HMVs Audit of the Marketing Environment:

Despite a high 1.24 billion turnover, HMV is in a difficult financial situation and they establish an open management allowing a two-way communication concerning every subject, and despite of the crisis, they keep rewarding their employees for good performances and nourishing the work environment. Thus, the vast amount of experience and expertise among employees has not suffered of damage so they keep staying close of customers expectations. Unfortunately they have had a late reaction in its responding to the technological change, which has cost HMV its stable position and lead it towards the problems it suffers today (especially the important in-store sales diminishing). HMVs new ability for innovation (product support, distribution, diversification, etc.) has offered new perspectives for success. Finally, regarding the factors which drive to the decline of the firm and the benchmarks which well-manage the solution related to these factors, the only thing missing is a good strategic planning to move up the slope.

SWOT Analysis:
STRENGTHS WEAKNESSES In-store sales diminishing. Bad coordination between channels. Excessive reliance on promotional pricing to stimulate sales. Non optimized website - Bad referencing on Google and other Search Engine (buy MP3, music, Music-seller , download MP3) Late arrival on the online retailing - Fail to adapt to change: diversified too late. Competitors have various prices but lower than HMV; a comparison is easy.

Well known brand name, strong image Largest range of products on the high street: Very diversified (music, visual, games, live tickets, clothing, other related-entertainment product). Well perceived reputation for services - Multi channel distributor: offline and online stores Good online and offline traffic consumers. Free delivery - Wide presence on the Internet (social networks, website, blogs, etc.) Strong human resources basis - Vast amount of experience and expertise (large readily capable workforce) Good relationships with suppliers - Well knowledge of their consumers. OPPORTUNITIES

THREATS

Downloading - Government strong will to fight against illegal downloading: Digital Economic Bill, passed in various countries. Entertainment industry - Music is still listened to in many different ways. New technologies have brought new perspectives of innovation and development The visual market is strong, in particular the 3D technology. Development of a new generation of consoles: Wireless consoles - The video games industry is at its maturity stage. Innovation can be considered now to develop a competitive advantage.

Financial crisis - USA is in the middle of a huge financial crisis. USA has been weakened: weak purchasing power. Consumers are reluctant to buy. Alternative means to listen to music and see movies: illegal downloading, second-hands, piracy, free platforms. Entertainment industry - New technologies are constantly evolving; hard to provide innovation quickly. Online gaming is seriously dangerous to physical video games - The power of suppliers is very important and restraint the power of

decision of retailers.

Rise of the use of Internet: e-commerce and buying online has become a consumer behavior: High development of IT, mobile and online factors in consideration; a young segmentation.

CD and DVD industries are in their final lifecycle stage. Downloading is cannibalizing these two industries. Purchasing power is one of the key factors and people can be reluctant classical segmentation, hard to organize.

Porters Five forces analysis:

Potential new entrants

The visual industry has also the same problem of evolution of informatics and the easiness of downloading movies or watching movies. Since the recession they became really careful about their retailing strategy: more and more often they ask for having credit insurance in case the sales are not insured. If HMV refuses this credit insurance, suppliers dont even provide the materials. Downloading also involves the visual industry. That is why buyers become more and more demanding of a competitive price and packaging, etc.

Bargaining power of suppliers

The number of music producers is very small and because of that their power is very strong. The main producers nowadays are: EMI, Warner, Universal, SONY BMG

The problem remains the same as visual and music. The suppliers have a huge role in bargaining decisions.

Bargaining power of buyers

The power of the clients becomes more and more important since they are able to download. They are now very exigent about the price, the packaging.

Threats of substitute

Downloading is a real threat for

As a market leader, the

The consumers can easily find the same products in other video game retailers. Downloading and hacking (for consoles) are also two important problems giving power to the consumers. The only substitute

products or services

the music industry, not only the retailers.

other existing competitors such as Virgin Megastore wont be a threat but many substitute products exist.

products we can find in this market are the downloaded videogames and hacked video games.

Segmentation Entertainment industry is divided by the online factor in which products are identified as dematerialized and materialized products. The following factors can help HMV to strategize their market segmentation. The culture of passionate persons about IT and gaming, accentuate the online factor on the games market but they can be very interested in new technologies like tablets, android, mp3, etc. And they would buy online products to use these technologies. There are also people who are passionate about music or films and they are more likely to buy physical supports to feel the product and appreciate everything to do with it (booklet songs, cover, etc.). They are more likely to go to live concerts of their favorite band or singer. People who travel and move a lot are more interested in using mobile devices which can have their songs and movies they like. They go for the downloading platform to buy the songs and movies to use them easily on their devices. These people are mostly among the age group of 15 to 40 years. There is a segmentation of economic factor. Wealthy people will be more likely to buy physical products that are more expensive than digital ones since it has a physical cover or it needs funds to organize a festival/concert. This will be mainly true for the music and movie industries.

Targeting Targeting can break the market into segments and then concentrate the marketing efforts on one or a few key segments. For promotion, pricing and distribution of products and/or services to be easier and more costeffective, targeting is required by focusing to all the marketing activities. After selecting the target market HMV should decide the size of the target market by asking, Is the target market large enough to sustain a business which will provide products or services to them? The target market has to be of at least a minimum size to be viable for HMV to process its business. Since entertainment industry in USA have lots of players in the market, it might be wise to find a niche within those target markets. Therefore, HMV must then focus on the particular types of entertainment market. Thus by targeting its product for its targeted market, HMV can decide its size on the basis of it in USA.

