COURSE: Diploma in Computer Science
SUBJECT: Business Skills For E-commerce
TITLE:
Organization’s core business functions, structures and
business strategy with stakeholders
NAME
STUDENT ID
PREPARED FOR
Putri Naqibah Balqis Binti Zainol
BCS2011-003
Madam Rozie Ezrina Shuhimi
i- Introductions
Spotify is a small start-up company founded by Daniel Ek and Martin Lorentzon on 23rd April
2006 in Stockholm, Sweden to solve the growing issues of piracy in the music industry that
became rampant with the existing of LimeWire, Napster and The Pirate Bay. Daniel Ek told
the Telegraph in 2010 “I realised you could never legislate away from piracy”. Daniel Ek and
Martin Lorentzon created Spotify by creating a platform that is better than piracy while
simultaneously compensates for the music industry. In February 2009, Daniel Ek and Martin
Lorentzon launched Spotify cross-wide platform for iOS, Android, macOS, and Linux. In the
United Kingdom and On July 2011 in the United States. For their first launch, Spotify offers
listeners and fans a free service with advertising for 30 seconds to continue listening to
music for 30 minutes. Spotify launches their free services in hopes the listeners would
upgrade to their premium service of $10 a month. Daniel Ek and Martin Lorentzon wrote an
open letter to Swedish policymakers in April 2016 proposing action in three areas that they
believed in impeded the ability of the organisation to attract top talents as Spotify expands,
including access to flexible accommodation, improved education in the programming and
development fields, and stock options. Daniel Ek and Martin Lorentzon wrote to
policymakers to continue competing in the global economy, the policymakers need to
respond with new policies, or else thousands of Spotify jobs would be moved from Sweden
to the United States. In February 2017, Spotify experienced a tremendous expansion of its
US operations at 4 World Trade Centre in Lower Manhattan, New York City, by adding
approximately 1,000 new jobs and retaining 832 existing positions. Their US headquarters of
the company now in the Flatiron District Of New York City. Currently, Spotify has 48
branches around the countries while it remains their headquarters in Stockholm, Sweden.
Spotify offers a wide range of services based on music and podcast towards the listeners
while also offering licensing and agreements with record labels and media companies for
artist and podcast creator. Spotify extensive music and podcast libraries while also offering
the users their freemium services by having basic features free with advertisement and
having free trial periods to try their premium features making the platform more accessible
towards the large majority compared to their competitors such as Apple Music and Tidal. As
for their premium users, they offer premium subscription at a low cost that the users find
suitable for them whether it is individual or family. Their premium features allow users to
download music, no advertisement interruption, and play any songs with unlimited skips
while also offering high-quality music streaming and downloads for a better listening
experience. Spotify also provides exclusive contents to their users such as Spotify Studio
Oyster, Spotify RADAR and Spotify Exclusives Podcast that’s only available on their
platform.
Meanwhile, for the artist and podcast creators, they offer royalties based on the number of
artist streams as a proportion of total songs streamed. It distributes approximately 70% of
the stream’s total revenue to the rights holder or record labels. Spotify pays most of them
between $0.003 and $0.005 per streams based, but also can be varied upon the listener’s
region and account type whether it is premium, or advertisement-supported. Over the last
year, Spotify has built its brand by using outdoor billboards to promote an up-and-coming
artist or already established artist new songs at The Times Square, New York. Spotify
RADAR is also one of the ways Spotify promotes small, independent and new artist to their
users to help boost their audiences.
ii-Types of ownerships
Spotify AB is an “Aktiebolag” company means Swedish Public Company. Swedish public
company is a public limited company which must have a minimum share capital of 500,000
Swedish Kronor, and the public can buy its share on the stock market. The suffix “publ” is
sometimes omitted from the text of an informal nature. However, according to Swedish
Registration Office, “The name of a public limited company must be mentioned with the term
(publ) after the business name in the articles of association and elsewhere” unless it is
explicitly understood from the company’s business name that the company is a public limited
company. Aktiebolag or Public limited company is the equivalent to “Berhad” in Malaysia
under the Commonwealth jurisdictions and United Kingdom company law in the governance
of European Union Directives. A Swedish AB company must have at least one managing
director. If several persons form the boards of directors, a chairman must be appointed.
