With CDnow's acquisition of N2K's Music Boulevard web site, this case deals with capturing value in the music industry with online sales. CDnow has the advantage of being one of the exclusive music online retailers on AOL but faces fierce competition from Amazon.com. CDnow went through formal proceedings with Columbia House (Sony) and is now part of a border battle between standards for distributing music over the Internet.
Authors :: Stephen P. Bradley, Howard Firestone Reitz, Christina Akers
Swot Analysis of "CDnow (A)" written by Stephen P. Bradley, Howard Firestone Reitz, Christina Akers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cdnow Music facing as an external strategic factors. Some of the topics covered in CDnow (A) case study are - Strategic Management Strategies, Internet, Marketing, Mergers & acquisitions and Strategy & Execution.
Some of the macro environment factors that can be used to understand the CDnow (A) casestudy better are - – there is backlash against globalization, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in CDnow (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cdnow Music, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cdnow Music operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of CDnow (A) can be done for the following purposes –
1. Strategic planning using facts provided in CDnow (A) case study
2. Improving business portfolio management of Cdnow Music
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cdnow Music
Strengths CDnow (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cdnow Music in CDnow (A) Harvard Business Review case study are -
Ability to recruit top talent
– Cdnow Music is one of the leading recruiters in the industry. Managers in the CDnow (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Cdnow Music are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Learning organization
- Cdnow Music is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Cdnow Music is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in CDnow (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Cdnow Music has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Cdnow Music is one of the most innovative firm in sector. Manager in CDnow (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Cdnow Music is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the CDnow (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Cdnow Music is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Stephen P. Bradley, Howard Firestone Reitz, Christina Akers can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Cdnow Music
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cdnow Music does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Cdnow Music has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cdnow Music to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Strategy & Execution industry
– CDnow (A) firm has clearly differentiated products in the market place. This has enabled Cdnow Music to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Cdnow Music to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Cdnow Music in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses CDnow (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CDnow (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Stephen P. Bradley, Howard Firestone Reitz, Christina Akers suggests that, Cdnow Music is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study CDnow (A), is just above the industry average. Cdnow Music needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Cdnow Music needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cdnow Music is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study CDnow (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study CDnow (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cdnow Music 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Cdnow Music has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the CDnow (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Cdnow Music has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study CDnow (A), in the dynamic environment Cdnow Music has struggled to respond to the nimble upstart competition. Cdnow Music has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Cdnow Music supply chain. Even after few cautionary changes mentioned in the HBR case study - CDnow (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cdnow Music vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Cdnow Music has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As CDnow (A) HBR case study mentions - Cdnow Music takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities CDnow (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study CDnow (A) are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cdnow Music can use these opportunities to build new business models that can help the communities that Cdnow Music operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cdnow Music can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Cdnow Music to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Cdnow Music can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. CDnow (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cdnow Music can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Cdnow Music can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cdnow Music in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Loyalty marketing
– Cdnow Music has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Cdnow Music can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Cdnow Music can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Cdnow Music has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study CDnow (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cdnow Music to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Cdnow Music can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cdnow Music to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Cdnow Music to hire the very best people irrespective of their geographical location.
Threats CDnow (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study CDnow (A) are -
Increasing wage structure of Cdnow Music
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Cdnow Music.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cdnow Music can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Cdnow Music has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Cdnow Music needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cdnow Music in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cdnow Music can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study CDnow (A) .
Regulatory challenges
– Cdnow Music needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Shortening product life cycle
– it is one of the major threat that Cdnow Music is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Cdnow Music will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Cdnow Music high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Cdnow Music demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Cdnow Music needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of CDnow (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study CDnow (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study CDnow (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study CDnow (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of CDnow (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Cdnow Music needs to make to build a sustainable competitive advantage.