We begin analyzing by asking ourselves about competitors`s new products, changes in the industry and changes in the market share.
(Mark Cosentino. Case in point)
In 2003 there was no any meaningful data about shifts in market share due to the arrival of iTune competitors. So the following actions would depend on Apples management toward risk.
If the management is risk averse, it would be prudent to somehow disrupt competitor efforts.
As it follows from financial records, Apple had enough gunpowder to acquire most irritating competitors. Merging would of course be out of question.
Hiring the upper management of competitors would be a good idea also since it is much cheaper than acquiring whole enterprises. As a matter of fact such action would temporally paralize the work of hostile companies.
By the way Apple actually applied such strategy several years ago when it buyed out music service Lala.com and shut it down after several months.
If the management is risk acceptant, the best idea would be focusing on Itunes competitive advantages and enhancing them. Previously I stated that Apple seems to be an expert in intuitive implementation of behavioral economics laws.
My hunch that Apple could capitalize on endowment effect by devising a system of «achievments» for Itunes users. For instance, accounts could be upgraded due to the amount of purchases.
Another idea is to capitalize on so called «power of free» (Dan Arielly) buy offering different options like «20 song for free for buying new Ipod». It is proven scintifically that our mind practically can`t resist such offers and views them as extremly lucrative. Historically Apple choose pretty much the same path — enhancing online accounts. In 2009 Apple announced that they have the credit card account information of more then 100 million consumers through iTunes. The idea with the credit cards was simple — by entrusting Apple with his bank account, consumer made a commitment to continue buying from Apple.
Virtually Apple DID NOTHING to respond to challenges from competitors. All it had to do was to maintain it`s market share.