According to the law, Daniel Ek was appointed to be the Chairman as he is the founder of
the company. Swedish AB must be responsible for organising the general meeting of the
shareholder at least once a year, and the shareholder must elect the boards of director each
year.
iii- Mission and Vision (Goals)
Spotify sets their mission based upon the ideas which follow “Our mission is to unlock the
potential of human creativity – by allowing a million creative artists to live off their art and
billions of fans the opportunity to enjoy and be inspired by it.” Spotify’s mission statement
focuses on the transformation of these goals into reality and directed towards the
achievement of the goals of the company from a broader perspective. In this regard, the
critical feature of their mission is by improving the lives of the public to guarantee
that the feature is fulfilled, Spotify ensures that its platform is always up-to-date and
interactive. In this regard, the need to build sustainable livelihoods and provide a vital digital
space for its target audience is well understood by the company. Spotify platform has given
artist better chances to access and reach out to their broader fan base more efficiently.
Furthermore, to make sure that the digital content produced by the artist reaches the
appropriate audience through its criteria of targeting, hence making it profitable for
individuals. As a result, the idea of enabling the artist “to live off their art” is echoed in the
mission statement. Another key in Spotify’s key value is global presence by implementing a
calculated approach that reaches out to as many users as possible so that the needs of the
users can be gratified at a global level. Regardless of genre, culture or any other boundary,
the company focuses upon ensuring connectivity with everyone. Spotify is proud of having
coverage for accessing billions of fans and millions of artist, which allows it to reach its user
on a global level.
Spotify vision is based on the objective to certify that its services result in win-win situations
for both the artist and fans, this allows them to feel a sense of belonging to the vision and
bigger picture of the company, along with the of being appreciated to quote from Spotify,
“We envision a cultural platform where professional creators can break free of their
medium’s constraints and where everyone can enjoy an immersive artistic experience that
enables us to empathise with each other and to feel part of a greater whole”. One of the
critical points of their vision is stimulating harmony and empathy by emphases on acquiring a
more significant role rather than merely identifying itself as a service provider. The focus of
the company seeks to perform a socially rooted role in a society, instead of only fulfilling the
needs and requirements of the industry by providing on-demand music. The idea lies in the
fact of weaving and developing a sense of linkage and connection between people in
everything that it does, which highlighted from the incorporation of culturalism within the
platform of the company. Another key in their vision is breaking from medium restrictions and
constraints; the application of medium barriers has significantly hindered the progress of the
artists over the long term. However, the model utilised by Spotify within the music industry
addresses and identifies this critical element. To resolve this issue and offer better and
improved opportunities for growth, Spotify identified and adopted a well-regulated, yet an
open option that allowed the artists to test their limitless creativity. As Spotify monitored this
element, therefore, it was adequately taken care of without placing any pressure on the
artists.
iv- Organisational Structure
Boards of directors consist of 9 directors, and Daniel Ek, the founder as the Chairman of the
board of directors. Daniel Ek has been the member of the board of directors since 21st July
2008, and his term will expire on the date of the general meeting in 2020. Danie Ek is
responsible for guiding the vision and strategy of the company and leading the management
team.
Martin Lorentzon the co-founder and member of Spotify’s boards of directors since 21st July
2008 and his term will expire on the date of general meetings in 2020. Martin Lorentzon has
served as Chairman of the boards of directors from 2008 to 2016. Additionally, Martin
Lorentzon holds a Master of Science in Civil Engineering from the Chalmers University of
Technology.
The other members of boards of directors and shareholders are Barry McCarthy,
Christopher (Woody) Marshall, Shishir Mehrotra, Heidi O’Neill, Ted Sarandos, Thomas
Staggs, Christina Stenbeck, Padmesree Warrior.
The crucial part of Spotify success is motivated by the company’s unique method to
organising employees around work to augment team agility. The Spotify model is a peopledriven, autonomous approach for scaling agile that emphasises the importance of culture
and network. The Spotify model is a people-driven, autonomous approach for scaling agile
that accentuates the importance of culture and network. It has helped Spotify, and other
organisations increase innovation and productivity by focusing on autonomy,
communication, accountability, and quality. In 2012 The Spotify model was presented to the
world when Henrik Kniberg and Anders Ivarsson published The Whitepaper Scaling Agile
Spotify, which introduced a fundamentally simple way Spotify approached agility. Since then,
The Spotify model generated much buzz and became popular in the agile transformation
space. Its focused on organising around work rather than following a specific set of practices
becomes one of its appeals. Spotify model focuses on how businesses can structure an
organisation to enable agility. The Spotify model centred around simplicity in organising their
work by identifying how people and teams should be structured instead of hierarchical topdown management filled with bureaucracy.
