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consumers can decide on the exact content they wanted to listen to and were able to form
personal playlists rather than going for label produced albums.
1) Does Spotify have a competitive advantage? If yes, what are the sources of it? Remember
id Spotify has CA, which means that (WTP-cost) for Spotify is higher than the
competitors. Hint: Does Spotify have something that others don’t have? Better catalogue,
etc… Please try to be as clear as possible).
To identify if Spotify has a CA or not, we need to understand things like the Strategic
Position of Spotify, its Value Chain, and its key capabilities and resources through a
VRIN analysis. Starting with a Strategic position, Spotify took the demand in the industry of
music lovers from Hardcore music fans, who are ready to invest in devices like players and
CDs to broader music fans who are ready to pay smaller amounts like 99cents to listen to
diverse songs. This although reduced the WTP of prime music customers, it dramatically
increases the WTP of customers who paid nothing and listened to pirated music to a minimal
amount but substantial when aggregated.
Coming to the Value Chain, Spotify changed the following things from the industry value
chain
1) Infrastructure: Partnered with current labels and raised funds due to a promising
future.
2) HRM: Key Competitive advantage, motivation quick decision making, and autonomy.
3) Tech-Development: First mover, but other players can catch up quickly
4) Procurement: Partnering with Labels gave Spotify a wide library set, but the same
was the case with other digital services as Labels wanted to increase their audience
base.
5) Marketing and Sales: Spotify ran promotions to onboard new customers which
created a brand for them in streaming services.
6) After-sales: Converting music listening from an individual hobby to a community
activity by connecting it with Twitter, Facebook, etc and enabling sharing and library
notifications changed the game for Spotify and increased the WTP of customers
VRIN analysis of Spotify’s resources or capabilities.
Yes, Spotify had a competitive advantage initially, resources like Customer data as a First
mover, can be a great asset to increase WTP by proving relevant recommendations to
listeners and increasing stickiness.
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Playlist and social media integration also increase WTP by creating a community and a
