Impact Of Technological Change In HMV group
Sufficient changes have been taken place over the last ten years in the UK’s music sector. One of the UK and Ireland’s leading CD, DVD and Computer Game seller is HMV. The central nature and context of the change for HMV is online music. Company’s poor trading performance reflects because the lack of progress adapting to structural change. According to John (2007) planned change is triggered by the failure of the people to create a continuously adaptive organisation. William and Thomas (2009) state that 70 present of planned organizational change initiative fail because of the lack of reliable and valid diagnostic instruments to assess and track an organization’s capacity for change. Change management entails thoughtful planning, sensitive implementation, consultation with and involvement of the people affected by the changes.
Organization Name: HMV Group
Nature of the change: There are three main categories of organisations that may experience period of change
1. The kind of self-organising and changing learning organisations.
2. Companies operating in niche market where they have not encountered the kind of environmental change.
3. Organisations that able to continue functioning without transforming themselves.
There are two types of changes-
1. Transitional or Incremental Change
2. Transformational or Revolutionary Change
Incremental Change: The focus for this part is doing better things through a continuous tinkering, adaptation and modification. This type of change is that it builds on what has already been done and may need continuous improvement.
Transformational Change: It involves a break with the past, a step function change rather than an extrapolation of past patterns of change and development. It is based on new relationships and dynamics within the industry that undermine core competencies. In this part things need to be done differently rather than doing things better. SOURCE – John Hayes (p-12-13, 2007)
The delivery of music over internet expected a great future over the next 5 years. Sales of digital downloads are expected to increase from $22 million in 2001 to $1.6 billion in 2006. For this transformation of the music industry there is a major impact of social and technological factors. These chase influenced by Digitization, Compression and streaming technologies. The technological improvements in music industry increase the availability of music easily and reduce cost as well. (Web Source 1)
Reason for Change: According to Joan (1958) technology can make a big change, not only with the development, manufacture, marketing and distribution of these new products, but also within their own corporate structure and culture. Burnes (1988) suggested an approach to assessing the need for the type of change which attempts to make the process of establishing objectives and outcomes more rigorous and open. Leaders focus on aligning people, communicating the new direction and creating coalitions committed to get the job done. Empower others to make the vision happen. A central feature of modern organisation is interdependence where most members of the organisation are tied to many others by their work as kotter argues (1995). Transformational leaders have the ability to identify those who might be able to support or sabotage an initiative, network with them and communicate in a credible way what needs to be done.
The main change drivers of HMV are online music. Due to get the online music the business of HMV affected and it lose its market share. We discuss below how change impacts on technological and social drivers of change. The price is the drivers of the change. Because there are competitors Tesco and Asda have sell the CD’s and DVD’s in the less price than HMV. So, it has intense competition in the market .However, technological drivers are the main reason for the change in customer mind. So, we will discuss about the drivers how it gets the market.
Company Background: HMV Group, formerly HMV Media: books, music and video for everyone formed in 1998 after HMV and Waterstones joined forces, acquired from EMI and WH Smith respectively, the HMV group began operations using its two chains.Both share the same goal in terms of customer satisfaction, offering the largest range of leisure and cultural products, despite the two chains keeping very much within the scope of their own work. HMV targeted the position of leading international distributor (Europe, Asia and North America) on the music and video (all formats) markets. Waterstones is dedicated to book sales and exclusively on a national scale. The power of the two entities is unquestionable as the HMV Group is made up of more of 500 shops.
Aim and Objectives: The main change drivers of HMV are online music. Due to get the online music the business of HMV affected and it lose its market share. We discuss below how change impacts on technological and social drivers of change. The price is the drivers of the change. Because there are competitors Tesco and Asda have sell the CD’s and DVD’s in the less price than HMV. So, it has intense competition in the market .However, technological drivers are the main reason for the change in customer mind. So, we will discuss about the drivers how it gets the market.Same Day.
External Factor: Change has been a future of organisational life for as long as organisations have existed, environment have brought about the need for organisations to adapt their internal attitudes, strategies, structures and operations to meet the demands of the new external conditions.
Hence, the study of internal change has increased both in academic circles and in organisations themselves. In change need to understand reactive and proactive change this area is what of the two principal sources of impetus to change.
Reactive change is change forced upon an organisation arising from a need to react to a change in the organisation’s environment. This can apply to an individual as well as an organisation, for example, you must change your lifestyle if your main source of income is suddenly reduced or discontinued. There are a number of environmental changes that can precipitate reactive change, but they usually have in common an element of necessity, of being unexpected or an element of surprise.
