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How did the firm try to grow worldwide?

How did the firm try to grow worldwide?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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How did the firm try to grow worldwide?

and peer-to-peer computing developed as a viable option. These new competitive configu- rations and technologies further altered the global landscape for music and other industries. But the beat continued: RIAA filed suits against individuals backed by angry claims that music downloaders are thieves (Gomes, 2003). Pepsi featured these individu- als in a promotional campaign for free (and legal) downloads, and smaller businesses emerged to handle legal issues and burn CDs for customers. The Dutch supreme court ruled that KaZaA's makers cannot be held liable for copyright infringement due to file sharing, but record-industry investigators raided firm offices. What's next? Stay tuned. Source material: Peter Burrows (2003, Oct. 20) Napster lives again-Sort of Business Week, pp 66, 68; Charles Goldsmith and Keith Johnson (2002, June 4) Music piracy forces industry to reduce signing new artists. The Wall Street Journal, p. B10; Lee Gomes (2003, Sept 15). RIAA takes off gloves in mounting its fight against music thieves. The Wall Street Journal (Eastern Edition), p. B1; Ethan Smith (2003, Oct. 16) Universal Music to cut work force as industry sags. The Wall Street Journal, pp. A3, A8.
Transcribed Image Text:and peer-to-peer computing developed as a viable option. These new competitive configu- rations and technologies further altered the global landscape for music and other industries. But the beat continued: RIAA filed suits against individuals backed by angry claims that music downloaders are thieves (Gomes, 2003). Pepsi featured these individu- als in a promotional campaign for free (and legal) downloads, and smaller businesses emerged to handle legal issues and burn CDs for customers. The Dutch supreme court ruled that KaZaA's makers cannot be held liable for copyright infringement due to file sharing, but record-industry investigators raided firm offices. What's next? Stay tuned. Source material: Peter Burrows (2003, Oct. 20) Napster lives again-Sort of Business Week, pp 66, 68; Charles Goldsmith and Keith Johnson (2002, June 4) Music piracy forces industry to reduce signing new artists. The Wall Street Journal, p. B10; Lee Gomes (2003, Sept 15). RIAA takes off gloves in mounting its fight against music thieves. The Wall Street Journal (Eastern Edition), p. B1; Ethan Smith (2003, Oct. 16) Universal Music to cut work force as industry sags. The Wall Street Journal, pp. A3, A8.
NAPSTER FORGES GLOBAL INTERCONNECTIONS Organizations and individuals face global shifts in six external environments: 1) busi- nesses and industries; 2) the natural environment; 3) economic; 4) political; 5) technology, particularly information technologies; and 6) culture. Although each of these six external environments is distinctive, they also interact with one another, and are additionally shaped by mediating organizations and even individual activities. This point is illustrated by a simple change in music technology that began with Shawn Fanning's Napster. Having provided consumers with a way to share files and download music from the Internet, Napster altered cultural habits for music acquisition worldwide. At the same time, another cultural shift occurred when the teen-pop fad faded but no new music fad replaced it. Businesses in the music industry witnessed an almost immediate downturn in sales of tapes and CDs: billions of dollars reported for the global economy were no longer counted because consumers had no costs. This downturn together with illegal copying of CDs caused many music companies to drop recording contracts for local artists, finding it cheaper to promote established international artists than to develop local ones. Hardest hit were recording artists in nations where CD piracy is particularly high. At the time 30 percent of music CDs in Spain and 60 percent of music CDs in Thailand were pirated. Thus, absence of politicallegal sanctions against both CD piracy and file sharing over the Internet affected music companies. Between 1999 and 2003 the record industry witnessed a 14 percent drop in revenue. This impacted not only on record producers but also on performing artists. Industry businesses created different strategies in response to file sharing services. For example, Bertelsmann loaned Napster more than $100 million to develop it as a legitimate business model comple- mentary to its own recording unit BMG Entertainment. New organizations such as KaZaA-incorporated in Vanuatu-and Morpheus entered the industry. These and other activities further altered recording-industry dynamics. Mediating organizations such as the Recording Industry Association of America filed lawsuits