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BMG Case |
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... Powerful Suppliers: Five major companies dominate the market, where each of them promotes a different product (in this case an actor or a genre) that in some cases results a hit and in some others do not. ... Customers can download the information –in this case music- in an easier, comfortable, and securable way. ... For example, technological information creates an opportunity to reach more markets, to establish connection with the customer, and to decrease costs in the value chain; however, it also creates threats to the major companies because the network economies of scale will drop barriers of entry, will give new opportunities to third parties (in this case online retailers, web surfers and competitive agencies), and will decrease switching costs. ... ) The actions that the Record Companies had implemented are: •BMG: set up web sites focusing on promotion; start to sell music directly over the Internet, arranged partnerships and small arrangements; maintain relationships with players involved in technological standards for download music. ... •Sony: new technology for music distribution, online store, digital downloads, digital “kiosks” in retail stores, and the creation of portable devices to download music •Universal: venture with BMG to promote artists online and to distribute music online and digital downloads. ... We have to remember that Strategies are impermanent, so the Record Companies have to change them in accordance of the industry environment (that is sometimes affected by the global environment, in this case by the technological environment. ... Evaluate BMG’s Internet strategy by identifying the pros and cons. ... BMG started its strategy to join the Internet market since 1995 by setting up web sites focused on promotion only, this was to attract fans and to get them know the company, the artists and all the information they were interested in; after that BMG started to sell music directly over the Internet by partnerships and small arrangements; in addition, BMG maintained relationships with all the companies involved in the research and improvement of technological standards for download music. Also, BMG worked with AOL (American Online) directing customers that listened to specific albums towards BMG’s web sites. The main objective, of all the sites created by BMG, was to make that this sites stand on their own. ... Moreover, with Universal Music, BMG set up an online store that contained all major labels but that promoted more BMG’s or Universal’s labels; the costs of these CD’s or cassettes were 20% less than in storefronts. Finally in 1999, BMG announced a direct music sale over the Internet along with the partnerships and agreements already mentioned. ... However, the new releases in the technology area, the low barriers of entry, and increased competition have pushed BMG to make a big decision: to serve its digital customers by its own distribution organization or to create a separate division to serve them. ... Exclusive Partnerships •Secure technological innovation and service to customers •If tech companies fail to deliver a good service of product BMG will lose reputation, sales and market share. ... Non-Exclusive Partnership •Freedom to acquire several technologies and use them to the benefit of the division •Freedom to halt any tech company that can compromise the reputation and service of the division •Technology companies can make arrangements with other Record companies to distribute their products, leaving BMG out of the reach for those technologies From these analyses we arrive to the following conclusions: The Internet division of BMG Company has to be managed separately. |
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Title: BMG Case
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