DUE TONIGHT Business Policy & Strategy - Company: Spotify

1

Paper #2: Spotify

Major functional areas in Spotify

The raw materials

Spotify, a company that provides an audio streaming subscription service, acquires its content through independent artists and major record labels. Agreements are done with the labels, or the individual artist and the company makes contracts on how to pay the content owners. Unlike other companies, which mostly pay artists a constant amount, Spotify pays for content according to the number of streams in that content and pays 70% to the record labels, who then pay their artists according to their agreements. Therefore, this content is considered the raw material in the case of this company (Loreto, 2017). Other inputs include technicians, programmers, and other people with competence in technology.

Research and development

Spotify uses interviews and surveys for their research and development to get their customer experience. Researching about the user allows the company to understand how its customers perceive it. Also, the R&D function consists of researchers, engineers, designers, and product managers who turn technology and knowledge into extraordinary listening expenses. The R&D also develops products and creates strategies to ensure when the product is released to the market, it will stand out. The research and development team in the Spotify company also keeps updates on the market changes and changes in consumer preference to create products that fit these consumer preferences.

Production/ manufacturing

The company is creating physical products, aiming to set up an operational organization for manufacturing, sales and marketing and supply chain (Voigt et al., 2017). However, the company has not yet come out about the products they intend to manufacture. These are speculations because of their job listing, which made people believe there was an ongoing project to start physical products. Spotify also produces its content, and they have a growing studio. The production team is also responsible for determining the kind of content to be put out.

Distribution

Spotify is a direct distributing company, and it deals with artists and labels directly to get content. Through distributors such as distrokid, CD Baby and EmuBands, the artists and the record labels can get their music to Spotify. These distributors handle the licensing and payment then the company distributes the content directly to the customers. Direct distribution enables the company to acquire knowledge of the customers, their needs, and their preferences. It then develops strategies that help it meet these customer needs. The company is a distributing channel that has grown over the years and allows content exchange from creators to consumers. It is also a producer of its content, and when they do this, they sell its range directly to the customers.

Marketing/ sales

The company has trained its marketing personnel, and they aim to turn the customer listening habits into money. The company mainly uses personalized and user-based strategies of marketing. When the user installs the app, they get a customized listening experience, and they are allowed to choose their preferred artist and the kind of music they want (Dyer et al., 2017). Social media trends are followed, and the marketing structure is dynamic and fluid; it keeps on changing to adopt changes in the market. Also, innovations are used to attract new customers as a marketing technique. Most of the company's marketing strategies are based on the consumers, and that's why the company is successful in marketing because they always meet the customers' needs.

Customer service

There is excellent customer service for both the artists and the fans of the Spotify company. The company has a support system for customers in case of any challenges faced by the customers. The customer's issues are taken seriously and handled by a team made expressly for handling customer complaints. It is possible to reach the customer care department through emails, phone numbers, among others.

Support/secondary functional areas

Human Resources

Due to the changes occurring in the company due to its growth, it is the responsibility of the human resource department to create a conducive environment that maximizes the utilization of human resources. Using the examples of the leaders from around the world, the HR leaders in Spotify are challenged to change the status quo and come up with the best conditions so that employees are well taken care of. The department also oversees the recruitment and training of personnel and aims to recruit the required expertise and provide them with the necessary training to conquer the market. Organizational culture and practices and the way people should interact with each other are determined in this department.

Information Technology

The IT department in Spotify company oversees most of its activities. For the company to provide services, it is supported by the IT department and protection against attacks and creating the whole system. The customer's experience is ensured because this department makes software that allow customers to access the content, they want personalized choices. Also, the IT team supports the activities in the entire company to ensure connectivity between the content producers and the customers. The organization's goals are realized through the IT departments because it is possible to create systems that align the organization with its goals.

Executive management

The company's chief executive officer guides the vision and strategy of the organization and leads the management team. The directors and other executive managers are the top managers of the company. They carry the company's interest at heart and roll-out strategies that ensure the company's continued success. They also protect the interests of the shareholders and other stakeholders in the organization. They authorize and approve almost all decisions and initiatives undertaken in the organization. The managers oversee the organization's running and implementation of decisions; they determine what happens in the company because many decisions must go through them.

