Business Strategy Report for Spotify.

Running head: BUSINESS STRATEGY REPORT FOR SPOTIFY
Business Strategy Report for Spotify
Name of the Student
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1BUSINESS STRATEGY REPORT FOR SPOTIFY
Executive Summary
The report discusses the crucial aspects in relation to business perspectives of Spotify, which
offers the best range of music experience for their customers. The company engages in a service
towards providing the world class service to their subscribers within their platform. In the
discussion supported in the report, there is a focus over the internal and external environment.
Both of these environments are considered to be vital for the growth of the organisation in the
global marketplace. The discussion over the internal environment helps in understanding the
potential of the company to derive unique strategies based on gaining a competitive advantage.
The next part of the discussion emphasizes over the macro environment and supporting trends
that might create an impact over the entire business scenario of the organization. Based on the
discussion over the internal and external environment of the organization, a recommendation
over the strategic direction of the organization have been put under consideration. This
discussion focuses on the ways in which the current business scenario could be further be
enriched for gaining a competitive advantage among all the competitors. After the discussion
over the recommendation, a conclusion has been supported based on the key facts of the business
and strategic alignment of key business functions.

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Table of Contents
1. Introduction..................................................................................................................................2
2. Analysis of the Internal Environment..........................................................................................2
3. Analysis of the External Environment.........................................................................................5
3.1 Macro Environment...............................................................................................................5
3.2 Industry Environment............................................................................................................8
4. Recommended Strategic Direction..............................................................................................9
5. Conclusions................................................................................................................................11
References......................................................................................................................................13

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1. Introduction
Internet and its in-built features are the core for any music industry in the present times.
Spotify is one of the largest online music platform, which is solely based on the Internet platform
and provides online streaming services to their wide ranging customers on a global basis. In
order to flourish in the global marketplace, Spotify has to continuously anticipate the rising
demands and needs of their users and then develop appropriate strategies to meet them (Boland
and Murray-Smith 2014). This report discusses the global use of Spotify and the wide ranging
market that it covers. The report thus would thus discuss the internal and external environment of
the company. A recommendation would also be supported based on discussing the strategic
direction while concluding over the discussions supported within the report.
2. Analysis of the Internal Environment
Organizational Resources - The organizational culture of Spotify directly helps in
reflecting the human resources that are possessed by Spotify Technologies. The wide diversity
maintained by the company is based on the various cultural backgrounds of the different workers
who work in the offices established by the company. These offices are widely located all over
the world (Skog, Wimelius and Sandberg 2018). As the leading kind of online music streaming
service provider, Spotify applies their immense form of corporate culture in order to provide
motivation towards their human resources. The motivation helps to ensure the core competencies
of their value creation towards the online platform.
The behavioural implications that are maintained by the company directly have an impact
over the effectiveness over the strategic management. The beliefs and values that are set by the
resources of the company help in determining the strategies that are implemented for the

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company in order to gain a competitive advantage in the global competitive market (Schettino et
al. 2017). The corporate culture established at Spotify, which further links with different aspects
of the organizational design further helps in the creation and development of a positive working
environment. Diverse contributions are also supported by the various human resources working
for the organization. They further help in ensuring the factor of innovation that would be made
for the business (Weber, Fulk and Monge 2016). Further, they also ensure that their developed
services and products are in proper alignment with the objectives set by the organization based
on future expansion of their online service.
Organizational Competencies – Based on the understanding over the different
perspectives of the organization in strengthening their business base and gaining a competitive
edge, the core competencies that are set by Spotify are:
1. The organization helps in offering a wide range of music services to their various
users. The company also increases their databases on a daily basis due to which they are able to
accommodate the large volume of songs that are produced on a regular basis (Bäcklander 2019).
Latest songs are streamed for music lovers, which helps in getting engaged with the musical
platform on a daily basis.
2. Spotify understands the diversified needs of their users. Hence, they have designed
their musical application in such a way that users would be able to choose their favourite album,
artist and any particular song from the huge database. The company also offers a huge playlist
that would comprise the mood and environment of the user (Tidd and Bessant 2018). This would
further mean the fact that the company designs and chooses songs to be displayed on their
platform based on understanding the mood of their customers.

