Frameworks for Spotify PDF

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Frameworks for Spotify Tuesday, 10 November 2020

12:41 pm

External Environment • Macro-Environmental: ○ PESTEL Factors Analysis • Industry & Sector: ○ Porter's Five Forces Model ○ Industry Life Cycle • Competitors & Market: ○ Market Segment Analysis ○ Competitor Analysis The Internal Environment • Resources & Capabilities ○ VRIO Analysis ○ Porter's Value Chain ○ Dynamic Capabilities & Core Competences • Strategic Purpose & Organisational Culture: ○ Stakeholder Analysis ○ Organisational Culture & Culture Web ○ McKinsey 7s Framework • New Product Development & Business Portfolio Assessment ○ Product or Market Life Cycle ○ BCG Matrix, Composite portfolio models Porter's Five Forces (Industry) • [Definition]: The Five Porter's Five model analyses the company's economics and attractiveness within the market. It has the benefits of assessing both the competition that includes the suppliers' and consumers' bargaining power. By bargaining power of suppliers and buyers, industry rivalry among existing firm • Threat of new Entrants: ○ Low threats of new entrants ○ The majority of these streaming platforms are in the shake-out & maturit ○ [Faces threats of other companies that might emerge in the future, may Spotify]

to draw up five elements determining the level of intensity external environment and competition, as well as the internal doing so, it will elaborate on the threat of new entrants, s, and the threat of substitute services.

y stage of the lifecycle (10-15+ years of operation) take up part of the market share that is already owned by

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Spotify]. Bargaining power of suppliers ○ Has the power to bargain with record labels but they built a bad reputatio ○ Bargaining is time-consuming & costly. Bargaining power of buyers ○ Buyers = users? ○ Stakeholders owned by the mighty 3 companies + the 2 co-founders. ○ Market shares are decreasing ○ Artist's and record labels are hesitant to be associated with might corpor Industry rivalry among existing firms ○ Fierce competition, especially with Apple Music ○ Spotify has low growth and doesn’t have enough access to certain song ○ Low differentiation holistically ○ Consumer switching costs are low ○ Competitors are numerous, difficult for users to choose Threat of substitute services ○ Users can switch platform due to higher costs, less supplies of music (So ○ Risk of higher cost due to the natural process can deter users unless the Michael E. Porter, "How Competitive Forces Shape Strategy", Harvard Busine

• Industry Type Oligopoly: A few often large firms dominate an industry, with limited rivalry. • Only a handful of these platforms dominate the music streaming industry and • Industry Structure Dynamic ○ Converging: Previously separated industries began to overlap or merge in ac ○ Many of these platforms are doing Podcasts ○ Similar user segments and demographics ○ Content creators alike overlap when it comes to Podcasts, probably not Apple Music. ○ Industry Life Cycle ○ Music streaming is in its Mature stage in Western markets. ○ Hence Spotify needs to focus on increasing "lifetime value". https://musicindustryblog.wordpress.com/tag/spotify/

Competitor's Analysis • 8 Factors to consider: Scope, Objectives, Success, Commitment, Appro [S ] It' lti i l tf i f it i i i

on from copyright issues

ate companies.

s and hits.

ome artists not featured) ey adopt an adequate advertisement model ess Review, May 1979 (Vol. 57, No. 2), pp. 137–145.

limited to a few strong competitors.

tivities, technology, products, and customers

so much with lesser-known music artists when it comes to

ach, Strategy,, Position, and Competitive resources. d th i P d ti d t i b i tili

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• [Scope]: It's a multi-service platform ranging from its main music service capturing a whole new demographic of higher-income, work-force age ra • [Objectives]:Currently have cost leadership due to their freemium featu doesn't offer. ○ [Position]: They have more of a range in income demographics tha • [Competitive Resources]: Technological support is subpar, offered by t smartphones, PC/Laptop, and has an attractive and eased display. • Offers less song supplies than Apple, however, due to the their relations ○ Copyright issues is still a threshold needed to overcome. ○ 87% of content available are from the world's largest music labels • [Objectives]: Due to the music-streaming sector nearing their mature st need to venture out in another sector to maintain their momentum. ○ Possibly creating their own record label, reducing intermediaries ○ Other than podcasts, may need to research other creative outlets th • [Success]: Reputation regarding their employees & inclusion of the man results in them being explementary in company culture within the industr ○ However, their reputation of actions regarding the law, profit of thei sizable supply is controversial. Causing various artist's to boycott th ○ Regarding market share, the founders recently started to profit from ○ Spotify lay claim to 36% of the global streaming market with 286 m § In comparison to Apple Music with 18% of market shares. § YouTube Music with 6% of market share https://www.midiaresearch.com/blog/music-subscriber-market-shares-q1-2020 https://www.midiaresearch.com/blog/music-subscriber-market-shares-q1-2020

