The online music market is a highly competitive market which has exploded with a large number of competitors in the recent years. Players such as tunes, Anapest and Amazonian dominate this market with revenues being made by all players in the market exceeding US$4. 2 billion In 2009 (http://mum. If. Org/content/library/ ADMIRED. PDF). The online digital music download market currently consist of 400 legal music services engaged In providing 260 types of products which Include music, videos, moonstones, rhinestones, audio tracks, etc.
The industry is pushed into more intention and the potential for new entrants are increased by the current trends in the market which includes higher consumer purchases of music online, faster and wider access to internet around the world and the increased ability to download and listen to music on-the-go with the developments In the mobile Industry and mobile connections. MI music, otherwise known as Electric & Musical Industries was established in 1931 through a merger between Columbia Gramophone company and Gramophone company.
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It is the fourth-largest business group and family of record labels in the oral and also owns MI music publishing which is their publishing arm. The main competitors for MI in the Digital music download sphere Include brands such as Anapest, Tunes. Amazon’s which are more prominent In the market presently. But it is accepted industry-wide that MI has the largest number of popular music artists under its logo and has the largest database of music of all record labels.
The following analysis attempts to identify the major forces operating in the market for Digital music downloads and alms at making recommendations for MI to achieve growth In the future. The marketing planning process must begin with the environmental analysis. It is the process through which a marketer develops his/her understanding about the factors affecting the business as a whole and ultimately decides which decisions must be taken In order to ensure that the organization Is moving towards achieving Its specified goals and objectives.
It is defined by Brown and Whiner (1985) as “a kind of radar to scan the world systematically and signal the new, the unexpected, the major and the minor”. The environmental scanning process involves understanding factors In 3 environments which are known as MACRO, which Includes forces In the wider and Legal) factors and MICRO, which involve forces operating in the closer market including Industry Rivals, Suppliers, Buyers, Substitutes & New entrants and finally the Internal environment which involves considerations of SOOT. He environmental scanning process is very important in terms of strategy development as it paves the foundation for the company to build & determine its strategy. Without undertaking the environmental scanning, the organization will be blind in terms of what is expected of it and where it should direct its activities. By undertaking Micro environmental analysis, a company is able to identify a wide range of indirect and direct effects on the market such as political environment, the economy, the technological developments and new trends developing within the society and changes to ways of living.
In addition to that, Macro environmental analysis is beneficial in terms of analyzing the activities of competitors and the effect on the organization, development of substitutes which may replace the company’s products in terms of satisfying consumer needs and also the threat of new enterprises invading the market and the barriers to entry which make the entry an uneasy task.
Undertaking these analyses is of utmost importance as it enables the company to identify the relative strengths and weaknesses of the company and compare them with the opportunities and threats in the market to develop a sustainable marketing effort which is aimed at exploiting those opportunities while minimizing the harmful effects of the threats. It is therefore included in the strategic marketing planning process (Miles, 2003 & asker, 2008) as follows; Situational Analysis Formulation of Objectives Strategy Formulation Tactical Considerations Implementation Control Figure 1: Strategic marketing planning process
In summarizing it can be said that environmental scanning is important to the marketing planners in terms of assisting in formulation of objectives which in turn forms the basis for strategy formulation for the future. ENVIRONMENTAL ANALYSIS preceded by an environmental analysis which will assist in identifying the forces operating in the environment and help in developing objectives for the future. ) Macro Environmental Analysis Macro environmental analysis helps marketing planners in identifying the factors Inch affect the industry as a whole, in this case the Music industry which will create industrial breakpoints leading to opportunities and threats for the existing players in the market including MI. The analysis takes into consideration the Political, Economic, Social, Technological, Ecological and Legal environments and the changes of which needs to be taken into consideration while developing strategies. Political In 2010, the UK political environment became volatile due to the General Election and the overturning of the Labor government which was in power for the best part of the last decade. With a hung parliament in sight the Conservatives and Liberal Democrats formed a coalition to gain the majority power in the parliament. With a high number of changes to existing policies expected to be made by the coalition Inch could include changes to tax structures, public expenditure, new laws, etc. , it can be said the future for business is unclear and yet to be decided.
But with successful relations being made in the coalition, the stability of the new government can be said to be positive which results in less risk to business. Ere above changes in the political environment, although is said to be low in its overall effect to MI, can result in opening of new paths for development and to exploit new opportunities. – Economic Ere I-J economy is showing slow and steady recovery from the recent global economic downturn but the progress it has made when compared to other superpowers such as USA and Japan can be said to be slow.
