Managers in organizations are tasked with making decisions aimed at achieving their set objectives. In fact, every organization has profit maximization and cost reduction as their key objectives. Therefore, managers do everything within their reach to make sure that key objectives are met. Managers ensure that they understand all aspects in the market hence being able to manipulate their operations. This helps the organization to react to changes in the market which may pose threats to the organization (Brickley, Smith and Zimmerman, 2009). Apple’s managers came up with various strategies to make sure that their iTunes music store remains profitable. This move was caused by increased competition from other players in online music stores. In fact, most of these competitors sold their music at lower prices hence attracting more customers.
To caution Apple’s iTunes music store from these threats, managers came up with various strategies, which included, products differentiation. This is where managers came up with three prices in order to capture customers. Depending on demand and quality of music in their iTunes store, they made them available at different prices. For example, some songs can be downloaded for 69 cents, 99 cents and $1.29 hence making it affordable to various groups of customers. In fact, the decision was made to ensure that customers download just what is ideal for their pockets (Keat and Young, 2006). Many customers prefer these categories since they can get what they want at prices that are favorable to them.
In addition to the pricing strategy, they dropped digital rights management from their songs. Competitors used this as a tactic to beat Apple Inc. in the market as customers preferred downloading music that they can play on their devices regardless of their manufacturers. Songs downloaded from iTunes music store could not be copied because they had copy protections. Apple’s managers considered to drop this in line with adjustment of prices in order to retain their loyal customers. In fact, since they are known for quality online music, majority of their customers tend to download from them regardless of their oppressive conditions. These motivated managers to drop such applications in order to make sure that their customers are comfortable whenever buying music from their stores.
Apple’s DRM made it impossible for customers to play music from their competitors. This was a strategy aimed at ensuring that Apple’s devices should be used to play music from their online stores only. This made sure that the organization sold its music at high prices as customers had no other options. This means that regardless of their products being sold at high prices, customers bought them due to lack of alternatives. Songs downloaded from other companies could not play on Apple’s devices. As a result, they came up with a strategy to charge their customers in order to access music from competitors on their devices. iTunes customers could consider parting with some extra cents in order to use products from Apple’s competitors. This was meant to discourage use of products from their competitors hence safeguarding their market share.
Apple’s managers realized that competition has become very tough hence coming up with strategies aimed at improving their nature of competition. For instance, they came up with a strategy that required customers to pay 30 cents to upgrade their songs to versions that can play on competitor’s devices (Brickley, Smith and Zimmerman, 2009). Customers felt relieved because they could download songs from iTunes music store and play them on their devices. Managers ensured that they benefited from every decision they made hence ensuring that their organization generated more revenue. For instance, 30 cents required to upgrade every song translates to a lot of money for the organization.
References
Brickley, J., Smith, C., & Zimmerman, J. (2009). Managerial economics and organizational architecture (5th ed.). New York: McGraw Hill/Irwin.
Keat, P. G. & Young, P. K. (2006) Managerial economics: economic tools for today’s decision makers. Michigan: Pearson Prentice Hall.