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Strategic “Management in Digital Music Industry”

Undeniably, significant changes have taken place in the music industry. Perhaps, these changes can be seen as a revolution, which has been propelled by advancement in technology. Even though the invention of the compact discs brought significant changes in the music business, the introduction of digital technology has given the music industry a new look. Unlike in the past, it is now possible distribute music through the internet, thanks to the invention of digital technology. It is also worth noting that, while this technology has contributed to loss of business opportunities to some organizations, it has also enhanced new opportunities to others. Perhaps, the negatively affected organizations include record stores, who have lost their business to online music distributing companies (Tschmuck, 2006). Consequently, for the losers to remain in business, undertaking strategic changes is inevitable. As an illustration, Sonicbids Corporation will be used in this analysis, to explain the importance of undertaking strategic change programme in the music industry in response to the invention of digital technology.

Company Profile

Sonicbids Corporation is one of the leading companies in digital music distribution industry. Particularly, it is considered a Social Music Marketing stage that brings together consumers brands, bands, promoters, as well as music fans. Sonicbids Corporation was established in 2001, in Massachusetts, Boston. Actually, it was among the first companies to be established, in reaction to the invention of digital technology. Possibly, this is one of the reasons behind the rapid growth of the Company, which now supports more than 360,000 bands and approximately 27,000 promoters from more than 100 countries in various parts of the world. In addition, currently the company has more than 100 million fans. The Company deals with various products, the most common being Internet Content Provider, Information Collection & Delivery, Media, Sales Promotion Services, Advertising & Marketing Services, as well as public Relations Services. Sonicbids Corporation initiated partnership with other companies, such as Red bull, Bonnroo Music and Arts Festival, Diesel Industry, and Marriott Hotels. However, since its incorporation, various companies have also ventured into the digital music industry; the most competitive being ARTST direct.com. Capital Sports & Entertainment, LLC, and Buddy Lee Attractions, Inc (Sonicbids, 2012).

Need for strategic change

As mentioned above, significant changes have occurred in the music industry, particularly with the introduction of digital technology (Kilmer, 2010). Thus, to remain competitive, Sonicbids Corporations need to execute strategic changes, in reaction to the ever changing competitive business environment. Arguably, in this particular case, the need for implementation of strategic change programmes for Sonicbids Corporation could be best explained using porter’s five forces.

Rivalry

Although Sonicbids Corporation was among the first companies to venture into the Social Music Marketing business, the intensity of rivalry in this business has increased considerably. A number of companies have grown to be strong competitors to the Company, contributing to a decrease of its market share. Some of the strong competitors include ARTST direct.com. Capital Sports & Entertainment, LLC, and Buddy Lee Attractions, Inc (Sonicbids, 2012). There is no doubt that venturing into social music marketing industry requires high investments, hence becoming a strong entry barrier. However, the high exiting costs has also contributed to the ever increasing competition for those companies already in this business. This implies that, the opportunity cost of companies already in this industry exiting from the industry is much higher than the opportunity cost of continuing operating in the industry. As such, for a company, like Sonicbids Corporation to enhance its survival in this industry, there is need to undertake strategic change in its operations.

In order to increase or maintain its market share in this industry, there is need for the company to capitalize on its strengths in minimizing its weakness, in reaction to the increasing competitors. This does not imply that the company has failed completely in its competitive strategies. For instance, in the recent past, Sonicbids Corporation has established partnerships with other companies, both within and outside its line of operation, as a way of facilitating its grobal growth; hence improving its competitiveness (Tschmuck, 2006). However, with time, industry keeps on changing and there is need to cope with such changes.

Threat of substitutes

The products and services offered by Sonicbids Corporation face a considerably high degree of threat of substitutes. Since the beginning of the digital technology revolution, a number of companies have emerged in the music industry. In addition, those companies established long before this revolution, have also undertaken business process reengineering to cope with the changes taking place in their business environment (Mulligan, 2011). For instance, Sony, one of the leading companies in the entertainment industry, has undertaken strategic measures to ensure that its products and services embrace the growing digital technology. Based on this analysis, it is evident that Sonicbids has a lot to do regarding differentiation of its products. However, this does not imply that the company’s products are not differentiated. Actually, being among the first company to venture into the digital music technology industry, the Company has already established its reputation among the consumers and other stakeholders, giving its brand an upper hand in the market. However, strategic changes are still needed, to differentiate its products and services further, in response to the ever increasing competition (Domingo, 2012).

