San Francisco Symphony Analysis - Case Study Example

Table of Contents Page Number 0 Introduction…………………………………………………………………………3 2.0 Situational analysis/ Industry Trends………………………………………………. 3 2.1Corporate strategy…………………………………………………………………...4 2.2 Business strategy……………………………………………………………………4 2.3 Functional strategy…………………………………………………………………..4 3.0 Porter’s five forces…………………………………………………………………..4 4.0 Internal analysis……………………………………………………………………..5 4.1 SWOT…………………………………………………………………………….…5 5.0 Competitive Analysis/Industry Group/Perceptual Map…………………………….6 6.0 Ethical Issues………………………………………………………………………..7 7.0 Finance……………………………………………………………………………....7 8.0 Alternative Actions Considered…………………………………………………….7 9.0 Recommendations…………………………………………………………………..8 10.0 Conclusion………………………………………………………………………....9 11.0 Evaluation Guide………………………………………………………………....10 11.0 References………………………………………………………………………...13 San Francisco Symphony Case Analysis 1.0 Introduction San Francisco Symphony (SFS) commenced operations in December, 1911, just 5 years after the 1906 earthquake and has grown to become one of the largest orchestras internationally (Schmitt, p 6). The company won a Grammy Award in 1993 for the ‘Best Choral Recording’ and its recording label (SFS Media) has now won eight Grammys (Schmitt, p 6). The international artistic reputation has not contributed to financial stability and the company is facing budget deficits due to high growth in expenses. In 2011, SFS filed for Chapter 11 bankruptcy protection due to difficult operating environment (Schmitt, p 1). The company is committed to introducing children to music. The company is facing a deficit and should implement strategic decisions that will lead to financial stability and maintain the musical experience. The corporate directional strategy is aimed at retrenchment since the company is facing high growth in expenses and deficits that may lead to closure of operations. The building blocks for SFS competitive advantage include the high international reputation, artistic performance and programs that are targeted to different age groups. The functional strategy targets diversified customer age groups that include children, families and youth. 2.0 Situational analysis/ Industry Trends The industry is characterized by declining subscriber base for concerts, which forms the core product of artistic performance. Symphonies are experiencing challenges in attracting younger generation and growing their subscriptions due to changes in lifestyles and desires (Schmitt, p 5). Another trend in the industry is the increasing musician costs that have led to operating deficits for 9 out of 10 of the orchestras in the US. Musician’s salaries form 50 percent of the operating costs and have increased substantially due to the need to retain talent and meet trade union demands (Schmitt, p 5). The industry is characterized by poor working relationships among musician unions, boards of directors and management staff. This trend has led to musician strikes (Schmitt, p 5). For instance, the Detroit Symphony experienced a 6 month strike in 2011. The Chicago Symphony Orchestra experienced a 48 hour strike that culminated in an increase of musician salaries without additional responsibilities like community outreach. SFS experienced a 2week strike in March 2013 leading to cancelation of the East Coast tour and performance at New York’s Carnegie Hall (Schmitt, p 6). 2.1Corporate strategy The corporate strategy of SFS is aimed at ensuring the highest possible standard of excellence in music performance across the globe. The company has a range of musical styles and innovative approach to music presentation (Schmitt, p 12). It is imperative for the SFS to appeal to a younger generation through outreach programs. 2.2 Business strategy The business strategy is to maintain financial stability through growing concert revenues and controlling the operating costs. The company is committed to serving and shaping the cultural life of Bay Area communities, while introducing music to children (Schmitt, p 12). If children are interested in the music, a new subscription base can be grown. 2.3 Functional strategy The functional strategies that have been implemented include the diversification of the concerts to specific groups such as kids, families and youth. The company desires to create an environment that encourages artistic growth through providing training and support to upcoming youthful musicians (Schmitt, p 10). This also brings in a younger client base. 3.0 Porter’s five forces The five forces analysis is a marketing tool that is useful in analyzing the attractiveness of an industry. The threat of new entrants is low due to the high financial outlay needed to establish operations such as the musician wages, costs of instruments and marketing costs. The bargaining power of suppliers is high since musician unions have bargained for higher salaries that have led to an annual increase of between 4-5 percent of musician costs (Schmitt, p 7). The bargaining power is high due to availability of alternative channels of music distribution and the poor working relationships with the unions (Daft, 2009). The bargaining power of buyers is also high due to high inflation that has led to increase in ticket sales. The buyers have various entertainment options and musical performance offered by the various orchestras is undifferentiated. The threat of substitutes is high due to availability of other Orchestras in the US and various musical entertainment options such as live concerts of travelling orchestras, the Internet, and music downloads The degree of rivalry in the market is high since the companies are of relatively equal size and the industry is characterized by a higher percentage of fixed costs that include musician costs. The exit costs are high due to similar products like the Siberian Orchestra that travel worldwide. 4.0 Internal analysis SFS has high brand recognition due to superior and thrilling live performance across the world. The company is experiencing a deficit in its financial performance due to decline in subscription for concerts and increase in operating costs. The company has various concerts specifically targeted to kids, families, schools and youth (Schmitt, p 10). A younger audience needs to be cultivated in order to retain a growing client base. 4.1 SWOT Strengths SFS has gained international reputation for its artistic performance that includes live performance and recordings. SFS forms part of San Francisco cultural life and has a season of 52 weeks. SFS has attained high customer awareness due to its educational program (Adventurers in Music) that aims at introducing children to musical world. It is also a brand for the San Francisco area. The years operated are a strength. Weaknesses SFS is facing is facing various weaknesses that threaten its ability to end the deficit by 2018. One of the weaknesses is the dependence on the traditional model for classical concerts that is facing challenges