- Identify the organisational goals and develop them
The first part of the process is to identify the main goals of the company and develop them into workable objectives. These should then cascade down the management structure accordingly to all levels of employees so that there is a specific focus and an ultimate objective. One of the main objectives at the moment at Universal is to try and get back to the level of revenue and operating income the company was enjoying in 2002 as there was a steep drop in both with operating income down by 87%.
- Identify and develop the specific goals
As the overall goals of the company cascade down the management structure, lower level managers and employees should be able to develop their own specific objectives and how they fit in to the whole outlook of the corporate objectives. More specific objectives may include the signing of more commercially viable artists, like the subsidiary of Universal, Rondor Music Int., recently did when they signed Obie Trice and Trak Starz. Other specific goals may include smaller objectives like the running of the labels and staff under Universal.
- Put together an action plan
Ways of how to come to these objectives must be formulated so there is a clear path for everyone to know how they are going to get there. Even though one of the main concepts of MBO is the focus on result, and not the how we got there, ways must still be thought out at every level of management on how to achieve these goals. A fairly recent example of this is the way Universal identified that it needed a separate department for the marketing of its catalogue and how it came to set up the Strategic Marketing unit within UME’s structure.
- Review progress
The organisational and specific goals must be reiterated constantly to all employees and managers do that they still have a continual focus. Also, there must be amendments made to any objectives and systems that don’t seem to be attainable or realistic.
If things aren’t running well, then another way of achieving the objective of the company must be formulated.
- Appraise the performance
There must be an assessment of the progress towards the corporate objectives and how things are going on as a whole. The managers must see if what they and the company as a whole are doing is good and adjust and improve the system to see if the corporate objectives are still being met. This is a continual cycle, which is always striving to better itself.
As there is always a continual cycle in the MBO system, there must also be continual review and assessment through out the organisation. As many people in the same department are going to be looking at the same objectives, departments can become more united and work better towards the common goal which will always keep the company strong internally.
Management of change
The music industry is unique in the fact that its consumer taste can change dramatically from one day to another depending on external factors and trends. It is always changing, so it is up to the music industry to make these inevitable changes work to their advantage. It isn’t only the external environment that puts pressure on the industry, but also the internal environment. These changes might include a shift in a particular product or market lifecycle. In order to prepare and adjust to these changes, Universal must plan, from a strategic, tactical through to operational level, involving all levels of management right down to the shop floor.
To identify and assess the changes to the market, Universal can employ PESTLE and SWOT analysis. PESTLE is used to look at the external environment whereas SWOT is used to identify factors in the internal environment. Universal can then assess what are the problems and strengths of their business are and work towards them.
PESTLE analysis identifies the changes and issues that are affecting the macro environment. PESTLE analysis looks at the political, economic, social, technological, legal and environmental issues. This would tell Universal what are the problems coming from outside they should adapt to.
POLITICAL
In certain parts of the world, certain countries like Canada have laws that say that a percentage (quite a big one actually) of all the music played on the radio has to be Canadian. This could have a big effect as that would only allow a smaller percentage of the time on the radio to be used by Universal and its competitors trying to propagate their artists from around the world.
ECONOMIC
Fluctuations in exchange rates around the world certainly affect Universal because if the exchange rate is very big compared to the pound or dollar, then people in places like Brazil or third world countries will definitely have a problem buying a CD from the first world.
SOCIAL
Consumer tastes are always changing so to accurately market the music, Universal recently set up a new department, Universal Music Enterprises, to better market its catalogue. Universal have also been keen to tap into the jazz revival scene that’s been going on recently with the signing of Jamie Cullum. Universal has also been very enthusiastic with the very lucrative ringtone market and has set up subsidiaries dedicated to exploiting this new cashcow.
TECHNOLOGICAL
With technology advancing at a huge pace, Universal must keep up to date with every new development in hardware and software to stay ahead of the game. Also, the onslaught of the Internet has brought new territories to be exploited. Universal has just recently completed the digitisation of their entire back catalogue and its possible merger with the Apple corporation might make even easier to get their products as the iPod has been so successful over the last year.
