Spotify E-Commerce - Essay Example

? E-COMMERCE Executive Summary Companies use different techniques in enhancing efficiency in their operations. At sportify, the management uses technologies supported by different software as a platform for leveraging the functions of various departments. For instance, Spotify uses Logitech’s squeezebox technologies in disseminating information in the airwaves. On a day-to-day basis, the company utilizes technology in conducting their operations. Additionally, the management uses generic marketing strategy in products and services to consumers. In addition to using Apple airplay, Denon and Marantz, Logitech squeezebox, Onkyo Network-Capable Receivers and Sonos Digital Music Systems, the company employs a combination of marketing strategies in promoting their products to clients. According to Gilmour (2012), Spotify uses cost leadership, product differentiation and generic strategies in the market. As discussed in the report, innovations are vital to success at spotify. The discussion is highlighting the implications of technologies at Spotify, the types of technologies used by the company, and the information systems used in conducting operations at the company. The report’s aim was to analyze the strategies that Sportify uses in conducting its operations in the global market, thereafter make recommendations that will suit the interest of the company. According to Sehgal (2010, p. 12), the report used online content in analyzing the stratagem that Sportify use in the market. The information was sourced from journals, books and sportify’s website. E-commerce Introduction Spotify TM is a Swedish company that offers a variety of entertainment services to consumers in different parts of the globe. The company has its head office in London but it still conducts some of its operations in Sweden. Additionally, the company offers services that include streaming of music and sharing of data via the internet (Eldring, 2009). Sportify TM works in conjunction with companies like Sony, universal records and EMI in ensuring that the company meets the growing demand in entertainment industry. Currently, the company serves more than twenty million customers on an annual basis. In 2010, records indicated that the company surpassed its initial target by supplying close to 10 million customers entertainment services. Professionals in Stockholm came up with the idea of starting the company in 2006. Daniel, E. K spearheaded the process with the assistance of Martin Lorentzon. Thereafter, the two came up with software that offers clients registration to the site. Generally, Spotify TM has revolutionized the entertainment industry despite facing challenges in their operations. In 2009, hackers invaded the sites of the company and got away with sensitive information that belonged to clients. This contributed to major losses recorded in that year. However, the company was able to regain back its position with support from Founders funds. Besides, Spotify recruited Sean parker who reintroduced the winning strategies at the company. According to Porter (2008), the manager used a combination of marketing strategies and technologies in putting back the company to its positions. At present, Spotify is leading distributor of music in the world’s entertainment industry. Spotify TM Spotify is a cloud-based music-streaming process delivered via desktop and mobile phone. It was launched in October 2008 and offers subscribers access to a vast database of songs via the internet. In order to achieve this, Spotify TM uses many information systems, some of which are so unique to its operations. An individual could play Spotify music through their network devices, smart phones and mobile devices. Spotify also continue to innovate new features that enhances music listening from inside the house. It allows people to simplify their work and vitality as they develop an admirable in music catalogue. Additionally, Spotify availability is also found in UNIX, Microsoft spotify code windows and Macintosh. These sites contain millions of musical tracks. Information systems used by Spotify TM The Spotify music service boasts of several and updated systems of information that help it perform its functions smoothly. Some of the information systems include Apple airplay, Denon and Marantz, Logitech squeezebox, Onkyo Network-Capable Receivers and Sonos Digital Music Systems. Apple Air Play This helps in the streaming of anything from the Spotify iPhone services into speakers in the house, the only condition is that one must have an Apple TV or an Airport Express. One can enjoy the services of Spotify by the use of apples at the comfort of his home, just by the click of the remote control Denon and Marantz This information system within Spotify allows specific receivers from Denon and Marantz to be built in Apple Air Play support. One only needs to run an application on Spotify premium into his or her iPod Touch, iPad as well as iPhone for streaming Denon receivers from wide ranges. However, the music can only be played through the speakers that are compatible with Air Play. Such speakers may include JBL on Air Wireless, iHome Airplay and Bowers & Wilkins Zepplin Air. Logitech Squeezebox This information system allows iOS and Android devices to be used as remote controls for all music services in support of Squeezebox hardware that range from WiFi radios to stereos components at home. With one’s own parameters, it is possible to use the Squeezebox hardware without applications. Onkyo Network-Capable Receivers This system of information does not entail Apple Air play. Besides, there is no Smartphone required with Onkyo. Instead, it has the latest 2011 network that is capable of receiving firmware upgrade. Sonos Digital Music Systems This is an application that offers music systems that is of long term digital nature. It has a feature that allows it to stream music to several rooms simultaneously without producing the muddy sound that characterizes phase cancellations. The successful management of these information systems by Spotify requires the development of a comprehensive business strategy. Incidentally, the Spotify TM has put in place