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Beats Porter’s Five Forces Essay

Introduction:

Beats Electronics was formally founded in 2006 by the rapper and hip-hop producer Dr Dre and Jimmy Iovine, the Interscope-Geffen-A&M Records chairman. Its headquarter is in Culver City, California, USA. It is a company which produces high quality audio products such as headphones, earphones or speakers but also a software called Beats Audio as well as a streaming music service called Beats Music. Dr Dre came with the fact that listeners, with most headphones, were not able to listen properly to music. He stated that Beats audio product would allow a much better way of listening “hear what the artists hear, and listen to the music the way you should: the way I do.” Porter’s five forces analysis:

Rivalry among industry: The headphone market is a very competitive market in which we can’t even name all the brands when we talk about all categories headphones. However when we talk about high quality headphones such as beats the number of companies competing is reduced, the most known between them are Beats, Bose, Sony or Sennheiser, but there also are some of them emerging with the same way that Beats did for example famous rappers Jay-Z and Ludacris each have their own line of headphones called respectively Skullcandy and Soul. Despite the competition Beats was able to conquer 64% of the market of 100$-an-more headphones.

Threat of new entrants: During the last years many celebrities, following Dr Dre and Iovine formula, launched their own brand of headphones (Usain Bolt, Tim Tebow, 50 cent in partnership with Timbaland, Denon…). Also, the technology to produce headphones is quiet simple and does not require lot of efforts. From this we deduce that the threat of new entrants is an important fact to take in consideration .Bargaining power of Buyers: Beats target young buyers. It is true to say that young people are the one who enjoyed music the most, but Beats headphones have another characteristic : it is a fashion accessory. The competition among the industry is high, but beats products are not the same as Sony, Bose or Sennheiser products. That’s why bargaining power of buyers is low.


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