in growing concert income. SFS relies mainly on concert revenues and does not earn commissions for food and beverage sales in Davies Symphony Hall (Schmitt, p 7). Children are not as interested in an orchestra without all the fancy lights and fireworks. Focusing on children is the future. Opportunities Another opportunity is to improve the working relationships with various stakeholders in order to negotiate for reduced musician wages and salaries. Youth talent should be encouraged in order to gain a younger cliental. Another opportunity is reduction of marketing costs through use of modern marketing technologies such as the internet and social media platforms. The company should grow revenues through use of additional distribution channels such as the radio, television and online platforms that will broadcast the live concerts (Schmitt, p 10). Another way to raise money is fundraising and venue sales. Threats The company is facing various threats that may hinder the attainment of its strategic objectives. For instance, the possibility of implementing another endowment campaign is limited while the investment returns are volatile. There are tensions among musician unions, boards of directors and management staff thus making working relationships across the industry difficult (Schmitt, p 5). The individual and corporate donation base is declining and the company has little opportunity of receiving public-sector grant due the current political environment that is aimed at maintaining fiscal austerity. The current cliental base is aging. Children not having an interest in live orchestras in a major threat. 5.0 Competitive Analysis/Industry Group/Perceptual Map The industry is characterized by high competition from companies such as Philadelphia Orchestra, LA Philharmonic, Chicago Symphony Orchestra, Detroit Symphony Orchestra and Hollywood Bowl (Schmitt, p 5). Travelling orchestras also take revenue from the SFS. 6.0 Ethical Issues SFS is committed to adhering with the highest possible standards of ethics in its operations since it contributes towards music development in the communities. The company organizes annual free concerts in order to attract audiences in venues such as Dolores Park, and Stern Groove (Schmitt, p 11). 7.0 Finance SFS is facing serious financial problems due to increasing costs and stagnant revenue growth. The company filed Chapter 11 bankruptcy protection since it has been operating on a deficit (Schmitt, p 1). SFS revenues for 2013 stood at $ 65, 686,712 while the expenses totaled $ 70, 830,552. In 2013, the company recorded a deficit of $ 5, 143,840 (Schmitt, p 9) through the educational programs that include Concerts for Kids, Youth Orchestra, and Adventurers in Music (AIM) (Schmitt, p 10). 8.0 Alternative Actions Considered The first strategic alternative for SFS is to control the rising musician costs through forming long-term partnerships with the unions and growing own talent. Musician unions should be cultivated and motivated to work within the SFS’s budget. The third strategic alternative that is available for SFS is to target a particular niche market such as the youth orchestra market. This will require the company to fund the development of youthful music talent through use of auditions, rehearsal centers and informative talks on the importance of music in the cultural life of the society (Schmitt, p 10). The company should maintain its classical and differentiate live performance and also promote the development of youthful talent. 9.0 Recommendations SFS has international recognition and reputation for musical performance and thus should set high standards for excellence in artistic musical performance that will enrich and shape the cultural life in the markets of operation. The company should encourage creativity and reward excellence in the industry through investing in development of youthful and talented musicians. The company should diversify the revenue streams such as earning commissions from the venue providers, using digital media to resell the performance recordings and organizing global tours. The company should maintain financial prudence by controlling unnecessary expenses and creating good working relationships with all stakeholders in the industry. For instance, good relations will enable the company to negotiate down the musician costs and avoid concert cancellations due to musician strikes. The musicians will be able to enhance the corporate reputation through participating in community outreach activities. The company should form partnerships with music academies and provide the necessary training to youths interested in pursuing music as their career. The company should provide free equipment such as music stands, mouthpieces and reeds to youth in Bay Area in order to attract young talent. 10.0 Conclusion San Francisco Symphony is committed at setting the highest possible standards of excellence in musical performance that will enrich and shape the cultural life of Bay Area. The company aims at attaining and maintaining global recognition through use of various musical styles and innovative presentation of music. The company has provided opportunities for communities to participate in music and targets groups such as youth and schools. SFS should maintain the artistic integrity while investing in community projects. 11.0 Evaluation guide Evaluation Guide Criteria N/A Poor Satisfactory Good Very Good Excellent Writing 1 Introduction (purpose and key issues) 2 Statements supported (i.e. examples, data) 3 Clarity 4 Concepts integrated 5 Grammar 6 Formatting, headings 7 Information is cited 8 References 9 Questions (if provided) answered 10 Overall Coherence Analysis and description 11 Introduction 12 Org Defined 13 Situational analysis (Industry/Trends) 14 Corporate strategy 15 Business level strategy 16 Functional strategies 17 Porter’s 5 forces 18 Internal analysis 19 SWOT 20 Competitive Analysis (Industry group/perceptual map) 21 Ethical issues 22 Finance 23 Other Frameworks 24 Other Concepts 25 Other Frameworks 26 Alternatives actions considered 27 Recommendations 28 Recommendations consistent with analysis 29 Recommendations are specific and actionable 30 Measurement (possible/described) 31 Additional Material SWOT analysis Strengths Weaknesses Opportunities Threats International reputation and customer awareness Financial deficit Opportunity to negotiate for reduction in musician wages and salaries limited ability to implement endowment campaign Educational programs that target younger groups like children and teenagers Overreliance on concern revenues Use of modern marketing technologies in order to reduce costs Poor working relationships with musician unions Diversify to radio, television and online platforms Earn food and beverage revenues Philadelphia Orchestra, LA Philharmonic, Chicago Symphony Orchestra, Detroit Symphony, Orchestra and Hollywood Bowl 12.0 References Schmitt, M. (2012). ‘The San Francisco Symphony’, Stanford Business, p 1-12. Read More