E-Commerce at Spotify - Essay Example

?E-COMMERCE AT SPOTIFY Executive Summary The use of e-commerce is another unique feature of the Spotify, a factor of which has been the focus of the company for some years now. The present report is therefore a detailed research analysis on the strategic role of technology in Spotify with specific emphasis on e-commerce. This task was played by using the company’s strategy that have been formulated and implemented over the years. By discussing the external and internal environments of the company, it is revealed that the use of PEST analysis and SWOT analysis are two important theories that serves as evaluation tools for discovering how well the company has been performing over the years and how best it can do in the nearest future. Through the two theories, Spotify has been identified to be a major competitor in the entertainment industry but lacking a high level sense of taking advantage of opportunities that it has. Some of these opportunities are key markets in key continents like Africa and South America where virtually no markets exists for the company. With the increase of technology in all of these continents, the company is in a position to take advantage. Finally, there is a recommendation for the company to have its own software to make access to music even easier. Introduction Cloud-based music-streaming services are becoming quite common of late with the advent of high speed internet technology (Boyer et al, 2007). Spotify is one company that provides this kind of service for financial gains, meaning that the company is in a highly competitive environment where it has to gain better market shares than its competitors who have been described to be in exceed in modern times. Launched in October 2008, Spotify has gone about the provision of cloud-based music-streaming service with style with the delivery of music-streaming unto both desktop and mobile phone. Another peculiar feature of Spotify would also have to do with the availability of songs that the company has in its database as the company provides wide range of songs from different backgrounds and genres; all of which forms the basis for e-commerce. 2.0 Strategic Situation Analysis The focus of this section of the paper is going to be to look at how Spotify is currently using information system to support its business strategy. 2.1 External Environment 2.11 Political The political environment of Spotify is largely influenced by both local and global legislations and regulations that are made by government to protect the intellectual property of musicians and other works of music. Depending on royalty levels however, some musicians have been reluctant in releasing their songs for use for online services by the company as there is the fear that songs that are made available online could easily be cyber attacked (Bradley, 2010). Politically therefore, local and international legislations have somewhat affected the number of songs that the company could have access to. 2.12 Economic Spotify’s business growth and development is largely dependent on prevailing economic conditions and climates. Rising cost of living therefore affects the company’s business negatively as in such times, the larger industry to which Spotify belongs, which is the entertainment industry, is considered by many not to be a necessity but a want (Christensen et al, 1998). In effect, even though the use of information systems and e-commerce in general is expected to make products more accessible to customers, accessibility does not automatically bring about patronage in harsh economic times. 2.13 Social The social environment of Spotify is made up of population dynamics of the people within the company’s operating environment as well as the lifestyle of the people, including their employment pattern and attitude towards work (Saunders, Philip and Andrian, 2003). The educational standards of these people are also very crucial and important. More refreshing for the company is the fact that the social environment has grown beyond the physical social environment to include what has today come to be known as the social media network. It is for this reason that e-commerce remains highly important for the company as it widens the customer base of the company (Shih, 2009). 2.14 Technological There is no denying the fact that the world is currently ruled by technology and so a very strong technological environment of any company comes with major advantages (Sekeran, 2000). Interestingly, Spotify is currently operating in an environment where there is the constant emergence of new technology, most of which are portable devices though which people can access music online. Examples of these new technologies are tablet computers, blackberry phones, modern versions of computer operating systems and other music software that allows for on-the-go access to online stream-music. The technological environment has therefore been very advantageous and promising for the company to continue to advance in its e-commerce quest as e-commerce is all about the use of electronics to make trade possible (Smillie, 2010). 2.2 Internal Environment 2.21 Strength The use of extensive electronic commerce continues to be a major strength of the company as the company has through electronic commerce made it possible to purchases to be made via the use of the internet without the need to be physically present in the offices of the company. The company also uses electronic business some other ways as the provision of live online customer support to customers who are in need of such customer services. Generally, this has led to a situation whereby the company has been noted to be one of the best when it comes to the provision of excellent customer service (Oliver, 1997). 2.22 Weaknesses Market penetration competencies have becomes one of the major weaknesses of the company for some time now. This assertion is made against the backdrop that there remains a number of countries that the company does not offer its services even though electronic services exists in some other forms and by other companies. It will be noted that one of the major advantages of e-commerce is to make market penetration easier with the help of publicity and advertisement (Pegler, 2006). The company should therefore take advantage to introduce services countries with absence of the Spotify service; particularly in Africa and some South American countries. 