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strategy analysis
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 GROUPSUBJECT 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 EntrantsRivalry
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 EntrantsRivalry
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
low high
lowhigh
Relative Market Share
MarketGrowth
?
moo.
implementation
low high
lowhigh
Relative Market Share
MarketGrowth
?
moo.
moo?
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?)
thank you.
(sorry, no encores)

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HMV Transforms with Live Concert Streaming

  • 2. 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 GROUPSUBJECT TO CLASS PEER EVALUATION, SEE PROFESSOR TAN’S INSTRUCTIONS 33⅓ R.P.M.
  • 3. 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
  • 4. 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?
  • 5. 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
  • 6. 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”
  • 7. 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
  • 8. industry analysis •  Five Forces: 1 2 3 4 5 Suppliers Substitutes New EntrantsRivalry 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
  • 9. industry analysis •  Five Forces: 1 2 3 4 5 Suppliers Substitutes New EntrantsRivalry 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
  • 10. 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
  • 11. value chain Strong •  Marketing: brand •  Procurement: artist and studio relations •  Sales: knowledgeable employees •  Operations: brick and mortar stores, locations Weak •  Technological Development: online presence
  • 12. 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
  • 13. 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)
  • 14. 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.
  • 16. implementation low high lowhigh Relative Market Share MarketGrowth ? moo. moo?
  • 17. 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
  • 18. 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?)