ASSIGNMENT Q1)
Imagine at the time Drop box was launched Google decided to target the opportunity that Houston has identified, what should be the response of the Drop Box?
Ans1) To some extent this problem was envisaged by Houston as indicated in the case and accordingly he wants to move in quickly to capture a large customer base at the earliest possible. Google is a giant company with advantages of strong financial position, large market presence over a long time, a established brand name and a diverse products with large customer base besides other advantages like established infrastructure, other R&D centre with specialist and a robust management team including marketing etc. Infact the possibility of Google “giving away a terabyte to 100 million machines”, “Google/MS/Yahoo” being possible companies most likely to buy it and “Google might finally unleash GDrive and steal a lot of Dropbox‟s thunder” is not ruled out by Houston. It is in this context and the also the differentiating characterstic which Drop box has the options are to be explored. Accordingly there may be three options: 1) That Houston may not take on direct competition with Google and avoid being crushed like Netscape by Microsoft. In this case it may sell the technology to Google for a hefty price based on the unique differentiation the product has over the existing competitor and consequently move into some other area of computer programming or software/ new apps development i.e a new innovative product development where there are no competitors. In fact Houston spells this that he shall have “hard time turning down $1 million after tax for months work”. By this way it shall avoid the direct competition with a large giant with which it is difficult to compete (since Google may provide a larger storage space at a lesser cost with similar features by using its available strengths and networks). SWOT Analysis/ Porter‟s 5 forces analysis show that In such a case the business proposition shall not be attractive as it does not have capital requirement to match marketing and brand building, build economy of scale in a field which is already crowded with competitors with similar products and the features of differentiation may get copied and lesser access to distribution channels. Further since as per the question Google targets this opportunity Drop box does not have much chance to build up until it makes a “First mover advantage”. Incase Google does not be interested with purchasing options of other major software firms e.g Microsoft etc or PC manufacturing firms (instead of PC security software providers as he did) can also be explored.
2) It may also form a strategic alliance with Google wherein it can jointly work with Google or other major software firms etc and stay focused on further development in this area of existing product. An advantage of this will be it can leverage on the brand of reputed companies like Google etc and help itself to build a brand for itself. It shall have access to a large distribution network, a large customer base, infrastructure, R&D, learning and knowledge assimilation of newer methods, tool of management, technology etc which shall be useful in future in case it opts out of venture later say after 5-6 years. It is presently lacking in these areas and also avoid direct head on competition with a powerful rival. The business also shall grow and a revenue sharing formula can be worked out while formulating the Joint venture. It shall be win win situation for both. 3) I personally feel that the following should be the response of Dropbox. The third option for Houston in case Google decided to target the opportunity that Houston has identified, is to go by itself but to make launch the product at the earliest before Google does so and gain First movers advantage. This is the only way by which it can survive and get some foothold in this crowded and competitive market. Here the advantage with Dropbox is that the prototype is already ready in Feb 07 and the beta version (chargeable) expected to be ready within just 8 weeks (though it took 18 months). To execute the product on time they need to have efficient dedicated product manager and Houston and Ferdowsi need to concentrate on other matters of marketing, management and growth. The other advantage is the unique business model adopted to suit their requirement and all actively coherently complimenting each other viz creating product differentiation for a opportunity /market gap (faster and safe data backup „whereas other often failed to transfer data across firewalls and sometimes balked with big files”, involving customers e.g beta users and “soliciting feedback on features” for development and incorporation, simple to use single product for both customers and business thus leading to less complication and earlier development of product and launch, lean and flat organizational structure and coherent team, freemium strategy, using viral marketing and word of mouth, using Diggs site etc and not understanding and organic customer acquisition, moving away from the strategy of paid advts in net which were costly (considering the conversion cost), referral programmes , using Amazon Simple storage service cloud storage platform to reduce infrastructure cost etc. Further the industry growth rate is estimated around 28% annually as per IDC which shows good potential and the window of opportunity is still open. It should also incorporate the following ;
