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distributing digitized sound and video boards, computers and related multimedia and personal
digital entertainment products. Creative was founded in Singapore in 1981 by Sim Wong Hoo.
Nowadays, Creative Technology Limited is the leader in digital entertainment products for the
the fact that the technology requires patents and a huge organization due to research and
manufacturing, threat of new entrants is low. Power of buyers are high as they denote how
players should be sold, Product substitutes include apple iPod. Intensity of rivalry is high as
competitors will fight for patents in creation of their own intellectual properties, and intention is
to gain monopoly. This leads to a world wide global demographic network that includes
doing well having publicly listed in 1994. Technologically, creative is widely recognized as
global leader for product innovation on audio and PDE segments. Politically and legally,
Creative is bound by international laws as it operates world wide depending on the region.
Internal environment, financial resources, there are from public stock exchange being a
public listed company and the board. Organizational resources include through controlling
systems of worlds wide headquarters. Physical resources include the 3 labs creative own.
Technological resources include patents and rights of the products and trademark they own. High
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capabilities through 3 research labs. A core competency is technology research having 3 research
labs 1 in America one in Europe and one in Asia. (Aker Mills 2005)
Starting with the launching of the multimedia revolution and its Sound Blaster sound
cards; Creative has become famous in the technology industry. Through time of development, the
company has changed itself to one of the driver in digital entertainment on the PC platform with
products like its highly acclaimed ZEN line of digital audio players.
Since then, huge user base and strong brand name are the results of Creative Technology
Limited’s audio technology. Unfortunately, Creative Technology Limited made a huge mistake in
the mid of 1990s when they were forced to write off nearly USD $100 million dollars in
inventory when the market collapsed due to a flood of cheaper alternatives. The failure of their
plan lied on the venture which they spent for the CD-ROM market because it turned out that
Even though the company has been through several failures but Creative is still widely
recognized as a global leader for product innovation in the audio and PDE segments. The
company is offering consumers a complete, high quality digital entertainment experience through
number of US-based companies. They are also a shareholder in US-based sigmatel, a sound chip
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Creative Technology Limited is offering more than 25 different types of digital media
players, which is one of the advantages in their differentiation strategy comparing to the seven
offers of Apple. Creative’s brand alone has ten different variations ranging from the Jukebox Zen
Xtra to the Zen Nano Plus and all the way up to the Zen Vision, all with different feature sets,
capacities, and so on. Beside that, Creative also sold more than eight million players worldwide,
compared with to its major competitors such as Apple and ScanDisk and other minor competitors
Meanwhile, Creative's sales are slumping. Even as the larger MP3 player business
booms, Creative's revenues for the first nine months of the year fell to $896.7 million, from $919
million a year earlier. The loss in the most recent quarter was $114 million on sales of $225.7
million. The company will need better luck before the judge than it has had at the hands of
consumers.
Apple faces patent dispute, apple could be in fight with rival creative rival technology
used in iPod music players. Creative announces with BBC that its plans to pursue aggressively a
US patent it owns on a system used to navigate music on digital players. Creative was the first to
market digital music players in 2000, but has since been overshadowed by apple. So far apple
dominated with iPod sales accounting for 80% of sales for digital music players using hard
drives to store music. Creative has struggled to keep up, being a distant second.
Creative Zen vision has a striking resemblance; gadget is a direct competitor to apple’s
iPod video. Creative are touting Zen as far more powerful player than apple’s offering, with
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On 9th august 2005 Creative awarded US Patent on user interface for portable media
players. Creative’s invention for user interface for portable media players enables selection of at
least one track in a portable media player as a user sequentially navigates through a hierarchy
using three or more successive screens on the display of the player. The user interface covered by
Zen patent was invented by creative research and developmental engineers in Creative advanced
technology centre in US. Creative was awarded the Zen patent, which helps to protect the
Sony is trying to make a comeback with their latest series of MP3 compatible players, but
it is Creative who has practically declared war on Apple. They are aiming to capture around 40%
of the market dominated by Apple and are planning to spend big bucks on advertising. Their
budget is reported to be in the region of USD 100 million. Like other Singapore makers of
electronics, which account for almost half of the non-oil exports, Creative is struggling to
compete with rivals like Apple and Samsung Electronics. The competition is hurting profit
Creative has experienced difficulties since sales of its flagship product started to falter --
it posted its lowest full-year sales in nine years as reported in February 2004. To stem the loss,
Creative turned to producing other consumer products such as digital music players, most
recently launching the Zen Neon model to compete against Apple's iPod and digital music
Beside, Creative has also been dealt a double blow by having to cut prices in order to lift
sales to offset falling revenue from Sound Blaster cards, with strong competition from other
industry players further driving down prices in the MP3 market. The company seems to be
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engaged in a MP3 price war with Apple. It is said that Creative slashed prices for its MuVo and
Zen Micro players after Apple reduced prices for the iPod mini and introduced newer and
To send a message back to Apple and other competitors, Creative has created a similar
product which provides better choice for people to chose. Three years after launching X-Fi
(Xtreme Fidelity), Creative Technology has taken a major step to push this highly rated sound
processing technology into mass adoption by incorporating it into a new line of digital media
players. And the Singapore firm expects to see X-Fi in more devices in future.
