Importance Of Environmental Scanning Marketing Essay

This study is regarding the EMI Music Company, EMI group is a worldwide music library from one corner to another corner of the world. This study is only focusing on the UK music market to come up with the marketing planning and the marketing strategy of the company. In the start this information is generous a concise opening of the environmental scanning and its consequence in stipulations of EMI music library.

Additionally this study take part in marketing analysis through acting the macro, micro and swot analysis. The end of this report is take part in analysis the Uk music industry and

Additionally this study is performing the market analysis via performing the macro, micro and SWOT analysis. In the last part of this report is analysing the UK music market and reinforcement the business of music in esteem to EMI Music group. This study is illustrating the marketing mix 4P’s and PORTERS 5 forces. The report is ending with some recommendation for EMI Music Company to plan their business in terms of marketing planning on the basis of study that is done.

Environmental Scanning

Every organisation is responsible for the environment that it creates. The organisation’s operation and structure all directly affected by the environment. Organisation’s environment impacts on resources and opportunities that how they can be treated? It is primary objective of the organisation to take care of the company’s operations that how they are affecting the environment. For the successful growth and development of business it is important to develop such a strategies those can be assist operate the business operations. [1] To understand the environmental scanning it is important to identify the business and how it can affect the environment business around. The definition of Environmental scanning is “Environmental scanning is a process of gathering, analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering”. The environmental scanning can be achieved by several ways but three important ways of scanning environment are given below:

Ad-hoc Scanning: Very unpredicted and short-term, mostly used in emergencies or crisis.

Regular Scanning: This scanning process being done after a certain period but regularly (e.g once in a quarter or once in a year)

Continuous Scanning: This is an ongoing process and remains in continuous state, have broad range of spectrum.

The work of researcher through many studies, surveys and researches shows, now a day’s most of the business likes to implement the continuous scanning. The continuous scanning allows businesses to take actions very quickly and effectively with keep tracking the work.

Importance of Environmental Scanning

Environmental scanning is important for the organisation to step out or find the exact solution for company’s procedure. Environmental scanning helps organisations to improve or enhance the ability of working for changing environment in stable means. The following highlighted points are given below:

It enables organisation to gain capitalise of the business in early stages of the business as compare to their competitor.

Environmental scanning give alerts to the organisation well before time for the impending problems. These problems can be handled and solutions can be found well before time if they are noticed well before time.

This process sensitises the company’s exact time of changing in environment process to meet the wishes and desire of their potential customers.

This scanning process helps to find out the qualitative information in regards to the environment to assist the strategist to find the best suitable strategies for the company.

It helps to strategy making bodies in their decision making process by providing them the simulation of the resource and risks.

Give more opportunities to increase the business and adds extra points in the good will of the company by adding the ability of environment scanning person.

It provides opportunity to company’s executive in continuing the broad based studies.

Helps the strategy developers in finding the latest and up-to date strategies for the organisation.

Macro Environment

Environment scanning is most commonly done on the macro level. The macro level analysis may contain the definition of the market, analysing the market size, potential market, market segmentation, structuring the industry, group management, competition, finding the market trends.

The Macro analysis in the industry of music is defined as: “In music theory, macro analysis is a method of transcribing, or writing down chords that may be used along with or instead of conventional musical analysis. Rather than roman numerals and figured bass symbols often used, letter names are used to indicate the roots of chords and are followed by symbols which specify the chord quality”

Market segmentation

Market segmentation is very common term to identify the group of people or organisations those have the some common characteristics and need a same or similar product for the cause. According to market analysts the market segmentation may have the criteria. The different segments have different needs but it is necessary that same segment have the same need and using the same product to fulfil their needs. These groups can be further more categorised by the consumption of products by according to their needs. The market segmentation can be concerned and can be viewed in more detail as positive or negative applications of the same idea.

Variables Used for market segmentation:

In general terminology the market can be segmented on Geographical locations, demographic attributes, psychographic, behaviour of people and technological segmentation.

SWOT Analysis

Strength

Strong global presence

EMI Group, PLC has a worldwide market in nearly 50 countries; among its major market are North America, Continental Europe, Latin America, UK & Ireland, Australia, Japan and Asia.

World largest independent music company

In 2002, EMI worldwide market share is 12.6%. Its large size gives many benefits such as cost reduction through economic of scale. Vast resources and strong market share also give the benefit of being able to attract the best staff and artists to the company which have a strong position for the future.

