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HMV Strategy Analysis
Citation preview
FORMERLY THE LOBLAW GROUP
1. KIRAN CHADARAM 2. NIANJIU LI
3. VI NGO 4. SEBASTIEN ROSNER
5. VARUN SHARMA 6. JEREMY WONG
1 1 © 2012 SGMT 6000
HMV GROUP SUBJECT TO CLASS PEER EVALUATION, SEE PROFESSOR TAN’S INSTRUCTIONS
33⅓ R.P.M.
company background
• First store opened in 1921 (London, England) • Public company; headquartered in England
• 252 stores (UK, Ireland, Singapore, and Hong Kong)
• Entertainment retail: music, film, games, and music accessories/technologies
• HMV Live: owns venues, organizes concerts and festivals
• HMV Digital: online music sale
strategic issue
• Industry structural changes: online delivery (Apple iTunes) • Price competition against supermarkets (Tesco) and online
retailers (Amazon)
• Seasonal; 1/3 of sales in December
• Declining sales, negative net income, financial distress
• Divesting Live business; sold HMV Canada and Waterstone (book retail chain)
Re-focus on in-store experience and bank on technology sales OR change strategic direction?
external environment
• Consumers shunning high street retail
• Online piracy + streaming vs. owning
• Online downloads and streaming (e.g. Spotify, Songza, Pandora) increasingly popular
• Proliferation of mobile and social media
• Poor economy and tight access to cash
• iDevices + accessories, headphones, etc. growth market
industry analysis
• Industry: Entertainment retail
• Last 5 years: revenue fell at 6.0% per year
• Next 5 years: market will shrink by 1.7% per year
• Key success factors: adoption of technology, online presence, relationship with suppliers, copyright protection
• Life cycle: CD/DVD à decline, video games à maturity
• Highly-concentrated: Tesco, Amazon, Apple, HMV
• Products are “made for the internet”
main competitors
• Tesco:
• Supermarket • Sells CDs and DVDs as loss leaders • Price competition
• Amazon:
• Online retail • Sells physical and digital, at lower prices, with reviews and
recommendations • Price competition & differentiated services
• Apple:
• Online and store retail • Biggest seller of music player and mp3s (iPod and iTunes) • Differentiated products
industry analysis
• Five Forces:
1
2
3
4
5 Suppliers
Substitutes
New Entrants Rivalry
Buyers
• Oligopoly of studios & record labels
• Store must stock popular items
• Legal downloads • Piracy • Online streaming
• Low fixed costs • Undifferentiated product • Online startups • Brand and marketing (barriers)
• Many players • Undifferentiated product
• Price competition • Online competition
• Low/no switch cost • Price sensitive
• Undifferentiated = no brand loyalty
industry analysis
• Five Forces:
1
2
3
4
5 Suppliers
Substitutes
New Entrants Rivalry
Buyers
• Oligopoly of studios & record labels
• Store must stock popular items
• Legal downloads • Piracy • Online streaming
• Low fixed costs • Undifferentiated product • Online startups • Brand and marketing (barriers)
• Many players • Undifferentiated product
• Price competition • Online competition
• Low/no switch cost • Price sensitive
• Undifferentiated = no brand loyalty
Inferences
from Porter
• Embrace new technology
• Consolidate with small players
• Focus on relationships
• Tackle changing landscape
• Must know how to sell old media
to new generations
internal environment
• Century-old brand, specialist reputation
• Industry experience (retail & live music)
• Solid relationship with artists, record labels, and studios
• Campaign and promotion experience
• Formerly owned by EMI; music in its DNA
• Laggard in the mp3 segment; not much success
value chain
Strong
• Marketing: brand • Procurement: artist and studio relations
• Sales: knowledgeable employees
• Operations: brick and mortar stores, locations Weak
• Technological Development: online presence
swot analysis
Strengths
• Established Brand • Great relationship with
artists, labels, and studios
• Industry expertise • Retail experience • Live events experience
Weaknesses
• Inadequate technological capability
• Inexperienced in online retail
• Seasonal business • Lack of cash
Opportunites
• Live concert streaming (untapped market)
• Niche markets (classical, jazz, audiophiles)
Threats
• Fierce competition • Changing consumer
preferences
alternative evaluation 1. Status Quo:
• Re-focus on core retail business and ride on growing technology sales; divest HMV Live
• Technology undifferentiated; future uncertain
2. Attack the Niche:
• Digital delivery of classical and jazz • Growing market of young listeners • Existing player: X5 Musical Group
3. Live Concert Streaming:
• Adapt to consumer preference for streaming • Uncontested market à first mover advantage • Leverage all strengths • No geographic barriers, revenue all year round • Will not cannibalize existing retail (studio-recorded)
recommendation 1. Status Quo:
• Re-focus on core retail business and ride on growing technology sales; divest HMV Live
• Technology undifferentiated; future uncertain
2. Attack the Niche:
• Digital delivery of classical and jazz • Growing market of young listeners • Existing player: X5 Musical Group
3. Live Concert Streaming:
• Adapt to consumer preference for streaming • Uncontested market à first mover advantage • Leverage all strengths • No geographic barriers, revenue all year round • Will not cannibalize existing retail (studio-recorded)
Unique
Position.
Awesome
Fit.
implementation
• Sell remaining venues to improve cash flow • Retain and revive HMV Live: keep talents who know the in’s
and out’s of running live concerts; maintain industry relations (artists and record labels)
• Negotiate and gain buy-in from artists and record labels
• Strategic alliances & joint ventures with small live streaming firms, e.g. Livestream.com, for missing technological capabilities (they need access to the labels)
• Synergy between retail and live business: share resources and capabilities (e.g. marketing, industry connections); develop cross-divisional teams
evaluation & control
• Cost may > revenue in the beginning; think long-term
• Monitor geographic and demographics trends
• Collect and analyze demand data; provide it to suppliers
• Make sure it does not hurt ticket sales, as implicitly promised
• Exit strategy: sell rights to or partner with Microsoft for its war against Apple? (Remember the Zune?)