Network Competition when Skype Enters the Mobile Market - Case Study Example

Skype Business Analysis Company Overview Skype is one of the most popular application software that has penetrated the market for use in social and business spheres. Skype was founded in the year 2003 by Janus Friis and Niklas Zennstrom. The company created an application that would allow users to make calls from a wide range of hardware equipment such as computers, tablets, and mobile devices. The company’s main aim was to allow the members of the public to call, exchange files and images and send video messages. The call option allows the public to make peer-to-peer calls or make conference calls (Stone n.p). Over the year, the company has experienced rapid growth with a substantial increase in the number of customers each year. While most of the services are free, the company requires customers pay for land line and mobile calls through the Skype credit card. The company leverages on the current technological development to push its product to the customers. In the era of technological revolution, communication has become an important aspect of the globalized population. The public intends to stay in contact no matter their large geographical separation. As a result, Skype creates the link to sustain communication within the world by providing an online communication platform. Since its foundation, the company has become a hot product within the market. Two years after its release, eBay announced its willingness to acquire it for $2.5 billion with other potential performance-based consideration. In 2009, eBay announced its intention to sell 65% of its Skype shares to Silver Lake for $1.9 billion (Curwen 11-23). Later in 2011Microsoft acquired Skype Communications for $8.5 billion. Microsoft established Skype as one of its division replacing the old Microsoft Live messenger. Today, the application has over 60 million users being one of the highest preferred communication website. The Skype division is a company that now delivers all its surfaces online to the international market. Users can download applications in their hardware to acquire the platform to communicate. The company provides a wide range of service from messaging, voice and video transfer services. The company’s business model is different to other social media sites such as Facebook and WhatsApp that are that are majorly used in social communication (Curwen 11-23). Skype has become a favorable communication tool within the business environment due to its ability to support telecommunication services. However, there is evidence that the company is still facing competition within the market due to the increase in the number of social media platforms that can offer messaging and calls services. Customer Profile Skype offers a wide range of services that aims at targeting a broad range of customers. The companies target individual as potential customers for their services and various products. Messaging, video sharing and calling services are available to all members of the public but are specifically designed for person to person communication within the network. Therefore, like any other social site, Skype provides a platform where the public can be socially connected from wherever location of the world. Secondly, unlike other social media services, Skype targets the business organizations that want to conduct their applications online. Since the data services are becoming more affordable, the company feels that it is possible for members of public to communicate online. The teleconferencing services have become important part of many business communication models. Currently, many organizations conduct their meetings through teleconferencing, which is a major venture for Skype. Majorly, the company targets the young members of public between the age of 15 and 65 years who are network aware and who have frequent access to computing and mobile devices as well as the internet (Curwen 11-23). The company customers have increased consistently since the day that the product was launched. In 2011, the year of its launch, the company was already enjoying a customer population of about 27 million users. By that time, iPhone was the major service subscriber as the company launched video calling on this mobile service. In the next month, the company customer population shot to 29 million and the same trend was experienced for the consequent months. The launch of the Android mobile application became another turning point for the company. In the year 2012, the company announced that it had over 32 million users which increase to 50 million in the next year. By the end of 2013, the company had 70 million application downloads on Android only and the traffic was already hitting the 115 billion mark. On average, the company estimates that each year customers spend over 214 billion minutes online while on Skype to Skype international calls. However, the Skype-to-Landline traffic is considerably small due to the rare use of this form of communication. Since landlines are becoming less popular in the modern world, this service is receiving little attention today (Datta and Yu-Shan 23-24). By 2014 the company claimed a market share of 40% and this is expected to reach 50% by 2015. The company’s future is highly promising as the numbers of customers continue to increase with increase in mobile access and proliferation of the android systems. The main purchasing motivation for the customers is that efficiency of services in Skype. Skype provides unique services that previous online applications have failed to offer to their customers. For instance, the Skype-to-Skype calls are free and they are considerably efficient. Since the computing devices have become more common and the cost has considerably become lower. Secondly, internet has become more accessible with free hotspots available all over towns and major hotels. Competition has become more severe in internet provision hence pushing the prices down. Therefore, Skype high customer inflow is fuelled by the availability of cheap devices and as well as the internet. In addition, the globalization era has increased the demand for communication as people move from place to place in search for favorable environments. Since they still to keep their social sphere active, they leverage on the Skype platforms to communicate with those at home. For instance, parents who travel abroad more often can always get in touch with their families through Skype. Since the video conferencing option allow people to have a visual contact, it is more real and a more efficient way of communication (Datta and Yu-Shan 23-24). In the period of business internationalization, Skype teleconferencing has become more valuable as companies can hold virtual meetings, which