STRATEGIC MANAGEMENT WEEKLY REPORT
CHAPTER 4: EVALUATING A COMPANY’S RESOURCES, CAPABILITIES, AND
COMPETITIVENESS
Andre Benito 377178
Albert Adiel 375477
Farhan Taufik A. 381723
P. Destia Larasati 359275
Safira Rayhana A. 381759
Vanessa Schuetze MEB3189
Faculty of Economics and Business
Universitas Gadjah Mada
2018
QUESTION 1: HOW WELL IS THE COMPANY’S STRATEGY WORKING?
The two main indicators of a company’s strategy– strength is on the one hand the gain in
financial strength and profitability and on the other hand the company’s competitive
strength and improvement of its market standing. Other indicators include a company’s
earnings growth, stock price, overall financial strength, customer’s retention rate,
acquiring rate of customers, image change and improvements in internal processes. If the
strategy of a company is well, major changes in strategy will not be necessary. However,
a strategy is proved to be weak if there are shortfalls in the company’s financial
performance targets or a comparably weak performance to rivals. In such case the current
strategy should be questioned.
While Spotify has more than 50 million paying subscribers with increasing number and
the turnover increased in 2017 more than 50 % to 2,9 billion euros, the company still
makes no profit as shown in following statistic:
Green: turnover
Light- red: turnover costs
Red: other costs
Orange: operative loss
The high costs occur due to expenses on licenses which is a common struggle in the
music streaming industry. On the one hand, Spotify is gaining financial strength, on the
other hand the company is not yet profitable.
Although Apple Music, Spotify’s closest rival, has been growing to more than 7 million
subscribers, Spotify still remains the leader in the music streaming market. Its high
competitive strength however should keep enlarging, as the on– demand music streaming
market is growing exponentially.
Shown table offers an insight in the growing revenue of Spotify although the company is
still not profitable. The current stock price of Spotify is valued at $19 billion, according
to Reuters.2 Using personalizing marketing tools, Spotify targets a great customers
retention rate.3 Compared to Apple Music, Spotify loses 3 times less of the subscribers
each month.4 Only this year, Spotify has acquired four companies, each adding value and
innovation to the business. The increasing number of employees, accesses to music each
day and subscribers as well as the turnover, indicates Spotify following a strong strategy.
Even though the company is not yet profitable, the rapid growth over the last few years
and the two main indicators of gain in financial strength and the company’s competitive
strength and improvement of its market standing prove that the company’s strategy is
working well.
QUESTION 2: WHAT ARE THE COMPANY’S COMPETITIVELY
IMPORTANT RESOURCES AND CAPABILITIES?
– Spotify is free: Other streaming services offer free music, however Spotify has a
wider variety of music. Spotify has an advantage over iTunes, a main competitor,
