assign 7c and 7d

TOPICS: Acquisitions, Brand Image, Business Startups, Innovation

SUMMARY: Apple recently announced its plans to acquire Beats Electronics LLC. Beats brings music streaming, high-end headphones and music-industry connections to Apple. Beats will continue as a stand-alone brand. Apple hopes the acquisition will help it develop connections and gain access to content.

CLASSROOM APPLICATION: It is interesting to see Apple move in a different direction with its proposed deal for Beats Electronics LLC. The acquisition means Apple recognizes the importance of streaming services and the competitive threat they represent to iTunes. Companies that recognize and respond to threats to their business model by innovating or acquiring can improve their long-term prospects. In the past, Apple's model to grow and compete was to develop innovative products and services. The acquisition of Beats is a game changer because Apple is buying a recognized brand and letting that brand maintain its identity. There are additional benefits that might accrue from the acquisition. Dr. Dre and Jimmy Iovine are part of the deal and their industry connections and ideas might help Apple develop relationships with content providers. The iTunes business model is very different from subscription and streaming services. Apple tried for years to create a device that could stream recordings that resided in the cloud, but it hasn't had much success making deals for the content it needs from media and cable companies. Netflix, Hulu, Pandora and Spotify already stream content and are gaining subscribers. The Beats deal is a response to competitive challenges and represents the company's willingness to depart from its traditional brand strategy and business model.

QUESTIONS:  1. Do you think Apple has been perceived as an innovator over the years? Why? 2 What is Apple acquiring with the buyout of Beats Electronics LLC? 3. Apple realizes it needs content and that its business model of downloads is threatened by streaming services. How does Beats shift the business model and help Apple compete? 4. Why do you think Apple is willing to let Beats maintain its own brand identity? What is one possible risk and one possible reward of this strategy? End