Environmental Factors
Environmental Factors do not have such a huge influence in this business but they have to take care about several groups which are interested in the company and can take pressure on the company. If they want to establish a new performance venue they may have to consider some laws.
Porters 5 Forces
Competitors
From its opening in 1883, the Metropolitan Opera has been one of the world's leading opera companies. Today, the Met's preeminent position rests on the elements that established its reputation: high quality performances with many of the world’s most renowned artists, a superior company of orchestral and choral musicians, a large repertory of works, and the resources to make performances available to the public. The Metropolitan Opera has always engaged many of the world's most important artists. Christine Nilsson and Marcella Sembrich shared leading roles during the opening season.
Lyric Opera of Chicago is recognized internationally as one of the truly great opera companies of our time. Its artistic standards are universally admired. The company's financial solvency and massive subscription audience are envied throughout the field. Its administrative and artistic leadership is longstanding and rock solid. Lyric's ticket sales have exceeded 100% capacity for the past 14 years, unprecedented in the performing-arts world. Its subscriber audience exceeds 35,000.
San Francisco Opera was founded by Gaetano Merola (1881-1953) and incorporated in 1923. Since 1923, San Francisco Opera has presented the United States debut performances of numerous artists, including Vladimir Atlantov, Inge Borkh, Boris Christoff and many more.
Since foundation in 1955 is one of the United States’ premier opera companies. The company is committed to the commissioning and performing of new works , the development and nurturing of American artists and composers, the imaginative presentation of masterpieces from the traditional operatic repertoire and reaching out to new audiences with such productions as Porgy and Bess, Treemonisha, Harvey Milk, Frida, Florencia en el Amazonas and Jackie O.
Others:
Los Angeles Opera, The Dallas Opera,…
Buyers
There exists no typical opera-visitor, but mostly the opera is attended by people of the middle and upper class segment, but also more and more by the youngsters.
Nowadays the Opera tries already to identify its customers in different ways:
For example, the buyer could provide their name at the point of purchase, and show a proof of identity before entering the venue. Such an approach, as used for international flights, might not be appropriate in terms of time, resources and reputation constraints.
Substitutes
Nowadays we have a wide range of substitutes in this area. The fast changing technology sector makes this fact possible through more and more innovations like the DVD player or the possibility to download whole films from the internet. But also the traditional media like the radio or television attract more and more people. Furthermore people have a lot of other forms of musical entertainment like musicals, jazz concerts etc.
Entrant’s barriers
This area is on the one hand deeply connected with very high investment costs to start up and on the other hand it has to face the problem of finding a right location. That means to open a new opera you need the right building with a great history, culture or reputation and of course suitable artists and the other needed staff. Furthermore the right infrastructure and the special knowledge are also very important factors. It is also difficult to gain visitors. Many of them went to operas they know or to operas with good reputations. Therefore established operas have the advantage of being known.
Suppliers
In our case the suppliers are the musicians and the singers- the people who make the music for the audience. For a famous opera it is important to attract world class artists with an equal reputation. Moreover the company needs trustees to manage the whole organisation and the financial part.
Complements
In this sector complements hardly play a role. For the company complements are different kinds of performances like festivals for example.
Resources, capabilities and key success factors
Resources
Capabilities
Generally speaking the capabilities of a company are the firm skills in coordinating the resources and putting these resources to productive use.
- combining tangible, intangible and human resources
- market research to fulfil consumer needs – in our case the Opera House lies the focus on trying to discover the typical “opera-visitor” in order to achieve a higher amount of subscribers per year.
- long-time experienced staff that is enthusiastic, realistic, creative and down-to-earth throughout the whole production process
- hiring top performers who are well-known for their “name” (=brand) as well as for their performances
- highly acclaimed, professional symphony orchestra
- well-known and enthusiastic directors
Key Success factors
- One of the major factors that made this Opera House successful in the mid-90ies was the decision to hire the world famous tenor Placido Domingo not only for performances but as the Opera’s artistic director. The fact that Domingo has a lot of experience as well as name recognition gained the Washington Opera House a better reputation and attention within the critics and the audiences.
- In addition to that the Opera made an unusual decision for this business by not only – as most other opera houses do – hiring one leader but to aim for an artistic as well as an executive director.
- With getting Domingo on board not only the artistic director changed but also quite a lot of changes occurred in the organizational structure. One major point that has to be mentioned is the fact that the operating budget was doubled and so more financial space was available.
