Case Study Description of Pandora Radio: Fire Unprofitable Customers?
Pandora Radio is at a crossroads. Founder Tim Westergren has just been told by a well known VC to get rid of his unprofitable customers in order to get his costs down, but Westergren is not sure that such actions are consistent with his company's business model. Pandora Radio is the largest Internet music stream site, and its rapidly growing user base loves the free customizable music stream under an advertising supported model. Pandora has to pay royalties for every song streamed, and has other variable costs that scale linearly with hours consumed, but it has taken no steps to restrict the amount of usage among its heaviest and most loyal users. Can Pandora make its model work when a significant percentage of its users cause it to lose money?
Swot Analysis of "Pandora Radio: Fire Unprofitable Customers?" written by Willy Shih, Halle Tecco includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pandora Westergren facing as an external strategic factors. Some of the topics covered in Pandora Radio: Fire Unprofitable Customers? case study are - Strategic Management Strategies, Customers, Disruptive innovation, Entrepreneurial management, Growth strategy, Internet, Sales, Strategy execution, Venture capital and Technology & Operations.
Some of the macro environment factors that can be used to understand the Pandora Radio: Fire Unprofitable Customers? casestudy better are - – increasing transportation and logistics costs, wage bills are increasing, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs,
increasing commodity prices, there is backlash against globalization, etc
Introduction to SWOT Analysis of Pandora Radio: Fire Unprofitable Customers?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pandora Radio: Fire Unprofitable Customers? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pandora Westergren, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pandora Westergren 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 Pandora Radio: Fire Unprofitable Customers? can be done for the following purposes –
1. Strategic planning using facts provided in Pandora Radio: Fire Unprofitable Customers? case study
2. Improving business portfolio management of Pandora Westergren
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 Pandora Westergren
Strengths Pandora Radio: Fire Unprofitable Customers? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pandora Westergren in Pandora Radio: Fire Unprofitable Customers? Harvard Business Review case study are -
Analytics focus
– Pandora Westergren 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 Willy Shih, Halle Tecco 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.
Diverse revenue streams
– Pandora Westergren is present in almost all the verticals within the industry. This has provided firm in Pandora Radio: Fire Unprofitable Customers? 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.
High brand equity
– Pandora Westergren has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pandora Westergren to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Pandora Westergren 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 Pandora Westergren is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pandora Radio: Fire Unprofitable Customers? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Pandora Westergren in the sector have low bargaining power. Pandora Radio: Fire Unprofitable Customers? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pandora Westergren to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Pandora Westergren is one of the leading recruiters in the industry. Managers in the Pandora Radio: Fire Unprofitable Customers? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Pandora Westergren 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 Pandora Radio: Fire Unprofitable Customers? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Pandora Westergren
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pandora Westergren 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
– Pandora Westergren 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 Pandora Westergren in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Pandora Westergren 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Pandora Westergren digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pandora Westergren 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.
Successful track record of launching new products
– Pandora Westergren has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pandora Westergren 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.
Weaknesses Pandora Radio: Fire Unprofitable Customers? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pandora Radio: Fire Unprofitable Customers? are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Pandora Radio: Fire Unprofitable Customers?, is just above the industry average. Pandora Westergren 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Pandora Radio: Fire Unprofitable Customers?, in the dynamic environment Pandora Westergren has struggled to respond to the nimble upstart competition. Pandora Westergren has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Pandora Westergren, firm in the HBR case study Pandora Radio: Fire Unprofitable Customers? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Pandora Radio: Fire Unprofitable Customers?, it seems that the employees of Pandora Westergren 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.
Lack of clear differentiation of Pandora Westergren products
– To increase the profitability and margins on the products, Pandora Westergren needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Pandora Westergren 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.
Interest costs
– Compare to the competition, Pandora Westergren 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Pandora Westergren 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Pandora Radio: Fire Unprofitable Customers? 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 Pandora Westergren has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Pandora Radio: Fire Unprofitable Customers? 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 Pandora Westergren 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Pandora Westergren 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.
Opportunities Pandora Radio: Fire Unprofitable Customers? | 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 Pandora Radio: Fire Unprofitable Customers? are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pandora Westergren is facing challenges because of the dominance of functional experts in the organization. Pandora Radio: Fire Unprofitable Customers? 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.
Better consumer reach
– The expansion of the 5G network will help Pandora Westergren to increase its market reach. Pandora Westergren 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.
Building a culture of innovation
– managers at Pandora Westergren 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.
Learning at scale
– Online learning technologies has now opened space for Pandora Westergren 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.
Manufacturing automation
– Pandora Westergren 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pandora Westergren 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.
Developing new processes and practices
– Pandora Westergren 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.
Using analytics as competitive advantage
– Pandora Westergren 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 Pandora Radio: Fire Unprofitable Customers? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pandora Westergren to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pandora Westergren 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, Pandora Radio: Fire Unprofitable Customers?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Pandora Westergren 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. Pandora Westergren 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.
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. Pandora Westergren can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Pandora Westergren 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.
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 Pandora Westergren 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.
Threats Pandora Radio: Fire Unprofitable Customers? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pandora Radio: Fire Unprofitable Customers? are -
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. Pandora Westergren needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pandora Westergren with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pandora Westergren 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 Pandora Radio: Fire Unprofitable Customers? .
Regulatory challenges
– Pandora Westergren 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.
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.
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 Pandora Westergren.
Increasing wage structure of Pandora Westergren
– 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 Pandora Westergren.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pandora Westergren 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.
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 Pandora Westergren in the Technology & Operations sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Pandora Westergren 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.
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. Pandora Westergren 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pandora Radio: Fire Unprofitable Customers?, Pandora Westergren 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 .
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.
Weighted SWOT Analysis of Pandora Radio: Fire Unprofitable Customers? 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 Pandora Radio: Fire Unprofitable Customers? 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 Pandora Radio: Fire Unprofitable Customers? 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 Pandora Radio: Fire Unprofitable Customers? 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 Pandora Radio: Fire Unprofitable Customers? 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 Pandora Westergren needs to make to build a sustainable competitive advantage.