1) Earliest launch of the product to gain first movers advantage. Take advantage of the complacency (as it appears in Google) and “past efforts around cloud storage failing for internal political reason”, “project has been a black sheep since 2005” and the “grandeur of their vision , trying to move everything to the web, Google is not solving the problems that real people have today”. This weakness /shortsightness of a large firm, its failing to read the customer‟s mind and their preferences and their needs has been well identified by Dropbox which it is trying to encash. 2) Besides the already product differentiation made from the storage/back up solutions provided by other firms, it may also focus on features like file versioning, permission /access control, encrypted storage, mobile version, forum/chat etc so that the features which are offered by other competitors (Ref Exhibit 1) are also available in this application so that their customers move to Dropbox considering the differentiating features which dropbox offers besides the other features which others also offers leading to faster shifting and expansion of customer base from other competitors. 3) Continuous study the market and reach out for merger and acquisition of other smaller competitor firms so that it becomes a bigger and stronger entity. 4) Tie up with PC manufacturers to provide the software as part of bundled software (helps to reduce distribution cost and reach out to large customer base and enhance popularity of the application). 5) Investment has to be made in building team of marketing, production etc. 6) Keeping the model simple, integrated and addressing the gap /customer need with ease and convenience is the key. 7) It may also go for patenting of the product.
Q 2) Should Houston create a separate version of small and medium business customer ? Give your reason for the option you suggest ? Ans 2) Yes Houston should create a separate version of small and medium business customer after some time, say after 1 year after first launching the current developed application which is simple integrated. The reason for the same is as under: The current Success factor of Dropbox is that it Offers a simple, ease of use and single product version currently provide a competitive advantage. However we must understand that the product is not a highly innovative one and can be developed /copied by other competetors and the industry is a highly competitive industry. The purpose of all these firms is to provide a storage solution. It is the method, ease, suitability and applicability for the to individual user/ business segments and mode of delivery and costing etc which shall decide which form shall remain ahead of the others in the long
run i.e the usage applicability, relevance and delivery and cost shall be the differentiating factors in the long run. In order to decide whether Dropbox should create a separate version of small and medium business customer we have to consider factors like whether an attractive market exists, whether there is customer demand for the product, how the strategy of the company has to be changed to address this issues, financial issues, whether it may not cannabalize the existing product, existing competition in this space, whether it will lead to economy of scale and profit and whether it is essential for future survival and growth and maintain competitive advantage and edge. In order to remain ahead of other it has to create product differentiation in terms of feature and service and build economy of scales since the market is fiercely competitive and their is declining costs for storage and bandwidth bolstered industry growth and competition over the years. Further as per the (Exhibit 7 ) Dropbox ranked 6th in the customer segment but it was not mentioned even in the top 25 provider in the either the small medium business or enterprise segment. It is pertinent to mention that this is one of the revenue giving segment for the firms since for them data storage is important from business point of view. Carbonite is aggressively focussing on this segment and Drop box shall have to create a segment for the small medium business customers if in case it wants to challenge the existing competitors in the long run and stay ahead. Certainly an attractive market is available.
It is clear from the case that the market is growing fastly and their is increasing global market for data synchronization and backup services. Dropbox's market dominance might fade away one day if it does not constantly improve and upgrade its functions while its competitors does. The small business entreprises (SME), as well as Multi National Corporations (MNC) are huge markets for dropbox to venture into. Dropbox will have to position itself as a product catering to the different needs and functionalities required by these organizations(product segmentation) to increase its chances of breaking into this lucrative market. Further it has to identify the specific requirement of this segments which are unfulfilled by the existing service providers and come up with innovative solutions. Capturing this market would need to alter its marketing strategy a bit and may require higher financial investment for which planning is to be made carefully. Innovative practices which reduce cost on other front like Drop box relied on a cloud services partner like Amazon S3 unlike Carbonite stored customer‟s file on its own servers. It will also help to build spirit to
challenge itself and go for more innovative products /creativity and finding better management methods which is essential in this particular product category rather than remaining stuck up with an existing developed simplistic product.