Threats to entry

Digital music industry requires huge amount of investments. Nevertheless, due to the high opportunity cost of investing in this industry, more companies find it worth venturing into the industry. It is evident that lately, the internet has become one of the essential tools influencing strategic global expansion in most companies, given that digital technology and the internet go hand in hand, investing in this industry at whatever cost is viable in the long-run for any company. To some extent, this increases the threats of new entry to Sonicbids Corporation. However, Sonicbids has an upper hand in countering the impacts of the new entrants, given that it is already established in the digital industry (Domingo, 2012).
The Company already has an advantage when it comes to economies of scale. This could be of greater significance to the Company in the intended strategic changes; particularly, in facilitating constant innovation in the attempt to differentiate its products from those of its existing competitors and new entrants. As the digital music industry grows, so does government regulations. This also acts as another barrier for the new entrants. However, to Sonicbids Corporation, this could be an added advantage to its strategic change policies. Given that the Company has been operating in the industry for quite a long time, it is obvious that it has taken government regulations into consideration in its business strategies. Hence, not much is needed when it comes to new government regulations, hence minimal impact is felt when implementing such changes in its business operations (Tschmuck, 2006).

Suppliers’ power

Sonicbids has suppliers from various parts of the world, where its products and services are accessible. Thus, the bargaining power of the suppliers is considerably low, reducing chances of the company suffering from any limitation of supplies. Nevertheless, as rivalry and new entrants increase, the bargaining power of suppliers also increases. An increase in competition and new entrants give the suppliers alternatives, which gives them an advantage when it comes to negotiating for their supplies. Consequently, if nothing is done to preserve its suppliers, Sonicbids is likely to lose the suppliers to its competitors and new entrants; which could be the beginning of reduction of its market share. Possibly, one of the strategic changes that the Company should focus on in the attempt to maintaining and acquiring new suppliers is to create a mutual relationship with its suppliers. For instance, the Company should consider negotiating directly with its suppliers, which will in turn, in addition to improving their relationships, ensure high quality supplies at a relatively lower cost. In the long-run, the high quality supplies obtained at low prices will allow the Company to further differentiate its products, hence improving its competitiveness.

Buyers’ power

As compared to the bargaining power of the suppliers, the buyers’ bargaining power in digital music industry is high. It is important to note that there is no cost associated with switching from one product or service to another (Tschmuck, 2006). Thus, buyers are at liberty to change from one brand to another, depending on their tastes and preferences. Thus, it is up to the players in this industry to up their game in producing better products, so as to maintain and attract new buyers. Perhaps, the ability of the buyers to easily switch from one product to another has been the most challenging for the Company to handle. Ideally, the only tool that the Company can use to maintain its customers is to continuously differentiate and innovate its products. Yet, again Sonicbids Corporation is advantaged when it comes to maintaining customers, thanks to its strong brand. Buyers tend to be inclined towards a given brand, and Sonicbids has succeeded in building its brand over the years it has been in operation. Thus, it is already a step ahead of its competitors and new entrants. Hence, the Company should be focusing on building its brand continuously, as a strategic change in connection to increasing its customer base (Domingo, 2012).

External Environment

In addition to the above analysis of the need for Sonicbids’ needs for strategic change, there is also need for the company to implement various changes, so as to realign itself to the needs of the external environment. Undeniably, there are various tools that can be applied in evaluating the need for change in connection to the external environment of the Company. Nevertheless, in this case, P.E.S.T analysis will be the most appropriate. This particularly includes the analysis of factors that affect business operations, but which are beyond the control of the company.

Political factors

Ideally, the government has powers to regulate the economy in general, to achieve the desired economic performance. Thus, companies are affected in one way or the other, once any changes are made in government regulations in a given industry. For instance, in the recent past global financial crisis, the United States government took strategic measures for reviving its economy. Such measure included stern conditions on how large companies managed their finances. Although such regulations were not directly imposed on Sonicbids, their impacts were felt within the Company, which forced certain changes to accommodate such impacts. Nevertheless, the same impacts were also felt by Sonicbids’ competitors. This implies that Sonicbids must come up with ideas on how to outdo its competitors in order to survive in the industry. Some of the government policies likely to affect Sonicbids include minimum wage for the workforce, the amount of tax to be paid, as well as the amount of VAT to be remitted by companies. These factors must be evaluated regularly to determine how they are likely to affect the performance of the company in the future (Wikstsrom, 2010).

Economic factors

Economic factors are closely connected to political factors on how they influence strategic changes in an organization. However, economic factors tend to largely focus on the performance of the economy and how such performance affects the purchasing power of the consumers. For instance, in the recent global financial crisis the economy of, not only the United States, but also other countries in various parts of the world, shrunk. This brought significant changes, the most common being increase in interest rates. This in turn affected the purchasing power of the consumers, implying that the performance of Sonicbids’ products in the market declined. This also contributed to changes in terms of tax contributions to the government from companies. Consequently, Sonicbids must take into account such changes, in monitoring and managing its performance in general. In addition, given that the Company is now available in different countries all over the world, the impacts of such changes are likely to vary from one country to another. To some degree, this will influence on how the Company will price its products, and investment opportunities to be given priorities (Mulligan, 2011).

