Sonic Cd Solution
Memorandum
To: Sonic Founders Tim Waters & Erin Bray and CEO Hannah Fitzgerald
From: Cliff Burrows
Class and Section: MBAD 518 Team: None
Date: 8-27-13
Re: Sonik CD word count: 492
Executive Summary
Our company has to determine a growth strategy apposite to the developing music industry. Major retailers and digital downloads have moved in to erode our once-niche position. The company should stay true to its founding values and pursue the niche market, as it is most profitable, but also find ways to expand in to new genres.
Situation Overview:
Hannah needs to make a decision about the strategic future of Sonic CD. She needs to select one of three growth options: Continue serving a niche market, move towards a mass-market retailing, or move forward as a distribution company only. Sonic CD is currently facing financial pressures from increased competition and eroding margins. Additionally, rapidly changing technology is transforming the industry and how consumers buy music.
Action Recommendations:
Sonik CD should continue competing as a niche player. To counter stagnating market in the jazz genre, Sonik CD should consider changing their marketing target toward other genres in order to continue growth. If the Jazz/Classical market is indeed captured and can no longer grow, focus on retention of the niche and expansion beyond base genres. The potential value of this course of action is $321.51 LCV. With a 95% retention investment in place, that value jumps to $439.43. Only 4,240 new customers need be acquired to break even on that investment. The value range based on these growth estimates over a 5-year period is $129M-176M. These figures assume that the entire $40 subscription fee is applied to the cost of member benefits.
There are some costs and risks associated with this course of action. First, there is the retention investment of .5M. It may or may not work. Second, there is the risk in the cost of attracting new customers.
To: Sonic Founders Tim Waters & Erin Bray and CEO Hannah Fitzgerald
From: Cliff Burrows
Class and Section: MBAD 518 Team: None
Date: 8-27-13
Re: Sonik CD word count: 492
Executive Summary
Our company has to determine a growth strategy apposite to the developing music industry. Major retailers and digital downloads have moved in to erode our once-niche position. The company should stay true to its founding values and pursue the niche market, as it is most profitable, but also find ways to expand in to new genres.
Situation Overview:
Hannah needs to make a decision about the strategic future of Sonic CD. She needs to select one of three growth options: Continue serving a niche market, move towards a mass-market retailing, or move forward as a distribution company only. Sonic CD is currently facing financial pressures from increased competition and eroding margins. Additionally, rapidly changing technology is transforming the industry and how consumers buy music.
Action Recommendations:
Sonik CD should continue competing as a niche player. To counter stagnating market in the jazz genre, Sonik CD should consider changing their marketing target toward other genres in order to continue growth. If the Jazz/Classical market is indeed captured and can no longer grow, focus on retention of the niche and expansion beyond base genres. The potential value of this course of action is $321.51 LCV. With a 95% retention investment in place, that value jumps to $439.43. Only 4,240 new customers need be acquired to break even on that investment. The value range based on these growth estimates over a 5-year period is $129M-176M. These figures assume that the entire $40 subscription fee is applied to the cost of member benefits.
There are some costs and risks associated with this course of action. First, there is the retention investment of .5M. It may or may not work. Second, there is the risk in the cost of attracting new customers.