1.

Brief Overview of the Company

Company History and Background:
Spotify, the Swedish global leader in audio streaming, offers a vast library comprising over
100 million songs, 5 million podcasts, and 350,000+ audiobooks. With a user base of 551
million and 220 million premium subscribers spanning 184 regions, It empowers users to
explore, organize, and share diverse content, making it a powerhouse in the world of
digital music and audio entertainment.

It was the 2006 when Daniel Ek conceptualized Spotify as a response to the evolving
digital music landscape. The name 'Spotify,' a blend of "spot" and "identify," (Daniel Ek
himself explained in his interview with The Telegraph) embodied the platform's essence –
a place where users could spot and identify their favorite music. Over the course of two
years, Ek and his team engaged in extensive negotiations with record labels and licensing
agreements, a pivotal phase that laid the foundation for Spotify’s vast music library.

The company launched in the United States in 2011 and issued an IPO in 2018 to become
a publicly traded company. Spotify embraced a transformative strategy, evolving into a
complex platform. During the years between 2011 and 2014 It allowed the integration of
third-party applications, enabling users to improve their music experience with features
related to lyrics, photography, and music charts. Spotify employs a broad differentiation
strategy by offering a diverse audio collection catering to a wide audience.. With large-
scale resources and agile innovation, Spotify reshapes the music streaming industry.

Spotify's mission is clear: to unlock human creativity, supporting a million artists in

sustaining their art and providing billions of fans a platform for inspiration and enjoyment
(Company Info, 2022). Their vision extends beyond mere music streaming; they aspire to
be a cultural platform, breaking artistic constraints and fostering empathy and unity among
people. Guided by core values like “innovation, collaboration, sincerity, passion, and
playfulness” (Whatley, 2016), Spotify is committed to offering listeners a personalized
musical journey, fulfilling its distinctive value proposition.

2. Internal Analysis
2.1 Introduction
In the market of audio streaming, Spotify stands as a global leader. This section delves
into an in-depth internal analysis of the company. Utilizing the 4 VCRN criteria, it identifies
and evaluates Spotify's key resources, capabilities, and competencies. The analysis
extends to dissecting Spotify's Value Chain. Based on the results, Spotify's strengths,
notably its pioneering innovations, are critically addressed, providing a comprehensive
overview of for what reason the music streaming is a giant in the industry.
2.2 Assessment of Resource and Capabilities (VCRN criteria)
This section of the report will analyse capabilities on 4 specific criteria to determine
potential for a sustainable competitive advantage Those criteria, named VCRN, are the
following: 1)Valuable 2)Rare 3)Costly-to-imitate 4)Non-substitutable.
Since its arrival in the American market in 2011, Spotify has transformed music
consumption fundamentally (Robinson, 2021, https://variety.com/2021/music/news/spotify-
turns-15-how-the-streaming-giant-has-changed-and-reinvented-the-music-industry-
1234948299/). The introduction of personalization and a wide range of music and podcast
library marked a pivotal moment, providing them with a significant advantage. This
advantage is sustained by their robust brand reputation, an extensive user base thanks to
the wide reach and easy accessibility of media streaming, partnerships, agile firm
orchestration and algorithms that enable scalability. These invaluable resources,
unmatched by competitors, serve as the key of Spotify's dominance in the industry.
https://variety.com/2021/music/news/spotify-turns-15-how-the-streaming-giant-has-
changed-and-reinvented-the-music-industry-1234948299/

COSTLY- NON-
VALUABLE RARE TO- SUBSTITUTABLE
IMITATE
Brand x x x x
Reputatio
n
SUSTAINABL Company x x x x
E Structure
COMPETITIVE
ADVANTAGE
User x x x x
Base
Datas
Tech x x x x
Structure