X-Fi has been touted by Creative as an upgrade to the sound quality of compressed
digital music. It does so via two key digital signal processing techniques. One, called Crystalizer,
recreates music details that have been lost via MP3 music compression, while another, called
Then when Creative introduces the new ZEN X-Fi digital media players, this technology
could yet find its largest audience. The Creative spokesman reiterated that the company wants to
make X-Fi the heart for all its new audio products and devices. ZEN X-Fi is also seen as a keen
challenger to Apple's iPod touch player - with its raft of similar features like a large video screen,
wireless connectivity and high-capacity flash memory. Creative's new digital media players,
The ZEN X-Fi with Wireless LAN costs around $400 and $330 for the 32GB and 16GB
models respectively. The iPod touch is listed at about $850 and $700 for the 32GB and 16GB
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models respectively. The 8GB ZEN X-Fi, which does not include the Wireless LAN function and
will be available later this month, costs around $230. In comparison, an 8GB iPod touch, which
has WiFi, it costs about $500. But a notable difference between both product lines is the
interface: Apple's iPod touch uses a touch-screen while Creative uses push-buttons. The Creative
player.
Here in Singapore, customers already have the option of going for an iPhone competitor
like Samsung's pretty-looking but hard-to-use Omnia. But local company Creative has stepped
into this window of opportunity by offering people its most compelling media player yet, the
ZEN X-Fi. Released on 16th of July 2008, the ZEN X-Fi looks physically similar to the standard
ZEN series, but there are some nice gizmos within to persuade people to part with their cash. The
first cool feature is wireless support, which is available on the top two models - those with 16GB
($329) and 32GB ($399) storage capacities. This means it helps to access all the music on
computer while walking around your house. No need to transfer it all onto ZEN X-Fi first, and
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Question 1. Analysis the current situation of Creative Technology Limited by using a model
of Competitive Rivalry and explain how the company can use its strength to compete
Model of competitive rivalry happens when two or more firms fight with each other in
pursuit of advantages market position. It occurs when one or more competitors feel pressure or
see opportunities to improve market position. It can have a major effect on firms’ profitability, as
Starting with the launching of the multimedia revolution and its Sound Blaster sound
cards; Creative has become famous in the technology industry. Through time of development, the
company has changed itself to one of the driver in digital entertainment on the PC platform with
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products like its highly acclaimed ZEN line of digital audio players. As the 1st mover in Sound
Blaster, Creative gains above average returns; loyalty of customers who may become committed
to firm’s goods or services. Market shares can be difficult for other competitors to take during
Being as the second mover for Portable Media-Player with friendly usage interface and
WiFi, it helps Creative to avoid certain mistakes from first mover which is Apple. Apple is the
first company which introduces the iPhone and iTouch with advance applications and technology
in portable audio and video player. However, as the second mover, Creative has create a reaction
Likelihood of attack, Creative is second mover as it is unable to keep up with rivals like
Sony, Samsung and Apple but the company did retaliate quickly with advertising and technology
research. Interface rivalry action and response in which case creative is a second mover, it
product innovations through market research researches technology of players first. Tries to find
any mistakes the first mover made, avoid them and improve quality Apple didn’t find patent for
technology. It can avoid some mistakes, risks and high investments of first movers in the case of
patent, seeking apple’s mistake and learning from it. Finally, it helps to develop more efficient
processes and technologies into advertising and research. (James Hulbert 2005)
Creative is a big organization with more than five thousands employees. They have both
tangible and intangible resources to research and develop such technology products in order to
compete with other competitors. With the use of number of labs that spread around the world, it
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helps to boost the response speed of Creative to the change of the industry. Beside, it is one of
the strongest drivers within the industry. A very good example for this ability of Creative is that
through years and years, the company has developed numbers of innovative technology products
in order for them to compete and gain the market share of others competitors. The results for
such a quality dimensions in its service and product is that Creative has won two time of the
"Best of CES" Award for the audio and visual product category at the annual Consumer
Electronics Show 2004 and 2003 in Las Vegas with the highly innovative product, the Zen
Explain competitor action, tactical action, actor reputation, market dependence resource
Likelihood of response is next, type of competitor action being strategic actions receive
strategic responses, strategic actions elicit fewer total competitive responses. The time needed to
implement and assess a strategic action delays competitor’s responses. Like it took 4 years for
Tactical actions responses are taken to counter effects of tactical actions like changes in price,
competitor is likely to respond quickily to tactical actions. Creative implement price war while
Actor’s reputation actions by market leaders with strong positive reputation for risk
taking and unpredictability are less likely to gain a response from competitors. Like for Apple,
with strong reputation for risk taking, creative gives a fast response. Firm’s studies responses that
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Market dependence is extent to which a firm’s revenues or profits are derived from a
particular market. In general, firms can predict that competitors with high market dependence are
likely to respond strongly to attacks threatening their market position. Creative’s market position
being superior in technology may be threatened if it has to buy royalties from apple.