Similarly, to a scrum team, Squads are cross-functional, autonomous teams (typically 6-12
individuals) that only focus on one feature area. Each squad has a unique mission that
guides the work they do, an agile coach for support, and a product owner for guidance.
Squads determine which agile methodology/framework will be used.
Tribes are formed when multiple Squads coordinate within each other on the same feature
area. Tribes help build alignment across Squads and typically consist of 40-150 people in
order to maintain alignment (leveraging what we call Dunbar’s Number). Tribe lead who is
responsible for helping coordinate across Squads and for encouraging collaboration.
Chapters are the family that each expert has, helping to keep engineering standards inn
place across a discipline. Chapters are typically led by senior technology leaders, who may
also be the manager for the team members in that chapter. Even though squads are
autonomous, specialist (e.g. JavaScript Developer, DBAs) must align on their best practices.
Guild is formed when team members are passionate about a topic; anyone can join a guild
which essentially is a community of interest and voluntary. Whereas Chapters belong to
Tribe, Guilds can cross different Tribes. There is no formal leader of a guild. Instead,
someone raises their hand to be the Guild Coordinator and help bring people together.
The Trio is a combination of a Tribe Lead, product lead and design lead. Each Tribe has a
Trio in place to ensure there is continuous alignment between these perspectives when
working on features area.
Alliance are a combination of Tribe Trios (typically three or more) that work together to help
their Tribes collaborate on a goal that is bigger than any tribe; multiple tribes need to form an
Alliance to accomplish a goal.
The benefits within the Spotify Model enable Squads to move fast, ship software quickly and
do all with minimum pain and overhead. The less formal process and ceremony allow
organisation greater flexibility on how Squads work and focus on aligning them with each
other and driving towards individual team outcomes. Augmented of self-management and
autonomy encourages creativity by trusting people to complete they see fit. The Spotify
model focuses on decentralising decision making and transferring that responsibility to
Squads, Tribes, Chapters and Guilds. The Spotify Model can offer increased transparency
across the work being done and grow a more experimentation-based approach to problemsolving in a high trust environment. All of this can lead to things like better products, happier
customers, and more engaged employees.
V- Reputation and Future Operations
Spotify’s reputation has been clean in the eye of the public, and they praise Spotify for its
data analysis that precisely judge the users’ music taste based of the genre and artist that
they listen to. Spotify extensive libraries of music allow them to categorise each song based
on their niche subgenre rather than genre. Their advancement in Artificial Intelligence and
Machine Learning is a big part of their success, as their services continue to acquire data
points, it is using that information to train information the algorithms and machine to listen to
music and extrapolate insights that affect its business and the experience of listeners. One
example is the Discovery Weekly where every user gets a personalised playlist every week
from Spotify of music that they have not heard before on the service, but that will be
something the listeners expected to enjoy. To make its mountains of data available to
musicians and their managers, Spotify just launched the Spotify for Artists app that provides
mobile access to analytics—everything from which playlists are generating new fans to how
many streams they are getting overall. Think of Google Analytics for musicians. It was
initially launched in a web version earlier this year, but the mobile app allows musicians to
access the info from the tour bus and the geographic streaming data can be instrumental to
musicians and their teams to plan tours more effectively. Artists also have more control over
their presence on Spotify, including selecting the “artist’s pick,” and they can update their
bios and post playlists.
With praised also comes criticism. In 2014, Thom Yorke and Taylor Swift withdrew their
music for the service because of the criticism of inadequate payment to the artist. In
response, Spotify claims that it is benefitting the industry by migrating users away from
unauthorised copying and less monetised platforms to its free service tier, and then
encouraging them to upgrade to paid accounts. Since then, Taylor Swift and Thom Yorke
had returned to Spotify in 2017. Another criticism despite their effort in trying to implement
multiculturalism to their platform is according to some computer science and music experts,
and various music communities are often ignored or overlooked by music streaming
services, such as Spotify. The most perceived error is said to be caused by a lack of diverse
scope within curation staffs, including overlooking mainstay artists in extensive genres,
potentially causing a categorical homogenisation of musical styles; even impacting mainline
artists like within hip hop with A Tribe Called Quest. This can potentially even harm heritage
styles, amongst both popular and traditional genres of New Mexico music and folk music,
even harming the growth of popular styles like country rap and contemporary Christian
music.
