An Analysis Of E-Sonic, A Newly Founded Firm That Provides Streaming Services In The U.S

This is an analysis of E-Sonic, a newly founded firm that provides streaming services in the U.S. and is expanding to large markets in other areas of the world. E-Sonic sees the growth potential in music streaming but is aware of this large competitive market, now dominated by firms like Spotify, iTunes and Amazon. The strength of the firm lies in the capabilities of its employees who come from the U.S. and the local market. Streaming services are proof of the continuous improvement in the music industry. This has generated vast revenues for streaming services firms like Spotify, Deezer, and Rdio, Inc. which have expanded worldwide. Live streaming is popular not only in the U.S. but also in Russia, China, India and other countries where the music markets are growing.

Downloadable music is like a common commodity increasingly very popular around the world because of advanced technology. But demand is characterized by stiff competition, and so companies like Spotify, iTunes, Rdio, Inc., Amazon, and many others do everything to reach and serve young customers in the U.S., Germany, or Brazil.

Industry Profile

E-Sonic has a listed code 512230 in the NAICS list. NAICS association provides the classification list for businesses and live streaming services are one of these. This list is self-administered by any business unit wanting to be included in the database of businesses. E-Sonic is now a part of this list and the search code is streaming.

External Environment

E-Sonic’s competitiveness is still low while its competitors are Spotify, iTunes, Amazon, and other new firms. E-Sonic should first start exploring internal and external environment, which is through knowledge acquisition of internal and external sources, in which a combination of these two will benefit E-Sonic. A firm must have the “absorptive capacity” of the external knowledge. This means E-Sonic’s human resource must have the ability to understand and practice the knowledge it gets from the external environment. Crescenzi and Gagliardi (2017) also emphasized knowledge management after acquiring these resources from the external environment.

The external environment creates uncertainty as this influences “decisions, structure and performance”. Further, external and internal environments are sources of uncertainty, while decision makers also affect the environment. Literature on environmental uncertainty has changed from objective to “‘perceived’ environmental uncertainty,” which is influenced by the relation between the environment and the organization’s strategic action. In sum, both internal and external environments must be carefully studied and managed in order for the firm to operate smoothly in a competitive market.

Competition

Competition are high in this sector. Apple’s iTunes, Amazon and Spotify are strong competitors. Firms in the music industry, or those that provide streaming services, are making it an opportune time for business as revenue is large, with subscribers growing day by day. Through streaming, one can enjoy almost all kinds of music, from top hits to jazz to folk music. There is no limit to one’s streaming leisure as these are available through the internet and can be listened to using the customers’ cell phones. “Demand is ever increasing worldwide, particularly in large markets like China, India, and Russia. India and China are large markets, though China is heavily regulated by the government”.

Foreign Demand

Knopper (2015) cites Rolling Stone as being ahead in the streaming competition in nine countries. The second most populous country in the world, India, is the target of streaming services, Rdio seemingly winning the competition as the company bought Dhingana, a local streaming service provider that caters Bollywood soundtracks and others in the music industry. “There is an upbeat in the music streaming in India because of the large market, with competitors Saavn and Guvera, an Australian company”.

Brazin, another populous music-loving country, has more than a hundred million music enthusiasts who use smartphones and Androids to download music. This prompted Spotify and other streaming companies to add more apps to captivate music fans who different tastes when it comes to Brazilian music. In Russia, Zvooq caters to local streaming customers which number to about 2.7 million with foreign competitors Spotify and Deezer. The problem in Russia is the growing demand for pirate materials. According to Peoples (2015), “digital revenues worldwide will reach $16.0 billion next year, which means a growth rate of 14.61 percent annually.” This is quite phenomenal in the sense that digital revenues were not as phenomenal five years before 2015. As predicted by TechNavio, a market research firm, “there will be a large increase in music downloads that will catapult digital music revenue”.

Long-term Industry Prospects

The music industry’s transformation is due to the presence of the internet. Lucas Shaw (2016) cites Bloomberg statistics which state that “in 2015, streaming reached a staggering $2.4 billion in the U.S. alone, exceeding music downloads as the music industry’s main revenue resource.” Digital download is different from music streaming. The listening structure increased sales by 34.3 percent, a little above the digital downloads which reached 34 percent, as reported by the Recording Industry Association of America. Current trends point to streaming services, such as Spotify and Apple Music, as more revenue generating than iTunes’ music downloads, which was reported to have declined in 2015. Online radio added to the streaming services, along with Google’s YouTube.

Music streaming is joined by the singers themselves, Taylor Swift and Jay Z, with their own streaming companies, aside from Deezer and Amazon Prime Music. This just shows how the streaming market is thunderously growing. The music industry is having a nonstop upheaval and continuously changing.

Labor-market Assessment

A labor market assessment is important in understanding the firm’s labor behavior. This process helps understand how and what employers should look for in the quality and quantity of employees, such as the skills they need in helping the firm meet its goals and target. “This also determines the employability of the local market and what skills the local labor have to offer”. E-Sonic needs IT skill which is important in live streaming.

The labor market for E-Sonic uses the internet most of the time and pay is systematic. The employees of E-Sonic are IT specialists. They do not only know how to handle the system but must be expert in it. This is because there might be errors and hacks that must be corrected right away while customers are streaming or listening to music. Payment of customers is automatic, which means before they listen they are already identified, and they pay while they listen. Other competitors have their own system features might be different than E-Sonic. The beauty of the system is that the listener must not be disrupted while listening, the actions are automatic, and disruption in listening might compel the customer to seek other service providers. E-sonic must look at the market carefully since other competitors have their skilled employees who are expert in their field, who know to manipulate things and can make their system more viable than E-Sonic’s. E-Sonic has IT professionals in its labor force and but is still looking for employees in the local market it is penetrating, maybe in Russia or Asia. Competitors in this sector are growing by the number because of the big demand in live streaming.

Internal capabilities

Capabilities are a wealth of a firm or organization because they refer to the skills, knowledge and capabilities of the employees and managers of the company which take a long time to acquire and muster. It will take money, time, and more resources for a firm to make its employees muster their skills to lead the company to where it should be. “Capabilities enable the firm to move forward and differentiate it from the rest of its competitors”. Capabilities technically refer to the firm’s core competencies, but when referring to social issues, capabilities are the people’s “leadership ability”. An individual’s technical capability points to the functional competence in working on the project, while his/her social capability denotes the ability lead and motivate fellow employees. “The organization’s social capability denotes its present culture and personality”.

Functional Capabilities

E-Sonic’s functional capabilities are its assets, the people behind the system, those who manage and those who make the firm’s mission a reality. As mentioned earlier, E-Sonic’s employees are mostly IT professionals. Streaming services need the knowledge and expertise of IT people; if they are not IT professional, they cannot meet the needs of the system if something goes wrong. Employees must have expertise in dealing with customers and must know how to respond to complaints and suggestions of customers.

Human Resource Capabilities

The success of a firm depends on many factors, but primarily on human resources. E-Sonic’s human resource capabilities will include IT experts, many of whom will come from the local market. Most of the managers will come from the U.S. as the company is based here but employees and middle-level managers will come from the local market where it will operate. The strength of the human resource depends not only on its number but on the quality, which refers to the knowledge and organizational culture. Management capabilities also contribute to its strength.