Partnersh x x x x
ip
Figure 1: Spotify VCRN Analysis

Key Resources:
Brand Reputation: Spotify's internal analysis highlights a major strength: its strong brand
reputation. Since it started expanding internationally in 2009, Spotify has steadily grown,
attracting a large number of users and becoming widely known for high-quality music
streaming and personalized playlists around the world. This popularity emphasizes the
importance of the brand as a valuable asset, making it hard for smaller streaming
companies to attract customers away. Indeed, Spotify's brand is more than just a name; it
signifies trust and reliability, which are crucial factors for consumers. This brand power is
unique and difficult for others to copy, giving Spotify a clear competitive advantage. The
company's strategic ability lies in effectively using this strong brand, shaping its
organizational strategies, and strengthening its position in music streaming markets
globally.
Company Structure: One of the main key resources of Spotify is the fluid and dynamic
orchestration operated inside of the company (Gupta, 2023). The Spotify organizational
architecture is based on small, autonomous teams. The Spotify model is a self-directed,
user-driven approach for agile scalability, emphasizing the importance of culture and
network. It has aided Spotify in boosting innovation and productivity by focusing on
autonomy, communication, accountability, and quality. This resource is scarce due to the
prevalence of hierarchical organizational structures, exemplified by one of Spotify's main
competitors, Apple. Such structures hinder agility and rapid innovation. In contrast,
Spotify's flat organizational approach empowers small teams, fostering quick innovation
and heightened productivity. This distinction grants Spotify a significant competitive
advantage. https://blog.logrocket.com/product-management/what-is-the-spotify-model-
agile/
User Base Datas: Spotify possesses a precious asset in its user data, reinforced by its
algorithms and artificial intelligence capabilities, enabling the platform to offer curated and
personalized suggestions to its users. This distinctive personalization significantly
amplifies the demand for Spotify's services. The platform's access to an extensive pool of
user listening and behavioral data positions it ahead of all other music streaming
competitors. This proprietary database serves as a precious tool for Spotify, conferring a
competitive advantage that proves challenging for rivals to replicate. In fact, the complexity
of duplicating Spotify's user data over time renders it nearly impossible for other
companies. Spotify's strategic vision lies in adeptly utilizing this resource, evident in the
creation of tailor-made music recommendations derived from user data. This showcases
the company's exceptional organizational skills and underscores the role this unique
resource plays in Spotify's continued success in the music streaming industry.
https://backlinko.com/spotify-users
Tech Structure: Spotify's technology, based on self-learning and artificial intelligence
algorithms, has been necessary for establishing and maintaining its competitive edge.
These algorithms craft personalized playlists, podcasts, and recommendations for each
user, tailored to their distinct tastes. This resource is not only rare but also inimitable;
competitors lack access to the same technological framework due to company secrets or
licenses. Moreover, Spotify's innovative approach to the crafting of personalized contents
not only sets it apart but also fosters a deep sense of appreciation among its users,
showcasing the company's commitment to enhancing user experience. (Marius, 2021,
https://towardsdatascience.com/uncovering-how-the-spotify-algorithm-works-
4d3c021ebc0)
Partnership: Spotify has forged over 90 partnerships, including 69 technology partners and
23 channel partners, establishing a robust network crucial for its operations. Notably, a
significant collaboration was inked in 2018 with Samsung, marking a pivotal alliance
(Spotify Newsroom, Partnership with Samsung, 2022). Together, Samsung and Spotify
have embarked on various cross-platform integrations spanning Samsung phones,
earbuds, watches, and TVs. This partnership consists on pre-installations of Spotify's app
on Samsung Galaxy phones and Smart TVs. Samsung users can now enjoy enhanced
Spotify features, including Group Sessions on Google Meet video calls, Spotify integration
with Google Assistant, and Spotify Tap on Galaxy Buds2 Pro. Additionally, Spotify extends
a generous offer of three free months of Spotify Premium to Samsung users across 85
markets. Since its introduction in August 2018, this partnership has seamlessly allowed
users to switch between devices while continuing to enjoy Spotify content, presenting a
mutually beneficial scenario. Spotify gains access to new listeners, while customers
continue their seamless experience on Samsung devices, making it a win-win
collaboration for both companies. https://www.newsroom.spotify.com/2022-08-16/spotify-
and-samsungs-partnership-gives-users-more-ways-to-listen/
Core Competency:
This VCRN analysis uncovers five fundamental competencies within Spotify. According to
the resource-based perspective, these organizational resources and capabilities serve as
the foundation for the company's enduring competitive advantages in the global music
streaming industry. Consider Spotify's brand, for instance; it stands as a crucial
organizational asset, ensuring a sustained competitive edge by attracting an expanding
user base to its online platform. As Spotify's user population grows, so does the marketing
appeal of its online services and the value chain benefits offered to users. Spotify's unique
structure, characterized by autonomous teams, further distinguishes it from competitors.
This flexibility empowers employees to choose frameworks tailored to their needs,
enhancing their agility and adaptability, a topic we'll explore further in the value chain
analysis. Furthermore, Spotify excels due to its core competency: personalization driven
by continuous innovation( Spotify Newsroom: Innovation, 2023). Achieved through self-
learning algorithms and robust artificial intelligence, these technologies swiftly process
vast amounts of data collected by Spotify every second. Furthermore, the establishment of
enduring partnership has facilitated Spotify's global expansion, allowing the company to
reach new customers in markets where its presence was already established. The synergy
of high brand recognition, agile organization, extensive user data, powerful algorithms and
strong partnerships cements Spotify's position as an industry leader. In Spotify's business
operations, these competencies form the foundation of its competitive advantage, ensuring
the company's stability and guaranteeing its ongoing success in the music streaming
landscape. https://newsroom.spotify.com/linernotes-innovation/
2.3 Value Chain Analysis
This part of the internal analyis is made to conduct a Spotify value chain analysis. This
means that in the next paragraphs the company's operations will be break down into
various activities, in order to understand how each activity adds value to the final product
or service
Primary Activities:
Production: Spotify's production process revolves around its user base streaming music
and podcasts. What sets Spotify apart is its flawless transition between various devices,
be it phones, speakers, or TVs. The user-friendly Spotify app ensures accessibility for
diverse customer segments, thanks to its intuitive interface. Premium users enjoy the
added benefit of simultaneous playback across multiple devices, enhancing their
experience. Additionally, the platform's social network integration allows users to share
personalized playlists, fostering a sense of community. These features collectively
enhance Spotify's production, providing value to users and reinforcing its position in the
market.
Marketing/Sales: One of Spotify's key value-add activities lies in its extensive use of
personalized and unpersonalized marketing campaigns (Karthikeyan, Kumar, 2023,
https://startuptalky.com/spotify-marketing-strategies/). The marketing department has
introduced several impactful features, notably their holiday campaigns, deeply rooted in
relatable cultural themes. These campaigns resonate with the target audience, suscitating
strong emotional connections. An excellent example is "Only You," which encouraged
users to embrace their uniqueness within a larger community. Utilizing in-app features,
Spotify allowed users to view personal listening statistics and share quirky facts,
enhancing the bond between Spotify and its audience. Moreover, Spotify's yearly tradition
of "Spotify Wrapped," providing personalized playlists and insights on ”the user favourites”
(including artists, songs, playlist and podcasts), has become a fan favorite. These
personalized campaigns not only create brand loyalty but also encourage users to share
their experiences on social media, shaping a sense of community and boosting Spotify's
brand presence.
Logistics: Logistics in Spotify involves the distribution of digital content, including music
tracks, playlists, podcasts, and other multimedia materials to users(Eriksson, 2019,
https://www.tandfonline.com/doi/full/10.1080/17530350.2019.1708780). This process not
only includes storing vast digital libraries but also ensuring seamless delivery to users'
devices. Every year, Spotify expands its reach into new territories, with its services
becoming accessible in 185 countries by the end of 2023 (out of a total of 195 countries
worldwide). This strategic move broadens Spotify's addressable market to nearly the entire
global population, with the exception of the elderly demographic. Additionally, Spotify's
outbound logistics also encompass partnerships and collaborations with artists, record
labels, and content creators, ensuring a constant influx of diverse and engaging content for
users. Effectively managed logistics enhance user satisfaction and engagement, vital for
Spotify's continuous growth and success in the competitive music streaming industry.
Customer Service: Spotify's value chain not only offers pre-sale services but also provides
comprehensive post-sale servicing features. These services significantly enhance
customer satisfaction and elevate the customer-provider relationship through post-sale
guidance. Utilizing customer feedback, Spotify diligently rectifies any digital errors within its
business applications and web platforms, ensuring a seamless user experience. This
commitment to exceptional service not only minimizes potential issues but also serves as
a powerful tool for positive product marketing.
Support activities:
Firm orchestration: A fundamental aspect of Spotify's success is the unique approach the
company has taken towards organizing work to enhance team agility (Cruth, 2022). As
Spotify's teams embarked on the journey to increased agility, they documented their
experience, shared it with the world, and ultimately influenced how many technology
companies organize their work. This approach is now widely recognized as the Spotify
model. The Spotify model revolves around simplicity. When Spotify began structuring its
work, it identified key elements on how individuals and teams should be organized. By
digging deeper in the Spotify orchestration, we can individuate 6 way of organizing teams:
 Squad: Squads are autonomous teams (typically consisting of 6-12 people)
focusing on specific functions. Each Squad has a specific mission, an Agile coach
for assistance, and a product owner for guidance.
 Tribe: Multiple Squads within the same area form a Tribe. Tribes help align Squads
and generally consist of 40-150 people. Each Tribe has a Tribe Lead responsible
for coordinating Squads and promoting collaboration.
 Chapter: Although Squads are autonomous, it's important for specialists to align
with best practices. Chapters group specialists by discipline, maintaining design
 standards. They are typically led by a Senior Technology Lead, who may also
oversee specific Chapter team members.
 Guild: Team members passionate about specific topics can form a Guild, essentially
a community of interest. Guild membership is entirely voluntary, allowing anyone to
join. While Chapters belong to a Tribe, Guilds can span different Tribes. There's no
official leader; anyone can coordinate and contribute to the Guild.
 Trio: The Trio is a combination of Tribe Lead, Product Lead, and Design Lead. Each
Tribe has a Trio to ensure continuous alignment among these three perspectives
when working on functional areas.
 Alliance: As organizations grow, multiple Tribes sometimes need to collaborate
closely to achieve broader goals. Alliances are a combination of Trios (usually three
or more) working together to assist Tribes in collaborating toward larger objectives.
https://www.atlassian.com/agile/agile-at-scale/spotify
Technological Systems: Spotify's revenue model primarily relies on its Technological
Systems. Hence the platform utilizes customer data intelligently to understand user
behaviors and preferences, aiming to deliver personalized and valuable content. Spotify's
competitive advantage lies in its robust recommendation engine, powered by machine
learning (ML), natural language processing (NLP), and convolutional neural networks
(CNN) (Spotify R&D, Engineering Section, https://engineering.atspotify.com/) . Through
ML algorithms, user behavior is analyzed to group listeners based on musical tastes,
enabling Spotify to recommend songs based on similar users' preferences. Additionally,
NLP is employed to analyze language from various sources, allowing Spotify to categorize
music based on descriptions and curate personalized playlists. Moreover, CNN helps
analyze raw audio data, including tempo and musical key, to classify songs by music type,
further refining its recommendation system. Spotify's artificial intelligence system
meticulously crafts a unique "taste profile" for every user, combining it with their past
listening data to offer tailored music suggestions(Marius, 2021,
https://towardsdatascience.com/uncovering-how-the-spotify-algorithm-works-
4d3c021ebc0). This personalized approach has significantly enhanced Spotify's value,
evident in the widespread acclaim for playlists like “Daily (specific genre) Mix”, “Spotify
Wrapped”, “Discovery Weekly” This innovative approach aligns with Spotify's commitment
to enhancing user experience on a vast scale.