2.23 Opportunities In direct relation to the company’s weaknesses, there is the opportunity of taking advantage of emerging technology to overcome some of these weaknesses. Luckily, the platform has been set with the absence of music-streaming media and so all that Spotify really have to do is to put in place technical personnel to work to start new markets and the production of new software and products that will enhance the services delivery of the customer. Apart from emerging technology, the company also has an internal opportunity in advancement of information and communication technology education among most curricula of various countries (Oliver, 1999b). 2.24 Threat On the basis of e-commerce, there is no denying the fact that the biggest internal threat that Spotify faces is the threat of information security. From all indications, there is what could be called a parallel rate of advancement between genuine technology and threatening technology (Cooley, 2003). This is because as much as technology based companies development in their bid to use technology to improve services, cyber criminals also improve in their ways of combating the successful use of technology. Most of these cyber criminal operate through means like hijacking of valuable company asset and the infusion of virus activities (Estivill-Castro and Yang, 2001). Another threat also has to do with new market entrants who keep springing up by the day. 3.0 Competitive Development Models The essence of this section is to use a theoretical model in the shape of Porter Model to analyze how Spotify is using technology to build sustainable competitive advantage. 3.1 Entry of competitors The entry of competitors into the cloud-based music-streaming service and for that matter entertainment industry is quite easier as this does not require much fund to do (Christensen et al, 1998). The reason why funding will not be a problem for most new entrants is that the service is highly technology based with the use of online technicalities rather than the purchase and construction of physical offices and stocking with expensive products. Equally also, there is not much barrier to entry as the construction of websites, which is a key factor in this industry is something that comes with almost no legal restrictions. This means that the availability of competitors is expected to go up by the day. 3.2 Threat of substitutes There are substitute products and services for the cloud-based music-streaming service that Spotify provides. This substitute comes in the form of use of computer and internet based programs and new media software including iTunes, YouTube and other Torrent websites where patrons can listen to music and download music virtually for free. This means that the substitutes are even far cheaper as the services come for free. This could indeed be a major threat for Spotify but there are brighter sides to the whole issue of substitutes as in most of the cases with the substitutes, there are no guaranteed protections against legal breaches of copyright issues (Gronroos, 1988). 3.3 Bargaining power of buyers Buyers from Spotify seem to have a very strong bargaining power and this is a situation that is against the fortunes and wellbeing of the company. The power of buyers comes in the wake of the numerous substitutes available to buyers as well as the number of competitors in the same industry. It will be noted that in such an environment where a company has several competitors offering the same service, buyers gain bargaining power to order large volumes but at the same time reduce cost (Estivill-Castro and Yang, 2001). The reduction of cost becomes even more inevitable as some competitors would want to respond to buyers with reduced cost as their competitive advantage. So far, Spotify has responded positively to the bargaining power of buyers by refusing to take an entrenched position with cost but offering highly reduced cost of music streaming service. This has created a major competitive advantage for the company and promises much future growth. 3.4 Bargaining power of suppliers Sellers and for that matter suppliers are many and so monopoly is totally absent. As each of these sellers come with different strategic and competitive advantages, the generalized bargaining power of suppliers become weakened (Gronroos, 1988). On the part of Spotify, this has not necessarily been a reason for it to be pushed out of business but for it to be challenged to take up new strategic planning that aims at overtaking competitors in terms of meeting the limited demand that comes with enormous supply. An example of the strategic plan is the use of a holistic customer oriented approach whereby the customer has been put at the center of the company’s operations so that once the customer has a choice of choosing among the numerous suppliers, Spotify would be a name that would easily come up. 3.5 Rivalry among the existing players Almost all competitors or rivals are using e-commerce, which was otherwise a major competitive advantage for players who used it over those who did not use it. For this end, it could be said that the strength of existing players is almost the same. This will not be without a saying that there are some market competitors who with the support of their parent companies, which are not directly music-streaming companies, give very though opposition to Spotify because of the capital injection that these companies do as part of their business activities. Spotify could therefore come into the limelight and equally brush shoulders with these companies if it takes advantage of its unused market destinations to set up new markets where it would become somewhat monotonous market competitor. Source: Value Based Management (2013) Conclusion and Recommendation It has been realized through the research that the company is in a very excellent position to dominating the market through e-commerce. But as much as the company has taken advantage of some of its opportunities, there still remains key aspect of information system advancement that the company has not looked at into detail. For example is has been noted that the company has a very wide array of music database with songs from ever genre and origin, making preferential selection of songs by customers easier. However, not much has been done in the area of customization of products and software. It is therefore recommended that the company gets a customized music device or software, which will make access to the company’s services even easier. REFERENCES Boyer K K., Laseter T M., Mollenkopf D A and Elliot R. E. 2007. Managing Internet Product Returns: A Focus on Effective Service Operations, Journal compilation, volume 38, number 2, Decision Sciences Institute Bradley, A. 2010. A new definition of Social Media. 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