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3. In this application, the users are provided with a choice to create their personalized
playlist and thus they would be able to share it further with their group of friends or anyone all
across the globe. This further helps in diversifying the musical platform and making it reach to
all parts of the globe (Schwind et al. 2018). The musical platform applies AI based technologies,
which understands the present state of the user and hence offers song recommendations that
plays coherently.
4. Apart from supporting the needs of their users, Spotify also offers businesses to
collaborate with them and also aids their growth. They have created their platform in such a
manner that businesses would be able to share high and impactful advertisements in the free
version of their application. These advertisements could be in the form of pictures or audio clips,
which are displayed on the application (Pesämaa et al. 2014). The use of advertising within the
platform, helps the businesses to force customers in listening throughout the entire audio clip.
Strategic Capabilities – Spotify offers different range of streaming services to their
customers. While providing certain specific services, in order to gain a competitive advantage in
the global marketplace, Spotify ensures that they have a strong sense of strategic capabilities,
which would further help them in strengthening their current position and also lead them in
topping the charts within their competitors. Some of the efficient strategic capabilities possessed
by Spotify are:
1. The capabilities of Spotify based on data analytics have potentially provided them with
the competitive edge over their different music labels. This has helped them in identifying the
changes made in the taste of customers and the emerging talents. In order to diversify their
platform, Spotify also attracts different independent artists for signing up on Spotify under a
music label (Scott, Loonam and Kumar 2017). This kind of open platform for independent artists

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helps them in gaining the attention of the audiences while also increasing their reach in the
global marketplace.
2. In the present times, the company has a major ambition to diversify their platform by
implementing a video-based strategy. Hence, they are in the process of creation of original TV
series for their platform. Another alternative focus to this strategy is to shift their focus towards
live events or concerts (Vassileva 2017). This can be considered as one of the core competency
towards supporting a musical experience for their huge subscriber base. This strategy could
further be enhanced with the combination of Virtual Reality (VR) technology and offering an
enhancing experience (Uggeldahl 2016). The implementation of VR technology would boost the
enthusiasm of users as anyone possessing a VR headset would be able to enjoy a live musical
concert experience.
3. Different businesses such as pubs, bars and retail stores depend on Spotify to for
providing a curated playlist based on the kind of audience, ambience and energy level (Vonderau
2019). Any retail subscriber of Spotify could use “Spotify for Business” to gain an insight over
the type of music being loved by customers and thus be able to engage with them.
3. Analysis of the External Environment
3.1 Macro Environment
The macro environment is directly linked with the PESTEL analysis that is conducted
over an organization to understand the external opportunities and threats that is created due to the
developments of the macro environment. Any form of changes over the forces of macro
environment could have a direct impact over the Porter Five Forces and attractiveness within the
industry (Loreto 2017). Based on understanding the different trends of the macro environment,

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the discussion in the following parts would be centred on two important macro-environmental
trends, which might create an impact over the organisation. The external environment maintained
by Spotify would also be need to be balanced based on survival within the global marketplace. A
proper balance between both external and internal environments would prove to be helpful for
the company to satisfy their customers. Additionally, there is a massive need for the company to
meet the growing needs of investors record labels and consumers who would flock towards using
the platform.
1. Social Factors – There are different cultures located at various parts of the world,
which offer a different kind of attitude towards the subject of authority. Spotify should be able to
carefully analyse the kind of attitude that would be made over their authority before the launch
over any marketing campaign made over their services and products.
Focusing over the demographic trends can be considered as another key factor that is put
under demand and which could forecast over the economy. The major consideration towards the
demographic factors would help Spotify in developing enriching content for specific
demographic groups of people (Saboo, Kumar and Ramani 2016). Integration of new features
before developing new kind of products would be majorly be helpful in catering to the needs of
the particular segments.
Spotify could also make use of gender composition in the labour market based on
understanding the liberal nature of women rights, society and say of women in different matters
of consumption decisions and societal issues.
2. Technological Factors – Different countries are in the competitive mind-set to
implement 5G infrastructure. Hence, Spotify should be careful in assessing the level up to which

