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 - – cloud computing is disrupting traditional business models, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, wage bills are increasing, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
Ability to recruit top talent
– Pentatone Sacd is one of the leading recruiters in the industry. Managers in the SACD are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
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.
Diverse revenue streams
– Pentatone Sacd is present in almost all the verticals within the industry. This has provided firm in SACD 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
– Pentatone Sacd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pentatone Sacd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Ability to lead change in Innovation & Entrepreneurship field
– Pentatone Sacd 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 Pentatone Sacd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Superior customer experience
– The customer experience strategy of Pentatone Sacd in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses SACD | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SACD are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SACD 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 Pentatone Sacd has relatively successful track record of launching new products.
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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Pentatone Sacd 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.
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.
Slow to strategic competitive environment developments
– As SACD HBR case study mentions - Pentatone Sacd 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.
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.
Increasing silos among functional specialists
– The organizational structure of Pentatone Sacd is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Pentatone Sacd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pentatone Sacd to focus more on services rather than just following the product oriented approach.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Pentatone Sacd 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.
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 -
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.
Better consumer reach
– The expansion of the 5G network will help Pentatone Sacd to increase its market reach. Pentatone Sacd 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 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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Pentatone Sacd 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pentatone Sacd 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, SACD, 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 Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pentatone Sacd 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. Pentatone Sacd 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.
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.
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.
Using analytics as competitive advantage
– Pentatone Sacd 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 SACD - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pentatone Sacd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
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.
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.
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.
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.
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.
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 .
Regulatory challenges
– Pentatone Sacd 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 Innovation & Entrepreneurship industry regulations.
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. Pentatone Sacd needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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.
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.
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 Pentatone Sacd in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pentatone Sacd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