https://en.wikipedia.org/wiki/Spotify
https://www.atlassian.com/it/agile/agile-at-scale/spotify
https://techcrunch.com/2022/08/17/spotify-and-samsung-expand-their-partnership-
in-2022-with-more-pre-installs-integrations-and-free-trials/
https://newsroom.spotify.com/collaboration/
https://www.partnerbase.com/spotify
https://www.statista.com/topics/2075/spotify/#topicOverview

General Industry
Introduction
In the ever-evolving landscape of digital technology, streaming has firmly established itself
as the primary mode of media consumption. As reiterated multiple times, Spotify stands as
a prominent pillar in the music streaming industry. The continuous growth of this sector
can be attributed to the high demand for streaming services, leading to a thriving market
with numerous contenders. In this section of the report, we will provide a comprehensive
overview of the streaming industry, shedding light on its key features and potential
challenges.
Music streaming market
The music streaming industry has undergone a radical transformation due to digitalization,
changing consumer preferences, information-seeking behavior, and social influences.
Traditional methods of music consumption, such as physical recordings, have declined in
recent years. In response to these changes, companies have created platforms that allow
users to access extensive music libraries directly on their personal devices over the
internet. https://www.grandviewresearch.com/industry-analysis/music-streaming-market

These platforms typically offer services in two main models: freemium, which includes
advertisements and certain limitations, and premium, where users pay a monthly fee for
unrestricted access to all features. This analysis will focus on the global music streaming
market, with Spotify being a prominent global player. Key markets in this industry include
Europe, North America, South America, Asia-Pacific, and the Middle East (Statista, 2022).
The study will explore the dynamics of these markets, considering the influence of
digitalization, evolving consumer tastes, and global social trends.
Industry Statistics
(https://www.statista.com/study/21423/spotify-statista-dossier/)
Following the aftermath of the COVID-19 pandemic, the music streaming industry
witnessed substantial growth. Projections indicate that the music streaming market will
expand at a remarkable Compound Annual Growth Rate (CAGR) of 14.4% from 2023 to
2030. In the second quarter of 2022, the total number of users in the music streaming
industry reached 616.2 million, marking a remarkable growth of nearly 54% from the
second quarter of 2020 when the user base was 400 million. Additionally, in 2022, the
global music streaming revenue reached $17.5 billion, showing a slight increase from the
2021 revenue of $16.9 billion. This growth though was not as significant as the jump
observed from 2020 to 2021 when the revenue increased by more than $3 billion.
 Source(s): IFPI, Statista
Future Forecast
The music streaming industry is set for substantial growth, with projections indicating a
remarkable Compound Annual Growth Rate (CAGR) of 14.4% from 2023 to 2030. By
2027, the market is anticipated to boast a user base of 1.1 billion users. According to
Statista (2022), the user penetration rate, which stands at 12.0% in 2023, is expected to
climb to 14.1% by 2027. These figures underscore the industry's robust expansion,
reflecting an increasing global appetite for music streaming services.