Live Nation Strategy Analysis - Case Study Example

Live Nation Strategy Analysis Introduction With constant development in technology, the current music industry has witnessed a sea of change in its operations. The case study on Live Nations conforms to strategies used by large multinationals in present scenario in order to grow and expand. The strategies include competitive advantage strategies, strategic capabilities and growth strategies. Live Nations is a premier player in the live concert area. Its main businesses is organizing live concerts in different parts of the world, managing the tours of music artists performing in these live concerts and providing customers an easy access to the same. The company is now diversifying into managing the entire business of music artists, their recordings, sale of albums and merchandise as well as other activities. In this study, the market position of Live Nations has been established with respect to current music industry. The strategic capabilities and competitive advantages of the company will be discussed in detail, along with growth strategies of Live Nations. The strategies of the company will also be discussed in relation to Bowman`s Strategy clock so as to understand its basic strategies. Analysis The future of music industry will be governed by new technology, which constantly changes with time. The manner in which consumers nowadays search and obtain music has undergone massive changes from earlier method of music acquisition. With older methods of music acquisition being proved ineffective, large entertainment companies are planning to modify the platform of locating, promoting and selling artists. The propagating cause of such major changes is not merely new technology, rather it is a complex scenario stemmed from political, economic, social and technological factors (Choo and Bontis, 2002). Individuals are able to build and maintain a global network spread worldwide by means of the internet, which is bridging gaps and helping cultures to digitally cross borders. This allows consumers to access a diverse range of music. Hence, in the present scenario, one’s access to music is not limited to the local music store. PESTLE Framework The music industry is not a sector that is directly affected by political decisions. Availability of public funding often affects existence of certain forms of music such as, classical and opera, owing to dependence on such funds. The greatest problem in contemporary music industry is piracy (Priem and Butler, 2001). Currently, the music industry is lobbying with governments of various states in order to introduce stronger legislation for curbing piracy. Some musicians have also taken a political stand artistically. The youth, which is shifting away from politics, has taken a stance globally over social media. In general, there is no direct relation or specific connection between demand of music and macro-economy of any country. In addition, the economics of music are intertwined with that of broader leisure. Recently, consumers are buying and listening music by way of internet-related activities and the economics of internet based music market is significantly different from traditional music marketing models. In sharp contrast to political and economic factors, social factors with respect to the music industry are highly essential. One of the important social changes to have affected the music industry has emerged from development of the youth market. The emergence of a new affluent consumer sector called teenagers after World War II had created an entirely new market for music in the 1950s and 1960s (Hitt, Ireland and Hoskisson, 2012). In 1970s, a serious approach to music surfaced in the society called progressive rock, which was mainly driven by the youth sector. It was the era of albums and pop artists. Moreover, this golden decade of popular music and singles was also boosted by emergence of glam rock, punk and disco, which produced numerous best-selling albums of all time. In 1980s and 1990s, attention of consumers was diverted towards video and multi-channel television. Finally, home computing came into existence in latter part of 1990s and the trend of exposure to music through personal computers started to gain popularity. The social reality of the music market in present scenario is that of division of the youth sector into ‘youth tribes’, with each tribe favoring their own type of music. International social influences have also affected the music industry. The major examples are the Afro-American culture music, which ranges from jazz to modern R&B and hip-hop. Dancing is the social partner of music industry and acts a complimentary aspect. Number of dancehalls was seen to decline after the introduction of television. The figures recovered with rise of disco in 1970s, faded away in the 1980s and then rebounded again with the ‘rave’ music culture in 1990s. The rise of nightclubs and television talent shows in 2000s has again brought back the culture of dance, thereby reviving the music industry too. Technology is the key factor, which influences the music industry in the 21st century. With development of technology and home computing, entire nature of the music company has changed. On one hand, this has allowed consumers to have better access to music and has reduced the cost of music production companies; on the other hand, this has led to tremendous increase in piracy (Ichijo, K., 2006). It has also made the industry more competitive with a declining cost of music production and artists being able to sell or promote their work from the comfort of their homes without major investments. The MP3 format that is enabled on home computers is used by consumers to share music and with the introduction of i-tunes, Apple Inc is now dominating the trends of sharing music through new technical gadgets like, iPod and iPhone, which allows users to create playlists and share personal collections of music or videos. Strategic Capability Strategic capability deals with the ability of a business in successfully employing competitive strategies, which facilitates its survival and increase in value with time. While strategic capabilities do take account of the strategies that a business utilizes, it mostly focuses on assets of organizations, their resources and position in the market, which indicates the extent to which they will be able to employ strategies in future (Barney and Clark, 2007). There is no particular method or metric that is followed universally, that measures or notes strategic capability. The strategic capability of a business is one of the major components to remain financially viable and to grow despite presence of competitors in the market. Many organizations and individuals are interested to measure and track their strategic capability and that of their competitors. These include investors, who aspire to invest their money in businesses, which have reasonable chances of success in future. Employees are also interested in strategic capability as it identifies businesses that are unstable and likely to go under or those businesses that want to cut costs by laying-off employees. Businesses monitor strategic capability of their own as well as of their competitors to properly understand the markets where they operate. The financial analysts and regulators of government agencies also have interests in the strategic capability of businesses as it plays a major role in the valuation and monitoring of businesses. Competitive Advantage A competitive advantage is a strategic management concept, which implies that an advantage over competitors of any business is gained by giving consumers the value they need, either by lowering prices or providing benefits and service that justifies higher prices. Porter gave four "generic" business strategies, which can be adopted to gain a competitive advantage. The strategy of differentiation focus and cost focus strategy is adopted in market so as to achieve competitive