are cheaper and do not involve much travelling. Since Skype allows over 15 members within a teleconference, it is clear that this is an efficient platform. Company Strategy Quality of service is one of the priority issues for Skype services providers. The company intention is to deliver reliable communication that can be accessed from all over the world. For any business organization, the quality of services is an attraction feature that seeks to satisfy the customer needs (Karami 157). Services such as video conferencing are real-time and require high efficiency to sustain communication. Lose of continuity would imply loss of communication which would render the service unusable. Therefore, the company has prioritized this service by reducing the downtime to ensure that the public remain always connected. Secondly, security has become an important service as internet becomes a target for many cybercriminals. Since some information shared over the internet is sensitive and sometimes confidential to the people engaging in communication, security becomes an important feature for Skype. The company has provided secure networks by ensuring that information is encoded and only authorized people can access this information. The company has branded itself as a low-cost service provider which aims at connecting people at the lowest fee possible. The company provides a number of free services that includes a free Skype account, video and voice calls to people within Skype and instant messaging and file sharing. These free services are marketing strategies that entice the public to become members of the Skype customers. However, the company charges a little fee for sending text messages and calls outside Skype specifically to mobile and landline numbers. The company services have become cheaper due to the reduction in the internet technology cost within the current world. As the price of internet goes down, the customers find it easy to communicate through this platform (Karami 159-160). Secondly, the cost of computer and mobile devices has gone down and this has made easier for the company to reach to more population. Therefore, the cost drivers of the Skype service are favorable, which explains why the company customer population is growing explosively. The functional-level of organizational strategy involves deciding on the management practices that are best for the organization and the area that the organization intends to specialize (Karami 157). So far the company has positioned itself an online platform with no market limit. The company has ensured service diversity as part of its strategy to win the broad market, which is essential in becoming a top winner in the market. It provides both message and speech services, which complements other social networks that do not allow for visual communication. Therefore, the company has branded itself as a full communication service provider. Targeting the business organizations has become an important corporate level strategy. Since organizations are more connected through the landline services, they are a major source of profit for the organization. Also, effective leadership has become an important part of the organization’s corporate level strategy as the management adopts an integrative approach to marketing. The company uses effective communication to ensure that all stakeholders of the company contribute to the business strategy. The business level strategy for Skype involves all activities that are intended to create a competitive front for the company. Evidently, the company has many competitors such as Tox and Vox which provide video conferencing platforms. However, the company has become a market winner through the development of the most reliable services within the market by ensuring that the company’s services are available and are satisfactory. Therefore, the company has won the largest market share and has an opportunity to improve. At the functional level, the company has applied effective human resource management practices that focus on employee-satisfaction. Skype recruits active professionals that have high level of software design skills. This ensures that all company functions operate smoothly and that there are low employee turnovers. Online marketing is also a functional level strategy that the company uses to reach out to more customers. In its international strategy, the company has focused on the customer needs to ensure that each member has the ability to communicate. Considering the ethical factors within the international communication market has formed an important part of its marketing strategies (Karami 170). For instance, in China, the company allows redirection of its services to TOM online, a site that helps to conduct internet content censorship in the country. This explains why Skype is allowed in China while other social media sites such as Facebook are still closed. Recommendations and Conclusions In the face of market competition, it would be essential for the company to consider the customer factors that may lead affect the organizational goals. For instance, as the number of the customers increase rapidly, the company resources are in the verge of becoming unsatisfying and this may reduce the reliability of its services (Datta and Yu-Shan 23-24). To avoid losing its customers to rival companies, it would be essential to acquire more infrastructures to allow the company to host more customers without losing reliability. Secondly, the company requires to further reduce their Skype-to-mobile costs to attract more customers and allow for profit generation. In conclusion, Skype is one of the companies that have benefited from an effective business model. The company provides unique and reliable communication services over the internet. Since its launch, the company has seen its population grow rapidly with customers highly motivated by cheap and reliable messaging and call services. Secondly, the proliferation of mobile and computer technology has allowed for the growth of the demand for internet services. The ability of the company to be efficient at the corporate, business and functional level has become important for survival in the market. However, the company has a challenge to acquire enough resource to ensure that they can accommodate more customers who are still demanding their services. Works Cited Curwen, Peter. "Will Skype fever abate before its too late?." info 8.1 (2006). Datta, Bipasa, and Yu-Shan Lo. "To block or not to block: Network Competition when Skype enters the mobile market." Business Monitor. 2013. Karami, Azhdar. Strategy Formulation in Entrepreneurial Firms. Aldershot, England: Ashgate, 2007. Internet resource. Stone, Brad. "A venture integrating Skype into the family room." The New York Times 5 2010. Read More