against Napster, putting a politicalllegal spin on music downloading. Both Universal Music Group and EMI Group- competitors to BMG-filed direct suits against Bertelsmann. Others with mediating interests include recording artists themselves as well as buyers and suppliers to the industry. This brief example illustrates how a global change in an information technology was fol- lowed by global shifts in the industry, in politics, in culture, and in economics. Although it might seem that the natural environment plays no role in this event, consider the packag- ing, plastic, and other materials that are ordinarily required to sell a CD or tape. The point is, each external environment is affected by a global change in any other but the felt effect may not be immediately obvious. But this story continues Napster liquidated assets after losing a battle over copyrights in 2001. Roxio bought Napter's name and remaining assets in 2002, then relaunched it as a subscription and pay-per-song service. Meanwhile Apple Computer introduced its iTunes store, charging just about $1 dollar per downloaded song. Musicmatch Inc., RealNetworks Inc's Rhapsody, and bigger competitors such as Amazon.com, Sony, and Wal-Mart fol- lowed this lead. Sony and Bertelsmann announced merger plans for their music division,
Transcribed Image Text:NAPSTER FORGES GLOBAL INTERCONNECTIONS Organizations and individuals face global shifts in six external environments: 1) busi- nesses and industries; 2) the natural environment; 3) economic; 4) political; 5) technology, particularly information technologies; and 6) culture. Although each of these six external environments is distinctive, they also interact with one another, and are additionally shaped by mediating organizations and even individual activities. This point is illustrated by a simple change in music technology that began with Shawn Fanning's Napster. Having provided consumers with a way to share files and download music from the Internet, Napster altered cultural habits for music acquisition worldwide. At the same time, another cultural shift occurred when the teen-pop fad faded but no new music fad replaced it. Businesses in the music industry witnessed an almost immediate downturn in sales of tapes and CDs: billions of dollars reported for the global economy were no longer counted because consumers had no costs. This downturn together with illegal copying of CDs caused many music companies to drop recording contracts for local artists, finding it cheaper to promote established international artists than to develop local ones. Hardest hit were recording artists in nations where CD piracy is particularly high. At the time 30 percent of music CDs in Spain and 60 percent of music CDs in Thailand were pirated. Thus, absence of politicallegal sanctions against both CD piracy and file sharing over the Internet affected music companies. Between 1999 and 2003 the record industry witnessed a 14 percent drop in revenue. This impacted not only on record producers but also on performing artists. Industry businesses created different strategies in response to file sharing services. For example, Bertelsmann loaned Napster more than $100 million to develop it as a legitimate business model comple- mentary to its own recording unit BMG Entertainment. New organizations such as KaZaA-incorporated in Vanuatu-and Morpheus entered the industry. These and other activities further altered recording-industry dynamics. Mediating organizations such as the Recording Industry Association of America filed lawsuits against Napster, putting a politicalllegal spin on music downloading. Both Universal Music Group and EMI Group- competitors to BMG-filed direct suits against Bertelsmann. Others with mediating interests include recording artists themselves as well as buyers and suppliers to the industry. This brief example illustrates how a global change in an information technology was fol- lowed by global shifts in the industry, in politics, in culture, and in economics. Although it might seem that the natural environment plays no role in this event, consider the packag- ing, plastic, and other materials that are ordinarily required to sell a CD or tape. The point is, each external environment is affected by a global change in any other but the felt effect may not be immediately obvious. But this story continues Napster liquidated assets after losing a battle over copyrights in 2001. Roxio bought Napter's name and remaining assets in 2002, then relaunched it as a subscription and pay-per-song service. Meanwhile Apple Computer introduced its iTunes store, charging just about $1 dollar per downloaded song. Musicmatch Inc., RealNetworks Inc's Rhapsody, and bigger competitors such as Amazon.com, Sony, and Wal-Mart fol- lowed this lead. Sony and Bertelsmann announced merger plans for their music division,
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