Naxos: Changing the World of Classical Music SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Naxos: Changing the World of Classical Music
Founded in 1987, Naxos had become the world's largest classical music label. It had reached this lofty position by being an innovative cost leader. The company's chairman, Klaus Heymann, had been quick to take advantage of a drop in the manufacturing price of CDs and the fall of the iron curtain. Recording with artists and orchestras in eastern Europe and paying musicians one-time fees instead of royalties, Naxos had developed a unique and effective business model. The company had also been a first mover in the web-based distribution of music. Having exhibited a knack for making the right move at the right time, what should Naxos do to sustain its success in the decade to come? This case was used in the Second McKinsey/HSBC Business Case Competition.
Swot Analysis of "Naxos: Changing the World of Classical Music" written by Marcus Schuetz, Grace Loo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Naxos Music facing as an external strategic factors. Some of the topics covered in Naxos: Changing the World of Classical Music case study are - Strategic Management Strategies, Disruptive innovation, Growth strategy, Internet, Marketing and Technology & Operations.
Some of the macro environment factors that can be used to understand the Naxos: Changing the World of Classical Music casestudy better are - – increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, etc
Introduction to SWOT Analysis of Naxos: Changing the World of Classical Music
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Naxos: Changing the World of Classical Music case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Naxos Music, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Naxos 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 Naxos: Changing the World of Classical Music can be done for the following purposes –
1. Strategic planning using facts provided in Naxos: Changing the World of Classical Music case study
2. Improving business portfolio management of Naxos Music
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Naxos Music
Strengths Naxos: Changing the World of Classical Music | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Naxos Music in Naxos: Changing the World of Classical Music Harvard Business Review case study are -
Successful track record of launching new products
– Naxos Music has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Naxos Music has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Technology & Operations industry
– Naxos: Changing the World of Classical Music firm has clearly differentiated products in the market place. This has enabled Naxos Music to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Naxos Music to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Naxos: Changing the World of Classical 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.
High brand equity
– Naxos Music has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Naxos Music to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Naxos 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 Naxos: Changing the World of Classical Music HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Naxos Music is present in almost all the verticals within the industry. This has provided firm in Naxos: Changing the World of Classical 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.
Training and development
– Naxos Music has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Naxos: Changing the World of Classical Music Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Naxos Music is one of the most innovative firm in sector. Manager in Naxos: Changing the World of Classical Music Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Naxos Music digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Naxos 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.
Cross disciplinary teams
– Horizontal connected teams at the Naxos 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 Naxos Music
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Naxos Music does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Technology & Operations field
– Naxos 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 Naxos Music in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Naxos: Changing the World of Classical Music | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Naxos: Changing the World of Classical Music are -
Lack of clear differentiation of Naxos Music products
– To increase the profitability and margins on the products, Naxos Music needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Naxos: Changing the World of Classical Music 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 Naxos Music 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Naxos Music, firm in the HBR case study Naxos: Changing the World of Classical Music needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Naxos 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. Naxos 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Naxos: Changing the World of Classical Music, is just above the industry average. Naxos 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Naxos: Changing the World of Classical Music 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 Naxos Music has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Marcus Schuetz, Grace Loo suggests that, Naxos 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Naxos Music is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Naxos: Changing the World of Classical 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Naxos 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.
Interest costs
– Compare to the competition, Naxos 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.
Aligning sales with marketing
– It come across in the case study Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical Music can leverage the sales team experience to cultivate customer relationships as Naxos Music is planning to shift buying processes online.
Opportunities Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical Music are -
Leveraging digital technologies
– Naxos 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.
Building a culture of innovation
– managers at Naxos Music can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Naxos 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.
Manufacturing automation
– Naxos Music can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Naxos Music can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Naxos Music can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Developing new processes and practices
– Naxos Music can develop new processes and procedures in Technology & Operations 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Naxos Music is facing challenges because of the dominance of functional experts in the organization. Naxos: Changing the World of Classical 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Naxos Music can use these opportunities to build new business models that can help the communities that Naxos Music operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Naxos 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 Naxos 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.
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 Naxos 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.
Using analytics as competitive advantage
– Naxos 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 Naxos: Changing the World of Classical Music - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Naxos Music to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Naxos 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 Naxos: Changing the World of Classical Music External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Naxos: Changing the World of Classical Music are -
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 Naxos Music in the Technology & Operations sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Naxos 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.
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. Naxos Music needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Naxos: Changing the World of Classical Music, Naxos 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 Technology & Operations .
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.
Regulatory challenges
– Naxos 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 Technology & Operations industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Naxos 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 Naxos: Changing the World of Classical Music .
Technology acceleration in Forth Industrial Revolution
– Naxos Music has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Naxos Music needs to keep up with the evolution of technology in the Technology & Operations 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.
Consumer confidence and its impact on Naxos 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Naxos Music with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Naxos 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Naxos Music in the Technology & Operations industry. The Technology & Operations 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.
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 Naxos Music business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical 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 Naxos: Changing the World of Classical 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 Naxos Music needs to make to build a sustainable competitive advantage.
