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Managing Markets

Research report on EMI Music Group

Submitted by : 13619
Course Name: MBA
Batch : April, 2010
Submitted on : 15/06/2010

Word count: 3003(Excluding referencing and bibliography)

Assignment Evaluator: JASS NAIDU


Table of Contents
Report on EMI Music Group 2010
Class ID: 13619

Exclusive summery........................................................................................... .3

Introduction..........................................................................................................
....4
A. Environmental scanning and its importance..........................5
A.1 Methods........................................................................6
A.2 Example........................................................................................6
A.3 Environmental scanning and marketing planners.........................7
A.4 Features of Environmental scanning............................................7
B. MACRO, MICRO and SWOT analysis of EMI.....................................8
B.1 MACRO Analysis.........................................................................8
B.2 MICRO Analysis.........................................................................10
B.3 SWOT Analysis...........................................................................11
B.4 SWOT MATRIX FOR EMI...........................................................13
C. Recommendations and justifications to EMI......................14
C.1 Marketing strategy.....................................................................14
C.2 Ansoff’s product / market matrix for EMI.....................................14
C.3 Recommendations and justifications..........................................16
Conclusion.............................................................................................................
.....19

Bibliography..........................................................................................................
....20

Table of figures
Fig.1: Business environment..............................................................................5
Fig.2: Internal environment.................................................................................5
Fig.3: Internal, Macro and Micro environment....................................................8
Fig.4: Macro environment ..................................................................................8
Fig.5 : Micro environment ...............................................................................10
Fig.6: SWOT Analysis......................................................................................12
Report on EMI Music Group 2010
Class ID: 13619

Fig.7: SWOT MATRIX of EMI...........................................................................13


Fig.8: Ansoff’s matrix for EMI ..........................................................................14

Exclusive summery
EMI music group has been one of the leading music industries in the world. EMI
had the advantage of being the first music recording company which was
established in early 1990’s. But now it faces intense competition in the music
industry market and struggles to produce quality music.

This report is a research study done on EMI music group to find the problems faced
by the company. Through this report I have found some opportunities and have
provided appropriate recommendations for improving its performance in the future.
Report on EMI Music Group 2010
Class ID: 13619

Introduction

Music industry which was one of the most profitable businesses in UK faces different
intimidation mainly because of the illegal use of new technologies. Since music is
provided free on some internet web sites people are prone to illegal downloading.
This report is a strategic analysis done on such a British music industry, EMI
(Electronic & Music Industries) which is the 4th biggest music recording and publishing
industry in the world. For this an explanation on environmental scanning and its
importance will be provided. Following this MACRO, MICRO & SWOT analysis of
EMI will be made by appraising its resources and capabilities to emphasize
company’s strengths and weaknesses. EMI’s present strategy will be analysed to
identify its efficiency with regards to its abilities and resources. Recommendations
and justifications will be provided to enhance the organizations approach for future
progress.

EMI music group is the 4th largest music giant in the world with operations in 19
countries with headquarters in London. During 1990’s EMI produced fantastic music
and showed massive growth by buying Virgin Music Group and its artists (largest
sovereign music group at that time). During these days company was fully capable of
concentrate on new trends and invented new technologies like compact disc and
stereo recording. In 2007 without any digital rights management software EMI was
the first company to produce music with high clarity and quality. Later EMI’s strategy
was downright which resulted in accusation of EMI by private equity firm Terra Firma
in 2007.
Report on EMI Music Group 2010
Class ID: 13619

Mission Statement of EMI: “The goal is for EMI to become the most innovative,
artist-friendly and consumer-focused music company in the world, while delivering the
financial performance needed to build a sustainable business”. 1

A. Environmental scanning

Environmental scanning is a tool for analysing and evaluating internal and external
factors that influence the business. To grow or uphold a sustainable competitive
advantage, it should be alert and surveillance of changing business environment. It
should also be lively enough to adjust its strategies and tactics when necessary.

An ample Environmental Scan includes:

 Predicting or estimating business trends.


 Performing internal and external scans.
 Projecting workforce demand and supply.
 Unfolding the current workforce.
 Identifying current and needed competencies (information, abilities, skills and
behaviours).

Business environment is divided as shown in the figure below.

1. Internal Environment: Every organization has a frontier that differentiates entities


from external environment. Environment within the frontier is called internal
environment. The internal environment of a business plays a crucial role in the

1
Terra firma, 2009. Terra firma annual review 2008 A Unique Perspective [online], Available at: URL:
<http://www.terrafirma.com/ar09/AR09.pdf> [Accessed 21 May 2010].
Report on EMI Music Group 2010
Class ID: 13619

strategic management. It is normally audited by analyzing the '5 Ms'


i.e. men, money, materials, markets and machinery. 

