CCM
...ler labels. Although movements between record label categories are uncommon, there is potential for CCM to grow to an independent label in future. Competition/ competitive forces - In today’s music industry there is intense rivalry within all four record label categories. However, breaking into the “established business machine” will provide significant opportunities due to economies of scale. Driving Forces of change – There is potential for the internet to force change in the music industry, bringing new opportunities in the areas of downloadable MP3 music and e-commerce sales. Analysis of CCM’s balance sheet highlights this potential, with web sales increasing 745% from 1999 – 2000 (figure1). 3.2 Environmental Analysis Technology - CCM will need to continually monitor industry changes in technology that could provide decreases in costs of production or new and exciting opportunities. Population Demographic - At present CCM has only targeted its home state through art festivals and shopping malls. The main target group of CCM’s light classical music are women aged between 40 and 60. CCM needs to continue to market their products towards their target market, continually searching for new ways to reach their audience, such as classical radio stations or advertisements on television through the day. 3.3 SWOT-Analysis Strengths • Cost advantages with new technology arising from the digital revolution. • Positioning of CCM in a distinctive market niche • Growing customer base and customer loyalty within target group. • Good customer service shown through the direct contact between Darren and his fans. Weaknesses • No clear strategic vision - CCM needs a long term vision which includes all areas of the business, from marketing and management to distribution and human resources. • Competitive disadvantages - CCM are not able to enter the retail market due to its current level of sales. Competitors such as major labels have an advantage because they have major market power and influence. Such firms can specify when their music should be played on radio and negotiate large contracts with distributors and retail outlets, hence giving themselves broader appeal. • CCM is short in financial resources to pursue new opportunities (see figure3). Profits are thin, meaning new opportunities may be unobtainable and long term improvements may not be afforded due to initial costs. • CCM is losing ground to larger firms because of limited exposure. CCM at present do not reach a global or national audience like independents and major labels. CCM needs to broaden its reach and widen its customer base. Opportunities • Serving additional customer groups by expanding co-operation with other artists and enlarging the Acoustitherapy and other segments with new marketing strategies. • Internet through expanding e-commerce and releasing MP3s (see figure2) • Expanding sales nation wide. • Opening to new technologies to cope with the driving forces of the industry. • Releasing compilations with other artists has proven popular. One strategy could be to assembly the songs (say for Accoustitherapy) at the studio, and sell the completed disks at a discounted rate back to the performing artists in their hometowns. This method would cover the costs up front and give the players a financial incentive to push the product. • Pushing sales into non-traditional areas such as weddings, shopping center music etc. Threats • High number of new entrants and growth of other smaller labels due to the digital revolution. In addition, major labels or independent labels could decide to enter into CCM’s domestic markets and try to drive the smaller labels out of the market. • Lose sales to substitute products like mp3s or internet downloads • Vulnerability to industry’s driving forces because of CCM’s weak position in its industry. 3.4 Accounting Analysis CCM could improve its financial position by looking at ways to reduce its expenses (see figure5). Strategies could include the purchase of an automated postage system, decreasing its supplies expense and reducing professional fees, such as hiring cheaper backup musicians at live performances (like uni students). One positive is that web sales have increased, but Darren indicates this is from the art festivals where he performs. As shown by figure4, gig sales still represent the bulk of CCM’s sales (85% in 2000). 4. Alternatives Do Nothing - The first alternative involves not making any strategic changes to the way CCM conducts business. This option has to be considered, for CCM has operated profitably for the past four years, experiencing an average increase on total sales and total income of approx 13% (see figure1). However, rate of return on sales has decreased dramatically over the last three years, mainly due to ballooning expenses (see figure3). This coupled with the injury Darren sustained will have a major impact on the sales and profitability of CCM, and does not address the sales/marketing issues. Hire New Staff and Restructure – As acknowledged by Darren, CCM has staffing issues that are affecting the way CCM manages its growth. One option would be to turn the business over to professional managers, while Darren concentrates on the music side of the business, managing the studio and his own recordings. This may involve a significant restructure and may require additional funds from investors. Form a Strategic Alliance With a Competitor - Alliances are very popular in industries where change is rapid. The music industry relies on technology which changes rapidly. CCM could form a strategic alliance, a partnership or sell out to a major label. Overheads and expenses would be reduced, and CCM would be in a strong position to continue to grow and diversify its product range and reduce its expenses. Develop a Marketing and Business Plan – This would involve a detailed analysis of CCM which would provide a strategic direction and recommendations to realize Darren’s goals for CCM. This report would address each section of the business, making recommendations regarding human resources, sales/marketing, distribution, competit...