Social factors

To some extent, the general performance of any given company largely depends on how it is perceived in a sociological context. Arguably, Sonicbids has done relatively well socially, thanks to the high quality products and services it provides. Nevertheless, the Company operates in a very volatile environment, given that technology keeps on changing. Thus, the Company should ensure that vital changes are incorporated in its business activities, for it to stay ahead of technology. Besides, the Company should ensure that all their activities are appealing to the society, because that will determine the future of the company. In this case, Sonicbids should ensure that it produces products that people will be proud to be associated with in the society. Although customers have various tastes and preferences, it is upon the Company to improve on their ideas on how the customers’ needs will be accommodated in their products and services (Wikstsrom, 2010).

Technological factors

Possibly, technological factors are the most significant for Sonicbids, given that all its activities surrounds the use of technology. Its productivity largely depends on productivity. In fact, almost all its operations are conducted through the internet, which is the main tool of connecting the buyers, sellers as well as other stakeholders. Therefore, investment in modern technology and updating the same from time to time accounts for a great percentage of its resources. The Company should make research a continuous process, as this will help it to update its technological requirements.
As a way of differentiating its products, Sonicbids, should for instance ensure that customers can easily navigate through their websites in the process of window shopping. Besides, it should also ensure that the online payment system is easy and safe, to avoid financial losses. A continuous investment on new technology will be advantageous to the Company in various ways. First, it will contribute to reduction of costs. Lately, online marketing is among the most preferred methods of business marketing. It not only accesses a large number of potential customers, but it is also relatively cheaper as compared to other marketing alternatives. Secondly, technology leads to better quality products. This is as a result of the ongoing research on how the products can be produced at a lower cost, without compromising on the quality. Lastly, investment in technology is the key to innovation. With up-to-date technology, Sonicbids stands a better chance of producing new products within its line of operation (Kilmer, 2010).

Outcome of the Strategic Change Programme

The main objective of undertaking strategic changes as discussed above is to give Sonicbids a better chance of improving its competitiveness with the industry. In this case, the possible outcomes of the strategic change programme can be evaluated based on the SWOT analysis principle. This will particularly concentrate on how the Company is likely to capitalize on its strengths to improve on its weaknesses, as well as how the opportunities arising from the strategic change programme would help the Company in dealing with the threats it faces.

Strengths

One of the strengths of Sonicbids is an already established brand. As a result, the Company has established a fairly large customer base as compared to its competitors. This implies that, the impacts of the ever increasing competition would remain marginal as compared to the extent its competitors are affected. Therefore, focusing on building its brand will differentiate its products further within the market, hence enhancing its continued growth. The Company’s second strength is associated with its economies of scale. As such it has an advantage when it comes to investing in large projects, such as acquiring new technology, which would increase efficiency in the company. In fact, it is as a result of its economies of scale, that the Company has managed to venture into new market segments in various countries throughout the world. Last, the company has managed to attract high talented and innovative workforce, since its incorporation. Given that it was among the first companies venturing into digital music industry, the management of the Company has managed to learn through experience on how to manage the operations of the Company for effective performances. Understanding the needs of the above discussed strategic changes will keep the Company at a better position of improving its strengths, hence high competitiveness (Kilmer, 2010).

Weakness

Despite the above mentioned strengths, Sonicbids has been facing a number of weaknesses. For instance, the Company offers a variety of products, as one of the strategies of diversifying its business. However, some of the products provided are not productive as such, contributing to a decline in its overall performance. In addition, as competition increases, sales of products tend to slow down. This is an indicator that strategic measures are needed to deal with this problem. Arguably, by focusing on implementing the above discussed strategic changes, the Company will be in a better position in dealing with these weaknesses.

Opportunities

One of the most significant opportunities for Sonicbids Corporation is venturing into new markets, which still remain untapped. There is no doubt that the digital music industry is yet to be flooded. There are various markets which remain untapped, and venturing into such market will be a great opportunity for this Company. In addition, the Company also has an opportunity of producing new products. It is well endowed in terms of resources, both human and financial, which could be invested in innovation projects. Lastly, the Company has a better chance of expanding its current market share, by investing and improving on its marketing strategies. All these opportunities are likely to be beneficial to the Company; it only focuses on implementing the above discussed strategic changes (Kilmer, 2010).

Threats

Competition is the main threat currently facing Sonicbids. Besides the previously mentioned competitors, within the context of digital music industry, Sonicbids also faces competition from such companies as: Bandcamp, RDIO, Soundloud, and Ticketley. However, based on the above discussed strategic change programme, Sonicbids will stand a better chance of remaining at the top of competition in the digital music industry.

Conclusion

As mentioned above, a revolution has occurred within the music industry, particularly with the introduction of digital technology. While the digital technology has opened new business opportunities, it has also been the main cause of business loss; particularly for the players who has failed to embrace this new technology. In this analysis, Sonicbids Corporation, one of the first companies to venture into digital music industry, has been used to…

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