Corporate Environment Assessment: The Music Streaming Business

Introduction

Businesses are always under pressure to follow emerging trends in consumer behavior. Businesses that do not anticipate and exploit the trends risk death in the face of competition.  Changes in consumer behavior are usually brought about by many things some predictable and some unpredictable. One of the areas in which consumer behavior has changed most in the last few years is in the use of internet. This has been brought about partly by the fast advancement in technology, decreasing costs of acquiring the required technology and rising awareness among the people. The fast advancement in the use of internet has changed the platform on which many businesses have operated for a long time (Scott, 1995). One of the industries that have been affected significantly is the music industry. Part of the reason that has made the industry one of the greatest beneficiary and at the same time casualty is the nature of the products handled. Music can easily be transformed into a digital format and distributed over the internet. The ease with which the music can be copied and changed into various formats has on the positive side lowered the distribution costs and increased the coverage of the music thereby increasing the revenues of the artist. On the flip side, the easiness in the copying of music has also made it very hard to enforce copyright laws leading to huge losses in the industry.  This for instance has been the case with download facilities on the internet. This is about to change in the current trend in consumption of music products and internet use is anything to go by (Clark et al, 1991).

Many businesses among them Spotify of Sweden believe the environment is about to change in favor of the online streaming method of consuming music that will not require download and will be free for the users. Spotify and other visionary businesses believe the advertisement and other user demanded products and facilities will be enough to cover the expenses of hosting such facilities and earn the owners a profit. As is expected with any new business model, there are many fanatical enthusiast as well as many hysterical fearful.  The reaction therefore begs the question, ‘what is the environmental outlook for such a business’?

There are many models that have been developed over time that can be used to evaluate the environmental outlook comprehensively. However, each of the models fits into a given business scenario better than others. Among the most popular is the widely used SWOT analysis. This method is liked due to its brevity and simplicity in application. Howeve,r the method lacks the comprehensiveness found in models like PEST which breaks down the environment into even small blocks allowing for a more critical analysis. Other models like the five forces under the Porter Model (Porter, 1998) are good for strategic analysis. This analysis follows the PEST model due to its comprehensiveness since this would give a lot of information to Spotify in their decision to roll out a full time streaming business (Worrell, 1998).

Analysis

PEST analysis groups all the environmental factors that a business is likely to face into four categories and seeks to evaluate how the aspects under each of the categories are likely to affect the prospects of the business (Worrell, 1998).

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