International business strategy of spotify from 2011 until now

In an era marked by the digital revolution and changing consumer preferences, Spotify recognized the need to expand its reach beyond its home market. The companys international business strategy has played a pivotal role in driving its growth and establishing a strong presence in numerous countries worldwide. The purpose of this report is to provide a comprehensive analysis of Spotifys international business strategy, focusing on its evolution from 2011 to the present. Spotify, a trailblazer in the music streaming industry, has embarked on a remarkable journey of global expansion during this period, strategically positioning itself as a frontrunner in the highly competitive global music market. This report aims to delve into the key factors that have influenced Spotifys international success, including its market entry strategies, strategic decisions, and initiatives taken to adapt to diverse cultural landscapes. By examining Spotifys trajectory, this report seeks to provide valuable insights into the effectiveness of its international business strategy and its impact on the global music industry. The analysis presented in this report will not only shed light on Spotifys approach to internationalization but also offer a comprehensive understanding of the challenges faced and the strategies employed to overcome them. Additionally, the report will explore the competitive positioning of Spotify in the global market, highlighting its partnerships and collaborations that have strengthened its global presence. By the end of this report, readers will gain a deeper appreciation of Spotifys international business strategy, its significance in the music streaming industry, and its potential for continued success in the future.

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS 000 - MIDTERM ASSIGNMENT SUBJECT: INTERNATIONAL BUSINESS TOPIC: INTERNATIONAL BUSINESS STRATEGY OF SPOTIFY FROM 2011 UNTIL NOW Group: - Class code: KDOE30 Lecturer: PhD Nguyen Hong Hanh Hanoi, June 2023 TABLE OF CONTENTS INTRODUCTION CHAPTER GENERAL OVERVIEW OF SPOTIFY 1.1 General Introduction 1.2 History .2 1.3 Mission, Vision, Core value 1.4 Organizational structure CHAPTER ANALYSIS OF SPOTIFY'S INTERNATIONAL BUSINESS STRATEGY: STANDARDIZATION STRATEGY 2.1 Analysis of Spotify's value chain model 2.1.1 Primary Activities 2.1.2 Support Activities 2.1.3 Conclusion .11 2.2 The reasons for choosing the Standardization strategy 11 2.2.1 Competitive advantages and core value of Spotify .11 2.2.2 SWOT analysis of Spotify .14 2.2.3 Competitive pressure of Spotify 17 2.2.4 The appropriation of the strategy based on the characteristics of the market 18 2.3 Measurement of Success and Impact 19 2.3.1 Evaluation of key performance indicators (KPIs) used to assess the effectiveness of Spotify's Standardization strategy 19 2.3.2 The reason why Spotify becomes the most successful streaming service .24 2.3.3 Limitations of strategy 25 CONCLUSION 27 REFERENCES 28 LIST OF FIGURES Figure 1: Spotify quarterly revenue Figure 2: Spotify annual number of users Figure 3: Spotify Monthly active user growth .7 Figure 4: The Tribe model 10 Figure 5: Global streaming music subscription market 19 Figure 7: Monthly active users of Spotify 20 Figure 7: Spotify’s net income/ loss from 2009 to 2022 .22 LIST OF TABLES Table 1: Spotify VRIO Analysis 13 Table 2: Net revenue of Spotify from each source from 2016 to 2022 21 Table 3: Average revenue per user 23 INTRODUCTION In an era marked by the digital revolution and changing consumer preferences, Spotify recognized the need to expand its reach beyond its home market The company's international business strategy has played a pivotal role in driving its growth and establishing a strong presence in numerous countries worldwide The purpose of this report is to provide a comprehensive analysis of Spotify's international business strategy, focusing on its evolution from 2011 to the present Spotify, a trailblazer in the music streaming industry, has embarked on a remarkable journey of global expansion during this period, strategically positioning itself as a frontrunner in the highly competitive global music market This report aims to delve into the key factors that have influenced Spotify's international success, including its market entry strategies, strategic decisions, and initiatives taken to adapt to diverse cultural landscapes By examining Spotify's trajectory, this report seeks to provide valuable insights into the effectiveness of its international business strategy and its impact on the global music industry The analysis presented in this report will not only shed light on Spotify's approach to internationalization but also offer a comprehensive understanding of the challenges faced and the strategies employed to overcome them Additionally, the report will explore the competitive positioning of Spotify in the global market, highlighting its