Giel Bessels is one of the three founders of a Dutch classical music record label called PentaTone Music BV (PentaTone), which releases all of its recordings on a high-resolution audio format called Super Audio Compact Disc (SACD). Now a decade old, PentaTone has survived the commercial failure of the SACD's launch in 1999 and the adverse market characterized by a continually shrinking demand for classical music recordings. However, the founders wish to build their company further and know that they must stimulate demand for their products so they can finance further recordings. Bessels and his team recognize the unique difficulties of educating consumers about the superior quality of high-resolution, surround-sound classical music on SACD, which needs to be heard to be fully appreciated. The case invites students to think creatively about alternative ways of growing and protecting PentaTone's business, including novel uses of social media and possible expansion into China. The case also illustrates a relatively unusual motive for new venture creation, which views a business as an asset to be built up to provide a future capital gain through a trade sale rather than as a vehicle to generate a stream of current and ongoing dividends (incomes).
Swot Analysis of "SACD" written by Simon Parker includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pentatone Sacd facing as an external strategic factors. Some of the topics covered in SACD case study are - Strategic Management Strategies, Entrepreneurship, Financial management, International business and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the SACD casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing energy prices, cloud computing is disrupting traditional business models, geopolitical disruptions, wage bills are increasing,
increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SACD case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pentatone Sacd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pentatone Sacd 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 SACD can be done for the following purposes –
1. Strategic planning using facts provided in SACD case study
2. Improving business portfolio management of Pentatone Sacd
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pentatone Sacd
Strengths SACD | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pentatone Sacd in SACD Harvard Business Review case study are -
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– SACD firm has clearly differentiated products in the market place. This has enabled Pentatone Sacd to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Pentatone Sacd to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the SACD 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.
Organizational Resilience of Pentatone Sacd
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pentatone Sacd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Pentatone Sacd 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 Pentatone Sacd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SACD Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Pentatone Sacd 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 Simon Parker 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.
Low bargaining power of suppliers
– Suppliers of Pentatone Sacd in the sector have low bargaining power. SACD has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pentatone Sacd to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Pentatone Sacd 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.
Training and development
– Pentatone Sacd has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SACD 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
– Pentatone Sacd is one of the most innovative firm in sector. Manager in SACD Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Pentatone Sacd 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 SACD HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Pentatone Sacd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pentatone Sacd 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 Pentatone Sacd are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses SACD | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SACD are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pentatone Sacd is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study SACD can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Pentatone Sacd, firm in the HBR case study SACD needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study SACD 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 Pentatone Sacd 's lucrative customers.
Products dominated business model
– Even though Pentatone Sacd has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - SACD should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study SACD 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 SACD can leverage the sales team experience to cultivate customer relationships as Pentatone Sacd 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 Pentatone Sacd supply chain. Even after few cautionary changes mentioned in the HBR case study - SACD, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pentatone Sacd vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Pentatone Sacd 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. Pentatone Sacd 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.
No frontier risks strategy
– After analyzing the HBR case study SACD, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Capital Spending Reduction
– Even during the low interest decade, Pentatone Sacd 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.
Interest costs
– Compare to the competition, Pentatone Sacd 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SACD, in the dynamic environment Pentatone Sacd has struggled to respond to the nimble upstart competition. Pentatone Sacd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities SACD | 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 SACD are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Pentatone Sacd 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.
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 Pentatone Sacd 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.
Developing new processes and practices
– Pentatone Sacd can develop new processes and procedures in Innovation & Entrepreneurship 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.
Leveraging digital technologies
– Pentatone Sacd 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pentatone Sacd 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 Pentatone Sacd to hire the very best people irrespective of their geographical location.
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. Pentatone Sacd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Pentatone Sacd 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pentatone Sacd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Manufacturing automation
– Pentatone Sacd can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Building a culture of innovation
– managers at Pentatone Sacd 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 Innovation & Entrepreneurship segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pentatone Sacd is facing challenges because of the dominance of functional experts in the organization. SACD 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, Pentatone Sacd can use these opportunities to build new business models that can help the communities that Pentatone Sacd operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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 Pentatone Sacd in the consumer business. Now Pentatone Sacd can target international markets with far fewer capital restrictions requirements than the existing system.
Threats SACD External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SACD are -
Environmental challenges
– Pentatone Sacd 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. Pentatone Sacd can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Technology acceleration in Forth Industrial Revolution
– Pentatone Sacd has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Pentatone Sacd needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pentatone Sacd 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 SACD .
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 Pentatone Sacd business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Pentatone Sacd 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pentatone Sacd in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Stagnating economy with rate increase
– Pentatone Sacd can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study SACD, Pentatone Sacd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
High dependence on third party suppliers
– Pentatone Sacd 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pentatone Sacd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Pentatone Sacd is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Pentatone Sacd 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.
Weighted SWOT Analysis of SACD 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 SACD 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 SACD 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 SACD 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 SACD 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 Pentatone Sacd needs to make to build a sustainable competitive advantage.