2. External Environment: Duncan (1972) defined “business external environment as


factors that are considered by a firm for its future decision making.” 2 External
environment is otherwise called as opportunities and threats analysis. 

2.1 External Micro: explains the connection between firms and the driving forces
that have power over this rapport. This environment influences the business
directly. 

2.2 External Macro: “The factors that are unable to control by an organization but
affects the organization”3. These factors may change regularly and the business
should be adaptive to these changes.

A.1 Methods:

 Ad-hoc scanning - this scanning is performed typically when a crises arises.

 Regular scanning - here scanning will be regularly done i.e. yearly.

 Continuous scanning/ continues learning – collecting and analyzing of structured


data up on verity of environmental factors.

A.2 Example:

EMI music recording industry is operating in a shrinking market. “According to


International Federation of the Phonographic Industry published in June 2008 the

2
Yahoo answers, what is the External Environment? [online], Available at: URL:
<http://answers.yahoo.com/question/index?qid=20071018023912AAMlDH8> [Accessed 21 May 2010].
3

Marketing environment [online], Available at: URL:


<http://www.marketingteacher.com/Lessons/lesson_marketing_environment.htm> [Accessed 21 May
2010].
Report on EMI Music Group 2010
Class ID: 13619

global music sales dropped 8% i.e. $19.4 billion in 2007, their lowest level in at least 10
years”4. CD which is the traditional product of EMI has diminished its market through
retail channels in terms of price and volume.

One of the main reasons for this declivity is illegal file sharing through the internet.
There is a number of music downloading sites like 123music.com, iTunes, Napster
etc that provide music free of cost which badly hit the music industry.
EMI has recently changed their strategy by analysing and understanding the external
environment i.e. they have embraced the new technology by making tie up with these
downloading sites and turns out the external threats in to massive opportunities.

A.3 Environmental scanning and marketing planners:

It helps an organization to obtain competitive advantage. It helps to foresee


developments to avoid costly mistakes. It also helps to take advantage of
opportunities. It helps to gain strategic direction. Indication of existing problems in
the organization will be provided, which can be identified and solved early than from
becoming worse. More over it helps marketing planners to identify weakness and
threats and convert these in to strengths and opportunities respectively and finally
convert its strength to opportunities (as shown in fig.5).

Customers changing needs and trends can be identified at proper times. It helps to
identify strengths and weakness of competitors and consumer behaviour which helps
the company to decide the appropriate effective strategy and products. It also helps
to improve the reputation of the business and projects it is receptive to its
environment and approachable to it.

A.4 Features of Environmental scanning:

 Complexity of the environment.


 Dynamic and multifaceted environment
 Impact is very high.
 Uncountable environment.

4
Times online, [online], Available at: URL:
<http://business.timesonline.co.uk/tol/business/industry_sectors/media/article4160553.ece> [Accessed
21 May 2010].
Report on EMI Music Group 2010
Class ID: 13619

B. MACRO, MICRO and SWOT analysis of EMI

(The Marketing Environment [online], Available at: URL:


<http://www.marketingteacher.com/Lessons/lesson_marketing_environment.htm> [Accessed 27-05-
2010].)

B.1 MACRO Analysis:


Analysis of external environmental forces that influences the organization directly
which has a high impact on the business, but cannot be controlled by the
organization. The macro environmental factors might change continually and the
business should be adaptive with the change in order to survive.
The external macro-environment forces include: Political, Economical, Social,
Technological, Environmental, and Legal.
Report on EMI Music Group 2010
Class ID: 13619

1. Political factors:

“The British government has planned to pass a bill to clamp down on illegal file
sharing” 5and “Some of the nations like Turkey are banning video sharing web site
‘YouTube’”6
Factors like tariffs, duties; export controls are upsetting EMI’s business. Political
instability is another factor affecting EMI since it has business around the world.

2 Economic factors:

Economic recession is major factor that affected EMI which caused all the industries
economic position in the market.
“Longer accounts receivable settlement cycles and difficulties in collecting accounts
receivable”7
Higher interest rates, recession, instability and inflation of the financial markets are
other major economic factors which had a direct impact over the organization.

3 Social factors:

Differences and unforeseen changes in regulatory environment, including ecological,


local planning, health and safety, labour laws and zoning, rules and regulations. In
some countries music videos containing sexual contents are prohibited especially in
most of the Arab nations and in some Asian countries.

