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Swot Analysis: Skullcandy's Business Strategy and Future Insight

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SWOT Analysis: Skullcandy’s Business Strategy and Future Insight

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Skullcandy is a key brand name in the headphones and audio accessories marketplace. The following strategic report analyzes internal and external factors that have directly influenced Skullcandy throughout the past two years. As we look ahead towards the future, it’s integral to build from Skullcandy’s past to thrive long into the decades to come. Countless opportunities exist in the marketplace, including R&D on new products, re-branding efforts, sponsorships, ambassadors, and influencer marketing. Threats exist against Skullcandy including the growing collection of domestic and international eCommerce brands improving on price, and larger corporations releasing similar products at the same or better price point. What no one else has is Skullcandy’s branding and the dedication of the company to pursuing thorough branding opportunities. Analyzing the strengths and weaknesses of Skullcandy, it becomes evident that the path the company is on currently is a smart investment towards the future. That said, a recommendation going forward may be to pursue these marketing efforts more aggressively. Analyzing the limited financial data available since Skullcandy was acquired less than two years ago, it’s evident that Skullcandy has stabilized as a brand. As management continues to focus on the future, stability cannot be the sole goal.

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Skullcandy is one of the world’s top brands for headphones and related audio accessories. Since establishing itself in the marketplace in 2003, Skullcandy rode the wave through the initial iPod/MP3 player boom and into today’s highly competitive consumer products environment. This strategic report is to delve into the internal and external influences that may be influencing Skullcandy’s current market share. The primary limitation to this report is a lack of financial data publicly released. The last financial data known about Skullcandy was released in 2015 which evidently saw the company in a very different set of circumstances than where it is at today. This report makes certain assumptions based on the press releases, media articles, and acquisition knowledge that has been publicized.

Skullcandy is no longer the company it may have been initially built to be when it was founded by Rick Alden. To Mr. Alden, though there was an underlying philosophy behind the formation of Skullcandy, the idea stemmed from a single product. Today, Mr. Alden is no longer a member of the company’s management and has left to pursue other endeavors. Today, the company that stands capitalizes on its long-standing philosophy, turning it into a global brand that continues to create high fidelity professional audio products available at more affordable price points than competitors. Across more than eighty countries, as Skullcandy continues its global expansion, its efforts to garner market share will have to be more specific and direct than ever. This report hopes to play a role in identifying strengths, weaknesses, opportunities, and threats to Skullcandy’s long-term success. By identifying where to dedicate resources moving forward, strategies can be developed to ensure that Skullcandy remains a valued brand in the consumer marketplace.

Company Overview

Skullcandy is based out of Park City, Utah and is an American company focused on selling a variety of audio products, including predominantly headphones, earphones, hands free audio playing devices, audio backpacks, and MP3 players. Skullcandy was originally founded by Rick Alden in 2003 and is currently overseen by Chief Executive Officer Jason Hodell. Skullcandy has a distribution network across more than eighty countries, generates more than $250 million annually in revenues as of 2015, and has key distribution deals in place with major retail corporations including Target and Best Buy. Skullcandy’s success in the marketplace, this report will argue, is based less from producing a high-quality product and more focused on integrating creative, bold designs with targeted descriptions on packaging appealing to the target market. Rick Alden left the company in 2011 after Skullcandy’s initial public offering and is no longer affiliated with managing any aspect of the business.

Skullcandy’s primary demographic are young, predominantly male outdoor action sports enthusiasts. Though the company’s products are marketed as a general consumer product, in many cases, the marketing is specialized to favor the demographic. Skullcandy initially garnered much attention for the patented Skullcandy Portable Link release in 2003, which made it possible for users to listen to music on a portable audio device while being able to make and receive phone calls. In June 2016, the Incipio Company attempted to purchase and acquire Skullcandy for $177 million however an agreement could not be reached. Throughout the remainder of the year, Skullcandy entertained different offers on the table, eventually settling on being acquired by Mill Road Capital for $197 million. The Mill Road Capital acquisition of Skullcandy was completed in October 2016 and immediately, shares were paid out and Skullcandy reverted to being a private business (Skullcandy 2016, n.p.).

