Strategic Plan for Digital Music Organization EMI - Essay Example

?Strategic plan for digital music organisation EMI Introduction Electrical and Musical Industries (EMI) Group or EMI Music or simply EMI is a UK based multinational music corporation headquartered in London. EMI Ltd was established in 1931 through the merger of the Columbia Graphophone Company and the Gramophone Company (EMI, n.d). EMI was one of the ‘big four’ record companies and currently it is the fourth largest business group in the recording industry (ibid). The EMI operates a major publishing subsidiary called EMI Music Publishing, which has branches worldwide. Although the EMI was a constituent of the FTSE 100 index earlier, it has been taken over by Citigroup and operated as a wholly owned subsidiary of Citigroup since February 2011 (ibid). According to a report by Cimilluca and Colchester (2011), in November 2011, the Citigroup announced a deal to sell EMI’s recorded music business to Universal Music Group for $1.9 billion and music publishing business to Sony/ATV consortium for 2.2 billion. This paper will suggest a strategic plan for this digital music organisation by referring to a number of strategic management theories including PESTLE analysis, Porter’s five forces model, SWOT analysis, and BCG matrix. PESTLE analysis Political factors The EMI maintains good relationship with overseas counties with intent to expand its business operations globally. Since the company offers extensive employee benefits including flexible work schedule, family friendly policies, and other flexible benefits; it gets full support from political environment. Economic factors The recent global economic recession has dreadfully affected economies worldwide and many of those economies are still under the process of recovery. Hence, the current economic environment is not favourable for the company. Socio-cultural factors Historically, music is present everywhere regardless of cultural variables such as customs, lifestyle, language, values, and beliefs. Hence, socio cultural factors provide the company with potential business environment. Technological factors The technology sector has been dramatically improving for the last two decades. The emergence of internet was a milestone in the history of music entertainment industry (BBC News, 2000). Therefore, current technological landscape is better for EMI’s business growth. Legal factors Governments worldwide have developed strict intellectual property laws and many of them specifically deal with music piracy issues. Thus, music entertainment industry is encouraged globally. Environmental factors People today are highly concerned about environmental sustainability. Therefore, increasing environmental concerns raise some sorts of challenges to every sector, and music entertainment industry is not an exception. Hence, EMI has to invest more on environmental sustainability so as to enhance its business growth. Porter’s five forces Degree of rivalry While analyzing the music entertainment industry, it seems that degree of competitive rivalry is very high. Since EMI is a multinational company, it struggles to confront with regionally focused rivals that are more knowledgeable about people’s music tastes. Hence, the company is forced to depend upon price cutting and M&A strategies to survive market competition. Buyer power In music entertainment industry, buyer power is relatively high since there are numerous potential sellers. In addition, market giants like Sony offers quality products to customers at cheaper rates; this situation compels EMI to cut its prices in order retain its customers. Supplier power EMI has high bargaining power over its suppliers as the organisation is well reputed for its quality music products and services. Since there are large number of potential suppliers in the industry, supplier price changes would not affect EMI’s business activities. Moreover, supplier switching cost is very low in the music entertainment industry. Threat of new entrants Threat of new entrants is very high in the industry, particularly because of the emergence of internet. As Bhattacharjee et al (2007) point out, internet enhanced the growth of online file sharing communities, and this situation has benefited users for obtaining millions of songs and videos at extremely no cost. Normally, a file sharing website can be launched very economically. Threat of substitutes Threat of substitutes is lower in the music entertainment industry since there is no absolute substitute to music. Although other entertainments like movies and video games are also enjoyable and stress relieving, they are not effective as music. Therefore, substitute products do not threaten EMI’s business sustainability. SWOT analysis Strengths Global presence, prolonged market experience, and a public stature are the major strengths of EMI. Since the EMI brand is well recognised globally, the company does not have to spend much on promotion. In addition, diversified product portfolio is the strength of EMI. Weaknesses Lack of advanced technological applications appears to be the EMI’s major weaknesses as this issue assists market rivals to obtain an edge over the firm. Declined customer loyalty is another weakness of the firm, for it may causes the company to lose its market share at considerable levels. Opportunities The increasing demand for music products and services raises a set of potential opportunities for the company. In addition, development of internet applications benefits EMI to reach customers worldwide despite all territory barriers. Threats Undoubtedly, music piracy and file sharing online communities are the major threats to EMI. Severe market competition also raises numerous potential challenges to the organisation. Due to the over-popularity of internet, people are less likely to buy music products from physical stores. BCG matrix While analysing the company using BCG matrix, it seems that the firm is currently operating as a cash cow. Obviously, EMI possesses high market share and operates under a slow growing industry. As a typical cash cow, EMI generates excess cash than the amount needed for maintaining the business. Here, huge investments would not benefit the company as it operates under a slow growing music entertainment industry. Need for strategic change Strategic management theories such as PESTLE analysis, Porter’s five forces model, and SWOT analysis indicate that the current business environment is not much favourable for EMI. Financial data indicate that the company is losing its market dominance due to stiff market competition. To illustrate, the company experienced a dramatic decline in its British market share by 7% (from 16% to 9%) and a loss of ?260 million during the 2006-07 period (BBC News, 2008). The SWOT analysis clearly indicates that growth of online file sharing websites dreadfully affect EMI’s business operations. When music and video files are available at free cost, naturally people will not buy them. In addition, it would not be possible for the company to legally restrict those websites since millions of people share music and videos every day through their blogs or other similar websites. Music piracy also is a severe threat to the company even though copyright laws are very strict. A person who legally purchases a music product tends to produce its copies among his/her friends and relatives illegally. Since