Dr. Dre's Case Study and answer the case study questions

DISRUPTION IN CONTENT DELIVERY Content delivery is rapidly moving from ownership through downloads to renting via online streaming. This disruption in the business model is most visible in movies as the suc- cess of Netflix demonstrates, but is also gaining steam in music. Apple is a laggard in music streaming when compared to leaders such as Pandora with 250 million users and Spo- tify with 60 million users. Apple's attempt at online music streaming service, iTunes Radio created in 2013, has been falling flat. After disrupting the music download space with iTunes in 2003, Apple is now being disrupted by others that lead in music streaming. is hoping that by acquiring Beats Music it can become a leader in the music streaming space.? You will learn more about Beats Electronics by reading this chapter, related questions appear on page 132. ONE OF THE KEY messages of this chapter is that a firm's ability to gain and sustain competitive advantage is partly driven by core competenciesunique strengths that are embedded deep within a firm. Core competencies allow a firm to dif- ferentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. So what are core competencies of Beats by Dr. Dre? Beats succeeds not because it provides the best possible acoustic experience, but because it functions as a fashion statement that com- municates coolness. The iconic headphones are worn by celebrities from music, movies, and sports. Even fashion designer Marc Jacobs had models wear Beats headphones during run- way shows. The extent to which Beats succeeds at product placements with celebrities across the world is unprecedented. The genius behind Beats is creating a perception that if you want to be as cool as one of your heroes, you need to shell out hundreds of dollars to wear plastic headphones in public. Beats' unique strengths in establishing a brand that communicates coolness is built upon Dr. Dre's intuition and feel for music and cultural trends: Dr. Dre is one of music's savviest marketing minds. Although the sound quality of Beats headphones is good enough, they mainly sell as a fashion accessory for their coolness factor and brand image. Dr. Dre relies on gut instinct in making decisions, while shunning market research. This approach is quite similar to Apple's late co-founder Steve Jobs who made no secret of his disdain for market research because he believed that consumers don't really know what they want until someone else shows it to them. Beats' core competency in marketing allows the company to differentiate its products from rival offerings because it is able to create higher perceived value for its customers, In turn, Beats' core competency affords the firm a competitive advantage. It is hugely successful: Beats holds some 65 percent market share in the premium headphone market, priced at $100 and up. Beats' competitive advantage was rewarded with a $3 billion acquisition by Apple. In this chapter, we study analytical tools to explain why differences in firm performance exist even within the same industry. For example, why does Beats Electronics outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market? Since these companies compete in the same industry and face similar external opportunities and threats, the source for some of the observable performance dif- ference must be found inside the firm. When discussing industry, firm, and other effects in explaining superior performance, we noted that up to 55 percent of the overall performance differences is explained by firm-specific effects (see Exhibit 1.1). Looking inside the firm to analyze its resources, capabilities, and core competencies allows us to understand the firm's strengths and weaknesses. Linking these insights from a firm's internal analysis to the ones derived in Chapter 3 on external analysis allows managers to determine their 106