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Universal Music Group

Nicole Golston. Universal Music Group. Pest/Industry analysis. Company Snapshot. Universal Music Group (UMG) was established in 1998 It was originally named Decca Records USA, which started in 1934 and went through many changes to get the current name

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Universal Music Group

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  1. Nicole Golston Universal Music Group

  2. Pest/Industry analysis

  3. Company Snapshot • Universal Music Group (UMG) was established in 1998 • It was originally named Decca Records USA, which started in 1934 and went through many changes to get the current name • In February 2006, the group became 100% owned by French media conglomerate Vivendi SA. It is in the entertainment industry and targets the global music market • UMG is the world’s leading music company • UMG also sells and distributes music video and DVD products, and licenses recordings, encouraging the legal distribution of music online and over cellular, cable and satellite networks

  4. Company Snapshot (cont.) • The CEO is Lucian Grainge • Currently they have 7,100 employees • Representing 98% of the music market, Universal has three key competitors. • Sony Music Entertainment • Warner Music Group • EMI Group • UMG has a diverse family of record labels which include: • A&M/Octone, Barclay, Decca, Deutsche Grammophon, Disa, ECM, Interscope Geffen A&M Records, Island Def Jam Music Group, Mercury Records, Show Dog–Universal Music, Universal Motown Republic Group, Universal Music Latino, Universal Music Group Nashville, and Verve Music Group • This also includes popular artists like Justin Bieber, Black Eyed Peas, Mary J. Blige, Mariah Carey, Sheryl Crow, The Killers, Lady Gaga, Lil Wayne, Ludacris, Maroon 5, M.I.A., Pussycat Dolls, Lionel Richie, Rihanna, Gwen Stefani, Sugarland, Robin Thicke, Stevie Wonder, Sting, 3 Doors Down, and Kanye West

  5. PEST Analysis

  6. Five Forces Model

  7. Five Forces Model

  8. Industry Analysis

  9. Supplier Power • The supply of available talent (artists) is very low, so they have a high bargaining position • Artists get signed in the beginning of their career, so they don’t have much leverage with UMG • Once artists get famous they gain more power and can basically name their own price

  10. Buyer Power • Music buyers, as a group have a high bargaining power • Price to pay • Software attached to product • May not need or want to buy it • Music Retailers have low bargaining power because there are few record companies

  11. Threat on New Entrants • Barriers to entry are high • “Big 4” recording companies control the market so much, independent labels pose no threat

  12. Substitute Products • Video game and movie companies • Online Entertainment • Download or stream • Mp3s or CDs

  13. Suggestions to Address Key Forces • Universal Music Group is competitive because they have: • Loyal customers • Technological advancements • Loyal suppliers • Rivalry could emerge because the market sizes are similar and they have similar organizational structures

  14. Blue Ocean Strategy

  15. Blue Ocean Strategy • Largest Music Company • Horizontal Integration- entering other entertainment genres • Low prices for unique and valuable products

  16. Conclusions • Technological and social factors have the greatest impact • Barriers of entry, buyer power and supply power are all high for Universal Music Group • UMG has the ability to adapt to blue ocean strategy. • New strategies will come along under the new management of CEO Lucian Grainge

  17. Competitor Analysis &market Analysis

  18. Identification of Key Competitors • Sony BMG Music Entertainment • Sony BMG Music Entertainment is the second biggest major record label in music sales. • Headquartered in New York City • Warner Music Group • The Warner Music Group is the third major record label in music sales • World’s only publicly-trade music company • Aimed at helping artists achieve long-term creative and financial success while providing consumers with the highest-quality music content available. • EMI Group • A business solely focused on music, tracing its history to the very beginnings of recording • Headquartered in London, UK • The EMI Group is the fourth biggest major record label in music sales. *Sony and EMI are privately held

  19. Evaluation of Competitors

  20. Industry Analysis

  21. Strategy Business Groups in the Industry • Differentiation Strategy • Investing in unique artists • Pursue digital distribution • Downloads/Online sales • Online streaming • UMD/ Blu-rays

  22. How Competitors Compete • Loyal Customers • Consumer Preference • Keep up with the rapidly changing style • Commercialize artist • Artists must be able to reach different demographics (exploitation)

  23. Recorded music market 75% of recorded sales come from • U.S (31%) • Japan • U.K • Germany • France

  24. Key Trends in the Music Market • Music product to music as a service • Just-in-time; customers want music at the click of a button • Move away from physical products • Technological development • High speed downloads • Apps • Wireless networks