this practice is kept secret, legal authorities can take no action against such music pirates. Hence, a strategic change is the only way to sustain in the current digital competitive environment. Hence, it is clear that changes in the corporate environment make corporate strategy modification a necessity. As compared to the last century, the digital competitive environment has changed notably and therefore EMI would go out of business unless it modifies its corporate strategy. An effective corporate strategy encompasses best ways to defend stiff market competition. Hence, a modified corporate strategy may assist EMI to successfully confront with other well known companies like Sony. In short, corporate strategy modification would benefit EMI to resolve its current market difficulties to a great extent. Understanding corporate strategy is necessary to evaluate how it relates to the long term planning process. “A corporate strategy is one that specifies what businesses a company is in or wants to be in and what it wants to do with those businesses” (Robbins et al. 2010, p.169). Slack and Parent (2005, p. 112) state that corporate strategies may include market development, product development, horizontal or vertical integration, concentrated growth, innovation, and concentric diversification. It is clear that a corporate strategy reflects the overall scope of the business to meet stakeholder expectations. Undoubtedly, wealth maximisation is the ultimate objective of every stakeholder. The effectiveness of management decisions and long term planning process can have a significant influence on business profitability. A corporate strategy determines the way management decisions and long term planning process are structured. In short, an effective corporate strategy is capable of meeting stakeholder expectations. In addition to the changes in technology and competitive business environment, EMI management must address other factors like organisational paradigms, market segmentation, and strategic change management while modifying its corporate strategy. Evidences suggest that these types of corporate strategic management issues are likely to impact the development or improvement of a corporate strategy. The strategic change In order to effectively execute the proposed strategic change, the organisation should realign itself to the needs of the external environment. Currently, EMI’s external environment requires high level competitive tactics so as to survive the cut-throat market competition. Since lack of technological advancement is the major problem, the firm should restructure itself to rapidly adapt to changing technological landscape. To be more specific, the company should give more focus to online business sector, because scope of physical sale of music products is decreasing day by day. The company may launch its own file sharing community and facilitate music download at affordable rates. In order to overwhelm other free music service providing websites, EMI has to offer broad range of music as well as video files. In order to prevent music piracy, the company may produce non-copyable CDs and DVDs. In short, the organisation has pace with the changing customer tastes and preferences. Before implementing the strategic change or realigning the business environment, the firm must perform a well planned change management programme. A strategic change or corporate strategy modification may involve changes in organisational culture; and hence EMI must prepare its employees and other organisational stakeholders to easily adapt to the change. A well structured change management programme would assist the firm to execute its planned change within the estimated budget and time (Gupta et al 2010, p. 89). To illustrate, the change management programme would provide EMI employees with proper training packages to improve their knowledge and skills on online music sales. Such programmes may aid the organisation to manage employee resistance to change. Thus, strategic thinking together with an effective change management programme would enhance EMI’s competitiveness and efficiency. While implementing the proposed strategic change, the organisation must fix specific time horizons. Timely execution of strategy is necessary for the firm to obtain expected competencies and other advantages. Once other online music sharing websites are established, it would be difficult for EMI to regain its market share. The strategic planning phase encompasses a range of forecasting activities and elements of uncertainty. It is advisable for the organisation to adopt a contingency approach to manage organisational change as it is the best way to rapidly bring changed business operations on track. Strategic flexibility is a central aspect of corporate strategy since digital business environment is dramatically changing these days. In order to clearly define the changing organisational paradigms, EMI should periodically identify the changes taking place in the external as well as internal business environments using appropriate strategy models such as PESTLE, SWOT, and Porter’s five forces models. Such analyses would assist the organisation to clearly identify current market situations and thereby forecast future changes. In other words, such organisational assessments may be beneficial for EMI to choose potential future strategy. Organisations have been giving particular emphasis to contemporary strategic management research and practices due to the corporate failures over the last decade. Business concerns believe that better corporate governance strategies would assist long term business sustainability. Conclusion From the above discussion, it is clear that EMI immediately needs a strategic change so as to cop up with its current external business environment. Growth of online file sharing websites and increasing prevalence of music piracy necessitate this immediate strategic change. The firm has to thoughtfully plan and perform a change management programme so as to execute the proposed change within the estimated budget and time. The change may include the firm’s corporate strategy modification, which in turn would influence the company’s long term planning process and management decisions. In short, EMI must possess a flexible corporate strategy in order to comply with the changing trends in the digital competitive environment. References BBC News., 18 January 2000. Internet ‘transforms music industry’, [Online] Available at: [Accessed 14 July 2012]. Bhattacharjee, S, Gopal, R. D, Lertwachara, K, Marsden, J. R and Telang, R., 2007. The effect of digital sharing technologies on music markets: A survival analysis of albums on ranking charts, Management Science, 53(9), pp. 1359-1374. BBC News., 15 January 2008. Profile: British music giant EMI, [Online] Available at: [Accessed 14 July 2012]. Cimilluca, D and Colchester, M., 2011. Universal, Sony split up EMI group, The Wall Street Journal: Media & Marketing, [Online] Available at: [Accessed 14 July 2012]. EMI., n.d, [online] Available at: [Accessed 14 July 2012]. Gupta, P, Prakash, S and Jayaraman, U., 2010. It Infrastructure and its Management. New Delhi: Tata McGraw-Hill Education. Robbins, S. P, Coulter, M and Vohra, N., 2010. Management. India: Pearson Education India. Slack, T and Parent, M. M., 2005. Understanding Sport Organizations: The Application of Organization Theory. USA: Human Kinetics. Read More