Positioning The consumers ascribes HMVs standing, quality, price, strengths, weaknesses, the type of people who use the products sold by HMV, any other unusual or memorable characteristics the products may possess and the value it represents. The following strategies can help HMVs successful positioning:

Clarity - While positioning its brand, HMV must be able to position itself in both distinct value, proposition, and to its target audience. Consistency HMV should keep the positioning plank/bases intact for longtime. Planks should be carefully chosen while positioning. But it does not mean that HMV must change its positioning bases even though its survival is at stake. HMV must be flexible to the changing environment. Credibility - HMV must deliver trustworthy and believable value proposition and there should be perfect match between promise and action. Competitiveness - For surviving in this competitive and changing environment, HMV must implement innovative resources, talent pool, competitive advantage, strong financial backup etc.

7 Ps of marketing mix for HMV: 1) Product Over the last few years, HMV has diversified into new and related-entertainment product areas (technology, clothing and merchandise). Therefore, HMVs product mix evolution must be accelerated, with a particular focus on technology, where the opportunity for range expansion in high-growth products is greatest. Indeed, the main driver of the growth from new product is the Technology, which is why HMV can launch mobile phones gaming offer on the HMV website in partnership with leading telecom operators. Clothing and merchandise can be sold be attractive offers and also keeping is stores, the varied and latest trends of fashion line. This diversification can help HMV to survive.

2) Prices Many products in HMV stores show inexplicable price variances. However, some price discrepancies across channels can make strategic sense as they leverage a specific property of a channel. For example, a promotion offering 4DVDs for $20 in-store can be an enjoyable browsing experience predicated on serendipitous visual browsing and discovery. Whereas, it could be an unpleasant and less attractive experience to search through the website. While the offline environmental offer an attractive visual search, online enable the speed of a specific search. Demand fluctuations should be successfully handled. The pricing strategy should coupe up with the degree of competition. Service prices should be based on costs so as to take into account the tangible clues to provide value addition and quality indication.

3) Promotion

The strong image of HMV comes from the companys commitment to advertising, promotions and personal appearances. HMVs logo, featuring Nipper the Dog (dog and trumpet), remains an integral part of HMVs advertising and promotion that plays an important role in publishing the brand.

HMV should generate new and existing customers and maintain them with an abiding interest in entertainment - music, video and games. HMV can make its stores attracting, exciting to visit and simple to shop for the customers with in-store designs to create atmosphere and ambience via video screens, listening posts, graphic elements and the like. HMV can pursue an aggressive marketing strategy across a broad spectrum of media, including TV, radio, posters and press advertisements which in turn promotes more releases in any one year via co-operative advertising approaches.

4) Place HMV are present on high street and e-commerce channels such as: HMV.com: Positive evolution since the creation of the website. Revenue and visits increased to significant levels. This is one place that HMV should plan to upgrade more because of the competitors online. HMVdigital.com: HMV established a joint venture with 7digital (HMV owning 50%equity stake) in September 2009. This is important for the B2B market. The company has now experimented social media not only opening a Facebook shop but also creating their own networking site. In these places, HMV can emphasis more styles or unique approaches to be more attractive and gain more customers online. People HMV can expand beyond threshold services such as online services (reservation, payment, free delivery...) or in-store services (space offered for physical presence of products, etc.). Employees should be made aware of and understand customers expectations and needs. They should try to close the knowledge gap in customer services for an effective and more personalized touch in their operations. Recruit the right staff and train them appropriately in the delivery of their service is essential to obtain a form of competitive advantage.

5)

6) Process

HMV has to deliver optimally without a loss in quality because its service is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer. HMV should not lack productive human resources because even the new generation of information technologies would hardly produce the desired results. The generation of efficiency should be substantially influenced by the quality of human resources sine the quality for HMV is an aggregation of all the products, which are found essential for generating the efficiency and projecting a fair image.

7)

Physical Evidence To create a better customer experience, tangible elements should also be delivered with its services service. Create of good impression among customers and increase credibility of HMV. Differentiate from competitors and effectively manage service quality and reposition its services. HMV can offer tangibles to improve their relationship with customers. In order to ensure that customers enjoy their service encounter, a well-designed layout, and maintenance of appropriate lighting, music and visuals, pleasant and attractive ambiance of the outlet should be done.

Control and Evaluation HMV can gain ownership or increase control over distributors or retailers since HMV is the retailer of the entertainment industry. As not each person has access to the Internet and so not everyone is buying online, there is a significant potential of growth. Indeed, this online industry is growing but not as much as it can be because of the illegal downloading. The online market penetration seems to be interesting to consider. HMV can provide new channels of distribution that are reliable and inexpensive, such as downloading platforms. This industry is also rapidly becoming global but HMV is in a very bad financial shape to develop a new market. This option seems interesting but quickly hard to organize because of HMV financial problems. Despite the fact of a lack of R&D, improving and developing products can be considered as an interesting strategic option. On physical support as CD and DVD, HMV competes in a slow-growth industry but merchandising and IT devices which are introducing a bit in stores can be helpful to attraction the core products: music, movie and games. Deciding cheap prices and develop more services can give a competitive advantage to grow. This option seems very interesting to consider due to its great potential in many satellite (around the core products: CD and DVD) products such as IT devices or merchandising. Since customers are difficult to reach as they have a lot of many alternative ways to listen to music or to see a movie, the best is to concentrate on the industry. Associating itself with a complementary industry such as an IT device can be interesting to develop its own brand with innovative products and services. It might help to develop a common R&D program to introduce new technology in a context of an IT and mobile fastgrowing industry. HMV, being in financial troubles, is not one of the weakest competitors for the moment, since it is one of the leaders. Performance should be improved about sales although of its high performance.

Reference List
Budhiraja S.B. & Athreya M.B., 2002. Cases in Strategic Management, page 220.