- Furthermore the Opera achieved the goal that Domingo felt personally involved with his new task as artistic director and so not only the Opera but also Domingo himself were convinced that they produce a win-win situation for each other.
- Moreover the Opera hired the well-known Consulting Group “McKinsey & Company” for preparing an analysis including such issues as costs of productions, staging and also cost projections for a new opera house. Among these issues the Group recommended six targeted efforts. Those included e.g.: Introducing premium seats in the ticket price schedule, securing more local corporate donors and adding one performance per production. Surely the decision of hiring such a highly acclaimed Consulting Group was very unusual (for this business) but highly successful.
- A very important factor in the success of the Opera was the decision to build and structure a brand new opera house. This should give the Opera the opportunity to sell more tickets due to more seats for audiences and high technology equipment. And most important of all the Opera insisted that this building should become a leading opera house which would be owned and ran itself. So the Washington Opera House wants to be an independent opera house.
- The directors created an early warning system that should inform about the financial expenditures and situation in general. With this tool the Opera is able to recognize financial dangers at the right time so that they can react properly.
- Another important fact is that the Opera tries to intensively focus on their major target group which is the mid-aged (around 40 years old), well-educated, wealthiest and suburban American citizen. The number of 18- to 24- year old citizens is increasing.
- Due to all the facts mentioned above the Washington Opera House was able to double its size within just three years and has a highly acclaimed international status.
Competitive Advantage
The name “The Washington Opera” has become a brand within this business line and stands for high quality and entertainment as far as the performances are concerned.
Not only Americans but also thousands of other visitors from all around the world visit this institution just because of its good reputation.
Another major competitive advantage is the fact that in this region of the US it surely is the best-known and visited opera house. Of course there are such direct competitors as the operas of San Francisco and Chicago – but a visit in an opera house is not just a service one engages but constitutes a personal highlight. And the name of the Washington Opera House has already become an important trade mark worldwide.
By hiring Placido Domingo as the artistic director the Washington Opera was able to bind another very important name from this business to the opera house.
Conclusion
The dramatic change in strategy of the Washington Opera House by e.g. hiring a new artistic director and deciding to expand their capacities by establishing a brand new opera house surely led to a quite high increase of the total expenses and also to several staff problems as far as the salaries were concerned. But still the strategic choices they made should bring reputation and of course revenue to the TWO again.
Especially their “brand” has become a much brighter image than it had before.
Mc Kinsey’s 7 S
Conclusion
What we found out in that analysis was that not all connections between the 7 S’s are given. For example the employee issue that there are no contracts for the singers, orchestra and the chorus.
Value Chain Analysis
Main activities:
- Marketing & Public Relations: The marketing segment includes tasks such as homepage design & update and advertising in various media (e.g. TV, print, internet and broadcasting services) for the upcoming & current events and artists. Moreover the public relation segment is, apart from other public services, responsible for the image and the name recognition of the Washington Opera.
- Customer service: The customer service apartment handles ticketing (per telephone/internet/personally), provides customer relationship management (per telephone/internet) and personal guidance for visitors.
- Play implementation & rehearsals: This segment is responsible for planning the implementation of the plays and moreover of course for all rehearsals that are required.
- Event (Plays): The main tasks are the performances of the plays, the operas and operettas, furthermore performances of solo-artists (e.g. Pavarotti).
Supporting activities:
- Company’s infrastructure: The buildings, parking areas, halls, stages, technological components (lights & sounds), seats, lounges, wardrobes etc.
- Human resources: All the employed staff including the director and the chairmen, artists, musicians, technicians, stylists, administration staff etc.
- Acquisition and supply: Costumes, stage settings etc.
- Administration: Accounting, finance & controlling and organisational issues.
The company’s margin:
The margin is made up of donations and ticket sales. Especially because of the fact that the Opera is dependent on donations, the relations between the Opera and the donors are very important for their success.
Conclusion:
In contrast to other businesses some quite different main and supporting activities can be identified in the case of the Opera House. As already mentioned before, donations are highly important and responsible for continuing success.
Issues
Out of our analysis we found out that the management of TWO made several mistakes on the long way to become a “world-class opera”. To show you these mistakes is the aim of the case study in hand.
During several years, the trustees devoted themselves to turn their vision to form a premiere opera out of TWO – and they ignored some issues which occurred.
