Spotify: E-Business and E-Commerce Management - Case Study Example

SPOTIFY Table of Contents Executive Summary 3 Introduction 3 Formulate and Developing Business Strategy 4 Evaluation of Strategy 5 Formulating Alternative Strategies 8 Customer Relationship Management 9 Supply Chain Management 10 Conclusion and Recommendation 10 References 12 Executive Summary SpotifyTM is cloud based music streaming service delivered via desktop and mobile phones. It was launched in October 2008 and offers subscribers access to vast database of music via internet. To maintain such large database the company would require effective managing of its information system. The organisation strategy and the information strategy of SpotifyTM depend on the business strategy of the company. The strategic framework of SpotifyTM will help to implement technology to sustain competitive advantage in terms of cost and efficiency. Formulating other forms of strategies such as e-marketing, CRM, or SCM as part of organisation’s strategy helps a company to mange and utilise their resources optimally. Introduction SpotifyTM provides cloud based music streaming service delivered via internet mobile phones. Through cloud computing it offers subscribers access to its vast database of music. To maintain such large database the company would require effective managing of its information system. The information system is not isolated and constitutes interaction between hardware, software, data, people, and telecommunication. These components of an information system are built to create, assemble, and distribute important data and information to people across the globe (Lucey, 2004, p.31). From the information system hierarchy model it can be said that the strategic development is a top down approach and it flows downwards from the top level management of organisation. The information system connects the top level management with people and process (Doyle, 2001, pp.2-14). Formulate and Developing Business Strategy Business strategy gives long term direction to an organisation (Jeffs, 2008, pp.12-19). Strategy is a plan or a vision of where SpotifyTM would like to reach in coming years and how it expects to get there. The organisation strategy and the information strategy of SpotifyTM would depend on the overall business strategy of the company. The business strategy of SpotifyTM is to adapt to new technology of cloud computing and generate revenues through cloud based business model which will allow subscribers unlimited access to music database at least cost and shortest time. Using the five forces model, the relative attractiveness of cloud based technology industry can be analysed as follows: Threat of New Entrants - SpotifyTM offers its subscribers a vast database of music via cloud computing technology. As a result the subscribers will have faster access to music more conveniently and even from their mobile sets, at any place any time without having them to carry memory devices. At the same time multi-user interface will not slow down the server. The users will also get unlimited storage space and remote access even if their hard disk may have limited space. All these features and facilities provided by SpotifyTM are unlikely to face threat from the new entrants. Bargaining Power of Suppliers - The cost of cloud computing is economical since the database is centralised. It also requires less space, bandwidth and power. Thus, suppliers will have limited influence over SpotifyTM business model. Bargaining Power of Buyers - Cloud computing is very cost effective as it do not require subscribers to invest extra time and money to use standalone servers. Using cloud based computing the subscriber will get the opportunity to save money on data storage cost, management cost, and software updates. Threat of Substitutes – The only threat to cloud based technology is open source computing but it is much slower and requires the subscriber to have physical memory in order to store data which makes it more expensive compared to cloud based technology. Rivalry among Existing Competitors - SpotifyTM offers cloud based music streaming service delivered via mobile phones and internet at affordable cost and with unlimited data storage. Existing competitors may have the technology and resources but lack of clear vision and mission will do more harm in the long run. The company specialises in music streaming and maintains a well organised database which receives positive feedbacks from customers on regularly basis. Thus, using Porter’s five forces model it can be said that the industry is attractive for SpotifyTM to implement its strategic goals (Henry, 2008, p.69). Moreover, clear vision and understanding of business strategy of SpotifyTM has given the company the edge to become the market leader of cloud computing. Evaluation of Strategy Organisational strategy includes a layout or a plan which answers how a company organises itself to achieve its goals and implement its business strategy (Heracleous, 2003, pp.27-33). To test and critically evaluate the business strategy of SpotifyTM, its business model, skill level and experience of employees, business