Financial Performance

Although EMI Group sales in fiscal 2003 decline compared to 2002, the company operating profit show excellent increased about 33.1% in 2003 compare to 2002. The improvement in operating profit was due to a comprehensive reorganization of EMI Record Music Division.

World class artist roster

EMI releases more than 1000 albums every year and has a roster of over 1300 artists. Among them are David Bowie, The Beatles, Norah Jones, Queen, Robbie William and many more.

Weaknesses

Difficulties in the US Market

EMI has consistently been towards the bottom of the five majors in the US market share, which is the world largest recorded music market in the world. In 2003 it only command 9.8 % of US market share. Don’t have conglomerate backing-EMI is the only top five music company that solely independent which not being own by larger corporation. This mean EMI has to generate its own resources without any help from other larger company.

Decreasing in worldwide market share

EMI Group, PLC worldwide market share dipped from 13.4% in 2002 to 12.6% in 2003. The worldwide decreasing were resulted from the decreasing of EMI Group market share in several major region in 2003 compared from 2002 which included North America (-0.03%), UK & Ireland (-0.01%), Continental Europe (-1.7%), Latin America (-2.6%) and Australia (-0.10%).

Opportunities

Joint Venture / collaboration

With recent merger attempts being stopped, EMI consolidation within the industry is becoming more difficult.

Internet sales

Internet has become the fastest growing media for music distribution and many analysts expect that the downloading trends will continue to grow in a future.

More Open M&A regulatory

More open or liberalization of M&A in music industry may increase EMI Group opportunity to acquire or merge with other music company. This will give EMI added market share and resources to compete with other major music companies.

Focus on market where it has a strong market share and growth

Although North America especially US is the biggest market for recorded music, however it seem that EMI having trouble to keep competing to gain more market share. Maybe EMI has to give more focus or gaining more in the market that it has a strong share such as UK & Ireland, Australasia and Continental Europe. EMI also has to focus more in growing market region such as Japan and Asia.

Threats

Limited growth potential for recorded music

The worldwide recorded music industry posted sales of $32 billion in 2002. The figure represent a 7% decline in Dollar sales and an 8% decrease in unit volume from 2001. Compared to 2001, sales of CD albums fell globally by 6% and there more continued declines in the sales of CD singles (down 16%) and cassettes (down 36%). These show that is very difficult to find growth opportunities in the market.

Poor economics condition and exchange rate fluctuation

As a global company operating in many countries worldwide, EMI Group, LTC is easily be vulnerable to the deteriorating economic condition worldwide and fluctuation in exchange rates and interest rates. These can often adversely affect both revenues and profits for the company.

Filling low

In early September 2003, RIAA filed 261 separate lawsuits in US against individuals engaged in unauthorized file sharing. Industry analysts expected that litigation would have a short-run dampening effect on unauthorized CD downloading and burning. However it was viewed as having a minima long-run effect on this practice.

Aggressive Competition

The recorded music industry is very competitive which dominates by five larger companies which included Universal Music Group, Sony Music Entertainment, Warner Music Group, BMG Entertainment and EMI Group, PLC. EMI has to always consider any action from competitors which may effect the company competitive position.

UK Music Market

Before continuing to any marketing strategy it is important to understand the market of the geographical location and trends of the targeted market. For this analysis it is important to understand the concept of the music industry’s content and structure. The Standard Industrial Classification (SIC) offers a description of the music industry as involving “businesses and organisations that record, produce, publish, distribute and market recorded music.” In addition to these, four main stakeholders characterize the music industry the artist, the consumers, the music agents and the distributors. However, in seeking to define the industry it is acknowledged that no one definition can capture its diverse nature in terms of “(…) musical activity and commerce.” In commercial terms the global music industry “is a multibillion dollar segment of the media industries” and has reached a stage of maturity in its lifecycle. However with the rise of the digital era, it is undergoing significant transformation. With a core business sector comprising the record companies and music publishers, the global music industry transcends national boundaries and “pervades virtually every culture and every society.”