The inflation rate has increased to similar moderate levels which was present in April 2008 (http:// which could lead to positive effects as a result of the “Dobbin Effect” (Dobbin, 1958) which states that moderate levels of inflation leads to higher investments due to falling value of money which leads to faster economic growth (UK GAP increased by 0. 3% according to http:// The overall positivist in the market after the recession can assist the music industry in expanding its operations to new areas and with the increased investor confidence, MI can expect to see new competitors emerging in the market.
Inch affects expendable income resulting in more purchases from consumers. This is DOD news for the music industry as extra expendable income from consumers will lead to increase in expenditure on secondary needs such as entertainment. – Social Ere recent trends in the market highlight consumer convenience which focuses on fewer visits to the shops and more purchases of products over the internet. Therefore downloading music through online shops has increased massively and it has also led to significant cost reductions to distributors.
The music industry is forced to react to this trend and has been concentrating on the overall website designs and attractiveness, ease of use, downloading speeds, delivery methods for albums and placement on search engines. Having services excel in those areas can nowadays lead to success in business. It has resulted in fall in prices of music albums fall rapidly and less revenues for the music producers but on the other-hand it can offer call based profits as the digital music market is rapidly growing.
It is also important to create and maintain online presence in terms of online advertising, viral marketing, social networking and featuring in blobs and forums, etc. N order to be successful in today’s business. It is of utmost importance as online presence is a major factor in the purchase decisions of today’s young generation Inch form a large part of the target audience for music. Ninth increasing road taxes and congestion charges, people increasingly prefer to take public transport instead of driving to work. This can provide an opportunity to remote music as a way to ‘kill time’ between home and work.
And with increased stress present in the working environments, people are in search for more ways to reduce stress. It especially leads to music as a way of reducing stress which creates opportunities for the players in the music industry to cater to the demand of the older, working population. – Technological Piracy is becoming a larger threat to the music industry as a whole. Even with patents and copyright laws being lifted to restrict piracy and online watchdogs being setup to Investigate piracy, it’s remains to be highly active.
With advanced piracy methods being developed illegal file sharing will remain to be the biggest threat to MI and other players in the music market. Mobile phone industry is increasingly synergism itself with the music industry through introducing enhancements to their mobiles. Manufacturers such as Apple, Monika and Sony Ericson introduce music phones which have high capacity to store music and provide better quality for music listening. Making associations with the fruitful returns in the future. – Ecological Consumer perception is moving towards reducing their carbon footprints and being Rene’.
This can be handled by promoting the importance of purchasing music online rather than purchasing CDC or DVD’s. Digital music is profitable as the cost for an album does not involve the production costs in terms of album covers, CDC or printing and only limits itself to cost to publish on the internet. It allows the company to reduce waste and be environmentally friendly which is expected by modern consumers. – Legal New laws aimed at reducing piracy will help the digital music market to strive forward.
Especially with the new Digital Economy Bill passed on April 2010 which allows the courts to block sites based on ‘intent’, the horizon looks clear for the music industry. These are supported by internet watchdogs which are setup to monitor traffic online in order to identify sites operating illegally or involved in piracy. Ninth the forces affecting the industry being identified, the focus now changes towards identifying the forces operating in the narrow and closer environment through Micro environmental analysis. ) Micro Environmental Analysis Michael Porter (1979), introduced the five forces framework which aims at industry analysis and business strategy development. The five forces allow marketers to analyses the competitive intensity in order to identify the attractiveness of industry in terms of profitability of operations. The reason for the analysis to be included under micro environment is that it takes into consideration those factors which determine the company’s ability to serve customers effectively. Below is a graphical presentation of the five forces. Pick] Figure 2: Porter’s Five Forces Bargaining power of Suppliers: Ere suppliers for MI consist of music producers for artists and internet service providers which includes website management companies. The bargaining power an be said to be high as signing of Artists who can be sold for a record label is very difficult. But the power of Web developers can be said to be low as the competition in Bargaining power of Customers: Due to rising competition and the increasing of online piracy the bargaining power of customers is rising.
This has to be tackled by using promotions such as discounts and draws which can attract customers from the competitors. Threat of New Entrants: Due to the prospects of the digital music market the threat of new entrants always remain at a very high level. When considering the entrance of high ranking online rand’s such as Amazon and eBay with highly reputable brands such as Walter into the digital music market, the competitive sphere is increasingly being threatened.
Threat of Substitutes Pirated music sites which offer music free of charge are the clearly identifiable substitute for the music industry. The choice of a customer to purchase music or to download it remains to be a battle in their conscience. Therefore the threat of substitutes is very high. Industry Rivalry Ere digital music industry is highly competitive presently due to high number of competitors such as Anapest, tunes, Amazonian, HEM, June, etc.
Each player in the market makes competitive offerings to the customer which makes the threat high for MI. Ay analyzing the five forces for MI, it can be said that the ability to generate high profits in the digital music industry is pale but there is always the probability to penetrate the market with lower margins in order to generate scale based profits. C) SOOT Analysts Albert Humphrey is credited with the development of SOOT analysis which evaluates the Strengths, Weaknesses, Opportunities & Threats involved in the pursuit of a specified objective.