partnerships and collaborations that have strengthened its global presence By the end of this report, readers will gain a deeper appreciation of Spotify's international business strategy, its significance in the music streaming industry, and its potential for continued success in the future CHAPTER GENERAL OVERVIEW OF SPOTIFY 1.1 General Introduction Spotify is a digital music, podcast, and video streaming service that gives users access to millions of songs and other content from creators all over the world Spotify is available in over 180 markets and offers both free and premium subscriptions Free users can listen to music with ads, while premium users can listen to music ad-free and with higher quality audio Spotify also offers a variety of features that allow users to discover new music, create and share playlists, and listen to music on different devices 1.2 History Spotify was founded in April 2006 in Stockholm, Sweden, by Daniel Ek and Martin Lorentzon Initially, Spotify started as a small startup and faced initial challenges in securing licensing agreements with major music labels However, after its launch in 2008, it gained popularity, particularly in Europe, and gradually expanded its reach to other parts of the world It introduced innovative features like personalized playlists, Discover Weekly, and algorithmic recommendations, which contributed to its rapid growth and user engagement Figure 1: Spotify quarterly revenue Source: Businessofapps From 2016 to 2023, Spotify's quarterly revenue showed a steady growth trajectory, highlighting the platform's increasing popularity and success in the music streaming industry, reflecting its dominance in the music streaming industry In 2011, Spotify entered the United States market, marking a significant milestone in its international expansion Spotify is listed on the New York Stock Exchange As of 2023, Spotify has over 515 million monthly active users, including over 210 million paying subscribers Spotify has grown rapidly since its launch, and it is now one of the most popular music streaming services in the world Figure 2: Spotify annual number of users Source: Businessofapps Spotify's annual user base experienced impressive growth from 2015 to 2023, solidifying its position as a major player in the music streaming industry 1.3 Mission, Vision, Core value  Mission: Spotify's mission is to "unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it."  Vision: Spotify's vision is to "be the most listened to audio platform in the world", to provide the best music streaming experience for users, ensuring they have access to the right music or audio content for every moment, on any device, wherever they are  Core value: Spotify has emphasized several core values: - Artists first: Spotify believes that artists are the foundation of its business, and it is committed to supporting them - Data-driven: Spotify uses data to understand its users and to create a personalized music experience for them - Open platform: Spotify is an open platform that allows third-party developers to create applications that can be hosted within the Spotify software - Simple and easy to use: Spotify is designed to be simple and easy to use, so that users can focus on enjoying music 1.4 Organizational structure Spotify's organizational structure can be described as a matrix structure with crossfunctional teams and a strong focus on autonomy and collaboration The company uses a system of "squads, tribes, chapters, and guilds" to organize its employees Squads are small, cross-functional teams that are responsible for a specific product or feature They typically consist of 6-12 people from different disciplines, such as engineering, design, and product management Tribes are a group of squads that are focused on a common area of work, such as product development or marketing Tribes are led by a tribe lead, who is responsible for ensuring that the squads within the tribe are aligned and working towards the same goals Chapters are groups of people who share a common skill set, such as engineering or design Chapters are led by a chapter lead, who is responsible for providing support and resources to the members of the chapter Guilds are groups of people who share an interest in a particular topic, such as machine learning or user experience Guilds are led by a guild lead, who is responsible for organizing events and meetups for the members of the guild This system of organizing employees allows Spotify to be agile and responsive to change It also allows employees to work on projects that they are passionate about and to collaborate with people from different disciplines CHAPTER ANALYSIS OF SPOTIFY'S INTERNATIONAL BUSINESS STRATEGY: STANDARDIZATION STRATEGY 2.1 Analysis of Spotify's value chain model 2.1.1 Primary Activities  Inbound Logistics: In the case of Spotify, as a digital streaming platform, their inbound logistics primarily involve the acquisition and distribution of music