Legal

The legal team is the support team in Spotify, which takes care of the organization's legal matters. Legal issues faced by the company include terms of the contracts entered by the company with the record labels and the artists—the time of use of the services provided by the company and compensations of employees according to laws. The legal team is critical because it ensures good relations between the company and the state and creates trust in the people due to its compliance with regulations. The legal team also ensures that the company operations comply with the state laws at all levels and present the company in case of lawsuits by other companies, customers, or artists.

Accounting

The accounting department makes financial strategies for the company to ensure that it stays on track regarding revenues and expenses. This department provides the company's profitability by looking at the areas that need improvement in finances either through cutting down costs or through taking opportunities that increase the company's earnings. The department also takes care of team member compensation and distribution of shares. The company's success can be from the department because when good strategies are produced, there is a likelihood for the company to become more competitive and to increase its market share. The accounting supervisor oversees the financial performance of content in the market. A comparison can be made to see the content with the best performance to capitalize on such content.

Significant processes that occur in the functional areas

Competitive advantage may be realized in the research and development function. This is because, through research, the best products are recognized, and if adopted, they put the company at a good mark in the market, and it can achieve a significant market share. Information technology as a secondary function can also increase the company's competitive advantage. Through maximum support of the systems, the customers receive the best experience, and they, therefore, are willing to spend on the company's products. This function also puts the company ahead of other companies by coming up with unique products. The accounting support function can also lead to the competitive advantage of the company. The accounting process compares the products financial performance. It can help the company is doing away with products that have low performance and adopt products with high performance hence increased competitive advantage.

Accounting functions can realize superior efficiency. The accounting function also comes up with ways for the company to lower its costs because it creates strategies that do away with wasteful spending (Pinarello et al., 2021). Therefore, if the company is spending on products and projects that are not profitable, the accounting function can do away with this spending, ensuring superior efficiency. Also, through purchasing raw materials, the company can see which input costs can be lowered to increase efficiency. The executive management is the overall overseers of all operations in the company can cut down excessive spending to drive the organization towards low costs for superior efficiency.

Some functions ensure the quality of the products to be consumed by the customers. The raw materials determine quality. If the programmers are hired and the content distributed is of high quality, the organization has overall increased quality (Almqvist, 2019). The human resource function also determines quality; recruiting the most competent expertise will ensure the best quality of the products due to proper coordination and sound systems of distribution. The executive management can propose quality measures and help implement quality strategies when the products are of good quality, customer loyalty and increased market share, which translates to increased competitive advantage.

The superior innovation can be realized due to the research and development functions. Through research, customers, preferences, and interests are learned. Also, the market trends are discovered through this knowledge; it is possible to develop innovative ideas (Schub et al., 2017). In addition, the IT function also can lead to innovation due to the deep knowledge of support systems. The IT team and the research and development team can take a study to create innovative ideas that keep the company's products appealing to the customers.

Spotify's biggest strength is its good reputation in music streaming; it has revolutionized music streaming and completely turned around the way people listen to music. the company also keeps on creating innovations that enable it to be ahead of the market competition. Another strength is that the company launched earlier in the streaming wars; hence it enjoys the early mover advantage.

Spotify is the most innovative company in Sweden. It has remained successful in the competitive market for so long because of its distinctive core competency: personalizing music and matching its content to the consumer's preference. It also supports freemium models, a tired strategy for pricing where essential services and music are offered freely.

References

Almqvist, C. F. (2019). Thinking, being, teaching and learning with Spotify: Aspects of existential and essential musical Bildung through listening in the classroom. Journal of Music, Technology & Education, 12(3), 279-296.

Dyer, J. H., Godfrey, P., Jensen, R., & Bryce, D. (2017). Strategic Management: concepts and cases. John Wiley & Sons.

Loreto, J. (2017). The impulse of regional growth in the creative economy. An analysis of the creative city of Stockholm. The case study of Spotify (Bachelor's thesis, Università Ca'Foscari Venezia).

Pinarello, G., Trabucchi, D., Frattini, F., & Manfredi Latilla, V. (2021). How firms use inbound Open Innovation practices over time: evidence from an exploratory multiple case study analysis. R&D Management.

Schub, J., Ivarsson, A., & Von Sydow, O. (2017). " Innovation is at the heart of everything we do"-How to sustain innovation and entrepreneurship, the case of Spotify.

Voigt, K. I., Buliga, O., & Michl, K. (2017). Business model pioneers. Management for Professionals. AG Switzerland: Springer International Publishing.