Spotify's Strategy in 2016: A Competitive Analysis for BUS845 IES631

This assignment provides a strategic analysis of Spotify, a leading music streaming service, using Porter's Five Forces framework to assess its competitive environment. It evaluates the threat of new entrants, substitutes, buyer power, and supplier power, highlighting the intense competition Spotify faces. The analysis also explores Spotify's competitive advantages in light of Barney's resource-based view, focusing on its unique service offerings like free and premium options with exclusive benefits. The study concludes that competitive advantage is crucial for business success, emphasizing the importance of market analysis and innovative strategies. Desklib provides access to a wide range of solved assignments and past papers for students.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author’s Note:

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Answer 1
The advent of globalization and also the recent advancements in the technological
fields have made the business world much more competitive than it was a few decades ago
(West, Ford and Ibrahim 2015). Therefore, the various business organizations often take the
help of various strategic and competitive market analysis frameworks to analyze the level of
competition faced by them in the business market (West, Ford and Ibrahim 2015). The
“Porter’s five forces” framework is one such framework which helps the various business
organizations to analyze the level of competition faced by them in the current business
market (Porter 1996). Spotify is a Sweden based company which was founded in the year
2008 and is generally considered to be one of the best “music, podcast, and video streaming
service” providers in the industry presently (Spotify.com. 2018). The company was initially
started in the nation of Sweden however presently the company caters to the needs and the
requirements of the customers from the various diverse parts of the globe (Spotify.com.
2018). A “Porter’s five forces” analysis of the company would reveal the following facts-
Threat of new entrants
The company Spotify is one of the leading ones in the world and caters to the needs
and the requirements of the customers from the various parts of the world (Spotify.com.
2018). In addition to that, the company provides free as well as premium services to the
customers (Spotify.com. 2018). Therefore, it would be apt to say that the company faces a
very low level of threat from the various new entrants in the market in which the company
Spotify conducts its business.

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Threat of substitutes
The company in addition to the premium services also provides free services to the
customers (Spotify.com. 2018). Furthermore, it is seen that many customers opt for the
premium services provided by this particular company. However, it is seen that many
companies provides the same kind of services to the customers at a much lower rate.
Therefore, the company faces a significant amount of threat from the various substitutes
which are operational in the same sector as the company Spotify. The following figure
provides a list of the various competitors of the company Spotify in terms of the revenue
earned by them since the year 2013-
Figure 1: Monthly royalties for the top companies in the music sector
Source: Spotify official website
Bargaining power of the buyers
It is significant to note that if the bargaining power of the customers is high then that
is likely to affect the prospects or the interests of the company concerned (Porter 2008). The
company Spotify has numerous competitors in the market which provide almost the same
kind of services to the customers and that too at a much lower rate. Moreover, the switching
cost is very low and this acts as an added advantage to the customers. Thus, it would be apt to
say that the company Spotify faces a considerable amount of threat as the bargaining power
of the customers who take the services offered by them is very high.

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Bargaining power of the suppliers
In the opinion of Porter, if the bargaining power of the various suppliers whose
services a particular company takes the help of is high then that is likely to impact the
business of the concerned organization in a significant manner (Porter 2008). It is significant
to note that the suppliers of the company Spotify are the various engineers as well as the
developers who constantly upgrade the software as well as the website of the company
Spotify (Spotify.com. 2018). Furthermore, the various users of the services provided by the
company listen to the music over their mobile phones or computer systems. Moreover, it is to
be noted that these suppliers exert a considerable influence on the business of the company
Spotify. Thus, it can be said that the company faces a considerable amount of threat on this
particular score.
Thus, it can be said that the level of competition faced by the various companies or
the business organizations in the present times has increased significantly. Therefore, it
becomes essential for the various business organizations to conduct a thorough market
analysis to develop new strategies so that they can overcome the market competition faced by
them in the most effective manner. Thus, the various business organizations also conduct
regular market as well as competitive analysis to find out the needs and the requirements of
the customers and design their products or services as per the requirements of the customers.
Answer 2
Competitive advantage can be defined as the process by means of which puts a
business organization or a particular company in a superior advantage over the other
companies or the business organizations (Amini, et al. 2012). In other words, the concept of
competitive advantage can be defined as the process, which “allows a particular company or
country to produce a good or service at equal value but at a lower price or in a more desirable

