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.
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?)