LEGAL
Universal must be careful not to engage in any anti-competitive practices. Universal Music Australia and another major record company were just found guilty of threatening retailers who were importing cheaper CD’s and each were fined 1 million dollars each.
ENVIROMENTAL
Universal are constantly striving to protect the environment during all stages of production and manufacturing. They are currently seeking to purchase 100% green power for their facility in Santa Monica. They aim to use energy as efficiently as possible by trying not to use non-renewable energy sources. They also aim to create as little waste as possible and to dispose of waste appropriately.
A SWOT analysis will attempt to identify the strengths, weaknesses, opportunities and threats to the corporation on an internal level. This will help Universal adapt to any changes in the microenvironment.
STRENGTHS
UMG’s artist roster is a major strength of the company. If a big artist is doing well with Universal, it will certainly attract the attention of other potentially big artists. UMG’s back catalogue is another great strength, as so much revenue is created by re-releasing best-of’s and merchandising them to new generations. UMG’s market share is enviable considering there are another 4 major record labels in operation around the world.
WEAKNESSES
UMG’s cash position at the moment is not the best. Due to adverse currency movements, global piracy and a decline in big international act, its revenue has decreased from 6,276 million euros to 4,974 million euros. Its operating income has also fallen by 87% to just 70 million (from 556 million). It has been seen that there has been many changes to the management in the Universal branches around the world including Brazil, U.K, Sweden and Austria. This isn’t always good as staff changes may inflict new ways of doing things and it costs a lot to reorganize things.
OPPORTUNITIES
The Internet is a big opportunity for all record companies as another way to reach and distribute music. Universal has recently bought MP3.com and Emusic.com, which offer individual tracks, and full album downloads for cheaper prices than the high street. Universal offers the biggest catalogue of digital downloading tracks with over 75,000 tracks. Apple is rumoured to be preparing an offer to buy Vivendi Universal for nearly 6 billion dollars. This takeover could be a fresh start for Universal as it has been experiencing problems in the last few years. The signing of potentially big artists is essential. Universal have been on track with the recent signing of Obie Trice and 50-Cent.
THREATS
The competition is very big with all the labels out there. The snapping up of commercially viable artists is the essential to the company. The Internet is a great threat at the moment not only to Universal but also to the music industry as a whole. It has dramatically decreased sales of music records. Piracy is another great threat to the company as many of its CD’s are reproduced illegally in Eastern European countries.
It is imperative for the Universal group to prepare and plan for the future as consumer tastes and trends are always shifting. Universal seems to be back on track as many changes have been made to the management and UMG seems to be pursuing new ways to distribute its products.
Decision-Making process
Decision-making is carried out at all levels of management in Universal, from the top guys right down to the shop floor. The top managers, like Doug Morris and Jorgen Larsen, make the corporate decisions like in who to invest more money on and more general decisions about the corporation. Lower level management deal with more specific decision-making like the day-to-day running of the label and staff.
The decision-making process involves 4 general steps:
- Identify the problem
- Come up with possible solutions
- Assess how these solutions could work
- Make them work and evaluate them.
The ways decisions are made are either rational or irrational. Many of the signings of artists will be irrational as a lot of the times, A&R people just have a hunch that they have to sign this or that artist. This may also be due to the pressure from the competition to snap up the right artists. Rational decisions are made based on statistics and research and the understanding of how certain things are done.
There are three kinds of decision-makers. These are:
Strategic- Generally, the top level management make these sort of decisions as they are long term decisions and can affect the company on the long run.
Doug Morris, the Chairman of Universal Music Group, will definitely make these sorts of decisions.
Tactical- These decisions are of a more departmental nature. They will be of medium range, not so wide ranging as strategic decisions.
Cees Wessels, Chairman of Roadrunner Records, will make these types of decisions.
Operational- These decisions are on a more one-to-one basis, where the management will be taking care of the day-to-day running of their own specific jobs.
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