4 Technological factors:

Physical piracy (unauthorised physical copies made for sale) is one of the most
important threats faced by EMI. Illicit downloading and CD-R piracy of music from the
web which are obtained free of cost is a critical problem faced by the industry.
Music’s incompatibility in new devices e.g. Apple iTunes is only compatible with the
5
The Economic Times, 2009 [online], Available at: URL:
<http://widget.economictimes.indiatimes.com/news/international-business/Britain-threatens-to-block-
web-access-in-piracy-fight/articleshow/5174104.cms> [Accessed 21 May 2010].

6
CBSNEWS [online], Available at: URL:
<http://www.cbsnews.com/stories/2009/03/10/tech/main4855546.shtml> [Accessed 27-05-2010].

7
EMI OFFERING CIRCULAR 30 September 2003 [online], Available at: URL:
<http://www.vernimmen.com/ftp/OC-EMI.pdf> [Accessed 27-05-2010].
Report on EMI Music Group 2010
Class ID: 13619

iPod. The popularity of CD format reduced so new trends in technologies like super
audio CD (SACD), Blu Ray discs should be introduced.

5. Environmental factors:

Terrorist activities around the world have a major influence in music industry e.g. after
the incident of September 11 in America the music industry also has gone down. The
failure in retaining popular and customer interested artist and songwriters, absence of
superstar release etc will affect the financial performance of the company.

6. Legal factors:
Most of the legal factors in EMI are based on loyalty. For example Pink Floyd (Rock
band in England) took EMI to Court over Online Royalties. Legal chances can affect
firms cost and demand. Legal factor affects the efficiency of the firm since it always affects its
employees mentally.

B.2 MICRO Analysis:


It is analysis of internal factors of an organization which directly impact on its
business strategy. This environment describes the relation linking the business and
the powerful forces that control this relationship. The micro environment of any
business consists of suppliers that deal directly or indirectly, local stakeholders and
customers and buyers.

The Micro Environmental forces include:

1 Customers: The organisations survival is based on meeting the wants, needs and


providing advantage to their clients. Any failure to do so will output failure of business
strategy.

 Customers around the world are showing less interest in buying music CDs,
rather their interest has changed to download from the net.
Report on EMI Music Group 2010
Class ID: 13619

 Consumers are not interested in brand name of the organization rather their
interest is on the artists and band name.

2 Employees: Organizations success lies on the key factor employees. Identifying


and selecting the right staffs and retaining them are key aspect in creating an efficient
work culture. Employing such staffs will make a good relation with the customers
which can help the organization to receive loyal customers.

 Emi has cut up to 2000 employees as part of restructuring in 2008 which is


against the organizational goal and which have also created confusion between other
employees.
 Emi was not able to retain its famous artist and song writers.

3 Suppliers: Suppliers is another vital element which decides the triumph of any
business. The organizations marketing mix is affected by the increase in scrap
supplies and prices.

 Manufacturing, supply, digital supply or distribution activities will be affected by


highly depending on one supplier.
 Emi failed to introduce new trends (music) by their existing artist in to the
music industry.

4 Shareholders: They are always under cumulative pressure to transform from


private to public ownership since organization requests better inward investment in
the growth.  Share holders have the right to vote on matters of corporate policy and
are the members in director board.

5 Media: Media is a major role as a micro factor. Since it has high influence among
the public any bad news about the organization will negatively affect the image of
the company.

 In 2008 most of the media reported that EMI has reduced their workforce to
one third in a negative manner. Even though the company did this for improving
Report on EMI Music Group 2010
Class ID: 13619

their performance, the media report will project that company is in large dept which
will made a huge fall in share holders and customers strength.
So company should maintain good terms and condition with media.

B.3 SWOT Analysis:

It is a tool for analysing business and its environment. It is the primary stage of
planning and helps marketers to concentrate on core issues. SWOT stands for
strengths, weaknesses, opportunities, and threats. Internal factors are evaluated by
strengths and weaknesses. External factors are evaluated by opportunities and
threats.

(PHILIP KOTLER, KEVIN LANE KELLER, Marketing Management, 12th edition, pp 54)

1. Internal factors:-

The internal factors of EMI group are listed below:

A. Strengths (S):-
 Brand name (EMI).
 Biggest independent music publisher globally.
 Strong global presence; branches over 50 countries.
 Emi has a assortment of over 1m music tracks in Australia and Asia.
B. Weaknesses (W):-
 Product cost.
 Both digital and physical music has been fashion driven.
 No patent protection.
 Impacted by diligence of global music piracy.

