Music Business

Acquisition is one of the corporate strategies used my different organizations to either enter new markets or expand existing markets (Finkelstein and Cooper, 2008). Sometimes, acquisitions provide the acquiring organization a chance to expand its customer base due to the presence of the acquired organization in a particular market. Moreover, the organization taking over another one gains means of production such as expertise from employees in the organization being acquired, physical structures and machinery and patent rights (Gaughan, 2007).

Beats Electronics is a company that produces audio equipment and products and had given another company, Monster Cable the exclusive license to manufacture its products. The electronic industry within which Beats Electronics operate is highly competitive with many players entering the market each year. Among Beats Electronics’ competitors include Sleek Audio, Sennheiser Electronic Corporation and Apple Inc. Sleek Audio is a direct competitor to Beats Electronics because is manufactures and sells wireless headphones. The company, therefore, manufactures and sells the same products as Beats Electronics. Moreover, Sennheiser Electronic Corporation is a direct competitor to Beats Electronics because some of its products compete directly with those manufactured by Beats Electronics such as headphones. Compared to the other competitors, Sennheiser is one of the biggest challenges because of the number of years it has been in operation. Sennheiser has been in operation for around sixty years. This means that the company’s experience provides it with ability to make high quality products compared to new entrants into the market such as Beats Electronics. Apple Inc is an indirect competitor to Beats Electronics. Apple manufactures electronic products such as smart phones and iPods. These products do not compete directly with earphones and headphones manufactured by Beats Electronics, but target the same market segment. The products manufactured by Apple Inc use products such as headphones and earphones as accessories. Due to the good brand image of Apple Inc, its products may reduce the attractiveness of Beats Electronics to its customers. This can happen because once an iPhone is purchased with its headphones, the customer may not be motivated to search for other headphones since there is an assumption that if the phone is the best in the market, its accessories are also the best. Although Apple Inc came into existence later compared to Sennheiser, the founder’s innovation and leadership has helped the company to attract the best talents in the technology industry.

The acquisition of MOG by Beats Electronics provides Beats electronics with a competitive advantage due to the synergy created by the two organizations coming together (Nilsson and Rapp, 2004). Pairing the two companies will expose Beats Electronics to a wider target audience than before. By March, 2012, HTC a big shareholder of Beats Electronics had about 6.3% market share of the mobile phone market. Digital music streaming faces a stiff competition especially due to the ever-increasing technological innovation. As technology changes new players emerge to take advantage of new opportunities created by the technological innovations. MOG is one of the largest companies that provide users with digital music streaming. In spite of the company being a force to reckon with in this sector, there are competitors who are struggling to snatch the market share from MOG.  One of the competitors of MOG is Spotify. Spotify is a Swedish company that offers digitally restricted streaming from both independent record labels and major record labels. It is a direct competitor of MOG because it sells the same product-live streaming music. The two companies, therefore, target the same customer base and market share. Another MOG competitor is Rdio. Rdio is a music subscription service free of ads. It is available in various countries and exists as a website and clients for various products such as iPhone, Blackberry and Androids. Just like MOG, Rdio has other features that enable clients to share their playlists with their friends. Rdio is also a direct competitor of MOG because it is offers the same products and services and targets the same audience and customers as MOG. Sonos is another competitor of MOG that manufactures consumer electronics, but also has devices that allow free online streaming of music. Sonos is an indirect competitor because its main products are electronics, but the electronics have features that allow its clients to access free music streaming the same way MOG clients do. As such, Sonos is competes indirectly with MOG for the live music streaming. Although this company’s main products are electronics, the product features may take away clients from MOG. The HiFi system manufactured by Sonos is an example of the systems that allow free music streaming from the internet.

Pairing MOG with Beats Electronics headphones would introduce MOG to a larger audience than its current customer base. As a result, the consolidated corporation would increase its earnings through the increased clientele. In addition, since promotions and advertisement would be done jointly, the consolidated corporation would enjoy the benefits of economies of scale and thus increase its profits. By being associated with Beats electronics, MOG would get endorsement from celebrities who endorse Beats Electronics’ products. Consequently, MOG products would gain popularity compared to those of their competitors (Warzel, 2012). This would translate to competitive advantage in terms of loyal customer base and high profitability.

The acquisition of MOG by Beats Electronics has several implications on copyright holders of the recorded music. The first implication is that they may lose business for which they had entered a contract with MOG. This can result from the unwillingness of the new owner to enforce the contract that had been entered between the former owner and the copyright holders. The second implication of the acquisition could be that Beats Electronics has totally new plans for the acquired MOG Corporation. This change of plan could mean that the original function of MOG does not match with the expectation of Beats Electronics. As a result of the breach of contract, the copyright holders can seek legal redress so that the original contract could be enforced by a court of law. On the other hand, the copyright holders may opt to try and enter into a new contract with Beats Electronics so that the intentions of the original contract can be achieved. Since Beats Electronics is the music industry, it is highly improbable that it has intentions of changing the business model of MOG. Therefore, it is possible for the newly acquired GOM to enter into new agreements with copyright owners under the leadership of Beats Electronics.

References

Finkelstein, S., & Cooper, C.L. (2008). Advances in Mergers and Acquisitions. West Yorkshire: Emerald Group Publishing.

Gaughan, P.A. (2007). Mergers, Acquisitions, and Corporate Restructurings. New York: John Wiley & Sons.

Nilsson, F., & Rapp, B. (2004). Understanding Competitive Advantage: The Importance of Strategic Congruence and Integrated Control. New York: Springer.

Warzel, C. (2012). Beats Electronic acquires Mog rapper Dr. Dre’s headphone makers scoop up digital streaming service. Retrieved from: http://www.adweek.com/news/technology/beats-electronics-acquires-mog-141575