Analysis of e-sonic’s external market environment
Sonic Records, a market-leading recording studio and production house, had witnessed declining demand for music CD’s. Five years ago, Sonic experienced record-breaking revenues totaling over $ 15 billion. However, over the past few years, CD burning, international piracy, and a shift in consumer preferences had reduced revenues by more than 30 percent. A recent market survey at universities across the nation (a key demographic for Sonic Records) revealed the over 80 percent of student had not purchased a CD in the last seven years. According to the survey, student either burned friend’s copies of CDs, illegally, downloaded music from private websites, or purchased tracks legally from online music portals for download to digital music players.
Although the past few years’ declining sales have been disheartening, some positive advantages in the fight against international piracy recently bolstered music revenues across the industry. The RIAA (Recording Industry Association of America) initiated lawsuits against hundreds of individuals and pirate file-sharing websites. The results so far have been positive. Fear of litigation has deterred illegal download volume. Further, the exceptionally successful launch of a number of on-line sites selling legal music downloads had demonstrated strong consumer demand. In fact, a recent computer company’s on-line music store launch results in astounding sales. According to the computer firm’s CEO, “We has hoped to sell a million songs in the first six months, but we did that in the first six days.”
Sonic Records, having experienced tremendous success in the recording and music distribution industry over the past 30 years, realized that the rule of the game were changing. No longer would music be distributed solely through the traditional retail store channel. Consumers desired instant delivery of music online and expected a selection of thousands of artists’ work at their fingertips. Further, consumer expected this music to be portable. Today’s listeners didn’t want to be constrained to the physical limitations of a CD. They wanted digital files that could be easily and legally transferred from computer to portable music player to home receiver interchangeably. Although downloads accounted for only 2 percent of music sales in 2004, industry analysis predicted a fundamental change in music delivery methods. Some estimated that up to 80 percent of all music sold might be delivered online in the next decade. Sonic executives understood that their business model needed to adapt quickly, lest they be left behind by other firms who had correctly anticipated this market shift.
In response, Sonic Recorded formed a subsidiary company named e-sonic. E-sonic would be responsible for creating an online music store capable for competing with established players in the industry. Key executives for Sonic Records were chosen to lead the new company. E-Sonic’s mission was to create the world’s leading online music store; ensuring Sonic Records’ prominence in the record industry’s future.
Backed financially by Sonic Records, a recording industry mogul, e-sonic possessed the resources and reputation necessary to build a world class company. The market recognized this. Just last month, e-sonic conducted a small, but very successful IPO. Although e-sonic had yet to even launch their outline music store, the reputation of its parent company, Sonic Records, bolstered demand for the new issue. E-sonic founders decided the firm should retain ownership of the majority of the shares, which could later be used as incentives for employees crucial to the organization’s long-term success.
E-sonic’s key business objective, as dictated by its parent company, Sonic Records, was to develop the world’s leading online music portal. Initially, e-sonic’s success would be measured by its ability to capture market share form competitors. Currently, two major players dominated the online music industry. These firms recognized the changing industry trends early and secured more than 85 percent of annual download market share, e-sonic needed to target there current customer while attracting newcomers to the world of online music.
Although the idea of offering digital music to millions of customer might initially seem complex, the formula for success in the industry has proven relatively simple. Superior marketing, a robust selection of artist, and a user friendly wed interface helped current firms establish their market leadership.
E-sonic executives, with decades of experiences in the recording industry, help established relationships with all of the major label and most of the smaller ones, affording them an advantage in the music offerings. However, as recording industry executives e-sonic’s management had little experience in software development. Further, although marketing expertise was important for success in the traditional music industry, company management had no experience with online marketing or marketing initiatives tailored to their new, tech savvy, customer base. Located in Los Angeles, e-sonic hoped to recruit the best and brightest of the music and software development industries. Further, they hoped to create a performance based culture where employees felt rewarded for their contributions.
Realizing the challenging task ahead of them, e-sonic executives had the foresight to recognize that despite their years of experience in the traditional recording business; outside consultants might offer them salient insights. Their new venture would require hiring employees I all business discipline, especially those with the marketing and technical skilled necessary to help establish e-sonic as the world’s pre-eminent online music store. In addition, e-sonic management understood well the importance of establishing a sound compensation system right from the firm’s inception. They knew that an internally equitable and market competitive compensation strategy could help e-sonci achieve their business objectives, but they had no expertise in this area. In response, the e-sonic’s management team has hired you as their compensation consulting staff. Congratulations and good luck with your new client!
Requirements of submission: Each section of the final project must follow these formatting guidelines: 5–7 pages, double spacing, 12-point Times New Roman font, one-inch margins, and discipline-appropriate citations.
Strategic Analysis Outline:
1. Executive Summary (Concisely conveys the project objectives and main findings. The executive summary is completed last, but included first in the strategic analysis.)
· The executive summary begins the strategic analysis, offering a concise explanation of the key finding your consulting team discovered while researching e-sonics external market environment and internal capabilities. ( one to two pages)
SECTION 1: STATGEIC ANALYSIS
A. Identification of e-sonic’s industry based on the North American Industry Classification System (NAICS)
B. Analysis of e-sonic’s external market environment
· These web site should be helpful for this section.http://www.census.gov/epcd/naics02/ ( Section A)
· www.bls.gov www.cencus.gov www.Commerce.govwww.wsj.com www.hoover.com www.businessweek.com ( Section B)
CB Analysis of e-sonic’s external market environment
1. Industry Profile
· The industry profile assessment highlight basic industry characteristic such as sales volume, the impact of relevant government regulation on competitive strategies and the impact of recent technological advancement on business activity.
· The analysis of competition highlight e-sonic competitors, paying special attention to specific factors that make competitors successful.
