Fotolia N.A: Acting Like A Start-Up In A Mature Industry Harvard Case Solution & Analysis

Fotolia N.A: Acting Like A Start-Up In A Mature Industry Case Solution

Question#1

Industry Analysis:  Porter’s Five Forces

  • Threat of new entrant:
  • Threat of new entrant is less
  • New entrants enter the market with few sales
  • Highest rates were paid to the contributors
  • Instead of paying higher rates, flat commission from customers is provided
  • Cost involved for new business is also higher
  • Includes renewal fees for initially

The threats of new entrants is less. However, it was identified that a the new companies that were entering and engaging in the market were unable to secure higher sales revenues. Furthermore, the contributors which included subscriber and API business partners were paid the highest commission rates by the company.

  • Threat of substitute products/services
  • Threat of substitute products is high
  • Companies compete not only regarding size and selection of their image database, but also on the cost of credit bundles and accessibility of the free images
  • Sell stock around the world
  • Like other competitors, Foliage has also based commission on the price of the file sold and the status of the competitor
  • High sellers in the market set higher prices to files to receive higher rates on higher prices

The threat of substitutes was high, as it was identified that the companies competed on the cost of credit bundles instead of just on the potential size and selection of the image database. However, Foliage based its commissions on the possible price of the file sold and the status of the competitor at that time. Moreover, it was identified that the market leader tend to set higher prices for their cases in an attempt to attain higher commissions for the files sold to the customers.

 

  • Bargaining power of suppliers:
  • Suppliers’ power is low
  • Vendors supply images for free or at very low cost
  • Due to the quantity determined industries, they weaken their margins, due to this condition suppliers become profoundly split.
  • Make few of dollars in a month as a profit
  • Fewer having small margins, make changes toward market (as a result market with lower margins)

The bargaining power of the suppliers was low, where the vendor was willing to provide images at a very low cost. Furthermore, it was identified providers profit margin were small which resulted in fragmenting the suppliers. However, the vendor’s monthly profitability was low. Moreover, fewer providers with having small margins made changes towards the market (as a result market had lower margin)

 

  • Bargaining power of buyers:
  • Bargaining power of buyers is high
  • Due to high bargaining power of buyers and lesser suppliers power, it weakened the performance of the industry and increased the competition
  • Fotolia had smaller prices than other competitors
  • Foliage was interested in expanding its business (increased customers), from small size to medium enterprise (S M E) market
  • Change in buyers’ preferences or habits changed the pricing model of the company

The bargaining margin of buyers was high, which weakened the technical performance and increased the competition in the market. However, the company had implemented effective pricing policy to price its service at a lower rate as compared to its competitor in the market. In addition to this, it assessed and estimated the demand pattern of the customers to adapt to the changing preferences and habit of the clients and employing is pricing policy with respect to the changes

  • Rivalry:
  • Competition is high
  • Changes in buying preferences of customers and online advertising can adversely affect the prices
  • Advertising has become expensive, and competition has become intense within industry
  • Due to lesser brand awareness, the customers quickly switched towards other similar brands

Fotolia N.A Acting Like A Start-Up In A Mature Industry Harvard Case Solution & Analysis

 

The competitive rivalry in the market was high, as the market had matured with various big names in the market including Microsoft and Google. The industry was based on innovation. However, the innovation capacity of a company was determined by spending in its research and development project to find new ways of conducting the business in the highly diverse and competitive market.............

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