process, control system, culture, and information system strategy should be analyses. With the advancement of technology, people can now do their work from their homes since cloud computing will enable them to enter a virtual space full of unlimited opportunities (ITL Education Solutions, 2005, pp.173-189). Such virtual organisation enables SpotifyTM to provide access of its music database for subscribers from remote location via internet. According to the business diamond framework, the four key components of SpotifyTM are business process, value and beliefs, management of control system and task structure (Rugman, 1996, pp.239-244). The business process of SpotifyTM is to offer cloud based music streaming service delivered via internet to subscriber’s desktop or mobile hand set. (Source: Omni Group, 2009) SpotifyTM was launched in the year 2008 and since the technology have gained vast amount of experience and knowledge in providing cloud based services to the customers. Over the time SpotifyTM has been able to develop business reputation and customer loyalty because of its constant focus in service and delivery. With the help of cloud computing the customers get the opportunity to customise their application along with remote access of data from anywhere at any time without having to carry any sort of memory devices. The subscriber would only require having an access to internet to avail the services through a desktop or smart phone and then the user will get unlimited access to complete music library of SpotifyTM. Without clear strategic mission and vision SpotifyTM would have missed the opportunity for additional subscription, efficient purchases, cost effectiveness, and at the same time it would have fallen behind its competitors since customers generally change brands when they experience poor services. Many e-business strategies fail because of timing errors, over ambition, lack of clear vision, and lack of creativity (Laudon, 2011, p.66-77). The reason for the success of SpotifyTM is its control over business and commitment towards serving its customers. The technology focuses on cost effectiveness, branding, continuous process improvement, and system integration. It uses cloud technology to reach its customers easily and hence reduce distribution cost of business. The technology has focused on marketplace restructuring through disintermediation. The online services are positioned according to price, speed of access, service quality, and timely delivery. The company’s strategic position in online marketplace is based on transactional and relationship excellence. SpotifyTM uses its services and market development matrix strategies to increase subscriber base and music stream volumes by varying target market segment. The technology creates business value by providing faster, easier, and secure music streaming access and services to subscribers. In order to reduce cost and make business more efficient, SpotifyTM makes continuous process improvement and innovative business model. SpotifyTM provides its subscribers the opportunity to create social networks, blogs, virtual worlds, and groups which share common characteristics. The biggest advantage in virtual teams is that geographically dispersed co-workers can assemble with the application of telecommunication and IT. The Information Technology (IT) department exercises control over the projects of SpotifyTM which encourage use of new technology in business process. The IT portfolio management division continuously decides staff requirements and fund management. The technology of SpotifyTM seeks to generate maximum benefits through optimum investment in most valuable initiatives. The Transactional system focus on cutting cost; infrastructure system focus on multi-server application and remote network access; information system supports communication and collaboration with clients and strategic system focus to gain competitive advantage in market place. Formulating Alternative Strategies Strategic planning is the process of formulating, implementing and assessing long term mission and vision of an organisation. While strategies are developed at the top level of management, they are implemented through all levels of organisation. Strategic analysis is the process which analyses the internal (resources and capabilities) and external environment (competitors, suppliers, substitutes, and macro environment). Formulating alternative strategies for SpotifyTM is based according to the requirements of target market. By adopting such strategies the technology would be able to realise higher sales volume by higher music streaming and also reduce cost of customer acquisition and retention. E-Marketing To formulate strategies from an e-marketing perspective, SpotifyTM would have to take decision about which markets they need to target to achieve their long term goals. This can be achieved by evaluating various digital channels that generates value. It needs to align the services to identify strategies that can increase subscriber volume or base by varying their services offerings according to requirements of different customers in different markets. Online