Mandate

The mission statement of Skullcandy is to innovate and create non-conformer music products that are highly differentiated and branded with distinct designs that stand out from the other products on the shelf. Skullcandy is all about doing this appealing to snowboarders, skateboarders, and different components of youth culture. The long-term mission is to continue to assert Skullcandy as a global brand that pushes the boundaries of contemporary music and audio products, while also keeping in mind high style and affordability of product. The company’s vision and major goal is to innovate on a variety of audio and music products, and to “solve real problems and democratize amazing audio experiences with quality and style” (Skullcandy 2018, n.p.).

Skullcandy’s core values and/or guiding principles is to maintain a presence in different components of youth culture including touching upon sport, music, art, film, and fashion. To some extent, Skullcandy’s branding is all about inspiring consumers, similar to lifestyle marketing. Since its acquisition in late 2016, Skullcandy has focused on creating a more complete lifestyle brand that does not necessarily solely focus on its history of innovative headphone-friendly products. This has successfully opened the doors for the business to potentially pivot to other areas of business in the future, keeping in mind the target audience they are seeking. Stakeholder analysis is somewhat limited as all shares of the company were sold in the process of its acquisition and Skullcandy no longer has shareholders. That said, when it comes to stakeholders, Mill Road Capital’s investment in Skullcandy shows that it believes the brand to have some value in both its patents, products, and perhaps also, in branding. Since Skullcandy’s acquisition, Mill Road Capital is their only major stakeholder.

External Analysis

There are many opportunities and threats to consider with Skullcandy. When it comes to the opportunities at play, the invention of Skullcandy came into play because of gaps in the marketplace. The action sports demographic in audio products and headphones was being underserved at the time of Skullcandy’s founding. The products brought to market by Skullcandy filled in this gap, resulting in spikes in multi-million-dollar annual revenues in the years that followed. That was at the beginning of the headphones and MP3 player boom in that decade. Today, as technology has advanced so much more, the gap has been filled however other gaps have opened. Skullcandy succeeds in this category of the marketplace because it’s able to provide a high-quality product at an affordable rate. When one examines the biggest players in headphones and similar audio equipment, one comes across names like Beats by Dre. These are intensely expensive, especially compared to Skullcandy. Skullcandy fulfills the needs of a demographic requiring a lower price point and they can do so by providing a similarly high-quality product.

The aesthetic of Skullcandy is also very attractive to younger millennials who may or may not be familiar with this product category. Skullcandy’s been able to connect with this demographic in a way that other products haven’t. That said, as popular as Skullcandy has been to this specific demographic, there’s a reason why prior to acquisition, Skullcandy’s sales and revenues were declining subsequently as costs were rising. From this report’s perspective, it was evident that management at the time did not know what to do to help turn the tide. Though the company is private and subsequent revenues have not been publicly shared, the conversation regarding Skullcandy has changed which is a highly important opportunity that the company must continue to take advantage of. When the conversation around a brand is negative, that tends to turn off investors, business partners, and consumers. Today’s Skullcandy has focused on continue to brand in the same vein however doing so with more attentiveness on high quality products and creative positive conversation in the marketplace. Since acquisition, some of the major releases Skullcandy has overseen includes the Barricade Family in October, 2016, Crusher Wireless in November, 2016, a sponsorship with the Vans Warped Tour to support emerging music in December, 2016, a battle of the bands type show for emerging music called the Stay Loud Showdown in March, 2017, a re-release of Skullcandy’s earbuds now wireless with Bluetooth technology in April, 2017, the use of influencer marketing partnering with professional surfer Coco Ho in June, 2017, and the Hesh 3 Wireless line of products in October, 2017.

Now, as it pertains to threats in the marketplace, there are several. Skullcandy builds revenues from innovation, affordability, and connection to the consumers. Regarding innovation, there are many, many companies on the edge of innovation in the product categories that Skullcandy operates in. Though they may occasionally come across a patent or may find themselves with a product that innovates over their competitors, it has been a long time since the company has successfully done so. Secondly, on the point of affordability, there are many threats to Skullcandy in this space, especially with the emergence of eCommerce platforms from both independent companies and, from international giants like Amazon. There are also low-price headphones available on the same shelf as Skullcandy’s from brands like Sony. The only way for Skullcandy to succeed across these two threats is to ensure their branding is strong and to partner with the relevant influencers to continue making connections to consumers. What’s evident from the limited financial data that has been publicized on Skullcandy in the last three or four years is there may be doubts they’re holding onto the target market that they were once the dominating name in.