3. Foreign Demand
· The foreign demand analysis reports levels of foreign demand e-sonic may experience for their products or services.
4. Long-Term Industry Prospects
· This profile describes projections related to the long-term outlook for e-sonic’s industry.
5. Labor-Market Assessment
· This profile describes key labor market characteristics such as current labor supply and future trends influencing the availability of qualified employees for e-sonic. Many government website will assist your team with the development of this profile. You will find BLS and the online Occupational Outlook Handbookespecially useful for projecting long-term employment supply.
C. Analysis of Internal Capabilities
1. Functional Capabilities
· Functional capabilities for a firm include manufacturing, engineering, research and development, operations, management information systems, human resources and marketing. Your consulting team should consider what functional capabilities will prove most crucial to e-sonic’s success. This information will assist your team in developing compensation strategies in line with e-sonic;s business objectives.
2. Human Resource Capabilities
· This assessment highlights the current strengths and weaknesses of e-sonic’s labor force while focusing upon future recruitment and retention strategies. An understanding of e-sonics human resources capabilities will allow your team to design compensation strategies consistent with talent acquisition and retention initiatives.
IN Section 1, your compensation team will focus on building an building an internally consistent compensation system. As mentioned earlier, an internally consistent compensation system design will clearly define the realtive value of each e- sonic sample job, creating a job hierarchy and an objective rationale for pay differences. To gain a clearer understanding of the proper design of internally consistent job structures, please consult Chapter 6 of strategic compensation.
Your consulting team is offered a sampe of E sonic jobs in section 1. Currently e sonic employs 100 people and will be hiring many more. Howerver, for the purpose of this simulation, you are asked to work with the sample of jobs offered(see appdenix 2 for sample jobs) Limiting the number of jobs removes one level of compexity from the simulation and allows your team to focus on learning the foundations of compensation adapted in the future to include all esonic positions
Outline for Section 1
A.Create Job Descriptions
B.Create Job Structures
C.Build Point Evaluation method
Seclect benchmark Jobs.
Choose compensable factors based upon benchmark jobs
Define factor degree statements
Determine Weights for each compensable factor
D. Caculate Point Values for Esconic Jobs
Determine point values for each compensable factor
Use Job evaluation worksheet to caculate point values for each position.
Distribute points for each compensable factor across degree statements
Rate jobs using point method
Indvidually Rate jobs to ensure reliablity
Resolve any discrapncies in point totals.
Rank Jobs in each Job structure According to results of your point evalution.
Section 2: Market Competitveness
In Section 2 of this simulation your consulting team shifts its focus from concentrating on E-sonic’s internal consistency to its external market competitvness. FIrst you will be introduced to the tools compensation most effectively within job structures. Many employees are unaware that their total compensation consist of much more than just base pay, benefits and different types of incentives to motivate employees in different ways. You will use some of these tools to develop pay policy mixes for each E sonic job structure. Next your team will consider pay policy level decisions for each job structure.
Your team will then use Comp analysis ( the included software program to conduct an external market survey specfic. Specfic Instructions provided with the software Program Will guide your consulting team through the steps involved in the compensation survey exercise. FInally your compensation team will report survey findings, interpreting regression anaylsis results gernated by the soft ware, and provide an explanation of major decision reached.
Section 2 outline
A. Determine Appropriate Pay Policy Mix
B. Pay Policy Level Decisions
C. COmpensation Survey
1. Choose Competitors based upon Industry, Size and union status
2. Slect Benchmark jobs for each structure using benchmark job descriptions
3. Evaluate and summarize decisions made for each job structure.
A. Determine the appropate Pay Policy Mix for E-sonic Job Structures
Intrinsic Compensation- Intrinsic rewards refect employee’s phychological mindsets that result from performing their jobs. Through effective job design, demonstrating respect for employees, and fostering a supportive and engaging work enviorment, managers promote intrinsic compensation. COmpensation professionals, although concerned with employee motivation created through intrinsic rewards, specialize in the devlopment of effective extrinsic, or monetary,reward stategies
23.Consider the list of jobs below. In your opinion, what is the appropriate span of management for each? Describe the factors you considered in reaching your conclusion.
· A physician practices medicine in a privately-owned clinic, while also supervising a number of professional nurses and office staff
· An owner/manager of an auto body shop deals with customers and directs several experienced mechanics and also trains and oversees the work of some unskilled laborers.
· A manager in an international advertising agency directs a team of professional who are located in offices around the world
DISCUSSION QUESTION Chapter 12 (4 points)
3) Describe the basic forms of organization design. What are the advantages and disadvantages of each?
APPLICATION QUESTION (2 points)
8) Consider an organization (such as your workplace, a club or society, a sorority or fraternity, a church, and so on) of which you are a member. Describe some structural elements of that organization that reflect the bureaucratic model. Describe some elements that reflect the behavioral model. In your opinion, is that organization more bureaucratic or more behavioral in its structure? Why?
MANAGEMENT IN ACTION: “Authority & FUNCTION AT A & F” (Opening case for the chapter) (8 points) Questions “You Make the Call” on page 346.
Case Question 1: If you were hired to advise Michael Jeffries on A & F’s current organizational design, what weaknesses and potential threats would you identify? What strengths and opportunities?
Case Question 2: What kind of organizational design do you think would be best suited to Jeffries’ managerial style?
Case Question4: It seems that mergers, acquisitions, and divestitures are currently business as usual in the retailing sector. Following such an event, does it make more sense to retain the current organizational design for a while or to modify it right away? Why?
Case Question 5: What differences might you expect to see between the organizational designs of such traditional retailers as A & F and American Eagle and those at online retailers such as Amazon.com and eBay?