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 - – technology disruption, there is backlash against globalization, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , geopolitical disruptions, 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 -
Diverse revenue streams
– Spotify Music is present in almost all the verticals within the industry. This has provided firm in Spotify: Face the Music case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
Ability to recruit top talent
– Spotify Music is one of the leading recruiters in the industry. Managers in the Spotify: Face the Music are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Spotify Music in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Spotify Music digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spotify Music has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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.
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 -
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.
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.
Interest costs
– Compare to the competition, Spotify Music has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Spotify: Face the Music, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Spotify: Face the Music, is just above the industry average. Spotify 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.
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.
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 Spotify Music supply chain. Even after few cautionary changes mentioned in the HBR case study - Spotify: Face the Music, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Spotify Music vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Spotify Music has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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 -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Spotify Music to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spotify Music can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Spotify Music in the consumer business. Now Spotify Music can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Spotify Music to increase its market reach. Spotify Music will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Spotify Music is facing challenges because of the dominance of functional experts in the organization. Spotify: Face the Music case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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. 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.
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 -
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.
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.
Regulatory challenges
– Spotify 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.
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.
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.
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. Spotify Music can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Technology acceleration in Forth Industrial Revolution
– Spotify Music has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Spotify 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.
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 .
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.
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 .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Spotify Music business can come under increasing regulations regarding data privacy, data security, etc.
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.