What could they have done differently to ensure success? How could they have managed their global business better? NAPSTER FORGES GLOBAL INTERCONNECTIONSOrganizations 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 externalenvironments is distinctive, they also interact with one another, and are additionallyshaped by mediating organizations and even individual activities. This point is illustratedby 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 theInternet, Napster altered cultural habits for music acquisition worldwide. At the sametime, another cultural shift occurred when the teen-pop fad faded but no new music fadreplaced it. Businesses in the music industry witnessed an almost immediate downturn insales of tapes and CDs: billions of dollars reported for the global economy were no longercounted because consumers had no costs. This downturn together with illegal copying ofCDs caused many music companies to drop recording contracts for local artists, finding itcheaper to promote established international artists than to develop local ones. Hardesthit were recording artists in nations where CD piracy is particularly high. At the time 30percent 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 theInternet affected music companies.Between 1999 and 2003 the record industry witnessed a 14 percent drop in revenue. Thisimpacted not only on record producers but also on performing artists. Industry businessescreated different strategies in response to file sharing services. For example, Bertelsmannloaned 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 asKaZaA-incorporated in Vanuatu-and Morpheus entered the industry. These and otheractivities further altered recording-industry dynamics. Mediating organizations such as theRecording Industry Association of America filed lawsuits against Napster, putting apoliticalllegal spin on music downloading. Both Universal Music Group and EMI Group-competitors to BMG-filed direct suits against Bertelsmann. Others with mediating interestsinclude 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 itmight 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 pointis, each external environment is affected by a global change in any other but the felteffect may not be immediately obvious.But this story continues Napster liquidated assets after losing a battle over copyrightsin 2001. Roxio bought Napter's name and remaining assets in 2002, then relaunched it asa subscription and pay-per-song service. Meanwhile Apple Computer introduced its iTunesstore, charging just about $1 dollar per downloaded song. Musicmatch Inc., RealNetworksInc'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, 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 otherindustries. But the beat continued: RIAA filed suits against individuals backed by angryclaims that music downloaders are thieves (Gomes, 2003). Pepsi featured these individu-als in a promotional campaign for free (and legal) downloads, and smaller businessesemerged to handle legal issues and burn CDs for customers. The Dutch supreme courtruled that KaZaA's makers cannot be held liable for copyright infringement due to filesharing, 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; CharlesGoldsmith and Keith Johnson (2002, June 4) Music piracy forces industry to reduce signing new artists. The WallStreet Journal, p. B10; Lee Gomes (2003, Sept 15). RIAA takes off gloves in mounting its fight against musicthieves. The Wall Street Journal (Eastern Edition), p. B1; Ethan Smith (2003, Oct. 16) Universal Music to cut workforce as industry sags. The Wall Street Journal, pp. A3, A8.

The music industry is complex as they have many different organizations, the record industry, firms,…

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

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE