Spotifys strategic analyze

Bài phân tích về 5 forces và SWOT của Spotify Online music streaming services are one of the most popular music consumption trends today. Instead of downloading or purchasing music, users can access online music streaming platforms to listen to music from any internetconnected device. Among these, Spotify has emerged as a major player in the music industry, considered one of the leading online music streaming services worldwide. This report will include an analysis of Spotify Technology SA that examines the SWOT, Porters 5 Forces that impact the company

INDIVIDUAL ASSIGNMENT 1 INTERNATIONAL BUSINESS STRATEGY

SPOTIFY TECHNOLOGY SA

COMPANYGROUP’S MEMBER: Quach Dinh Nam HS170815

Nguyen Thi Thuy Trang HS173032 Nguyen Bao Giang HS173237 Phung Phuong Thanh HS180026

Vu Thu Huong HS173147 Luong Thi Hong Nhung HS179017 CLASS: IB1715

LECTURE: Bui Thuy Duong

COURSE: IBS301m

TABLE OF CONTENT

I INTRODUCTION- Nguyen Thi Thuy Trang

II BODY

1 Background of Spotify Technology SA Company - Vu Thu Huong

● Basic information of the company

● Core value

● Mission, vision

2 Determine level/scope to analysis 5 forces - Vu Thu Huong

3 Analysis SWOT of Spotify Technology SA Company

● Strengths - Nguyen Bao Giang

● Weaknesses - Nguyen Bao Giang

● Opportunities - Luong Thi Hong Nhung

● Threats - Luong Thi Hong Nhung

4 Porter’s 5 Forces Analysis

● Threat of new entry - Phung Phuong Thanh

● Bargaining power of buyers - Phung Phuong Thanh

● Bargaining power of suppliers - Nguyen Thi Thuy Trang

● Threat of substitute - Nguyen Thi Thuy Trang

● Threat of rivalries - Quach Dinh Nam

III CONCLUSIONS- Quach Dinh Nam

IV REFERENCES -Quach Dinh Nam

Vu Thu Huong

Nguyen Bao Giang

Luong Thi Hong Nhung

Phung Phuong Thanh

Nguyen Thi Thuy Trang

Quach Dinh Nam

Vu Thu

Huong

Spotify Technology SA based in Stockholm, Sweden, was created in 2006 by Daniel Ek andMartin Lorentzon as a provider of online music and media streaming Spotify's majorservices include music, digital video, and podcasts, which provide users with access tomillions of songs and other material from producers all over the world Spotify is currentlyavailable in the majority of European nations, as well as the United States, Australia, NewZealand, and portions of Asia.

b, Core Value [ 2 ]

Spotify’s core values include “passionate, innovative, sincere, collaborative, and playful.”These values are what the corporation considers as the guiding principles that keepeverything within the expectations of the management They also ensure the success of themission and vision statement by ensuring everyone stays realigned to the goals and objectives

The mission statement of Spotify is based upon the idea, which is as follows:

“We envision a cultural platform where professional creators can break free of their medium’sconstraints and where everyone can enjoy an immersive artistic experience that enables us toempathize with each other and to feel part of a greater whole.”

2. Determine level/scope to analyze 5 forces - Vu Thu Huong

Spotify now allows more listeners than ever before to find, manage, and enjoy over 100million music, 5 million podcast items, and 350,000 audiobooks on demand They are theworld's most popular audio streaming subscription service, with over 574 million users and

226 million customers in over 180 regions With this report, to better analyze the 5 forcesAnalysis, our group is aiming at the global scope

3. Analysis SWOT of Spotify Technology SA Company

a, Strengths

Brand Reputation: With a strong brand reputation, Spotify has become a market leader in themusic stream market Customers, market share, catalog quality, and long-term stability allplay a role in making it popular It’s the world’s most popular audio streaming subscriptionservice with over 574 million users in over 180 markets [5] The brand value of Spotify hasrisen continuously in recent years and had a net worth of 11,114 million dollars in 2023 [6]

Early Mover: is one of the earliest companies that entered the music streaming field (from2006) This provides them a huge advantage over the newcomers in this industry They knowthe market and customers better, and from that earned this position through providing highlyrated music services It has gained a high market share

Personalized user experience: Spotify spends about 1,387 million dollars on research anddevelopment [7] It employs a variety of algorithms, including data-sifting technology,

artificial intelligence, and machine learning Allows the platform to provide highly

personalized content recommendations for users based on their listening habits This featuregives them the potential to form relationships and create bonds between brand and customer.One of the special features of personalized user experience is Spotify Wrapped - which usescustomer listening history to create a personalized summary of what they've been listening tothroughout the year It usually includes a user's 5 favored artists, most listened-to songs, theirfavorite genres, and top podcasts This campaign becomes a “weapon” that helps this

platform hit up the social network each year

Freemium model: Spotify’s freemium model allows it to attract a wide range of users byoffering both a free, ad-supported tier and a premium, subscription-based tier This model isconsidered a competitive advantage that helps this brand differentiate itself from other

competitors in the market Statistics show that with nearly half of users choosing the freeversion, Spotify can still generate revenue based on ads on the platform Besides, the

freemium business model has also proven its effectiveness by creating a conversion rate fromfree to paid users of up to 46% for this platform [8]

Highly effective localized pricing strategy: Spotify employs a localized pricing strategy inwhich fees across different subscription tiers vary per country As of end-2022, the lowestprices for a monthly individual premium subscription can be found in emerging markets atjust below $2, while the highest prices are above $20, found in Europe [9].

b, Weaknesses

High royalty cost: A significant earning of Spotify’s revenue goes towards royalty payments.For example, the publishers, composers, copyright holders, record labels, etc These costs canimpact the company’s profitability and limit its ability to invest in other areas, such as contentacquisition and technology development According to Statista, Spotify paid out 75% of itsrevenue in royalties [10]

Limited revenue streams: Spotify only has two reportable revenue streams, its PremiumService and Ad-Support Service While the freemium model has successfully attracted users

to the platform, converting free users to paying subscribers can be challenging Furthermore,the ad-supported tier’s revenue per user is significantly lower than that of premium

subscribers, limiting the overall revenue potential from the free user base Although revenuesacross these two segments continue to grow year-over-year [11] the lack of other sourcescould be detrimental to Spotify in the long run It makes the company vulnerable to

unpredictable changes in its sources of revenue, such as a potential decrease in the number ofpaying subscribers or a decline in ad spending due to an economic downturn

Regional restrictions: Spotify’s regional restrictions can be a drawback for users, as theavailability of features and content may vary based on their geographical location Certaincountries may have limited access to specific features, such as podcasts, or may face delays

in releasing new music due to licensing agreements and regional restrictions, creating anuneven user experience globally

Lack of competitive differentiation: Despite Spotify's commanding position in the streamingmusic market, the company lacks anything that might be termed a differentiating feature.Spotify's services, platform structure, and other characteristics are almost the same; thecompany does not provide anything unique or different The only differentiating traits arebrand reputation and premium features, which may change at any moment

c, Opportunities

Expanding into new markets: Because Spotify operates globally, the company has yet to fullycapitalize on a number of markets Spotify can keep broadening its footprint in developingnations and areas where the use of music streaming services is continuously increasing Thecompany may be able to produce more income and users as a result of this expansion

Additionally, Spotify has a lot of chances in the music industry because of its brand Success

in the upcoming years may depend on the adoption of novel company techniques [12]

Video release: Spotify has been able to expand its services into new categories like podcastsand audiobooks and offer a better listening experience because of its focus on research anddevelopment To preserve its current user base, draw in new clients, and diversify its revenuestreams, the business can still expand Music videos present yet another area for

development As of right now, the only videos available to viewers are relatively large onesthat repeat while playing If full-length videos are added to this function, customers won'thave to utilize another streaming site like Youtube to watch music videos—instead they canstay on the Spotify platform

Endorsements: Influencers and celebrities have a sizable fan base, and their endorsements aid

a company in growing its market Britney Spears, Justin Bieber, and Barack Obama have allbacked Spotify and given followers access to their personal playlists Influencers will supportthe business more often as the music streaming market becomes more competitive

Live content integration: In July 2020, Spotify launched as a video podcast to join the videostreaming market However, the market for online video streaming is extremely competitive,

so the platform must work really hard to establish its reputation and draw in new consumers.Spotify has a big chance to improve user experience and give a sense of immediacy by

integrating live content By offering live radio, listeners can participate in interactive

programs, follow broadcasts in real time, and stay up to date on audio events, interviews, andnews new music [16]

Additionally, customers will be able to virtually attend live performances, increase access toexclusive shows, and have a more engaging experience thanks to live streaming of concertsand events User retention and engagement on the platform may rise as a result of this directcontent integration.

d, Threats

Fierce competition: Spotify's market position is seriously threatened by the intense

competition in the music streaming space Rivals with substantial financial resources andsteady user bases, such as Apple Music, Amazon Music, and YouTube Music, are able tomake investments in marketing, original content, and technology breakthroughs Spotify mustconstantly innovate and set itself apart from the competition to draw in new customers andkeep existing ones Furthermore, if Spotify can't properly compete and adjust to changingcustomer preferences, it runs the danger of losing market share and growth prospects as theserival platforms keep improving and expanding their offers

Negotiate copyright fees: Negotiations over royalty rates pose a serious concern as well Anyappreciable rise in royalties might have a big effect on Spotify's finances because the

streaming service depends on licensing deals with record labels and copyright holders

Spotify may experience financial pressure that necessitates changes, such boosting

subscription pricing to preserve profitability, if music license costs rise noticeably However,

if customers believe the service is less affordable than other platforms, higher subscriptioncosts may drive away customers

Illegal streaming and piracy: Another concern is illicit streaming and piracy The ease withwhich users can obtain copyrighted music for free through illicit channels will erode theappeal of paying subscriptions and make it more difficult for Spotify to make money off ofthe service Because pirated music is so widely available, there may be a decline in the

market for legitimate streaming services, which could lead to customers quitting or not usingSpotify at all Typically in 2022, more than 80% of respondents used pirated content [33]

As a result, Spotify needs to keep up its efforts to stop copyright violations, fight piracy, andinform consumers about the value of supporting artists by using authorized streaming

services Only YouTube is more susceptible to piracy attempts than Spotify The artist and theplatform gain nothing when people are able to download music and keep listening to it

offline They'll transfer their music to more secure and safe platforms [15]

Consumers’ ever-shifting media consumption behavior: Spotify has competition from

numerous other media platforms in addition to other major music streaming companies forusers' ever-diminishing attention spans These include social media sites like Facebook,Twitter, Instagram, and TikTok; gaming platforms and consoles like Steam, Nintendo Switch,

Sony Playstation, and Microsoft Xbox; and video streaming services like Netflix, YouTube,and Twitch.

Users between the ages of 18 and 64 spend an average of one hour and two minutes per daylistening to music on streaming services like Spotify and one hour and two minutes per daylistening to podcasts, according to We Are Social and Meltwater's Digital 2023 research [14].These figures, meanwhile, are insignificant when compared to the amount of time spentstreaming or viewing TV In order to offer fresh experiences, services, or content that candraw in and even retain more customers, Spotify must thus keep up its innovative streak.Economic uncertainty: Consumer spending may be impacted by economic downturns orglobal economic uncertainty, which could result in decreased advertising expenditures, lowersubscription rates, or more price-sensitive customers These elements may have a detrimentaleffect on Spotify's earnings and future growth

4. 5 Forces Analysis

The global music streaming industry is ruled by industry giants like Spotify, Apple, Amazon,Google, and Tencent In 2022, Spotify claimed the top market share by subscribers with 188million subscribers, comprising 32.10% of the market, followed by Apple Music, TencentMusic, Youtube Music, and Amazon Music These industry giants collectively commandover 80% of the market share [17], leaving little room for new entrants to establish afoothold.

New entrants face the first barrier is high sunk costs that are crucial for Research andDevelopment (R&D) in platform development The need for an innovative and differentiatedplatform is crucial, yet the investments made by industry leaders in new services, features,technology in platforms make it challenging for newcomers to compete on the same level[18] Marketing and promotion, vital components for gaining market share, are furthercomplicated by the established players' existing customer bases and competitive subscriptionfees, including offering free trial offers, creating a high barrier for entry Salaries for generaland administrative purposes, especially for experts, researchers, and programmers, add to thefinancial burden for new entrants

Secondly, the competitive advantage held by incumbents is underscored by their extensivepatent portfolios For example, with Spotify alone securing 1110 patents globally, whichbelong to 449 unique patent families and 965 patents are still active [19] Pioneering brandslike Spotify hold sway, benefiting from current reputation and pre-commitment contracts thatsecure top-quality content from leading record labels, distributors, and aggregators likeUniversal Music Group, Sony Music Entertainment, Warner Music Group, and Music andEntertainment Rights Licensing Independent Network [20] Furthermore, Apple, Google,and Amazon's ownership of application store platforms, coupled with their ability to chargein-application purchase fees, creates a distinct competitive advantage