Resource availability, response requires having available resources; firms with fewer
resources are more likely to respond to tactical actions than to strategic actions. Tactical actions
require fewer resources and easier to implement. Like in the case of a tactical price war whereby
most firms like sony and samsung are easy to meet up to while unable to do strategic actions to
register for patents as need many months of research of the product. (Herbert S, Daniel J R,
Barry R A 2006)
In a fast cycle market, firm’s competitive advantages are not shielded from imitation;
imitation is often rapid and inexpensive. Competitive advantages are not sustainable, competitors
use reverse engineering to quicken imitate or improve existing products. In which case, they are
laws and patents protecting them. And Non-proprietary technology is diffused rapidly. In which
case Creative, Sony, Samsung and Apple are all in this cycle. Having fight for patent due to rapid
copying and new products from Sony and Samsung are being high in sales. (Morkel, Hubbard,
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Question 2. What is differentiation strategy and how does Creative implement their
Through the differentiation strategy, the firm produces non-standardised products for
customers who value differentiated features more than they value low costs. The success of the
firm’s differentiation strategy depends on its ability to continuously and consistent upgrade the
Creative produces new products with higher technology and has registered patents to
support it. (viewed on 22/8/2008 creative awarded patent on user interface) It has been in the
leading edge of constantly producing higher technological goods. Creative Technology Limited
is offering more than 25 different types of digital media players, which is one of the advantages
in their differentiation strategy comparing to the seven offers of Apple. Creative are touting Zen
as far more powerful player than apple’s offering, with additional functions such as FM radio and
built in mike. The result of the research shows that Creative always focuses in developing the
features of its products in order to make it different than the rest of the competitors. A very good
example is that Creative are touting Zen as far more powerful player than Apple and the other
competitor is offering, with additional functions such as FM radio and built in mike.
Beside that, Creative’s invention for user interface for portable media players enables
selection of at least one track in a portable media player as a user sequentially navigates through
a hierarchy using three or more successive screens on the display of the player. This is one of
most unique features and application that Creative implements on its MP3 players.
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Value creating strategies associated with the differentiation strategy that Creative
implemented
Value creating activities associated with the differentiation strategy (Morkel, Hubbard,
technology products. However, brand name reputation can effectively suggest an underlying
vector of differentiation. It can trigger Creative customer’s feeling of value the underlying vector
can establish and maintain the value of a brand name. It’s imperative that the underlying vector is
understood; otherwise, the company can take in itself into believing that differentiation based on
its brand name is sufficient. As for Creative they have spent millions of dollars in marketing and
building such a famous brand name within the industry. However, at this point of view, its
competitors also have such similar quality brand names which they can be used to compete with
Creative, such as: Sony walkman, Samsung MP3 and Apple iPod.
Creative has also set new audio standards with the launch of its latest Xtreme Fidelity (X-
Fi) audio platform. The cutting-edge technology has gained wide industry recognition and was
selected by Popular Science as the "Best of What's New in Home Entertainment" in 2006 for
bringing outstanding audio quality to MP3 music. Most of the MP3 players in the market, has
different unique designs, but what special the most about Creative products is that the company
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has each of their design in more different color comparing to others. This provides more choice
Like brand name, convenience is not usually a primary vector of differentiation for high-
technology products. In the PC market, Dell and Gateway enabled customers to order computers
directly to their desired configuration on loaded selected application software on the computers
before shipping them to customers. This made the purchase and setup more convenient for
customers and provided a competitive advantage to some extent. Creative has brought the
convenience into the ZEN X-Fi, where people can find it so convenience by using the new
Creative MP3 player. Equipped with wireless capability, there is also no need for messy cables
anymore as users can download and stream music from your PC to your player instantly within a
home network and enjoy in X-Fi audio quality. Convenience has a higher value in markets where
little else distinguishes Creative products to its competitor expect the Apple iTouch. However,
the applications of Creative are compactable with most of the operating systems and softwares.