The most obvious threat to Skullcandy right now evidently appears to be that the company has not had a big success on any one product or marketing campaign in some time. Despite the acquisition and any re-branding activity that has taken place, at best, Skullcandy has stabilized. Though this is not inherently a bad thing, it has not provided them the growth they need to continue moving upwards in a very competitive market. If Skullcandy continues to maintain however, they should remain in the conversation with similar brands like JBL, Portronics and other direct competitors. As the world moves towards new technologies and products, the threat also exists that Skullcandy may one day find itself so far behind the curb regarding tech that its products could be made obsolete. Therefore, investment needs to be considered in areas of tech related to Skullcandy’s existing product lines to navigate products that may be able to continue opening the marketplace to new opportunities. Should Skullcandy compromise on quality, cost, or branding, they risk losing the market share they have. In addition, any effort to expand the Skullcandy brand to find a larger audience might mean giving up the current audience with intense consequences.

Internal Analysis

Looking inwardly, there is a lot that Skullcandy has done right since its acquisition. The appointment of Jason Hodell to Chief Executive Office in October 2016 was a big step in establishing new leadership and stability. Also, as a former Chief Financial Officer (CFO) and Chief Operating Officer (COO) for Skullcandy, Jason is someone that no doubt has the experience and knowledge to successfully lead the company. Subsequently, there is a lot that has been done with its marketing to bring new eyes to the product, including several key partnerships in promoting emerging musicians, artists, and live performance. By continuing to associate the Skullcandy brand with indie artists across the United States, it has helped to establish and assert the company as a trendy product. As Skullcandy has continued to tap into these promotional opportunities and the signing of different ambassadors and influencers to its brand, there is a lot that has been done right with Skullcandy in the last two years.

Skullcandy has done well at keeping its products in the conversation, with new releases regularly featured on key eCommerce sales such as this past Amazon Prime Day in July 2018 and on tech-driven blog sites like TechRadar. Internally, the structure seems strong to move forward and maintain however from what is known, it’s unsure how well Skullcandy might be built for the future. The company is not pushing ahead with any aggressive marketing campaigns, perhaps as a means of saving money and/or not knowing what kind of branding they want to push. The weaknesses to Skullcandy is that the future is so uncertain and there’s not been a lot of public discourse about if the company has any big plans. Presenting a re-branding or a new product or doing something to generate buzz in the marketplace might be a smart move for Skullcandy yet they seem so far behind with this. For example, the last press releases they put out was in October 2017, almost a year ago. Surely, there’s been more development in the Skullcandy brand since then, yet no one has heard about it. Now, because no one has heard about it, they may believe Skullcandy to be on its way to be a dead brand.

Despite the weaknesses, Skullcandy has several strengths to its name. It comes with a decade and a half of history, including the inspiring tale of its founder entrepreneur Rick Alden. Skullcandy has several patents and products in its catalogue, continues to have very strong branding, has an established distribution channel in the United States and abroad with some of the biggest retail corporations in the world, and from an infrastructure standpoint, it has everything a company would need to succeed. Skullcandy has also continued to embed itself across several concert series for emerging artists. Because of its efforts in marketing and promotions on this point, Skullcandy has received press in key music publications including Billboard. To a younger generation, it’s integral the Skullcandy name stays out there and in center view. Skullcandy has the advantage of being in a space where there are multiple demographics to chase – general consumers, tech-driven consumers, music industry professionals, and the younger generation. If Skullcandy appears like a viable, cool product in vogue, there is no telling what can be accomplished in time. The more sponsorships that Skullcandy can buy on related events marketing opportunities and the more ambassadors the brand is able to gather, the more likely it is that Skullcandy can survive and thrive in the future.

As Skullcandy moves forward, its internal infrastructure should be provided the tools and resources it needs to continue expanding the brand internationally. Skullcandy still has a relatively new presence in international non-North American territories. Throughout a product category where there are several exclusive, high priced brands, Skullcandy is very much its own. This is evident on price point and across its stylized color branding. Counterculture, self-expression, and risk takers are all aspects of the Skullcandy philosophy that is on-trend currently. There exist major opportunities to adapt Skullcandy to the marketplace and to grow its revenues, which only a few years ago were beginning to lag far behind where management predicted. To accomplish this however, the internal structure of the company will have to grow and bring in artists, athletes, DJs, and more to provide authority to Skullcandy that the company cannot itself provide. This strategy and so many others will be key to Skullcandy’s long-term success.

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