This analysis provides an overview of the current and prospective opportunities for Skype, a Voice-over Internet Protocol (VoIP) company. The report finds that Skype’s revenue has decreased dramatically in the last three years mainly due to the increase in competition. Josh Silverman, president of Skype, realizes some decisions must be made in order to remain an industry leader. The company’s current growth plan strategy includes three phases. Phase 1 though already completed, was to become operational on at least one platform, with one revenue system, and focus on one market with one primary service. Phase 2 consist of developing many platforms, diversified revenue streams, many conversation modes, many regions and market targets. Phase 3 encompasses multiple market segments, established products, regional ubiquity, and mature target markets. Though Skype is well developed there are still potential growth opportunities. These opportunities include expansion of existing calling plans and prices, incenting existing users to ‘sell’ Skype to new users and collaborating with cell phone providers. With the market growing rapidly the next phase taken by Skype is crucial in their development. By using the current opportunities Silverman can advance the company as well as attack other providers in the industry. SYNOPSIS OF CASE FACTS
Skype is a software application that essentially allows users to use any telephone or videoconference services over any internet connection. This transmission is called VoIP (as shown in Appendix A) and because of the reasonable long-distance and local call packages this option has become an attractive economical alternative to landline or traditional cell phone plan. Josh Silverman, president of Skype, is faced with making the next strategic move that will put Skype in a better position to successfully compete in the telecommunications industry. In order for Silverman and his leadership team to proceed with the next steps it is recommended that they first assess the economic environment. It is important to understand the economic environment that it currently has, as well as the predictions for growth within the industry. Finally, Skype’s key success factors (KSF’s) include cost, building relationships with mobile operators, globalization and word of mouth promotion by existing users. If Skype can focus on one of these KSF’s and be uniquely different where it sets them apart from rivals then Skype will continue to see growth in users and revenue. In terms of market size and growth rate, The VoIP market increased 66% from 2005-2006 with a projected continual increase of growth for decade upwards of 150%. This growth was due to the inclusion of an expansion to other ways of utilizing VoIP services. From internet to cell phone usage, the forecasts called for VoIP applications to create $32.2 billion in profit with over 270 million users. As of 2009, Skype would not be considered a major competitor within the VoIP Market. Comcast Corporation, which held 31.5% of the market, was the leader by 15.3%. Time Warner was in second with 16.2%, and Cox Enterprises, Inc. at 9.6% was only 1.3% ahead of Vontage Holdings Corp. with 8.3%. The rest of the market, which was considered as “other”, encompassed 34.4% in which Skype captured a small share. All of the major competitors growth rates from 2005-2009 were declining rapidly. For Skype, this was good news because the projections in growth of U.S. and Europe users from 2005-2011 showed 17% increase in the U.S. and 37% increase in Europe. Although major players had a traditional stronghold on the telephone industry, Skype services created a substantial technological pull that provided a major shift in the macro environment for these majority companies. In addition, the transition from PTSN to VoIP technology also sparked regulatory and social conversations of change. And according to our textbook, “since macroeconomic factors affect different industries in...
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