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the local market would be able to absorb the rollout of the 5G connectivity (Eriksson, Groth and
Sabelfeld 2019). E-commerce is extremely vital for the business model of Spotify. Hence, the
organisation should ensure and evaluate the technological infrastructure, e-commerce
infrastructure before entering into the competitive marketplace.
One of the main areas in which the US are lagging far behind China is in the area of
Mobile Payments. The business model of Spotify should be able to assess the preferred choice of
options based on mobile payment within the local economy (Esteban 2014). They should also be
able to assess the business model that would be most suitable for the platform.
The integration of technology within the business and society based processes is highly
crucial in nature. Hence, Spotify should be able to develop a certain strategy, which could be
able to integrate infrastructure and societal values within the business model (van der Velden and
Hitters 2016). The transparency within the digital infrastructure could be implemented with the
help of digitalization. The implementation of such processes could be helpful in eradication of
corruption occurring in the local economy.
In order to avoid IPR-based thefts and technical shakedowns, there should be a proper
form of analysis over the culture and laws based on licensing of IPR and digital assets that would
be conducted by Spotify. Thus, Spotify should also be able to analyse the areas in which
technology could majorly empower the different supply chain partners (Richardson 2014). This
could also help the organisation in bringing higher level of transparency and ensuring flexibility
within the supply chain.

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3.2 Industry Environment
The Porter’s Five Forces Model can be defined as a strategic form of management tool,
which further helps in determining the competitive kind of landscape present within an industry.
In this given case, there would be a discussion over the five important aspects of the model based
on Spotify.
1. Threat of New Entrants – Spotify offers a huge differentiation in the kind of products
being offered by them. Selling of differentiated products helps in ensuring the maximum
purchase rate by customers. The organization could take a major advantage of the large
economies of scale within the music industry (Riesewijk 2017). Thus, they would be able to fight
from new entrants through their effective cost advantage strategies. The Spotify Technologies
could majorly focus over innovation, which is the primary key towards product differentiation
from the new entrants. Thus, spending on intensive marketing could help in building an
identification of a strong brand image.
2. Bargaining Power of Suppliers – The total number of suppliers within the music
industry at which Spotify operates is large as compared to the buyers (Ghanbari, Laya and
Markendahl 2016). This would further mean that suppliers would have a less form of control
over the prices, which would further make the bargaining power of suppliers as a weak force.
The product offerings are less differentiated standardised and offer low costs of switching
(Curwen 2016). Hence, Spotify could easily switch their suppliers and make it a weak force.
Spotify could develop a strong sense of relationship with their diversified supplier groups and
thus can benefit.
3. Bargaining Power of Buyers – There is a wide margin of product differentiation. This
would mean that the buyers would not be able to find too many alternatives from the purchasing