Proactive change, in diametric opposition to reactive change, is planned in advance, usually with a particular objective in mind. Whilst proactive change may be as an indirect consequence of changes in the environment, it is essentially change because the organisation wants, or internally feel the need to change. To relate this to the individual, you might proactively improve your educational qualifications in order to increase your job prospects. [Source: David Campbal & Tom Craig, p-(449-450)]
A number of factors have stimulated interest in the learning organisational change concept:
Ã¢â‚¬Â¢ The production of goods and services increasingly involves sophisticated knowledge
Ã¢â‚¬Â¢ Knowledge is therefore as valuable a resources as raw material
Ã¢â‚¬Â¢ Many organizations lost knowledgeable staff through de-layering in the 1990s
Ã¢â‚¬Â¢ Information technologies are knowledge intensive
Ã¢â‚¬Â¢ Knowledge can have a short life span, made obsolete by innovation
Ã¢â‚¬Â¢ Flexibility, creativity and responsiveness are now prized capabilities
Ã¢â‚¬Â¢ Knowledge can thus be a source of competitive advantage for an organization
Complete PEST analyses of HMV Group: The PEST analysis is a useful tool for understanding risks associated with market growth or decline. This helps to understand the environment that HMV is operating in and what the risks that could affect its products and what to consider when developing a new product range. Such as political, economical, social environment and other legal factors. Most of them are out of the control of HMV.
Political/legal factors- This affects HMV in many ways. For example the trading / government polices HMV have to follow when selling their product on the market and advertising them to the public. All business needs to follow the legal factors when producing and selling products such as prices/descriptions etc. HMV need to keep up to date with the changes in the law to make sure they stay within them.
The social environment- This helps HMV to identify the specifics of its targeted market. To identify what type of person buys their products, so the company can produce products that suit their preferences. This also helps them to reveal the gender, income and other areas of the social environment that HMV is in. This provides the company with useful Information that they can use when promoting their products to help attract the type of consumers that is in the environment.
Technological Factors- Technological Factors are most important factors for the business. because now a days businesses is working in changing environment. There is a great change in technology Advancement in technology and means of communication will help same day to keep track of its parcels and couriers.
Economic Factors- All businesses are affected by economical factors nationally and globally. Economic factors affect your customer’s ability to purchase your goods and services as well as a firms cost of capital. Examples of these issues would be: Government intervention in the free market, Rate of inflation, Capital borrowing costs, Currency exchange rates, Inflation/deflation impacts, Labour costs.
Luecke’s Seven Steps to Change: In 2003, a new model of emergent change was given by Luecke which is known as seven steps of change. These steps are:
If any change is to take place, the management should create and mobilize the energy and commitment needed to identify the problems of the organization and their solutions (Todnem, 2005)
Management should include employees to create a shared vision of how the organization can be organized and managed in order to face the competition (Todnem, 2005).
According to Todnem (2005), Luecke proposed that in third step that leadership to bring about change should be identified.
The focus of the management should be the end result of the change and not the activities that lead to change (Todnem, 2005).
According to Luecke (Todnem, 2005) change should start on small scale and then it should spread to the other parts of the organization.
Policies, procedures and systems should be institutionalized to achieve success.
If any problems occurs in the change process, strategies should be adjusted to deal with it (Todnem, 2005)
Simon Fox new chief executive of HMV have chosen Luecke’s Seven Steps model to gain its profit: Few HMV music store could be sold according to saving cost. Changing trends in the music market by internet in order to download track or buy albums from website such amazons. Company hoped to avoid redundancies by redeployment. HMV will focus heavily on its online presence, aiming HMV sales via internet from 6% to 10% by 2010. The company has announced a three year transformation plan which will save 50 million costs per annum by 2010 through simplifying HMV. In the UK and Ireland HMV’s sales grew by 1%. The firm said it is initiating a turnover plan which it hoped would revitalize its core business. If the cost cut will go down well in the city(short term goal), Mr. fox’s growth plan to derive 20% of HMV sales through its online channel compared to 6% by utilize high street store space. The most radical plan is for the transformation of its music retail business into an interactive store aimed at restoring HMV, will launch a loyalty-card scheme the target the rapidly growing mobile phone music market. HMV will team up with 3 to install concessions within its store that sale music centric handsets.
It will also plan sell some mp3 players from the likes apples and Sony and reducing its dependences on sales of CD’s and DVD’s. HMV will also provide content to mobile music retailer 3’s 3.7 million subscribers. It will launch its own social networking site for film and music. A refreshment hub shoppers will able to log on to a social networking site for music, films and games also provided. It will able to burn its own CD. Fox will increase HMV’s sales of games 12 percent to 15 percent over 3 years, and digital music, audio and video products to 16percent from 5 percent. (Web Source-3)
Benefits of Proposal: HMV should take a plan to have some meeting with its employees regarding the change and need to tell them how they have to participate with the change. It should tell their involvement with the change .it should take some training session, develop new ideas and approaches without being influenced by the old ways. The guiding coalition must remove obstacles that may be entrenched in organizational process. They should be given the opportunities to get on board any embrace the vision.
