Spotify: Face the Music (update 2018) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Spotify: Face the Music (update 2018)
Spotify reached $3 billion in revenues in 2016, amid a booming music-streaming market that now made up 51% of the U.S. music industry's total revenues. Finally the industry had embraced digitization and was now seeing two-digit growth for the first time in decades. However, that growth had an Achilles' heel. Spotify itself was staring at an operating loss of $350 million, having never been able to post a profit in all its years of existence. Now, the company was starting a round of negotiations with the major labels in order to get a new licensing deal that would help improve the company's numbers. The case looks in detail at both the history of the digitization of the music industry, and the history of Spotify itself, presenting a snapshot of the state of the industry at the time these negotiations were taking place. What are the alternatives for Spotify? Would a deal with the labels be enough to make it profitable? Does the company - and the industry itself - have a positive future?
Swot Analysis of "Spotify: Face the Music (update 2018)" written by Govert Vroom, Isaac Sastre 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 (update 2018) case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Spotify: Face the Music (update 2018) casestudy better are - – wage bills are increasing, there is backlash against globalization, increasing transportation and logistics costs, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion,
digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Spotify: Face the Music (update 2018)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Spotify: Face the Music (update 2018) 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 (update 2018) can be done for the following purposes –
1. Strategic planning using facts provided in Spotify: Face the Music (update 2018) case study
2. Improving business portfolio management of Spotify Music
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Spotify Music
Strengths Spotify: Face the Music (update 2018) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spotify Music in Spotify: Face the Music (update 2018) Harvard Business Review case study are -
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.
Diverse revenue streams
– Spotify Music is present in almost all the verticals within the industry. This has provided firm in Spotify: Face the Music (update 2018) 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.
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 Govert Vroom, Isaac Sastre 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 Leadership & Managing People 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.
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.
Learning organization
- Spotify Music is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Spotify Music is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Spotify: Face the Music (update 2018) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Spotify Music has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Spotify: Face the Music (update 2018) 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.
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.
Innovation driven organization
– Spotify Music is one of the most innovative firm in sector. Manager in Spotify: Face the Music (update 2018) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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 (update 2018) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Spotify: Face the Music (update 2018) 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 Leadership & Managing People industry. The sustainable margins have also helped Spotify Music to invest into research and development (R&D) and innovation.
Weaknesses Spotify: Face the Music (update 2018) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spotify: Face the Music (update 2018) are -
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.
Slow to strategic competitive environment developments
– As Spotify: Face the Music (update 2018) HBR case study mentions - Spotify Music takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Spotify: Face the Music (update 2018), 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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Spotify 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.
Aligning sales with marketing
– It come across in the case study Spotify: Face the Music (update 2018) 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 (update 2018) 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 (update 2018) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Spotify Music is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Spotify Music needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Spotify Music to focus more on services rather than just following the product oriented approach.
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 (update 2018), 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.
Opportunities Spotify: Face the Music (update 2018) | 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 (update 2018) are -
Developing new processes and practices
– Spotify Music can develop new processes and procedures in Leadership & Managing People 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.
Manufacturing automation
– Spotify Music can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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 (update 2018) 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.
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 (update 2018) - 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.
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.
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 (update 2018), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 (update 2018) case study. Spotify Music can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 (update 2018) 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, 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 Leadership & Managing People sector.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Spotify Music can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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 Leadership & Managing People segment, and it will provide faster access to the consumers.
Threats Spotify: Face the Music (update 2018) 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 (update 2018) 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 Spotify Music in the Leadership & Managing People 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.
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.
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.
Easy access to finance
– Easy access to finance in Leadership & Managing People 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.
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 Leadership & Managing People industry regulations.
Shortening product life cycle
– it is one of the major threat that Spotify Music is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Leadership & Managing People industry.
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 Leadership & Managing People industry. The Leadership & Managing People 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.
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.
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 (update 2018), 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 Leadership & Managing People .
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.
Weighted SWOT Analysis of Spotify: Face the Music (update 2018) 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 (update 2018) 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 (update 2018) 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 (update 2018) 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 (update 2018) 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.
