Value chain analysisThe value chain analysis consists of the following components arranged in sequence: artists and repertoire development,CCM Music Recording Company Case Study Part 3 Articles recording, manufacturing, marketing, distribution and finally retail. Such chains as manufacture, recording and retail are very often outsourced, even by the Great Five (Warner Music group, EMI Recorded Music, Universal, BMG Entertainment and Sony Music Group).
A thorough analysis and review of CCM’s operations alexisshv Twitch recording has been completed by reviewing the current and long-term problems in both the internal and external environments. Artists and Repertoire Development: Recording companies put as much available money as possible into developing their groups and music, the musical repertoire and quality, to promote concerts and organize tours, to prepare the merchandising. CCM plans to expand its product line to include more musicians and albums and to expand the musical genre the company operates into. Recording: Usually major labels have their own recording studios, though still outsourcing this link of the value chain is possible even by such premier companies as Columbia and EMI. Primary costs come from the equipment and mixing, which in the case of Colorado Creative Music were the cheapest quality equipment from all possible.
Manufacturing: Manufacturing a CD usually takes 10% of its cost. There are not too much CD manufacturers in the world, since the costs of the process make the market very limited with serious entry barriers. CCM’s manufacturing is not very costly process due to the technology employed, though the company didn’t manufacture actually CDs, it bought them from the relevant producers, and then just duplicated them. Marketing: activities connected with marketing and advertisement traditionally account for 30% of total CD production costs. Marketing costs combine radio and television advertisement, printed catalogues and press releases, promotional tours and other events. Also, marketing costs include preparation of PR tours and music videos. CCM’s marketing events include: live performance, comprising malls, art festivals and concerts; Website, specifically website promotion and new programs to acquire and to learn; publicity consisting of airplay radio, TV, internet radio, live interviews on radio and TV, print press releases and reviews featuring listings of events; promotion – in store, contests, sponsoring, giveaway; and email marketing methods comprising monthly newsletters. Distribution: The distribution phase accounts for about 40% of the total cost of the product. This process involves physical transportation and packaging of a CD from manufacturing place to distributors or direct retailers. Since there are few manufacturing facilities, delivery from these places to any corner of the world may be very costly. Moreover, as delivery is often needed within short terms, the distribution costs grow even higher. For CCM, the distribution may include direct sales on live performances, through 800 number order, through website or mail order catalogue. Indirect distribution channels applicable for the company can be traditional and untraditional. Traditional channels comprise chain music stores, chain book stores and independent music stores. Nontraditional methods include catalogs, retail chains, gift stores, independent bookstores, Christian chains and independents. Inclusion of indirect distribution methods into CCM’s distributional tactics is wise since it distincts the company from its competitors and aims at winning still untouched potential markets. Retailing: the retailing operations are generally carried out by major labels and internet superstores like Amazon.com and CDnow. Until products of CCM become popular with particular public segment, the company cannot enjoy such retail service. Strategic cost analysisStrategic cost analysis aims at comparing the cost position of the firm relative to the key competitors activity by activity from purchase of raw materials until the price paid by the final customer.( Hill & Jones , 1995) In this case, the analysis will be carried out in regards to CCM and the representatives of premier market segment such as Sony Music of EMI. In 2000, with the total income making up $216, 614.05, the primary source thereof was direct gig sales, accounting for $181, 451.92, that is more than 80 percent. Major companies derive their main income from traditional indirect distribution channels, such as retail music stores. Other major sources of CCM income comprise wholesale ($12,238.83), mail and phone orders ($11, 442.24), and website sales ($6,419.35). Traditional distribution channels, along with other sales, make up only $1,758.79.