2. External factors:-
Report on EMI Music Group 2010
Class ID: 13619

A. Opportunities (O):-
 Online marketing.
 Unrelenting legal action on pirates enables the legal market to expand.
 Through its A&R activities EMI should build up new music talent.
 Loosening regulations.
B. Threats (T):-

 Internet piracy.
 Online/P2P sharing of music files.
 Industry structure and competitive environment.
 Weak album releases will cause physical product sales.
 Legal markets for music will be collapsed by the music pirates.

B.4 SWOT MATRIX FOR EMI:


Report on EMI Music Group 2010
Class ID: 13619

(SWOT Analysis [online], Available at: URL:


<http://www.marketingteacher.com/Lessons/lesson_swot.htm> [Accessed 27-05-2010])

C. Recommendations and justifications to EMI


C.1 marketing strategy:
The initial strategy which helps a business to survives and flourishes for a long time.
Marketing strategy must tackle the subsequent elements: position, endorsement,
price, advertising, supply, sales, product improvements, and fresh products. Strategy
Report on EMI Music Group 2010
Class ID: 13619

should hardly ever diverge, once it is entirely recognized and accepted via marketing
research.

C.2 Ansoff’s product / market matrix for EMI: It is a means for helping
businesses to decide their market and product development plan. “Ansoff’s matrix
suggests that a business’ tries to develop depending on whether it markets new or
existing products in new or existing markets”8.

(Ansoff’s Matrix, [online] <http://tutor2u.net/business/strategy/ansoff_matrix.htm> [Accessed 27-05-


2010])

1. Market Penetration: is a growth plan “where the business focuses on selling


existing products into existing markets”9.
 Reduce price of Audio and video CD’s

 Introduce new, popular and crowd attracting artists and secure


dominance of market

8
Ansoff's product / market matrix, [online] <http://tutor2u.net/business/strategy/ansoff_matrix.htm>
[Accessed 27-05-2010].

9
Ansoff’s product/market matrix [online]< http://tutor2u.net/business/strategy/ansoff_matrix.htm>
[Accessed 27-05-2010]
Report on EMI Music Group 2010
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 Online advertisements

2. Market development: is a growth plan “where the business seeks to sell its existing
products into new markets”10.
 Music & videos in mobile and iPods

 Marketing & sales through the internet

3. Product development: is a growth plan “where a business aims to introduce new


products into existing markets”11.
 Introduce Blu ray, super audio CD’s

 New artists like Justin Bieber must be introduced in to the field

4. Diversification: is a growth plan ”where a business aims to introduce markets new


products into new markets”12.
 Joint ventures with YouTube, iTunes and online music streaming sites

 For the MSRP, EMI has reduced small share price, form a latest
internet based market, enhance the endorsement using the innovative means
and focus on areas like Asia and Japan.

C.3 Recommendations and justifications:


Based on the analysis done on EMI music group the following are the
recommendations;

10
Ansoff’s product/market matrix [online] <http://tutor2u.net/business/strategy/ansoff_matrix.htm>
[Accessed 27-05-2010]

11
Ansoff’s product/market matrix [online] <http://tutor2u.net/business/strategy/ansoff_matrix.htm>
[Accessed 27-05-2010]

12
Ansoff’s product/market matrix [online] <http://tutor2u.net/business/strategy/ansoff_matrix.htm>
[Accessed 27-05-2010]
Report on EMI Music Group 2010
Class ID: 13619

 Emi could create a fresh market by internet as a means and boost the
endorsement using this recent standard and should spotlight on other areas like
Japan and Asia.

Justifications:

Provides a new market share to EMI Group: Marketing through medium can help to
get more customers to EMI, since most of the people around the world are adopting
internet as a medium for getting music which can also be adopted by Emi.

Joint venture with Internet Company: Like YouTube, EBay, Amazon, iTunes and
numerous others which will give EMI new customers and advertisements along with
regular income.

A sturdy advertising and promotion: EMI Group can compete with the major
competitor like UMG. Competing based on pricing would be very difficult but they can
create devoted customers by creating very good quality albums and good promotion.

Using big and crowd gathering artists: also can create a huge and powerful
market to EMI. Big artists like Robbie Williams, Snoop Dog and young and new
generation artists like Justin Bieber and several others could amplify their promotion.
Famous bands like Beatles, Rolling Stones etc songs should be promoted since they
are more popular among the people.

