengths/Threats (ST) – Apple can use its high tech designs and innovations to produce laptops and phones that are better than the ones that are being currently produced by Dell and Android (Kahn et al. 2015).

Weakness/Opportunities (WO) – Apple can overcome its weakness of being incompatible with third party software by hiring software developers and practitioners who can amend such loopholes and give Apple products the opportunity to do well when used with third party software (Greenwood 2016).

Weaknesses/ThreatS (WT) – The inability of the Apple Company to produce products and services that are compatible with third party software can hinder its growth in the domain of laptop computers and smart phones (Caffara and Latham 2018).

The Apple Company possesses a skilled employee base and networking capital, both of which are needed to come up with innovative music streaming services that stand out in the market. The company has skilled technicians and engineers who can manipulate the latest technology using adequate financial resources to offer top notch and unique music streaming services upon its acquisition of Shazam, especially due to its ownership now of the audio recognition technology patents that are previously belonged exclusively to Shazam (Hernandez and Pederen 2017).

Identification of Key Stakeholders

Customers – Customers constitute the top stakeholders where Apple products and services are concerned. Given that Apple Music already had a subscriber list of 50 million users for its music streaming services, it is likely to cater to its customers even better, now that it has acquired Shazam, which brings with it a subscription base of 120 million active users (Chernev 2018).

Apple’s Employees – Given the huge demand for music streaming services offered by Apple worldwide, Apple is sure to be able to look after its employees even better upon its acquisition of Shazam by hiring more and more people for the business and by offering its present set of employees more diverse jobs and duties to perform (Bhattacharya 2016).

Conclusion

Investors – Investors in Apple products and services constitute key stakeholders always, and Apple Music is no exception. Those investing in the Apple music streaming services are likely to benefit greatly from the company’s acquisition of Shazam, given that the company is now in a position to expand its customer base of 50 million users by another 120 million users at least, if not more (Greenwood 2016).

Apple Music is certainly to do enormously well as far as performance is concerned due to its acquisition of Shazam. This is because the company is going to be able to expand its customer base by a considerable number. Apple Music already had fifty million or more subscribers for its music streaming services prior to this acquisition and following the acquisition, the company has 120 million more subscribers for its services at the least, thus being in a position to cater to a huge clientele. The fact that after the acquisition Apple has acquired the audio recognition technology patents of Shazam puts it in a position to come up with music streaming services that are unique in nature and character, over and above being innovative (Bhattacharya 2016).

One of the significant problems that Apple could face when providing music streaming services upon its acquisition of Shazam is the fact that it may be at a loss as to understand how to best make use of the audio recognition technology patents, given that it has never made use of such patents before. Problems could also be faced by the Apple company as far as the pricing of its music streaming services is concerned. Apple tends to keep its products and services limited to high income customers only. This in turn could mean that many of the erstwhile customers or clients of Shazam music streaming services may not be in a position to avail the new music streaming services that the Apple Company has to now offer, leading to some difficult business in the initial months of operation (Chernev 2018). 

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