In this case the objective is to further penetrate the I-J market for chital music therefore the analysis will focus on the Strengths and Weaknesses of MI which will determine its ability to tackle the Opportunities and Threats generated by the market. Strengths: – One of the big four record companies in the world with high brand reputation – Owns the world’s most comprehensive catalogue of popular music available for download. – Associations with a large number of artists & groups such as Robbie Williams, Mille Cyrus, Iranian, Jay Z, Rolling Stones, etc. Winner of Music Week publisher of the year for the past 10 years except 2009 Inhere it was shared with Universal Music. Insaneness: Customer awareness of the online catalogue of downloads is low. – Not accepted as a top digital music download site where tunes, Anapest, Amazonian operate as leaders. – Higher pricing compared to the market leaders in digital music downloads. Opportunities: – Economic recovery & decreasing unemployment rates could spark new purchasing patterns in customers leading to more online music purchases. More emphasis on listening to music on the go to ‘kill time’ in commuting to work and also as a means of reducing stress. – Rapidly growing digital music download market where the young population make up the majority of customers. Mobile phones increasingly being used as means of listening to music on the go but there are no sites online which provide tracks with sound quality to suit each type of mobile. – I-J anti-piracy laws being established. – Green consumerism.
Threats: – Uncertainty with regard to the policies of the new government in I-J. – New technologies in piracy able to avert the existing protection measures implemented by the governments or the online watchdogs. Ay taking into consideration the above SOOT analysis we can generate a proper strategy for penetrating the I-J market further in order achieve growth in market hare and revenues. Igor Insofar (1957), introduced the product-market growth matrix Inch identifies four methods a company can use to achieve growth.
Figure 3: Insofar Growth Matrix Ere strategy which suits MI can be identified as Market Penetration which aims at growth through; 1) Attracting competitor’s customers – gaining customers from major competitors as Anapest 2) Attract non-users of digital music downloads 3) Increasing the usage/making current customers purchase more Ere main reason for selecting this strategy is the less risky nature of the strategy Inch is important in the volatile economic situation in the I-J. The means through Inch the strategy will be implemented is discussed below. ) Attracting competitor’s customers: Ere competitors such as tunes, Anapest & Amazonian conduct the business through purchasing music from other labels and publishing them online. That means that they will always need to maintain a margin when selling music online. Since MI owns their own labels and produce music themselves, they can make use of this to position the pricing of their online tracks lower than the competitors. They can promote the pricing along with the claim that they have the most comprehensive USIA catalogue of pop music available to download which can gain the attention of customers and spark switching.
Using offers such as discounts on recommending friends to MI and by providing under 21 discounts, MI can attract young generation customers especially the College & high school students who are currently using competitor services. They can promote their online catalogue through young artists such as Mille Cyrus which can appeal to the young generation and MI can also organize prize draws to offer free backstage passes to Miles I-J concerts in order to generate the necessary buzz in he young customers. Ere non-users of MI online music downloads include the customers who continue to ‘sit stores and purchase music CDC.
In order to move them from the store visit to the online store, MI can promote the convenience of using the internet from home and the time savings that is offered. They can also promote the ability to listen to a sample of every track before purchase, similar to the service offered at the local music store, at the convenience of their own home along with the ability to download music and transfer to other devices which is more environmentally friendly when impairing the carbon footprint of traveling and purchasing a CD.
MI can also promote their services to age groups who prefer to listen to classical music as they are the only record company among the competitors to have been in operation from sass’s. Making this rare music available can attract the non-users to access MI’S online music stores. With Auk’s ageing population who are considerably stable in terms of finances increasingly being exposed to new technology, MI can establish itself to be competitive in the future. 3) Increasing the usage of service/making customers buy more:
In order to increase purchases from current customers, MI can introduce vouchers Inch allow customers to download a specified number of tracks online, rather than Charging for each track downloaded. They can also put recommendations of other tracks which suit the profile of the customer (which is done by Amazon & eBay) while the customer is purchasing the tracks online. It can help in sparking impulse buying Inch results in additional purchases. In addition, they can target the office workers who seek stress relief or means to kill time while commuting by promoting access to MI site on the go through mobile hones.
It is possible since MI has access to a large volume of classical, Jazz and Relaxation music through their labels. They can promote facilities to listen to music Introit actually downloading them and can introduce new subscriptions which facilitate the service. CONCLUSION It can be concluded that undertaking environmental analysis is essential before marketing strategies are developed and through evaluating the environmental forces operating in the digital music download market we were able to arrive at suitable strategies for MI to achieve growth in the future.