Five forces that Creative has to look out in their differentiation strategy
Rivalry with existing competitors, well positioned relative to competitors because, brand
loyalty to a differentiated product tends to offset price competition. Creative’s marketing strategy
could have failed in the sense that Apple’s ipod has a better branding and differentiated on
marketing terms. However, the pricing method that Creative is having is more attractive
Bargaining power of buyers can mitigate buyer’s power by, producing well differentiated
products, reducing customer sensitivity to price increases. Creative retaliated with a technology
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patent which was effective in protecting their intellectual rights and strengthen their competitive
advantage instead of fighting a price war. (viewed on 22/8/2008 creative awarded patent on user
interface.)
Bargaining power of suppliers can mitigate supplier’s power by, absorbing price increases
due to higher margins, passing along higher supplier prices because buyers are loyal to
differentiated brand. People who like advanced technology like creative and navigation in music
Potential entrants can defend against new entrants because new products must surpass
proven products. Entrants new products must be at least equal to performance of proven
products, but offered at lower prices. Creative constantly research and push new higher
differentiated product tends to reduce customers’ testing of new products or switching brands.
Customers that are loyal to Creative due to higher technology and cheaper prices may not
Overall, Creative has been quite successful in their differentiation strategy. They have
applied the right features and innovative applications to its MP3 player. Especially for the last
test MP3 product, the company has integrated the best technology which brings convenience and
more value adds to its users. However, the strategy that they have been implementing is not
strong enough to beat its major competitors in the MP3 and portable media-player.
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Question 3. What are the advantages, benefits, and risks involved in cost
– learn new skills and technologies more quickly which help Creative being one of
– effectively leverage its core competencies while competing against its rivals
– relatively low cost (but not as low as the cost leader’s price)
There are some risks facing the company that chooses to implement an integrated
cost/leadership differentiation strategy:
- There is a possibility the company become neither the lowest cost nor the most
differentiated firm
- Becoming ‘stuck in the middle’
- Lacking the strong commitment and expertise that accompanies firms following either a
cost leadership or a differentiated strategy
- Earning below-average returns
- Competing at a disadvantage
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However, the company can mitigate the risks with some of the solutions that have been
developed through years of Creative’ expriences
Being "stuck-in-the-middle" implies that the company will not be able to manage
successfully the five competitive forces and will not achieve strategic competitiveness. In fact,
these companies can only earn average profits when industry structure is favourable or when
other companies in the industry also are "stuck-in-the-middle." Even so, the integrated strategy is
an appropriate choice for firms possessing the core competencies to produce somewhat
differentiated products at relatively low prices.
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References
1. BBC Website, 2005, “Apple Faces iPod Dispute”, viewed August 22 2008,
http://news.bbc.co.uk/2/hi/technology/4510044.stm
2. Business Week Website, 1997, The Sweet Sound of Success for Creative Technology”,
3. Business Week Website, 1999, Splendor on the Web for Creative Technology?, viewed
4. Business Week Website, 2006, “Creative Technology Takes on Apple”, viewed August 29
2008,
http://www.businessweek.com/technology/content/may2006/tc20060516_960123.htm
http://sg.creative.com/
8. Hulbert, J, 2005, “Strategic Management”, John Willey and sons: West Sussex England.
9. McGrath, Michael E., 2000, “Product Strategy for High Technology Companies:
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11. Morkel, Hubbard, Daveport, Stockport , 1999, “Strategic Management”, Prentice Hall:
Austrailia, NSW
12. Pearce and Robinson, 1997, Times Mirror Higher Education Group USA.
13. Physorg Website, 2005, “Creative Awarded Patent on User Interface”, viewed August 22
2008, www.physorg.com/news6135.html
15. The Business Times, 2008, “More Creative's ZEN X-Fi is a Winner”, Factiva, viewed
August 29 2008.
16. The Business Times, 2008, “More Device Makers Could Use Creative Sound
17. The Business Times, 2008, “More Pint-sized Videocam from Creative”, Factiva, viewed
August 29 2008.
18. The Business Times, 2008, “Streaming Music in the Palm of Your Hand”, Factiva,
19. Wheelen, Thomas L., Hunger, J. David, 2002, “Strategic Management”, Prentice Hall:
20. http://forums.macworld.com/thread/51217?tstart=0
21. http://news.techwhack.com/613-apple-creative-sony
22. http://www.iht.com/articles/2005/04/25/bloomberg/sxcreative.php
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23. http://www.openlearningworld.com/olw/courses/books/Business%20Strategies/Business
%20Strategy/Integrated%20Cost%20Leadership%20-
%20Differentiation%20Strategy.html
24. http://www.marketing-interactive.com/news/1389
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