Marketing Mix

4 Ps

Product:

Once EMI has taken control to the UK music market for the marketing of their products, it is the responsibility of the management to make the desired strategies which will explore products in country which also can raise their market share price. EMI has to look for their strategies according to the need of music listener and their needs and should the product as accordingly. [8]

Price:

Price is very important factor to be notice before planning any marketing plans and it mostly depends upon the area and the population. Everyone buys product according to pocket and if any rivals in the same area where EMI operates unable to low their cost, EMI can get the competitive advantage by keeping themselves in the market. In UK at present EMI offers promotions on mostly of their products and all promo prices are still cheaper then the other rivals. [8]

Place:

For more expansion of the business EMI need to do big investments in the areas where lands are cheap which normally localities are in the district and village and in general the public lives in those areas are of similar minded which can give extra advantage for do marketing. Also opening stores in the disadvantaged areas enable EMI to win the trust of local communities by providing them job opportunities in their stores. [8]

Promotion:

Promotion has a very vital role in any business revenue as if the business is not attaining their targets the best way is to use promotions 1st and if no result could come up, change the strategy. EMI and all different companies in the world use promotion to sell out their product. Keeping the product for a long time puts an extra burden for the warehouses which could leads to company loss if any of them gets out of date. During recession EMI and other rivals have good offers on their products to win the loyalty of their customers.

PORTER Five Forces

1. Competition from substitutes:

Within the music industry the threat of substitutes is extremely high. The internet has created an emerging source of substitute competition in the form of digital music and digital delivery. The availability of substitutes allows consumers to make performance and price comparisons with the option of switching to download music. The growth of both illicit and subscription downloading is effectively leading to the direct substitution of recorded music for digital alternatives. With little cost or inconvenience consumers are switching, to digital and online music services attracted by the value- added benefits of greater convenience, diversity of choice and lower costs compared with traditional formats.

2. Threat of entry:

The threat from new entrants has increased with the growth of the internet. Lower capital investment and operational costs for online distribution has lowered the entry barriers for new independent record companies. As a direct consequence, new entrants compete on a more level playing field, where size is no longer a determinant of success or failure within the online market. With diversity of demands, new entrants have the opportunity to achieve success through niche target marketing. Furthermore with these evolutionary changes, traditional distribution channels are less relied upon and new entrants can compete through online distribution and marketing. However starting up in the music industry still involves risks, where investing in a new- artist may involve unrecoverable sunk costs. Representing a new artist requires financial resources, experience and substantial contact networks and with limited resources independents might find it hard to break in to the industry. The major players have already achieved a substantial competitive advantage with well established contact networks, global reputations and long- term relationships with artists. Their financial muscle and repertoire of artists enables them to spread risk over their range of portfolio projects.

3. Rivalry between established players:

Internal rivalry and competition within the industry is high and remains tightly concentrated between Sony BMG, Universal, Warner and EMI. With the increase of independent labels entering the industry competition has increased. Large and small companies are now directly competing to attract artists and improve market share in both the physical and online markets. Due to the intense nature of this competition, decisions made by one company can influence others. For the main companies this intense rivalry means that their market share fluctuates through competition and can no longer be guaranteed. With “parallelism” pricing decisions CD’s are priced at similar levels and as such companies are looking to their artists as a means of differentiation whilst attempting to offer the most creative channels of music distribution.

4. Bargaining power of buyers:

The emergence of the digital music market has increased the strength of buyers bargaining power. Through online network communities, consumers’ bargaining power is strengthened by the abundance of online information. Consumers are now much more price sensitive and are becoming an empowered force, directly influencing how music is delivered and in what format.

With the growing perception that they offer nothing more than capital, record companies are forced to react, reinventing their business models accordingly.

5. Bargaining power of suppliers:

The bargaining power of suppliers within the industry has lowered .The artists can now choose to circumvent the suppliers by either setting up their own label or promoting their music via the internet. This has substantially increased artists control over earnings and marketing.

Recommendations

The following recommendations are provided in light of the key issues facing the company. EMI Group revenue has gone down 15.79% in the 2007 fiscal year and led it to low gross profit, net profit and ROCE ratios, as well as undesirable EPS figures. It is vital for EMI to offset the decline in CD sales and adapt to the changes in the environment to remain being attractive to investors and artists. With the growing power of the internet and technologies, the top management may consider to put weight into effective e-commerce marketing instead of continuing with traditional expensive marketing methods. It is also essential to understand that gaining market share in the digital music area should be highly prioritized as the trend of the music industry is clearly moving towards the technological side.

Piracy has nonetheless become a serious issue in the industry with the rapid development of technology. It is highly advisable for EMI to cooperate with its competitors to target piracy. The possibility of achieving a satisfactory result against piracy is high with their dominant power in the industry. By bringing in game theory logic, it would be more sensible to work with the rivals in this scenario to protect revenues in the future. In addition to sales of record music, there are many other income generating activities such as concerts, merchandise and sponsorship.

It is, of course, important that EMI continue developing its key strengths whiles adjusting its strategy to the changing environment. The quality of music produced is the core of the business; EMI should definitely try to keep successful artist as well as continuing to identify new artists with potential to growth.