Warner Music Group SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Warner Music Group managers to do a situational analysis of the company . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Warner Music Group is facing in its current business environment.

The Warner Music Group is one of the leading organizatations in its industry. Warner Music Group maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Warner Music Group to develop four types of strategies:

• SO (strengths-opportunities) Strategies
• WO (weaknesses-opportunities) Strategies
• ST (strengths-threats) Strategies
•  WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The main purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Warner Music Group strengths, and eradicate its weaknesses.

Step by Step Guide to Warner Music Group SWOT Analysis

Strengths of Warner Music Group – Internal Strategic Factors

As one of the leading companies in its industry, Warner Music Group has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Warner Music Group are –

• High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
• Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
• Strong distribution network – Over the years Warner Music Group has built a reliable distribution network that can reach majority of its potential market.
• Strong Brand Portfolio – Over the years Warner Music Group has invested in building a strong brand portfolio. The SWOT analysis of Warner Music Group just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
• Successful track record of developing new products – product innovation.
• Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
• Good Returns on Capital Expenditure – Warner Music Group is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• Superb Performance in New Markets – Warner Music Group has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

Weakness of Warner Music Group – Internal Strategic Factors

Weakness are the areas where Warner Music Group can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
• Limited success outside core business – Even though Warner Music Group is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Warner Music Group
• High attrition rate in work force – compare to other organizations in the industry Warner Music Group has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
• Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.

Opportunities for Warner Music Group – External Strategic Factors

• The new technology provides an opportunity to Warner Music Group to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• The market development will lead to dilution of competitor’s advantage and enable Warner Music Group to increase its competitiveness compare to the other competitors.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Warner Music Group an opportunity to enter a new emerging market.
• Government green drive also opens an opportunity for procurement of Warner Music Group products by the state as well as federal government contractors.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Warner Music Group’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
• Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Warner Music Group.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Warner Music Group to increase its profitability.

Threats Warner Music Group Facing - External Strategic Factors

• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Warner Music Group   in those markets.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
• Liability laws in different countries are different and Warner Music Group may be exposed to various liability claims given change in policies in those markets.
• Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
• New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
• Imitation of the counterfeit and low quality product is also a threat to Warner Music Group’s product especially in the emerging markets and low income markets.

Limitations of SWOT Analysis for Warner Music Group

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

• Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
• SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
• The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Warner Music Group
• SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
• SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Warner Music Group

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Warner Music Group managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Warner Music Group

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

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References / Citations & Bibliography

• M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
• A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
• L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)