advantage by a company. With the strategy of cost leadership, objective of business is to become one the lowest-cost producer in the market. The traditional method in achieving this objective is through production on a very large scale, which helps businesses to exploit the economies of scale and thus, reduce price. Many producers of goods and services present in market supply goods or services to customers with the emphasis on reducing costs. If the selling price so achieved is equal or even near to the average price in market, then producer with the lowest cost will earn maximum profits. This strategy is usually used by businesses, which offer standard products at a large scale with relatively or almost no differentiation; but is readily acceptable in the market (Gulati, 2007). Occasionally, a business with low-cost products or services can discount its products and services so as to maximize sales, provided it has a large cost advantage over competitors. This helps to increase the market share. The cost leadership strategy can be achieved through close cooperation of main functional areas of the business. Some of the strategies that can be utilized are high productivity, high capacity utilization, bargaining for the lowest priced raw materials for production, lean production methods, use of advanced technology and usage of effective distribution channels. The strategy of cost leadership is used by Live Nations by way of providing a low cost single window option to all music artists for managing their marketing portfolio. The company offers low cost solution through management of all forms of businesses of music artists, thereby helping artist to save on commissions, which had to be paid to separate agencies they hired for managing business affairs. Another strategy to gain competitive advantage is the differentiation focus strategy, wherein the business aims to differentiate its products or services in a few target market segments. The customer needs of a segment are served by the business in contrast to competitors who target a larger group of customers (Winter, 2003). The important issue in adoption of such a strategy is to ensure that needs and wants of the customers is properly identified and then met through customized products and services. Many businesses establish and cater to a niche market segment with this strategy by commanding higher prices than other products, which are un-differentiated. Through this strategy, customers are convinced to pay a premium for the customized higher quality products and services produced for them. Some of the methods to implement this strategy include providing superior product and service quality in terms of benefits, features, reliability and durability; strong branding initiatives leading to strong brand loyalty; establishing an extensive distribution in all major channels and good promotion of produced goods and services (Hult, Ketchen and Arrfelt, 2007). Live Nations also uses the differentiation strategy to cater to needs of the targeted customer segment, which consists of teenagers and young professionals who love to attend or view live music performances. Through its online sales of live concerts, the company has created a niche for itself in the music industry. Bowman`s Strategy Clock Figure 1 (Source: Voropajeva, 2012) Bowman’s Strategy clock suggests that there are eight strategies, which are represented by the clock. These strategies can be further grouped into three types of strategies, low price strategies, differentiation strategies and risk strategies (Hill and Jones, 2008). Differentiation strategy provides consumers with an added value that is related to design of the product and increase in functionality or other attributes, which are valued by the customer. The businesses generally use differentiation strategy while targeting a particular customer segment. The customers generally pay a premium for such differentiated products and services as these are particularly customized for respective customer segments. The consumers pay an enhanced price of the product or service if the same is able to effectively reflect the social status of prospective customers. Live Nations employs this strategy by providing concert tickets online to targeted market segment, which consists of youth who are teenagers or young adults. The artists are also provided with the unique value proposition of managing their entire business under a single roof. These added and unique market offerings help Live Nations to distinguish itself from other music companies. The increased price strategy is generally practiced in markets that have no competition or are monopolistic in nature (Chrisman, Chua and Sharma, 2005). If there is only one player in the market, then it can charge high prices from consumers even if the actual and perceived value of offered services or products is very low. Live Nations does not follow this strategy as it operates in a free market with a number of players present in the industry, which provide similar offerings. Another strategy of the Bowman’s Strategy clock is the low price strategy. In this strategy, companies offer goods and services at lower price than their competitors, mainly because of their low cost of production or economies of scale. The companies who apply this strategy maintain low price so as to stay ahead of their competitors. This strategy is risky especially due to presence of low profit margins and little resources for innovation, research and development. The last strategy is defined as no-frills strategy, which serves customer segments whose demand for the services or products benefits is low. No-frills strategy aspires to fulfill needs of the consumers in a manner which involves the least amount of inconvenience (Ireland, Hitt and Sexton, 2001). Live Nations utilizes this strategy by providing the artists with a single window for management of their concerts, tours and recording businesses. This provides an effortless service to all music artists for conducting their business. Growth Strategy The growth strategies utilized by Live Nations are threefold. The first growth strategy is concentration. Through this strategy, Live Nations concentrates on its existing market of managing tours for the music artists and organizing live concerts. The target segment or the youth who are music fans can buy tickets to concerts online. Live Nations is presently focusing on the present business of organizing live music concerts throughout the world. Integration is the second growth strategy. Live Nations is integrating all aspects of managing business of music artists. It is venturing into managing the sale and recording of music as well as merchandise endorsed by music artists. The final growth strategy is diversification. Live Nations has diversified into business management from organizing live concerts worldwide. The company is offering services ranging from managing the recording services for music artists to complete functional business management of artists. Conclusion Several critical strategic management concepts were understood and analyzed from this study of Live Nations. The concept of PESTLE was considered with respect to the music industry and position of Live Nations. The competitive strategies employed by Live Nations in order to stay ahead of its competitors were also recognized and examined. In addition, growth strategies that are supporting the company’s growth in current music industry were discussed. The strategic capabilities of Live Nations were also elaborated in detail. The basic strategies of Live Nations were explained through the Bowman’s Strategy Clock framework. Therefore, this study has been able to effectively foreground major strategies that are used by a large music industry stalwart. Reference List Barney, J. B. and Clark, D. N., 2007. Resource-based theory: Creating and sustaining competitive advantage. Oxford: Oxford University Press. Choo, C. 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