 EMI should follow the Universal Music Group’s (UMG) Pricing Strategy which
includes retail price reduction, vendor display space requirements, and abolishment
of merchant’s obliging marketing allowance and reduction.

Justifications:
Report on EMI Music Group 2010
Class ID: 13619

Increase retailers demand and sales of CD: UMG has reduced its retail prices to
$12.98 from $16.98 to $18.98. The whole sale CD price has been reduced to $9.09
except for megastar artist titles. Recent pricing strategy of UMG has made customers
to buy CD’s from the store itself.

More money on advertising: When EMI spend $734,000 for advertising UMG has
spent $4.7m for advertising. Spending more money on advertising will help EMI to
popularize among the public and helps to create an eagerness among the customers
to know about their artists.

Quality a necessity: The new generation is more concerned about the quality of
product they are choosing. Pirated music available in low quality will make think
customers to buy same music from the company if it is available in low price and high
quality.

 HVD, Blu rays etc like new technologies are now a day’s getting popular
among the customers. Making music and videos around these new technologies can
create a constructive market for EMI. So EMI should implement these technologies in
new environment.
Report on EMI Music Group 2010
Class ID: 13619

Justifications:

New Technologies: Providing approachable way for the customer to get music with
the help of new technologies will help the customers to change to non pirated copies
of music. Even for videos and movies people are looking for high quality prints in
shops or in the internet.

New Environment: Music should be available in mobiles and iPods which are
compact and common among the people. Emi could conduct concerts and stage
shows which are now a day’s popular among the public which will be a means of
income and publicity to the organization. Conducting such activities can help to
create EMI popular and earn money.

 Most importantly EMI should practice and give more concentration on loyalty
based management. “Loyalty based management not just give importance to select
best customers but also to its employees and investors and working hard to retain
them”.( Harvard Business group press, year unknown)
Report on EMI Music Group 2010
Class ID: 13619

Justification:

EMI against its mission statement: It states “ EMI’s goal is to become the most
13
innovative, artist-friendly and consumer-focused music company in the world” [but]
by "2000 job cut in the year 2008” 14and regular cases against its artist like Pink Floyd
proved it has no artist friendly environment.

Improving customer loyalty through employee loyalty: Every company likes to


have loyal customers for growth, “profit” and lasting value etc. “Without loyal
employee/ artists EMI cannot improve customer loyalty”. (Bain and company
consultants, Mid 1980’s)

Conclusion
Music as an entertaining medium helps people to get relaxed, enjoy and party. But
music industries like EMI are facing different challenges. The new generation need
music at hand any time anywhere as per their need. So they highly depend on new
technologies like internet which is some time misused by some group of people
tempts others to choose the same way. Proper management and identifying the new
trends and wants of the people helps EMI music industry to reduce their problems to
a high extend.

Bibliography

TEXT BOOKS:
Grant, R. M. (2008) Contemporary Strategy Analysis (6th Ed) Blackwell
Publishing Ltd, Oxford.
13
EMI OFFERING CIRCULAR 30 September 2003 [online], Available at: URL:
<http://www.vernimmen.com/ftp/OC-EMI.pdf> [Accessed 27-05-2010].

14
The Economic Times, 2008 [online], Available at: URL:
<http://economictimes.indiatimes.com/articleshow/2702311.cms> [Accessed 27-05-2010].
Report on EMI Music Group 2010
Class ID: 13619

Principles of Marketing – Philip Kotler & Kevin Keller (12th Ed)


Churchill, Gilbert A., and Peter, Paul J. (1995). Marketing: Creating Value for
Customers. Boston MA: Irwin.
Farese, Lois, Kimbrell, Grady, and Woloszyk, Carl (1991). Marketing
Essentials. Mission Hills, CA: Glencoe/McGraw-Hill.
Kotler, Philip, and Armstrong, Gary (1993). Marketing: An Introduction, (3rd
Ed) Englewood Cliffs, NJ: Prentice-Hall.
Semenik, Richard J., and Bamossy, Gary J. (1995). Principles of Marketing: A
Global Perspective, 2d ed. Cincinnati, OH: South-Western.

ONLINE:
http://www.emimusic.com/
http://www.terrafirma.com/ar09/AR09.pdf
http://www.vernimmen.com/ftp/OC-EMI.pdf
http://www.businessdictionary.com/definition/internal-environment.html
http://mystrategicplan.com/resources/internal-and-external-analysis/#Internal
http://www.pcworld.com/businesscenter/

NEWS PAPERS:

The Economic Times


CBSNEWS
Times online
Financial Times

Journals:
KCBONLINE

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