Force Field Analysis:
Force field analysis can suggest a number of changes to the initial plan:
By training staff
It would be useful to show staff that change is necessary for business survival in current music ins
Staff could be shown that new technology would introduce variety and interest to their jobs.
You could raise wages to reflect new productivity.
HMV UK and Ireland’s expansion is a testament to its success. Board members of HMV attribute this to quality of HMV store manager who is developed from within the business. Their performance is judged on the achievement of weekly targets set by the business.
In 1998 HMV conducted a company-wide opinion survey called ‘your shout’. To support management development HMV established a development programme. Day to day learning in store was less structured and less inconsistent application across the business.
HMV saw the investors in people standard as a framework to accelerate the effectiveness of the company’s response to the ‘your shout’ survey. Quality could be assured by aligning a new development initiative with an external standard.
A development package was created to provide a structural framework and comprehensive development materials for in-store learning which called the ‘continuous development plan’ (CDP). Its aim to increase knowledge and skills of management and staff in the critical elements of HMV store operations. The knowledge of staffs is defined on their job role which is articulate in four areas. By the assessment existing levels of knowledge was identified so that people can get the individual development plan and workbooks to support CDP coach nominated by every store to support the CDP activities. All levels of staff support the training structure. Progress reported to the board in every month.
HMV has supported this massive initiative with considerable additional resources, including 15 development centers across the UK & Ireland, an expanded course offering for all staff levels and a larger learning and development team.
Working with the investor in people standard has helped its employees recognise the day to day development. People can see what the knowledge and skills they developed and what they need to be a manager. The success of CDP rises by 12 months to twenty percent in critical areas. This helped to raise the standard of customer service and make the stock management efficient.
Investors in people have helped us communicate the dynamic career opportunities in HMV. It has provided a structured framework to continuously support and stimulate the development of existing staff.
The change Process: Simon fox appointed chief executive of HMV group plc. The management undertook a comprehensive review of operations to identify strategies for revitalising the groups business over next three years. The result of this work, together with the financial impact for the group and its capital structure which discussed below:
The board expect the markets in which the group operates to be subject to significant structural change, with the total music and DVD markets continuing to decline, and growth in the books market coming from the online channel. In addressing this issue the board has identify three key areas of focus:
Saving – Driving cost efficiency
Protecting – revitalising the core business
Growing- Establish new channels.
Saving – Direct cost efficiency
Cost savings of Â£40m per annum will be achieved by 2009/10 by simplifying the HMV UK and Waterstone’s supply chains, maximising group purchasing and head office synergies and from the review of the UK store portfolio.
Revitalising the core business
* HMV UK will launch an enhanced range of portable digital products from suppliers including Apple, Bose, Samsung and Sony.
* A new HMV store format of the future is being developed and will be trialled from autumn 2007.
* A loyalty card to drive spends across both brands and all channels will be rolled out during 2007/08.
Establishing the new channel
* HMV will launch a social network site for music, films and games, proving revenue streams from advertising, sponsorship and paid-for content.
* HMV UK is partnering with 3, the UK’s leading mobile music retailer to provide content to 3’s 3.7m subscribers.
* Growth in hmv.co.uk and Waterstones.com will be accelerated by increased marketing.
* HMV.co.uk will become 20% of HMV UK sales by 2010.
As over 80% of the groups profit is made in the UK, today are strategic and operational review will be focused on UK markets. SOURCE – HMV group website – Media – News
Recommendations and Conclusion:
STRENGTH: HMV is the market leader for CD, DVD and computer games. HMV brands are synonymous with range authority, expertise, customer service and a stimulating store environment. The company listed on the London stock exchange on 15 may, 2002 successfully establishing a more appropriate capital structure for the future growth of the company. SOURCE – HMV group website – About Us – History
WEAKNESS: HMV had not adapted quickly enough to the way customers are buying and consuming media. Before Christmas last year, HMV and other high street retailer issued profit warning because of poor sales affected by the growth of online retail. The group has admitted being too slow to recognise the changing shape of the music and entertainment industry and has been hard hit by competition from online specialist as Amazon and play.com as well as supermarket such as Tesco, asda with their offers of bargain CD’s and DVD’s.
A new pricing architecture is being rolled out to the entire HMV UK chain by September 2006. HMV was named best retail chain in the 2006 music week awards for an eighth consecutive year, multiple retail success of the year at the 2006 British video association awards and most improved retailer in games in 2006 MCV Industry Excellent Awards. Sales in HMV UK and Ireland for the full year ended April 2006 were Â£937.2m and operating profit was Â£60.6m. For the year ended April 2006 turnover of HMV Asia pacific was Â£275.5m and operating profit 8.6m. SOURCE – HMV group website – About Us – Fast Facts