During the Spotify’s Investor Call 2020, Daniel Ek is confident in his goals to make Spotify
become the worlds’ No.1 audio platform and to achieve those goals Daniel Ek has made
several plans to keep up with the ever-changing pace of trends in music and podcast. Daniel
Ek discloses Spotify saw a 20% increase in the number of artists streamed on their platform
year over year and a 29% increase in the number of artists with at least 100,000 listeners.
This engagement has led to Spotify’s plan on curating the best tools and services for both its
consumer and artist alike. Since the implementation of podcasts in 2015 and peaking in April
2020 during the pandemic, Spotify saw a significant consumption of podcast that grew by
200% annually. The immersion of podcast users has led to the increase in music
consumptions, Spotify plans to increase discoverability for podcasts as a priority with
personalisation aligned to the user’s data and taste as the core pillars of their strategy. After
testing the Premium Duo payment plan for two people living under the same roof in
Colombia, Chile, Denmark, Ireland and Holland, they plan to expand Premium Duo
subscriptions options globally. Even though the podcast market and their Premium Duo
plans is still new, Spotify’s daring approach on being broad-minded with their user’s opinion
and rapidly updating their platforms with new tools build loyalty and trust within them and
users.
2 (a) Stakeholder
i.
Internal Stakeholder
 Founder
Making a substantial decision on what is best for the company to increase
profits and growth of the company
 Managers
Managing and deciding for the employees and branches so everything in the
company going through smoothly
 Employee
have significant financial and time investments in the organization, and play a
defining role in the strategy, tactics, and operations the organization carries
out.
ii.
External Stakeholder
 Artist
Releasing music to the platform as an exchange for royalties
 Record Labels
Licensing, royalties and music licensing to boost the artist image and build
audiences
 Advertisers
Making profits and making an impression to the listeners so they can increase
sales of their products
 Users/Listeners
Using the platform to listen to their music and supporting their favourites artist
2 (b) Stakeholder Analysis Table
Stakeholder names
Founders
(Daniel EK & Martin
Lorentzon)
High
How
much
influence
do they
have over
the
company?
High
Managers
High
High
Employees
High
High
Artist
High
High
Royalties and
platform to build their
audiences
Record labels
High
High
Advertisers
Medium
High
Marketing, royalties
and music licensing
through digital
copyright
Profits and increase
the visibility of their
product’s image to the
users
Users / Listeners
High
High
and roles
How
much
does the
company
impact
them?
What is important to
the stakeholders?
How could
stakeholders
contribute to the
company?
How could the
stakeholders block
the company?
Profits and the growth
of the company
Deciding what is best
for the company
The productivity of the
employees and
accomplishing
financial objectives
Salaries and the
profits of the company
Managing and making
an essential decision
for the employees and
branches.
Increasing productivity
and efficiency of their
work
Increase the quality of
their music
A controversial decision
on management of the
company or the artist
and users
Lack of leadership and
company vision while
contributing to a lousy
work environment
Worker protest, strikes
and lack of efficacy of
their work
A mass amount of artist
moving their streaming
platforms
Listens to music to
their favourite artist,
making playlists and
discovering new
music that fits their
taste
Strategy for engaging the
stakeholders
Increase fund for Public
Relations to boost the company
and founders’ image
Awarding bonuses for every
attainable productivity and
financial goals
Raise employee wages and
providing better benefits for the
employee
Raise the artist’s royalties and
pay per streams. Develop better
ways for promoting an
independent artist
Negotiate for fair deals between
the company and record label.
Increase the volume
of music that needs to
be released
Terminating contract
and moving their
platforms
Providing specific kind
of advertisement
tailored to user’s data
based on their
listening habit
Subscribing to
Spotify’s premium
plans and streams to
continue supporting
their favourite artists
Boycotts and
withdrawing
advertisements from the
platform
Increase better way of
advertisement personalization
and placement, whether it is
audio or banners advertisement.
Boycotts and
cancellation of
subscription
Make the subscription cheaper,
making the user interface more
inclusive and accessible and
implementing users’ feedback or
suggestion.
3(a) Spotify’s PEST Analysis
Political
In 2018, President Donald Trump signed
Economics
The UK is Spotify's main market,
the Music Modernization Act (MMA) into law accounting for 37 per cent of the number of
that is a music copyright law for the digital
registered monthly users. The
era. This act ensures that artists and
unemployment rate in the United Kingdom
songwriters receive royalties on their songs,
fell from a high of 8.1 per cent in 2011 to a
yet Spotify’s Cost of Revenue (COR) —
low of 4.4 per cent in 2017. With a low
which consists predominantly of royalties,
unemployment rate, customers have a
this law consumed 74.6% of Spotify’s total
strong purchasing power and confidence to
revenues. New laws or policies may
subscribe to Spotify's premium services.
potentially threaten the profitability of music
This gives Spotify the ability to increase its
streaming companies, putting them in a
profit margin by growing the number of
vulnerable position.
subscribers. As such, the desire of
consumers to buy was believed to be highly
influenced by the economic outlook.