products and services are positioned according to price, timely delivery, faster access, quality, and data security (Chaffey, 2008, pp.336). Customer Relationship Management Strategic Customer Relationship Management (CRM) aims to enhance the organisation’s knowledge about their customer’s requirements through improved and customised interaction with customers. The alternative business strategy according to this model is to maintain long term relationship with the customers. The following diagram summarises the steps to develop CRM strategy, (Source: Customer Relationship Management, Kumar and Reinartz, 2006) CRM is concerned with improving shareholder value through developing relationship with customers. Implementing CRM strategy can become dangerous for SpotifyTM if it fails to implement CRM without developing a customer acquisition and retention strategy. Chances of failure will also exist if it targets wrong customers (Blumberg, 2002, pp.15-18). Supply Chain Management Strategic decision regarding Supply Chain Management (SCM) aims to add value to organisations by managing suppliers, distributers, manufacturers, and customers. It is systematic process for managing materials and flow of information from suppliers to end customers. The SCM strategy of SpotifyTM aims to organise its business process by eliminating processes which lead to inefficiency. Efficiency in supply chain will help the company to work collaboratively with customers, suppliers and distributors through extended supply chain. Investment in supply chain information technology to manage information flow leads to better planning, execution and analysis. Proper feedback channels must be ensured so that the company would be able to identify areas of improvements. The items that will constitute SpotifyTM SCM are money, information, and materials and strategic decisions will be based on processes, materials and logistics. The two tools that would be required to implement SCM strategies are information technology and proper communication channel (Ross, 2002, p.118). Conclusion and Recommendation SpotifyTM three level architecture focus on functional aspects by providing cloud based services at least cost, operational and informational needs. The second level makes its business effective by integrating scarce resources of organisation and informative decision making. The third level focus on business process innovation by providing strategic initiatives. Providing services to business organisation can be effective when the employees have the right skill and focus to achieve organisation’s strategic goals. Different organisations differ in their IT activities because their goals are different. Organisation’s goal depends on firm’s size, organisational structure and level of business maturity. Form the above discussion it can be said that SpotifyTM would be able to further develop its operations and services by maintaining and developing well organised information system; managing data, information and knowledge; managing talent and human resources; managing cloud networks and services; timely delivery, hassle-free faster access to subscribers; planning for innovating current business model; anticipating new technologies; integrating social IT; and by allowing customers to participate in implementing company’s strategic goals. The company will also need to focus on Information Security Management to protect subscriber data from theft and misuse by unauthorised parties. The objective of ISM is data integrity, confidentiality, and availability of data only to authorised individual (Chandra, 2002, pp.32-41). The company can manage risk by identifying threats and establishing security policies to implement control over data. The company will be able to manage risk by identifying the degree of impact and vulnerability. Some of the possible security policies that the company may implement are System Access Control, Information System Security, and Telecommunication Security. References Lucey, T., 2004. Management Information System. 9. London: Cengage Learning EMEA. Doyle, S., 2001. Information System for You. 3. United Kingdom: Nelson Thrones Ltd. Jeffs, C., 2008. Strategic Management. New Delhi: SAGE Publications Inc. Henry, A., 2008. Understanding Strategic Management. New York: Oxford University Press. Heracleous, L., 2003. Strategy and Organization: Realizing Strategic Management. New York: Cambridge University Press. ITL Education Solutions Limited, 2005. Introduction to Information Technology. 7. New Delhi: Dorling Kindersley (India) Pvt. Ltd. Rugman, A. M., 1996. The Theory of Multinational Enterprises. United States: Edward Elgar Publishing Company. Chaffey, D., 2008. E-Business and E-Commerce Management. 3. New Delhi: Dorling Kindersley (India) Pvt. Ltd. Blumberg, D. F., 2002. Managing High-Tech Services Using a CRM Strategy. United States: CRC Press. Ross, D. F., 2002. Introduction to e-Supply Chain Management. United States: CRC Press. Chandra, R., 2002. Management Information System. New Delhi: Gyan Publishing House. Laudon, K. C., 2011. E-Commerce: Business, Technology, Society. 4. New Delhi: Pearson Education India. Read More