  25. Products and Service types • Discover and develop artists • Market and distribute artists and their recorded music • Encourages legal distribution of online music

  26. Target Market • Music retailers • Consumers that listen to music • Ages 16-45 • All races • Middle class or greater • Preferably with a computer

  27. Market Segmentation • Industry segregation by region • Location has a lot to do with the type music people listen to • Industry Segregation by genre of music • Declining market- Many people opening their taste of music and listening to all different genres • Industry Segregation by age • The younger generation listens to music more • Industry Segregation by technology • Those who have the ability to download apps or music in general • Growing market- Technology is advancing quickly

  28. Social Media The music industry is focused around the media -Artists have Facebook, twitter and YouTube pages in order for consumers to be more connected -Consumers can play artist music and videos on sites like YouTube and Vevo -Almost all of the popular social media sites have streaming music, so music can be playing while visiting the site -There are cell phone apps like Pandora to play music from your phone -All these sites are great marketing tools for the record label and artist themselves

  29. Conclusions • UMG’s Main Competitors • Sony BMG Music Entertainment (Privately Held) • Warner Music Group (Publicly Traded) • EMI Group (Privately Held) • Record Labels use the same strategies to get to the goal of successful music • Strategies • Differentiation • Digital Distribution

  30. Conclusions • Competitors compete by • Loyal Customers • Consumer Preference • Commercialize artist • Key trends for the Music market • Music product to music as a service • Technological developments • Market segmentation • Industry Segmentation by • Region • Genre • Age • Technology

  31. Internal analysis

  32. UMG Business Model • Diverse group of business divisions has allowed the company to respond quickly and capitalize on the changing music industry • Different business divisions at UMG work together in great harmony throughout the whole process of publishing and eventually selling an artist’s music • The eLab’s division is responsible for handling the company’s electronic commerce initiatives, internet exploration, and new technology opportunities worldwide

  33. Company Strategy • Ensure leadership of the core business during the transition to digital • Participate in a broader range of music revenue streams • Maximize profitability through efficient cost management

  34. Company Strategy • Product differentiation • Uniqueness of artists and songs • The best resources • best recording technologies • merchandising services • management services • live music services

  35. Resources • interdependence of different business functions and divisions • excellent corporate integration and acquisition skills • a tremendous ability to attract top talent

  36. BCG Matrix High High Market Rate: UMG is the world’s largest music company, with 35% of the market Low Growth Rate: The “Big 4” has the industry locked down. There is little opportunity for growth Industry Growth Rate Low High Low Relative Market Rate

  37. Value Chain Analysis • UMG controls the entire chain • Retailers will be eliminated, since the products will be directly delivered to the client through internet Brick and Mortar Digital

  38. SWOT Analysis

  39. Generic Strategy Comparative Advantage Low Cost Higher Cost Low Cost Comparative Advantage: UMG has reduced the price of products Broad Competitive Scope: UMG has a broad range of customers to market to Competitive Scope Narrow Broad

  40. Grand Strategy

  41. Grand Strategy • Acquisitions and Mergers • In 2001, UMG acquired an online subscription music service, EMusic.com, which it used to help grow digital sales and internet related operations • From 2003 to 2008, UMG made over six acquisitions of different record labels which helped the company achieve the largest music catalog in the industry • In 2006, UMG acquired BMG Music Publishing and in turn became the world’s largest music publisher

  42. Grand Strategy • Acquisitions and Mergers • The acquisition of Univision Music Group in 2008, expanded UMG’s reached to nearly 50% of the Latin music market • There are many independent labels UMG can acquire

  43. Ansoff’s Growth Matrix • UMG should focus on Product Development: • publish new albums • change album packaging (size, shape, etc.) • use different medias to publish albums like online,DVD’s, Blu-Ray Discs, etc.

  44. International Markets • Currently has a network of subsidiaries, joint ventures and licensees in 77 countries • Universal Music Group International is the division that manages UMG's businesses in countries outside of North America • In some markets outside the U.S., UMG companies handle their own distribution and sales • In other markets UMG companies have sub-contracted services to third parties or entered into distribution joint ventures with other record companies

  45. Conclusions • Business Model • Different business divisions at UMG work together in great harmony throughout the whole process of publishing and eventually selling an artist’s music • Generic Strategy • Overall Cost Leadership • Grand Strategy • Acquisitions and Mergers

  46. Conclusions • Ansoff’s Growth Matrix • Product Development • New Albums • Use different medias • International Markets • Currently has offices in 77 countries

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