SWOT Analysis ○ These organisational resources & capabilities facilitate strategic management TOWS Analysis

e and now the emerging Podcast industry is being utilised, anges who listen while commuting. re & student membership that their high competitor, Apple, an their fierce competitors their application, automatically provided in Samsung hip with record labels outside of their shareholders.

age, they are at a threat of new entrants, substitution, and will

hey can venture to. ny nationalities, individual interest, and overall well-being, y. r content makers, and approach of cutting corners to gain a he company. m the company. llion monthly active users as of the 1st quarter of 2020.

t & planning to capitalise on available market opportunities.

Type of Competitive strategy ○ Generic competitive strategy: ○ Intensive growth strategy: Business Model Design ○ Integrates an income model & General business model that adapts to operati ○ [From a top level perspective]: Spotify Technology S.A has a platform busines ○ Exploits the advantages of network & how it effects organisational devel ○ Implements generic strategies for competitive advantage & intensive stra ○ Characteristics of these business models: ○ Network effects business model & network orchestrator business model ○ [Network effects]: refers to the positive value & benefits of each add ○ Benefit of Spotify's value chain, resources, and capabilities increas ○ [Network effects & Network Orchestrator]: Maximises user base of Spotify's generic strategy to gain competitive advantage ○ These business models depend on intensive company's growth stra ○ Freemium business model ○ Revenue based model since it defines how Spotify revenue is gene ○ Unlimited subscription business model ○ Company's generic cost leadership strategy supports this business ○ Intensive market penetration & market development strategies supp maintain the business model profitable. https://www.scribd.com/document/439216266/Spotify-Strategig-Possining-and-Product-Li

Brown, Catherine. Business Model, Generic Strategy & Growth Strategies. Ap Spotify's Product Life Cycle ○ [Argued]: Spotify is in their Rapid Growth phase due to having room to expan https://quizlet.com/ca/348994817/spotify-flash-cards/

Market Segment Analysis

ons by providing a market platform for creators. ss model (major category of business models). opment & strategic management. ategies.

ditional users (artist, content creator, or subscriber) es when more artists & consumers join the platform. music streaming & economies of scale, necessary to support ategies, attracting & retaining more artists & music consumers

rated from its user base

model by ensuring affordable & attractive subscription prices port this business model by increasing the number of users to fe-Cycle-Four-Basic-Stages

pril 12, 2019.

d and potentially might even become a record label.

○ The market for music streaming services has created a oligopoly competition ○ Market entry is low, and the existing popular companies such as Spotify & Ap accessibility. ○ Recently, many of these services are attempting to standout by investing in e such as concerts & podcasts. ○ Entering podcasts Is already an entrance to another market segment which a ○ The segment that are relevant comprises of age & income, rather than nation ○ [According to the Statista Global Consumer Survey, Oct 2020]: 18-21 ye 29.7%; while 35-44 ranks fourth in 25.3%. The less notable ages of 45-5 ○ Surprisingly, low income are the less likely to use Spotify, comprising jus majority of user demographic (40.8%), Medium income as 33%. https://www.statista.com/outlook/209/156/music-streaming/united-kingdom#market-glob