a conceptual framework guided by Porter’s model to ensure the achievement of this concept. With the use of both the generic strategy process model and the Porter’s model, Spotify has ensured that it puts the best management practices in place for the achievement of its goals. Spotify TM’s use of Porter’s Generic Strategies Spotify operates in an industry that depends on innovation, attractiveness and up-to date entertainment to put it in an edge of earning profit besides competing favorably with its competitors. In this regard, Spotify will apply Porte’s generic strategies. This is because it will provide the secondary determinant upon which the firm will position itself in the industry. In this case, even in instances that the Spotify TM performs below average in making profit, it will still be able to make higher returns due to its optimum position. Spotify TM must position itself appropriately. It will do this through leveraging its strengths. Incidentally, just like any other firm, Spotify TM will retrieve its strengths by exploiting and taking advantage of differentiation and cost advantage. The application of these strengths will allow Spotify to produce two generic strategies namely differentiation, focus and leadership. Thereafter, the firm will apply all these strategies at all levels of its business unit. Apparently, these strategies are not unique to Spotify TM’s firm alone but to any other business model. Michael Porter, the man behind Porter’s generic strategies intended that a firm would abide by these standard principles (Stonehouse, Campbell, Hamill, & Purdie, 2007, p. 281). Cost leadership In this generic strategy, Spotify will go for low cost producer because it operates in an industry that purely depends on quality level. It will have to sell its products at industry prices average than what its rivals sell. Alternatively, Spotify will sell its products at prices that are below industry prices to gain a share of the market. The outcome of this might be price wars in the industry. In this instance, Spotify will uphold profitability at the expense of competition. Conversely, in an event that this does not generate price wars, the maturity of the industry and the subsequent decline in prices will lead the firm into cheaper production costs while still upholding its profitability (Eldring, 2009). This strategy targets those kinds of markets that are broad. The acquisition of cost advantages by Spotify would take diverse forms. The firm will have to improve its efficiency processes, gain exceptional access to huge sources of production materials at lower costs and make optimal outsourcing. Additionally, Spotify will have to resort to making decisions that have vertical integration or avoid costs. In case that Spotify TM’s will not be able to lower their costs with the same amount, then Spotify will be in a better position of sustaining their aggressive advantage because of their cost leadership approach. However, in order for Spotify TM to be in a better position of taking advantage of its cost leadership, it must develop some unique internal strength. Some of the strengths include accessing the required capital that is necessary for production of assets. Spotify will have an entry barrier that is difficult to be overcome by many other firms in competition with these investments. Spotify must also have the required skills that will be useful for designing specific products for efficiency purposes. Besides, the level of expertise must be high for efficient channel distribution. However, low cost strategy, just like any other generic strategy has its risks as well. One risk may appear if other competing firms decide to lower their costs too. The improvement of technology might overtake the capabilities of a company to produce. When this happens, the entity will lose its advantage. Additionally, when many firms decide to pursue a focus strategy with narrow market targets, it is highly likely that they will achieve lower costs segmentation while gaining significant market share as a group (Mun, 2010, p. 103). Differentiation strategy Spotify will have to develop services or products that provide unique attributes upon which customers can value. Besides, the customers must perceive Spotify TM’s products and processes as unique and distinct from the products of other firms in the same industry. In this regard, the Spotify must add some value to its products to attain some unique levels. However, the addition of this unique value will imply that the firm attaches some premium prices to it. Subsequently, Spotify will raise the prices of its services and products with the hope that such price rises will cover the extra costs incurred in attaining uniqueness. In the meantime, the unique attributes of a product will encourage Spotify TM’s suppliers to increase their prices. In this event, Spotify will have to transfer the costs to its clients who in most cases do not have alternatives (Botten, 2009, p. 247). The firm must have some internal strength to put it in a better position of succeeding in differentiation strategy. Spotify have proven to be leading in accessing scientific research. This can put over the edge of differentiation strategy. Additionally, the firm must be able to hire a team that is very imaginative and highly skilled for the innovations and merchandise development. Further still, Spotify will need a sales team that is strong and able to communicate the perceived strengths of the product to the clients successfully. Besides, the Spotify TM’s corporate reputation must always be high for high quality innovation. Some risks can cripple the services of a company despite attributes to differentiation strategy. The most significant risks include customer’s change of preferences and product imitation by competitors. Furthermore, some other firms in the same business in pursuit of focus strategies may cut a niche in the achievement of greater differentiation within their market segments (Mollona, 2010, p. 241). Focus strategy In this strategy, Spotify TM will have to concentrate within a narrow segment. While in this narrow segment, the firm will strive to achieve either differentiation or cost