Project #96114 - Strategic Analysis

I am only in need of Section C 1. Executive Summary A. Identification of Firm’s Industry Based on the North American Industrial Classification System (NAICS) B. Analysis of the External Market Environment 1. Industry Profile 2. Competition 3. Foreign Demand 4. Industry’s Long-Term Prospects 5. Labor Market Assessment C. Analysis of Internal Capabilities 1. Functional Capabilities 2. Human Resource Capabilities Group Project I am responsible for the above portion -Analysis of Internal Capabilities. Teacher gave us a dummy company and we are to develop the compensation system

Sonic Records, a market leading recording studio and production house, has witnessed declining demand for music CDs. About ten years ago, Sonic experienced record-breaking revenues totaling over $15 billion. However, over the past few years, CD burning, international piracy, and a shift in consumer preferences has reduced revenues by over 30%. A recent market survey at universities across the nation (a key demographic for Sonic Records) revealed that over 80% of students had not purchased a CD in the last seven years. According to the survey, students either burned friends’ copies of CD’s, illegally downloaded music from pirate Websites, or purchased tracks legally from online music portals for download to digital music players.

 

           

 

Although the past few years’ declining sales have been disheartening, some positive advances in the fight against international piracy recently bolstered music revenues across the industry. The RIAA (Recording Industry of Association America) initiated lawsuits against hundreds of individuals and pirate file-sharing Websites. The results so far have been positive. Fear of litigation has deterred illegal download volume. Further, the exceptionally successful launch of a number of online sites selling legal music downloads has demonstrated strong consumer demand. In fact, a recent computer company’s online music store launch resulted in astounding sales. According to the computer firm’s CEO, “We had hoped to sell a million songs in the first six months, but we did that in the first six days.”

 

 

 

Sonic Records, having experienced tremendous success in the recording and music distribution industry over the past 30 years, realized that the rules of the game were changing. No longer would music be distributed solely through the traditional retail store channel. Consumers desired instant delivery of music online and expected a selection of thousands of artists’ work at their fingertips. Further, consumers expected this music to be portable. Today’s listeners didn’t want to be constrained to the physical limitations of a CD. They wanted digital files that could be easily and legally transferred from computer to portable music player to home receiver interchangeably. Although downloads accounted for only 2% of music sales in 2004, industry analysts predicted a fundamental change in music delivery methods. Some estimated that up to 80% of all music sold might be delivered online in the next decade. Sonic executives understood that their business model needed to adapt quickly, lest they be left behind by other firms who had correctly anticipated this market shift.

In response, Sonic Records formed a subsidiary company named e-sonic. E-sonic would be responsible for creating an online music store capable of competing with established players in the industry. Key executives from Sonic Records were chosen to lead the new company. E-sonic’s mission was to create the world’s leading online music store; ensuring Sonic Records’ prominence in the record industryBacked financially by Sonic Records, a recording industry mogul, e-sonic possessed the resources and reputation necessary to build a world class company. The market recognized this. Just last month, e-sonic conducted a small, but very successful IPO. Although e-sonic had yet to even launch their online music store, the reputation of its parent company, Sonic Records, bolstered demand for the new issue. E-sonic founders decided the firm should retain ownership of the majority of the shares, which could later be used as incentives for employees crucial to the organization’s long-term success.>E-sonic’s key business objective, as dictated by its parent company Sonic Records, was to develop the world’s leading online music portal. Initially, e-sonic’s success would be measured by its ability to capture market share from competitors. Currently, two major players dominated the online music industry. These firms recognized the changing industry trends early and secured over 85% of annual download market share. E-sonic needed to target these current customers while attracting newcomers to the world of online music.Although the idea of offering digital music to millions of customers might initially seem complex, the formula for success in the industry has proven relatively simple. Superior marketing, a robust selection of artists, and a user-friendly Web interface helped current firms establish their market leadership. E-sonic executives, with decades of experience in the recording industry, held established relationships with all of the major record labels and most of the smaller ones, affording them an advantage in music offerings. However, as recording industry executives, e-sonic’s management had little experience in software development. Further, although marketing expertise was important for success in the traditional music industry, company management had no experience with online marketing or marketing initiatives tailored to their new, tech-savvy, customer base. Located in Los Angeles, e-sonic hoped to recruit the best and brightest of the music and software development industries. Further, they hoped to create a performance-based culture where employees felt rewarded for their contributions. Realizing the challenging task ahead of them, e-sonic executives had the foresight to recognize that despite their years of experience in the traditional recording business; outside consultants might offer them salient insights. Their new venture would require hiring employees in all business disciplines, especially those with the marketing and technical skills necessary to help establish e-sonic as the world’s preeminent online music source. In addition, e-sonic management understood well the importance of establishing a sound compensation system right from the firm’s inception. They knew that an internally equitable and market competitive compensation strategy could help e-sonic achieve their business objectives, but they had no expertise in this area. In response, the e-sonic’s management team has hired you as their compensation consulting staff. Congratulations and good luck with your new client!

Subject Business
Due By (Pacific Time) 11/28/2015 12:00 am
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