By Anastasia Kurdina
History, development and growth of CCM over time
CCM, Colorado Creative Music, is music recording studio, foundedin 1995 by Darren Curtis Skanson, primarily established asvanity label for producing, promoting and selling his ownrecords, and consequently developed into microlabel with 4product lines and 11 different albums. In 2000, the company sold30,000 of Darren Curtis Skanson CDs and received net profit of$4,292.00. The company aims at expanding its customer base,acquire more popularity, and develop the company from microlabelto the independent one.
Vision/objectives
The business vision of Colorado Creative Music consists of threecomponents - Core Value, Core Purpose and Visionary Goals(Thompson, Strickland, 2003).
Core values of CCM are quality, creativity, and excellentcustomer service. The core purpose of this organization is tomake more people listen to classical and light acoustic musicand admire it. As for the visionary goals, the strategic dilemmaof the business arises. Thus, one of the visionary goal is tomake the music produced, played and recorded by CCM musicians,heard by larger audience. The other visionary goal that doesn'tcompletely go in line with the first one is to win the largecustom market for the company's products and services. Thecollision here is in the primary value and target of thebusiness: in the first case the attention is attached to theproduct, music, while the second one is focused on thedevelopment of the organization. This dilemma is the subject ofstrategic choice of the organization, which will be outlined anddiscussed later.
At the present moment, the main objectives of the company are:positioning the business against its rivals, development ofdistribution channels, development of the products andenhancement of the product line, anticipating changes in demandand adjusting the firm's strategy to respond to them.
Operating environment
The firm operates on American market which is characterized bypolitical and economical stability, technical advancements inproducing and distribution processes, large number of potentialcustomers, broad demand and intense competition.
Business model
Business model is the mechanism for the company to generate therevenues and profits. It includes strategy and implementationthereof and should answer such questions as how the firm selectsits customers, how it differentiates its products from those orrivals, how it creates utility for the customers, how itacquires and preserves them, promotion and distributionstrategies, how it allocates its resources and derives profit.As for promotion and distribution techniques for ColoradoCreative Music, the particular attention is attached to Internetaspect of the distribution and its capabilities.
Internet is not only alternative way to traditional methods ofmusic distribution, but also a great opportunity for artists andmusic-recording companies to expose these products to broadpublic. The advantages of such means are low cost of entranceand enormous size of potential customers market. Traditionalchain of music distribution includes such components aswriter/performer, publisher, musical instruments company, liveperformances, venue equipment and services, recording, studioequipment and services, recorded performances such as nightclubs, bars, business music, broadcast, film and music videos,and retail. These are traditional stages through which the songor other musical product must pass to get to the final customer.Internet makes this chain of distribution shorter and simpler,and therefore internet-based promotion, advertisement anddistribution can be considered a new business model to base thebusiness on. Further information on virtual distribution will bediscussed in relevant section.
CCM business model includes following components:
Value Proposition: satisfaction of customers' needs in qualityclassic music;
Market Segment: white females (predominantly) and males of 40-60age range. The market segment needs to be further expanded.
Value Chain Structure: structure of the firm to be describedbelow
Revenue generation: through sales, direct sales in particular;revenue generation roots need to be expanded.
Position in the value network: enters the most specializedindustry segment. A large number of competitors from all 4segments of the industry; business may be complemented throughalliance with larger recording company.
Competitive strategy: company's strategy primarily focused ondifferentiation rather than cost leadership strategy, throughinternet distribution allows making the products of CCM cheaperthan those of competitors.
Market segmentation, targeting, positioning
The music recording industry has 4 clearly identifiablesegments: major recording studios, independent labels,micro-labels and vanity labels. Major companies have largequantities of artists under contracts, reaching the number of100, specialize on multiple types of music - rock, country,jazz, classical, traditional and other, and have formal andreliable national and international channels of distribution.Independent labels have 10-100 artists under contract, focus onrecording of one or two major music styles and have eithernational or most often regional distribution channels.
Micro-labels have less then 10 artists under contract and aretightly focused on definite style of music. They arecharacterized by small staff and manager performing as theleading artist of the studio. Micro-labels have rarely formaldistribution system and heavily rely on direct sales to fans andwholesale to clubs and specialty retailers.
Vanity labels segment is the fourth, the last and the mostspecialized segment of the music recording industry. They arefounded by independent artists for recording and selling theirproducts (Darren& Winn, 2003). At present, CCM is themicro-label that strives to convert into independent label.Therefore, CCM currently occupies rather narrow market niche ofclassic and traditional acoustic music admirers within the ageof 40-60, predominantly white, middle class females throughoutthe territory of the United States, though the major part of thecustomers is focused in Colorado region. This is the result ofmarket targeting, when the studio developed the measure ofsegment attractiveness - loyal customers and fans of performers;music, and selected appropriate target segment.
Today, the company wishes to change the segment it operatesinto. To expand the company's market segment it should developproduct differentiation aimed at selling various products withdifferent characteristics to different market segments. So farsuch differentiation is not developed.
On the basis thereof, the positioning approach now applied bythe firm is differentiation positioning, which lies in fillingless competitive, smaller market niche in which the firm locatesits brand and attracts its customers.
Products
At present, the company disposes of 4 product lines and 11different records. The brand names of the Company are: DarrenCurtis Skanson, Acoustictherapy, Andrew Thomas Harling and Musicfor Candles. The style of the music offered is the samethroughout all the brands: light classical guitar.
Distribution channels
The distribution channels of CCM are predominantly direct sales.These include sales in the gig, shopping mall distribution andin the back end (which includes CD order through 800 number,website sales, mail order). In 2000 CCM sold 30,000 DarrenCurtis Skanson CDs, predominantly through direct sales. Though,traditional chains of distribution are more effective and theyinclude major distributors, one-stop distributors, independentrecord stores and major chain record stores. Developingtraditional distribution methods is one of CCM's primary tasks.
Financial positions
CCM is a micro-label, the third of the four segments in musicrecording industry. Therefore, in contrast to the premierrecording studios as Columbia, Sony Music, EMI and BMG, whichpossess enormous financial actives, financial position of CCM israther modest. In 2000, the company reached total income numberof $216,614.05 and net income of $4,292.00, which, though, was 4times less than net income in 1998 (amounting to 20,626.70) andnearly the same as in 1997 and 1999.
Major strategic issues
Major strategic issues of the company are formulated by themanager of the company, Darren Skanson, in the Case Study forColorado Creative Music (Darren & Winn, 2003) and include thefollowing: - create a profitable music recording label withexpanded range of artists and performers; - position DarrenCurtis Skanson label to compete with major artists who havecontracts to Sony Classical. For this, acquiring traditionaldistribution methods is necessary; - create new product linesimilar to Acoustcitherpay which would be saleable and providefunds for the previous two goals.
The strategic tasks and ways of their implementation are notuniform and completely complementary. Thus, the first aim ofgrowing the company contradicts the easiest and most possibleway of accomplishing the second goal - promote the music byselling CCM's product lines to recording studio larger then CCM,independent of major label with access to traditional outlets.Thus, the company has to define its prerogative - develop therecording label or promote the music by means other than withinCCM capabilities
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