Independent Music Company EMI - Case Study Example

Existing Strategy and the extent of its success Presently, EMI is the largest among the independent music companies of the world with its direct operations spread to over 50 nations, employing about 5000 people and achieving sales of approximately 2000 million pounds. This success does imply a strong business strategy operating in the background to make EMI what it is today. In what follows, we shall explore the strategy, resources, competences, strengths and weaknesses of EMI in as much detail as allowed by the scope of the present endeavor. EMI participates mainly in two types of operations for business purposes. First, EMI is a publisher of music. This business line involves acquiring the rights in musical compositions and profitably exploiting them. The other line of business is through production of recorded music. Everything related to this including operating studios, labels, distribution manufacturing, and new media production is undertaken. Over the past ten years EMI has adopted a multifaceted strategy that essentially strives to enhance market penetration for older products, introduce developed products in pre-existing markets, create new markets for older products and create a diversified spectrum of products that differ horizontally as well as vertically to capture and cater to a larger spectrum of consumers in newer markets. At the core of the EMI business strategy is vertical differentiation. EMI since its inception has looked to tie in the biggest names in the music industry. The EMI roster has included artists ranging from Nigel Kennedy, Sir Simon Rattle and Myleene Klass, to KT Tunstall, Lily Allen and Coldplay. This strategy of providing products that are qualitatively ranked in very high terms has along with the benefit of raising sales of the products featuring big names also led to a consumer perception of EMI as a publisher of high quality music which in turn has raised sales of products that feature new previously unheard of performers. Again, the EMI business strategy also includes horizontal product differentiation. EMI has classified different types of music under different labels to cater to customers found of some particular types of music, and sought to increase the number of classifications to increase the magnitude of customers that find their adored types of music being sold under the EMI brand name. The increasing number of such record labels includes huge names like EMI Classics, Capitol, Virgin, Capitol Nashville and Parlophone. This horizontal differentiation strategy has led to creation of large niche markets for EMI products. This aggregative business strategy of EMI has definitely been successful, a fact reflected in the well in the high transnational growth exhibited by the company. Further, the global music market is oligopolistic and EMI along with BMG music service, Universal music group and Sony Music account for approximately 75 percent of the market. However, a recent overall slowdown has been observed and with the piracy problem being intensified day by day, the music industry itself is going through rough times. Recently falling sales and mounting corporate debt statures of EMI essentially reflect these facts rather than wrong strategic choices. Sustainability of the competitive advantage The resources and competences of EMI lie primarily in its very strong line-up of artists and its ability in generating a very broad as well as deep repertoire respectively. The rights to some of the greatest music is owned by EMI and with successful and highly value enhancing vertical as well as horizontal integration activities, the generated competitive advantage appears to be sustainable. However, for this the problematic of music piracy has to be combated first. In fact all the music industry giants have significantly affected by the mounting amount of music piracy and in this environment, it does seem that the company that will be able to combat the piracy problem best will emerge with a sustainable competitive advantage over others. The pressure imposed due to piracy is perceptible in the restructuring that EMI underwent in 2002. HMV shares were floated in the market with the intent of using the income to reduce the corporate debt burden and facilitate expansion activities. There was a large amount of job cuts. More than 400 artists were shed off the roster. These structural changes were expected generate a bulk amount of savings that EMI exigently needed to efficiently employ to maintain its advantage. EMI, to combat piracy, while at the same time maintaining its esteemed status, has introduced technological enhancements into its production cycle. Consumers now have the option of directly downloading music from official websites legally after paying for the product. In fact apart from such downloadable formats, EMI has introduced burnable and portable formats as well. Empowering the consumer officially to copy and burn music although lowers the profitability of the concern it at the same time does significantly lower the lure of pirated material with similar options legally made viable. Consumers have now the opportunity of purchasing material as soon as they are debuted on the radio and even before the official release of the tracks. All these competent steps have significantly improved EMI’s situation and the advantage gained thus does seem to be sustainable, if the piracy quotient can be kept in check through future strategies. Adoption of newer technology remains essential in this pursuit. SWOT analysis The major strengths of EMI lie primarily in its artist roster which not only is world class from qualitative aspects but also covers a very broad spectrum of types so that the roster boasts of breadth in variety as well as coverage depth. Rights to a large share of the best produced music belong to the EMI catalogue. Vertical and horizontal integration activities have generated significant value and created entry barriers that ensure competitive advantage to EMI. From an investor’s point of view, EMI is associated with a considerably strong balance sheet and steady and stable cash flows. However, the company does have some weaknesses. Lack of up to date technological knowledge and capacities do constrain expansion activities as well as efficient diversification. Though consumer confidence is quite high for EMI products, it is yet to generate high brand name sustenance. EMI is respected as a company but does not yet have significantly high loyalty as a brand. A main reason for this is the lack of conglomerate support and backing for EMI. As already mentioned, the increasing penetration of piracy is the most serious threat facing EMI. The spreading dominance of internet sources such as Gnuttela, KaZaA, Piratebay, Demonoid etc are hugely affecting the music industry and its very survival is being challenged more by the day. Along with this the problem of an economic slowing down is also adversely affecting the concern. Substitutes of the products have also gained somewhat in popularity which is another area of concern. In fact, the dominance of the internet and digital music formats while being at the core of the piracy problem essentially offer music companies like EMI myriad opportunities. By using the internet to its true potential it is possible to gain a market share very quickly that is inconceivable if an equal spread is attempted physically. Newer technologies are offering immense opportunities. For instance, with newer storage devices now available with much greater capacities compared to CDs and DVDs, providing greater volumes of music in lower costs can be conceived. For instance, through the proper utilization of these devices, a number of anthologies can be served in a single device. With EMI’s superlative collection of music, publishing multiple anthologies of classic performers in single formats can be quite a value generating strategy. Other opportunities exist in allowing the customers to make customized compilations and purchase them. This can be utilized once more due to the great music repertoire of EMI. To adopt technological advances another option is to make music available for downloads to mobile phones as MP3s. In fact, collaborations with service providers can be mutually advantageous as well as value generating. References: Saloner, G., Shepard, A. & Joel Podolny (2000) Strategic Management 1st ed, Wiley Reid, A., Bebel, M.J., Lundvall, B., McGlade, A., LiPuma, T. & Forger, M., et al (2004) Inside the Minds: The Music Business – A Behind the scenes glimpse into the Music business, Aspatore Books Read More