Building
First the board decided, in an effort to increase TWO’s reputation, to re-evaluate TWO’s venue. While the Kennedy Center offered inexpensive rent, there were scheduling conflicts between TWO and other Kennedy Center events. In 1996, Betty Casey, board chair; Christine Hunter, executive committee chair; and Pat Mossel, executive director went in search of a new location. Their search ended with Betty Casey purchasing the Woodward & Lothrop (W&L) retail building at auction for $18.05 million. However, the building was not designed for opera; therefore, renovations would be necessary. Renovations were projected to cost roughly $100 million. The actual cost for the proposed design would be $200-280 million.
Employees
While the board was focused on its efforts to raise funds and secure an appropriate venue, the orchestra and chorus contracts expired in August of 1998. The chorus decided to strike. Both the orchestra and chorus sited information from The Lyric Opera and San Francisco Opera to show the unequal compensation TWO employees were receiving. Expired contracts and uncertainty surrounding TWO’s future location were not the only crises the organization faced. Despite the fact that TWO produced eight different operas, consisting of seventy-nine performances from 1998 to 1999, the 1998-99 season resulted in a $765,000 deficit. There is a lack of HRM this is shown by the unsatisfied staff.
Lack of donors and subscribers
The TWO is not having enough subscribers during the opera season and so a lot of seats are not sold. Much money is lost because of that issue.
In general operas are dependant on to financial supports and benefactors. When analysing the case we found out that in the area of Washington only few companies can be considered as donors.
Organisational structures
There are to big differences in interests of all management members. There is on the one hand Placido Domingo with the visions of great operas and on the other hand the financial problem. TWO is too less concentrated on economic factors. Furthermore the information flow is not efficient.
To solve all these issues, a powerful management structure and strategies to gain high-level donors and subscribers are in need.
Choices
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Building:
Stay at Kennedy Center and cooperate
Renovate the W&L Building and adapt it to the needs of TWO
Search a new location
Build a new building
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Employees:
Implement HRM
Fair payment and contracts for the employees
Motivation
-
Donors and Subscribers:
Strong marketing activities
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Organisational structures:
The whole management structure of TWO should be reworked.
Information- and workflow system should be implemented.
Changes – Our suggested solutions
Ticket Pricing
First we would change the ticket pricing system. Each seat should be assessed for both sight lines and acoustics. The seats should be categorized into 9 different classes, and priced accordingly like other operas are doing that. Furthermore, pricing should be differentiated by day of the week, recognizing that weekend tickets are inherently more valuable than weekday tickets. Even with the large increase in price on the best seats, they will be sold out on the weekend. Additionally, the demand for the less popular mid-week events will grew due to the stimulation effect of lower prices.
Donors
To gain new donors, a strong marketing activity has to be improved. Around Washington are not enough big companies so we think that TWO should go “global” to find noble donors. Therefore some strategies to gain high-level donors have to be developed.
Subscribers
To gain new subscribers also strong marketing activities have to be improved. The potential to gain new subscribers is high because in the catchments area of Washington life nearly 6 million people. The marketing activies should be addressed to younger people but the biggest target group are people in the age of 40 to 60 years.
Building
Considering the actual venue, there is just one solution. TWO should stay at the Kennedy Centre as well as some renovations are needed it will be the best solution.
Employees
To solve the staff-strikes they should get their fair contracts. A secondary effect will be more staff motivation and less employee denouncements so Two will save money in staff recruiting.
Organisational structures
In the case of the management we suggest that it should be clearly defined who is allowed to make decisions. A Human Recourse Management also a Controlling section should be implemented.
Recommentation
We would recommend the TWO to focus on the following points:
- We recommend that TWO sells the W&L-Building and invests the profits in the endowment and the annual fund.
- TWO should renew their lease with the Kennedy Center on the basis that they agree to renovate the performance spaces.
- TWO officials need to realize that their organization is a major asset for the Kennedy Center; so they should not be afraid to make reasonable demands every now and then.
- Furthermore TWO officials should settle negotiations with their musicians and choristers as soon as possible.
- Firing the employees would only bring bad press and more work on TWO management.
- They should use the earnings from selling the building to pay the staff competitive wages. Then they should budget for a cost-of-living increase in every employee’s salary every year.
- We also recommend that TWO board members closely monitor every production in its early phases to make sure that it is not going over budget.
- Finally, TWO’s development department needs to set and meet higher goals. Steady cultivation of donors would ensure less dependence on ticket revenue, a better chance for TWO to stay out of the red, and the continuance of TWO striving to become the world leader of opera performance.
References:
Porters 5 Forces