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fashion” (McGrath 2013). It is significant to note that the various companies or the business
organizations often take the help of various innovative strategies to gain a competitive
advantage over their rival business organizations. This strategies or policies might include
price competition, quality service or goods and others.
The concept of “sustainable competitive advantage”, on the other hand, can be
defined as the process by means of which the various business organizations gain a
sustainable advantage over their rivals (McGrath 2013). In other words, these advantages are
the ones which “are company assets, attributes, or abilities that are difficult to duplicate or
exceed; and provide a superior or favorable long term position over competitors” (McGrath
2013). Thus, it can be said that the concepts of competitive advantage and “sustainable
competitive advantage” form an important part of the overall business strategy of the various
business organizations (McGrath 2013).
In the opinion of Barney articulated in his 1991 article "Firm Resources and Sustained
Competitive Advantage", “resource-based view can be seen as a reaction against the
positioning school and its somewhat prescriptive approach which focused managerial
attention on external considerations, notably industry structure” (Barney 2014). Furthermore,
his article states that “the emergent resource-based view argued that the source of sustainable
advantage derives from doing things in a superior manner; by developing superior
capabilities and resources” (Barney 2014). Thus, the primary focus of this particular theory
articulated by Barney is on the way the various business organizations do the basic things of
their business in a much superior manner in a bid to develop sustainable advantage over their
rivals (Barney 2014).
The business operations of the company Spotify when viewed in the light of the
theories of competitive advantage of Barney and Porter will reveal the fact that although the

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company started less than a decade ago yet the company has been able to gain to gain to a
sufficient amount of competitive advantage over its rivals (Barney 2014). This becomes very
apparent from the above given analysis of the company in terms of the “Porter’s five forces”.
Furthermore, the theory of Barney focuses on the need of the various business organizations
to do things in a superior manner to gain a kind of competitive advantage over their rivals.
The business operation of the company Spotify when viewed in this particular light will seem
very superior in comparison to the same kind of services provided by the company Spotify.
The company Spotify, for example, provides not only premium services to its customers from
various parts of the world but also provides free services to the customers as well. The
customers who take the help of the premium services offered by the company get some
additional benefits as well. For example, the customers belonging to the premium section not
only get access to unlimited number of songs belonging to various languages as well as
genres but also get the option to download these songs and music albums. In addition to
these, the premium clients of the company do not have to listen to the various kinds of
advertisements which the normal customers who take the help of the free services had to. It is
significant to note that these are very unique features which very few companies or business
organizations in the present times offer to the customers or in the manner which the company
Spotify provides to its customers. Therefore, it can be said that the company Spotify
possesses a certain level of advantage over its competitors.
To conclude, it becomes clear that competitive advantage forms an important part of
the overall business strategy of the various business organizations. Thus, the various business
organizations often take the help of various innovative business strategies to gain a
considerable amount of competitive advantage over their competitors. Therefore, it is often
seen that the various business organizations undertake a thorough market analysis to gain a
competitive advantage over their competitors.

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References
Amini, A., Darani, M., Afshani, M. and Amini, Z., 2012. Effectiveness of marketing
strategies and corporate image on brand equity as a sustainable competitive
advantage. Interdisciplinary Journal of Contemporary Research in Business, 4(2), pp.192-
205.
Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of
Management, 17(1), 99-120.
Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson higher ed.
McGrath, R.G., 2013. The end of competitive advantage: How to keep your strategy moving
as fast as your business. Harvard Business Review Press.
Porter, M. E. 1996. What is strategy? Harvard Business Review, 74(6), 61-78
Porter, M. E. 2008. The five competitive forces that shape strategy. Harvard Business
Review, 86(1), 78-93.
Spotify.com. 2018. Music for everyone.. [online] Available at:
https://www.spotify.com/int/why-not-available/ [Accessed 11 Apr. 2018].
West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive
advantage. Oxford University Press, USA.

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