advantage. This is based on the recognition that Spotify can serve its needs better by focusing on fundamental attributes. If Spotify decides to use the focus strategy, then it will enjoy immense levels of customer loyalty (Porter, 2008, 450). As a result, the entrenched loyalty will discourage direct competition from other firms within the industry. Apparently, the focus strategy pursues a very slight focus on the market. This enables the Spotify TM to lower its volume and thus ensures less bargaining power from the suppliers of its products. Conversely, if Spotify decides to go the differentiation-focused strategy path, it will eventually transfer the high costs of valuation to its clients. This is because of the absence of products that will substitute the original products of benefits. In order for Spotify to succeed in its focus strategy, it must develop product development to match with narrow segment of the market that the firm acknowledges. The risks that come with focus policy include the alterations in the segments being targeted and imitations. Additionally, the leader in broad market might find it very easy to adapt its products for direct competition purposes. Furthermore, it will be so easy for other businesspersons to carve out specific sub segments that they believe will give them better services (Kossowski, 2007, p. 16). Generic strategies combination Spotify TM will not find it easy to merge all these strategies together to work in a compatible manner. This is attributable to the fact that its efforts to achieve a competitive advantage through the application of all fronts will eventually lead to the achievement of no advantage at all. For instance, suppose Spotify decides to differentiate it and supply products and services that are of very high quality, it will have to contend to the risk of compromising on the quality in its quest to emerge as the cost leader. Suppose the quality survives, there will still be a confusing image portrayed by Spotify. This is why Michael Porter was categorical that a firm must only select one of the generic factors in order to maintain success for long. With more than one generic strategy for use at the same time, Spotify will become spoilt for choice and subsequently unable to achieve its competitive advantage (Sehgal, 2010, p. 192). Porter’ model Spotify is in this business to make profit making it compete with other business enterprises within the industry. Porter introduced some factors that he thought would influence the kind of competition that Spotify TM will undergo. These factors include the power of bargaining of the suppliers, the threats supposedly occasioned by the entry of new organizations into the market, customer’s bargaining power, product’s substitute threat and the competitive rivalry degree. The combination of these factors is responsible for the intensity of the amount of rivalry that exists within the industry. E-business Strategy framework The e-business strategy framework will allow Spotify to apply three phase in the development of strategies. These include formulation, analysis and implementation. During external analysis, it will analyze the structure of the industry together with macro environment while the internal analysis covers the capabilities and the crucial resources that the company possesses. Additionally, the company will have to do an analysis involving its sustainable competitive advantage and the alternatives for generic strategy. It will also seek to explore new markets besides determining and capturing value. Furthermore, Spotify will examine its interaction with its clients and suppliers before implementing the strategies. Conclusion According to Porter, for a firm to succeed with multiple strategies, it must open separate units for operating its businesses. This implies that for each business unit that Spotify has, it will apply separate strategies. If Spotify TM decides to go this route, it will actually have different business units with each having different cultures, business units and cultures. The firm will not be spoilt for alternative with this structure. A solitary generic strategy might not be the best strategy. This is because customers look for multidimensional satisfactions in the same product. Such dimensions could be the combination of style, quality, price and convenience. Some firms have actually been victims of single generic strategy approach. This is because they have sometimes followed a unitary strategy but later on suffered when a competing firm decides to lower the quality of its products and meanwhile ensure that all the general needs of the customer are met. Recommendations Sportify should come up with technologies that will incorporate the use of different techniques in disseminating information. Consequently, the company should utilize the digital rights management technology (DRM) in denying unauthorized asses to its site by the members of the public. Furthermore, the company should devise a way for summarizing client’s information within its system and not rely on the indexing approach in enhancing connections. Additionally, the company should install software that will support higher capacity processors. This will create opportunities for the company since the users will assess the sites from a wider platform. List of References Botten, N 2009, Enterprise Strategy, Oxford, U.K. ; Burlington, MA, Elsevier. Eldring, J 2009, Porter ?s (1980) Generic Strategies, Performance and Risk. Hamburg Diplomica, Diplomica Verlag. Kossowski, A 2007, STRATEGIC MANAGEMENT: PORTER'S MODEL OF GENERIC CO. Mu?nchen, GRIN Verlag. Mollona, E 2010, Computational Analysis of Firms’ Organization and Strategic Behaviour, Boston, Taylor & Francis. Mun, H 2010, Global Business Strategy: Asian Perspective. Singapore ; Hackensack, NJ, World Scientific. Porter, M 2008, Competitive Advantage: Creating and Sustaining Superior Performance, New York, Simon and Schuste. Sehgal, V2010, Supply Chain as Strategic Asset: The Key to Reaching Business Goals, Hoboken , John Wiley & Sons. Stonehouse, G, Campbell, D., Hamill, J., & Purdie, T 2007, Global and Transnational Business: Strategy and Management, New York, John Wiley & Sons. Read More