Case Study: Colorado Creative Music

Opportunities:

1. Signing additional musicians which fit into Darren Skanson’s vision.
2. Industry is big enough and diverse enough to support many niche players like CCM
3. Selling the Acoustitherapy brand and using the proceeds to grow CCM
4. Partner with other vanity or micro-labels to centralize the sales functions and provide a larger selection to one-stops retailers
5. Growing to a size that a major studio will want to buy CCM

Threats:

1. Low entry barriers encourage continual stream of new niche players
2. Traditional distribution channels are difficult to penetrate
3. Major record labels exert power over radio stations and retail outlets.
4.  New web technology (e.g.: MP3) allows easy access to copyrighted materials.

Observation in the financial performances:

In 2000, CCM’s catalog had 4 product lines and 11 records.  The majority of CCM’s sales come from Gig’s, followed by wholesale, mail and phone orders, and then Website sales.  Total sales for the year 2000 were $213,311.13, an increase from total sales in 1997 of $141,591.86.  The Gross Profit Margin rose from 74% to 90% over the years 1997 through 2000.  

Identification of Primary and Secondary problem

One of the biggest problems facing CCM is their lack of retail outlets and distribution problems. Also, from 1999 to 2000 CCM showed a decrease net income due to a huge increase in advertising, professional fees, payroll costs, supplies, royalties, and travel and entertainment costs. Beside that there are several other secondary problems:

1. CCM lacks of core competencies
2. Darren has not successful in signing new artistes. He spent most of his time in promoting his own CDs at malls and art festivals.
3. Darren is not a good salesman as the sales is stagnating.
4. Amy’s salary is too high for her contribution to the CCM.
5. Lack of a strategic vision and business strategy supported by well-defined financial and strategic objectives.
6. Darren’s health is deteriorating and jeopardizing his business(Tendonitis)
7. Problem of division between times dedicated between managing and performances.

Recommendations

1. CCM should focus on providing better a retail outlet for their products.
2. A good way for a reduction in costs in this area would be to enter into agreements with larger music companies and even partner directly with retail stores to sell and distribute CCM’s products (Baca, 2004)
3. They should make more recording on CD
4. Avoid to hiring new stuff for now.
5. Explore distributing through traditional distributor as long-term goal.
6. Developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities ( Saunders, 2002)
7. The company must learn to make use of new technologies, such as the internet, in generating interest in the product, as well as of assuring sellers of the marketability and desirability of some of his lesser-known artists (Canetta & Winn, 2002)
8. Develop a strategic vision and business strategy supported by well-defined financial and strategic objectives.
9. Colorado Creative Music needs to target itself as establishing a niche in the market, rather than out and out domination of any particular sector of the music market (Feldman, 1998)

References:

1. Baca, R (2004) “Independent concert promoter NIPP loses point man over creative differences” Denver Post Popular Music Writer. Denver Post. Colo.: Jan 16, 2004. p. B.04
2. Canetta R D, Winn J (2002) “”
   Entrepreneurship Theory and Practice. Waco: Spring 2002. Vol. 26, Iss. 3; p. 101
3. Feldman, M (1998) “”
   Mitchell Feldman. Down Beat. Chicago: Jul 1998. Vol. 65, Iss. 7; p. 12
4.  Saunders, B (2002) “”. Denver Post. Denver, Colo.: Dec 22, 2002. p. F.06