Social
Technological
Smartphone progress has seen countries
Spotify is planning to debut its own smart
like India and China adopt subscription
speaker, the first ever to be a music
services. As the business was launched in
listening giant hardware product that will
these regions, Spotify wanted to appeal to
place Amazon, Apple and Google in direct
the needs of locals by introducing local
competition. The growth in the number of
music, language adjustments solutions and
users using smartphones would encourage
playlist suggestions algorithms. Social
an increase in the number of people using
movements are of special concern as they
Spotify, providing Spotify a chance to
have a significant impact on how
increase its number of subscribers resulting
advertisers perceive and motivate
in high sales. With the dramatic
consumers.
developments in the technology
environment, it has an impact on the way
companies manufacture and sell products
and services.
3(b) Spotify’s SWOT Analysis
Strengths
1. Strong brand based on service popularity
Weaknesses
1. Payment agreements with rights holders
Spotify's powerful reputation is focused on the
Spotify's shortcomings reflect its business model
music streaming services' success. Despite
and the nature of capital used to sustain its music
beginning its foreign growth in 2009, the
streaming operations. For example, payment
company has gradually grown to deliver its
arrangements with copyright holders are a major
interactive technology offerings to an ever-
weakness, impacting and potentially restricting the
increasing customer base. Brand supremacy
company's success rate. To deliver on-demand
leads to competition and reduces the ability of
music to its target market, Spotify must compensate
smaller music streaming platforms to allow
creators or producers of such digital material. For
consumers to move away from business. This
example, the company pays producers like
internal strategic aspect thus forms Spotify's
Universal Music Group for royalties and related
growth in terms of how it organises its
rights. This internal factor is a limitation that restricts
operation around the brand and its usage in
the profitability of Spotify by taking a big part of the
different music listening markets worldwide.
company's subscription revenue.
2. Demand-side economies of scale for music
2. Dependence on other technology companies,
streaming and related services
including some competitors
Spotify's demand-side economies of scale are
Spotify's reliance on other technology firms, such
another asset. These economies of scale draw
reliance is an internal competitive consideration
on the other strengths. For example, a strong
affecting not only third-party distributors, but also
brand and broad usability of the online service
some of the company's rivals in the music streaming
contribute to a substantial market share and a
industry. For example, Spotify depends on Apple's
correspondingly large user base. This market
App Store, a primary portal to access and install
situation enhances Spotify through the size of
mobile apps. Similarly, the company relies on
the business needed to achieve productivity
Google Play for Android smartphone applications.
and efficiency through economies of scale. It
Given that both Google and Apple have their
emphasises the advantages of such an
respective music streaming platforms, this
internal factor, including the reduction of fixed
vulnerability places Spotify's company under these
costs per account or per client, and the
two main competitors' negotiating power. Based on
enhancement of profit margins. Through this
this internal factor, it highlights strategic challenges
market resilience, Spotify has achieved
such as the company's payment of 30% commission
profitability amid fees to rights holders, such
or Apple fees on revenue created through the
as musicians or production companies, and
Spotify iOS app
other costs.
Opportunities
1. Diversification of online services to include
Threats
1. Legal disputes and challenges
new or different products for the same or
Legal conflicts and challenges threaten Spotify in
new target market and market segments
terms of costs and legal limitations. This external
Spotify's SWOT review table provides ways to
factor is common threat among leading technology
diversify web services across new or different
firms. This external strategic consideration is
products. This external strategic consideration
focused on ongoing legal disputes with rivals such
is focused on the company's constraint on
as Apple Inc., involving payments amounting to 30%
music streaming operations. Considering the
of revenue produced by apps through the App
ability to create, maintain and manage IT
Store. This conflict are external causes that need
systems for these operations, Spotify has the
support, challenging Spotify's public relations
potential to develop new products that could
standing and brand image.
include providing other forms of digital content
or other services that take advantage of the
company's global user base. Based on
Spotify's SWOT research, such an external
factor provides the potential to generate new
revenue streams or increase existing revenue
sources as the business evolves and develops
during cutthroat rivalry with global technology
firms.