Spotify: Face the Music SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Spotify: Face the Music
The case describes the business model of Spotify, setting it against the backdrop of a music industry that has faced steep revenue declines since the advent of digital formats in the late 1990s and the rise of illegal file sharing. The case also presents the competition Spotify is facing from the likes of Pandora, Google and Apple and eventually poses the question of whether Spotify has a viable long-term business model despite explosive user and revenue growth as of 2014. The case also considers whether Spotify's model could eventually return the industry to a path of global growth, as has occurred in some of the markets the company has entered.
Swot Analysis of "Spotify: Face the Music" written by Isaac Sastre, Govert Vroom includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Spotify Music facing as an external strategic factors. Some of the topics covered in Spotify: Face the Music case study are - Strategic Management Strategies, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Spotify: Face the Music casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, increasing energy prices, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, challanges to central banks by blockchain based private currencies,
technology disruption, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Spotify: Face the Music
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Spotify: Face the Music case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spotify Music, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spotify 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 Spotify: Face the Music can be done for the following purposes –
1. Strategic planning using facts provided in Spotify: Face the Music case study
2. Improving business portfolio management of Spotify 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 Spotify Music
Strengths Spotify: Face the Music | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spotify Music in Spotify: Face the Music Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– Spotify: Face the Music firm has clearly differentiated products in the market place. This has enabled Spotify Music to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Spotify Music to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Spotify 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.
High brand equity
– Spotify Music has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Spotify Music to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Spotify Music in the sector have low bargaining power. Spotify: Face the Music has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Spotify Music to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Spotify: Face the Music 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.
Strong track record of project management
– Spotify 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.
Analytics focus
– Spotify 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 Isaac Sastre, Govert Vroom 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 Spotify Music
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Spotify Music does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Strategy & Execution field
– Spotify Music is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Spotify Music in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Spotify Music has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Spotify: Face the Music HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Spotify Music has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Spotify: Face the Music - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Spotify 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.
Weaknesses Spotify: Face the Music | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spotify: Face the Music are -
Slow decision making process
– As mentioned earlier in the report, Spotify Music has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Spotify Music even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Spotify Music products
– To increase the profitability and margins on the products, Spotify Music needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Spotify Music has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Spotify: Face the Music should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Spotify: Face the Music, it seems that the employees of Spotify Music don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Spotify Music, firm in the HBR case study Spotify: Face the Music needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Spotify: Face the Music that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Spotify: Face the Music can leverage the sales team experience to cultivate customer relationships as Spotify Music is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Spotify Music is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Spotify: Face the Music 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 bargaining power of channel partners
– Because of the regulatory requirements, Isaac Sastre, Govert Vroom suggests that, Spotify 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.
Capital Spending Reduction
– Even during the low interest decade, Spotify Music has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Need for greater diversity
– Spotify 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Spotify: Face the Music, in the dynamic environment Spotify Music has struggled to respond to the nimble upstart competition. Spotify Music has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Spotify: Face the Music | 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 Spotify: Face the Music are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Spotify 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 Spotify Music to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Spotify Music can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Spotify: Face the Music 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.
Leveraging digital technologies
– Spotify 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.
Creating value in data economy
– The success of analytics program of Spotify Music has opened avenues for new revenue streams for the organization in the industry. This can help Spotify Music to build a more holistic ecosystem as suggested in the Spotify: Face the Music case study. Spotify Music can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Spotify 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 Spotify: Face the Music - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spotify Music to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Spotify Music can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Spotify Music can use these opportunities to build new business models that can help the communities that Spotify Music operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Spotify Music can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Spotify: Face the Music, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Spotify 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.
Learning at scale
– Online learning technologies has now opened space for Spotify 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.
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. Spotify Music can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spotify 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
– Spotify 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.
Threats Spotify: Face the Music External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Spotify: Face the Music are -
Increasing wage structure of Spotify 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 Spotify Music.
Consumer confidence and its impact on Spotify 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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Spotify Music in the Strategy & Execution sector and impact the bottomline of the organization.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Spotify Music.
Stagnating economy with rate increase
– Spotify Music can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Spotify: Face the Music, Spotify Music may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Spotify 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spotify 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 Spotify: Face the Music .
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. Spotify 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
– Spotify 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.
Environmental challenges
– Spotify Music needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Spotify Music can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Weighted SWOT Analysis of Spotify: Face the Music 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 Spotify: Face the Music 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 Spotify: Face the Music 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 Spotify: Face the Music 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 Spotify: Face the Music 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 Spotify Music needs to make to build a sustainable competitive advantage.