Netscapes Initial Public Offering Harvard Case Solution & Analysis

Netscape’s Initial Public Offering (IPO)

Introduction

The report presents a case about Netscape Communications, which is one of the leading IT companies. It was founded in the year 1994 and was engaged in the provision of server and integrated application software for communication and commerce on the internet along with private Internet Protocol (IP) networks. The company enjoyed tremendous success over the past six months and its revenue had increased from $695,871 in Dec 1994 to $16,625,391 in June 1995.

One of the company’s products, Netscape Navigator, became very popular that provides a program, which allows individual personal computer (PC) users to share information and conduct commerce on the internet. Further, with the passage of time, IT industry reported substantial growth along with an increase in competition in the industry; hence, the existing businesses in this particular industry were required to invest heavily in the research and development so as to develop new innovative products that would benefit the organization to achieve a competitor’s edge.

In order to finance future growth in the industry and to respond appropriately to the intense competition from the competitors; the organization is considering to move towards an Initial Public Offering (IPO) program where the company would sell the company’s equity to the public at large for the first time.

Problem Statement

The management was concerned about the future growth prospects of the company and volatility of the industry. They were also concerned about the suitability of the financing options and they were considering whether the organization shall opt for an Initial Public Offering (IPO). Further, the management also was also concerned about the amount of funds that were required to finance the potential strategy.

Analysis

  • Key success factor of Netscape Communications’ business and consideration of future strategy.
  • Assessment of the funds needed and consideration of the available options.
  • Evaluation of the Initial Public Offering (IPO) strategy along with pros and cons of such strategy.
  • Evaluate the reasonableness of the offer price and consideration of the volatility of the internet industry.
  • Analysis of the IPO program, possible future actions and evaluation of the broker’s offer price.

1.      Key success factor of Netscape’s business and consideration of future strategy

The environment has become more complex, which raises the increased difficulty for the organizations to retain its customers, so in order to tackle this problem the organizations started to identify key success factors which would promote an organization to achieve organizational success. Basically, these are the core factors which attract customers and help an organization to retain its customers. Further, it also provides an opportunity for the company to focus on such core areas.

The key success factor of Netscape is that it increases the ability of customers to easily browse the required data from the internet. However, this key success factor was one feature of the software offered by Netscape that provide an added feature and enabled internet surfer to find their required data by not simply typing in but also providing suggestions to the users which attracts customers. Further, this feature uses different icons; windows and graphical data analysis provide its consumers with the relevant data and enabled users to access the data with simple click-and-point to brows the requited data which was resented in graphical format.

Further, the service offered by Netscape was another key success factor which attracted major customers and provide them an opportunity for organizations to attract and retain customers. Netscape is operating in the internet market, which rapidly changes and increases the possibility for management to launch innovative products, so as to compete actively with their competitors. The company succeeds to deliver innovative products which substantially increase the revenue of the company.

Netscape operates in the technology industry where the customer retention is increasingly difficult due to low switching cost so the organization shall consider to adopt a future strategy which would satisfy the customer’s need. Increased customer care will encourage them and helps an organization to increase its customer retention ratio. Further, the organization can also move towards innovative entity where the organization continuously develops innovative products and provide the latest products to customers, so that they could easily cope with the latest technology.

However, it seems that Netscape Communications’ future strategy is to provide free primary products to its customers and once the product has been widely accepted by the consumers, then Netscape will start earning revenues through selling the complementary product in order to generate revenues. This strategy seems to be very successful because once the customer has started using the free product then it will become familiar with that product and will not be willing to switch to other products and they may purchase that standard product. Netscape distributed its software for free and then earned from selling the server software to individual companies who wanted access to the servers for retrieval of their information....................

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In August 1995, the board of directors of Netscape faced with a decision about what price to offer shares in an initial public offering (IPO). Preliminary demand for shares was high, but the company has not created any positive return at the time of placement. "Hide
on W. Carl Kester, Kendall Backstrand Source: HBS Premier Case Collection 12 pages. Publication date: April 17, 1996. Prod. #: 296088-PDF-ENG

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