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of any kind of a particular product. The product quality is another important specification that
would be important to buyers in relation to the frequent purchases being made. Less price
sensitive factor is relative to buyers. Hence, the bargaining power of buyers can be described as a
weaker force in Spotify (Kerckhoffs 2018). Thus, in order to draw the attention of buyers, there
should be a major need towards the focus on differentiation and bringing innovation within their
platform.
4. Threat of Substitute Products or Services – There are fewer substitutes available
within the market in which Spotify operates. There are low profit earning industries. Although
there are few substitutes in the market but they have an expensive strategy as compared to other
firms. In this aspect, Spotify could enrich their service offerings based on providing excellent
quality of products. Hence, buyers would only choose certain products that would offer great
quality but at a suitable price rate. They could also focus over differentiating among their offered
products (Björk 2017). This would ensure that buyers would be able to differentiate between
their service offerings based on their unique nature.
5. Rivalry among Existing Firms – There are extremely few competitors, which might
be large in size. Any kind of move that might be made by their competitors could be easily
noticed by Spotify and hence they can take actions accordingly. Spotify should majorly focus
over new customers and provide them with engaging content, which would retain them in the
long run (Danemo 2018). Extensive market research could also be conducted based on
understanding the situation of supply and demand present within the industry thus preventing
over-production.

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4. Recommended Strategic Direction
Based on the understanding and focus over the external and internal environments, it can
be discussed that Spotify owns the most effective strategic strategy among its competitors to
bring uniqueness to their business model. They make different applications in order to ensure
that users can avail the best quality of music and top notch quality. Top quality of video and
sound quality are some important reasons for which the company has been able to gain a much
form of popularity on a worldwide basis. The major competitors of Spotify includes Amazon,
Apple and Google, which are in the race of providing extreme quality of streaming services to
their customers. Technology is a key factor behind the success stories of the competitors of
Spotify. Hence, the implementation of the most proper technology would prove to be useful for
the company to improve their recommendation strategies for the benefits of customers.
In order to bring in innovative culture within the business strategy, Spotify should
develop curative strategies by focusing over every user integrated within their platform. In order
to engage with every user, Spotify should focus on user satisfaction. This could further be
achieved based on understanding the needs of every individual user and generating suggestions
on their application as per their preferences. In recent times, the most obvious strategy is
implementation of a recommendation algorithm that would be able to set everything on a proper
track. With the proper music artists on their platform, Spotify could completely own the circle of
music distribution and thus save the excessive flow of money.
Free marketing could also be targeted by the company based on their own group of
artists. Thus, then they would not have the need for paying royalties on the kind of music that has
already been owned by them. Harnessing the same kind of payment system that are already being
used by the existing subscribers, the musical platform could become the primary place from

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where musical fans would be able to purchase tickets in order to view those artists. Such kind of
savings of money could further help towards paying for a particular artist as per their demand.
In the present position, Spotify is not equipped to sell their own hardware as compared to
its competitors such as Google and Apple. Both of them offer a unique device such as the
Amazon Alexa and Google Home, which offer the same kind of musical experience to their
customers. Following this path by bringing in a unique feature into the device could prove to be
highly helpful for Spotify to enter into the global marketing sphere. A home speaker powered
with unique feature could lead to complete control over the type of service being received by
them. This could further lead to attraction of new and premium subscribers getting attracted
towards their platform. Bringing innovation within their product offerings would lead to a
stoppage to the dominant factor before Google and Apple. Building an own operating system and
operating it on a global basis would help the company to draw the attention of customers and
make them seek their own personalized products.
From the defined recommendation towards the business strategy of Spotify, it can be
understood that the organisation should focus towards improvement of their services in a good
manner. This would help users in getting attracted with the wide range of exclusive features.
Putting a major stake on investment could prove to be useful for the business. This would further
be able to lure customers towards their platform and thus the business revenue could make a
positive impact.
5. Conclusions
From the discussion of the above business description and strategic environment of
Spotify, it can be concluded that Spotify has the major potential for growing and expanding in

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the global competitive marketplace. The company would also need to take under consideration
regarding the internal and external environment. The discussion focuses over the key strengths of
the company, which needs to be majorly be focused upon. This would help in enhancing the
factor of user-friendliness and simplicity of the application thus leading to global expansion of
the platform. However, there might also be threats from potential and existing rivals, which
could be mitigated based on developing an enriching experience for the customers. The company
should also consider the different ways in which they would engage with their stakeholders as it
would define a strategy of survival in the future times.

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