VRIO Analysis ○ ○ ○ ○

Discusses competencies with regard to resources & capabilities in the digital [Jay B Barney]: Core competencies are Valuable, Rare, Inimitable, and a reso Non-substitutability variable is used in the VRIN Framework: [Use timetable in the Appendices] ○ Spotify's competencies identified in the VRIO/VRIN analysis reflect the te ○ In the resource-based view, the company's non-core competencies are r ○ Wide market reach, Wide accessibility, and Wide reach to advertise ○ These non-core competencies provide competitive parity or temporary c to develop similar tech competencies for the value chain operations of th ○ However, a solid operational presence in major markets is a non-core or ○ Structural components correspond to the company's offices in domestic ○ Personnel for IT & creative work are organisational resources linked to S ○ However, their core-competencies don't maintain sustained competitive distribution competitors. ○ Amazon & Apple. ○ VRIO Analysis shows that the company's major market share supports n businesses & their value proposition. ○ Having achieved a large international user network, it has the privile against smaller music streaming businesses. ○ VRIO Analysis is the core competency of partnerships with device manu optimising its value chain by making the online service the default in dev ○ High brand popularity, major market share, and network effects, an capabilities that satisfy the VRIO analysis criteria for core competen

where few large companies dominate the whole industry. ple Music strive to stand out by price, features, music, xclusivity, pre-releasing new music, or offering unique content re increasingly overlapping. ality or gender. ars are 3rd in rank, 21.9%; 25-34 years old rank first by 4 (14.7%), 55-64% (8.4%). st being 26.2% of users. High income earners comprise of the alRevenue

content distribution value chain. ource or capability around how Spotify is organised [VRIO].

echnological nature of the business & its value chain. related to IT supporting music platform operations. ers are all based on the automated & online nature. ompetitive advantage because competitors posses the ability eir respective online platforms. ganisation capability linked to Spotify's corporate structure. or regional on-demand digital content markets. potify's corporate culture. advantages, especially compared to digital content

etwork effects, which is a characteristic of platform ege to enjoy a sustainable competitive advantage, especially facturers, thus strengthening their market positioning & ices like Samsung smartphones. d partnership with manufacturers are enterprise resources & ncies

capabilities that satisfy the VRIO analysis criteria for core competen ○ Core competencies determined through the VRIO Framework also satisf VRIN Analysis ○ Compared to the VRIN analysis, all of the company's VRIO resources and ca ○ For instance, Spotify's brand is an organisational resource that is non-substitu the value of a strong digital content distribution brand. ○ Major market share is a core competency included in this VRIN analysis, refe user base growth. ○ Resource-based view of Spotify indicates strategic partnerships with major de ○ Non-substitutable business capability for establishing market presence & inte ○

○ ○ ○ ○ ○

Porter's Value Chain Analysis The core competencies that satisfy the requirements of the VRIO and the VR significant impact on Spotify's value chain and competitive power. ○ The company's major market share ensures network effects to maximise ○ [Add diagram to appendices] Spotify's business model, generic strategy, and intensive growth strategies de Although manufacturers, distributors, and sellers are external parties outside IT systems & databases, but they are digital content distribution industry's val The company's VRIO & VRIN core competencies are used in the value chain vision statement, which comprise of supporting artists' livelihood & enable fan Thus, strategically developing these core organisational resources & capabilit leading streaming music service provider. Developing new core competencies can help maintain their position. https://www.rancord.org/spotify-vrin-vrio-analysis-value-chain-analysis-resource-based-vie

Porter, M. E. The Competitive Advantage: Creating and Sustaining Superio Stakeholder Analysis ○ In February 2018, Spotify filed initial public offering papers with the Securities company. ○ Listed on the New York Stock Exchange under the symbol of SPOT ○ Differs from other technology companies that it's striving to be listed directly, a companies launching IPO's beforehand. ○ Spotify has 6 shareholders: ○ Daniel Ek: Co-founder & CEO (25% of company stock) - warrants (owns ○ Martin Lorentzon: Co-founder, Director, and Former Chairman (13% stak ○ Tencent Music Entertainment: 7.5% stake due to a stock swap deal with ○ Tiger Global Management: Largest hedge funds who is an earlier investo

ncies. fy the VRIN Framework Criteria.

pabilities are also VRIN core competencies. utable because other resources or capabilities can't replace rring to network effects & value chain optimisation through evice manufacturers nsifying market penetration by attracting more subscribers.

N analysis framework are the one that have the most e the value delivered to digital content creators & consumers. etermine the activities in its value chain. of the supply chain that delivers equipment for the company's ue system. activities, which correspond to Spotify's corporate mission & s to access creative work. ies strengthens the company's competitive position as a

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r Performance. NY: Free Press, 1985.

& Exchange Commission to become a publicly traded abstaining from Wall Street underwriters just like tech

9% of the music company) ke) - warrants (12%) Spotify in 2017 or in Facebook (6 9% in stake)...