content from record labels, artists, and other content providers - Content Acquisition: Spotify secures licensing agreements with record labels, artists, and content creators to obtain a vast library of music and audio content As Spotify expanded its user base and global reach, it entered into licensing agreements with major record labels and music publishers to ensure a comprehensive music library for its users - Data Management: Incoming data related to user preferences, listening habits, and metadata is retrieved and organized to enhance the recommendation system and improve user experience The standardized inbound logistics processes allow Spotify to streamline operations, ensure consistent quality of content, and leverage economies of scale By centralizing many of their inbound logistics activities, Spotify can efficiently manage and distribute music content across various markets, providing users with a standardized experience regardless of their location  Operations Spotify's operations in different markets involve a range of activities and processes necessary for the functioning of their digital music streaming platform While there may be variations based on market characteristics, customer preferences, cultural nuances, and competition, Spotify applies certain strategies consistently across all countries - Personalization: With Spotify, users can create a personalized profile by picking their favorite artists or songs and adding them to their music library or playlists Spotify’s algorithm is designed to recommend songs that align with a user’s interests, tastes, and preferences, based on previous selections - Content Management: Once the music is acquired, Spotify's operations include organizing and managing the content within their platform This involves categorizing songs, albums, and playlists, assigning metadata (such as artist, genre, release date), and creating a user-friendly interface for users to navigate and discover music - Content Delivery and Streaming: Spotify's operations revolve around delivering music content to its users in real-time through streaming This involves building and maintaining a robust infrastructure of servers and networks that can handle the demands of streaming music to millions of users simultaneously  Outbound Logistics The outbound operations of Spotify involve activities related to delivering services and content to users, as well as engaging with customers and maintaining ongoing relationships Spotify utilizes various distribution channels to deliver music and audio content to its global user base Its primary distribution channel is its website, which serves as a hub for users, artists, developers, advertisers, investors, and vendors The website plays a significant role in acquiring new customers for Spotify In addition to the website, Spotify has developed mobile apps for both Android and iOS operating systems These mobile apps cater to the diverse needs of its consumers For users, there is the "Spotify: Play Trending Music" app, while podcasters can utilize the "Anchor" app Artists have access to the "Spotify for Artists" app, which caters to their specific needs, and the "Soundtrap Studio" app enables recording capabilities Furthermore, Spotify has introduced the "Spotify Live" app, facilitating interactions between artists/podcasters and their fans One of Spotify's key value-add activities in the distribution area is allowing users to seamlessly switch between different devices Users can start playing a song on one device and continue where they left off on another device Premium users can even listen to a song simultaneously on multiple devices This flexibility and synchronization contribute to a userfriendly and intuitive experience, enhancing Spotify's value proposition By leveraging its website, mobile apps, and synchronization capabilities, Spotify optimizes its distribution strategy to reach a wide range of users and cater to their specific needs, ultimately enhancing the overall music listening experience  Marketing and Sales - Marketing: Spotify focused on providing a high-quality service to its users, which has helped to drive word-of-mouth as a marketing strategy and create a loyal user base Let’s take a look at some of the critical features of Spotify marketing strategy that helped the platform reach the top: - Freemium Model: The freemium model is an integral part of Spotify's marketing strategy It allows users to listen to music without paying any subscription fees, addressing the issue of music piracy that the founders aimed to combat This approach not only increases Spotify's user base but also generates word-of-mouth referrals, acting as free marketing by users Spotify also made the most of this feature to promote ads in between to keep coercing the users consciously or subconsciously to sign up for premium to listen to music without any ad breaks This unique marketing hack helped it boost its subscriber base around the world