Harvard Case - Skype: A Case Study of How Skype Derived "Place Surplus" in the Estonian Capital of Tallinn
"Skype: A Case Study of How Skype Derived "Place Surplus" in the Estonian Capital of Tallinn" Harvard business case study is written by Sami Mahroum, Elizabeth Scott. It deals with the challenges in the field of Entrepreneurship. The case study is 19 page(s) long and it was first published on : Mar 24, 2014
At Fern Fort University, we recommend that Skype continue to leverage its ?place surplus? in Tallinn by fostering a vibrant tech ecosystem and attracting further investment. This can be achieved through strategic partnerships with the Estonian government, supporting local startups, and creating a world-class talent pool.
2. Background
The case study focuses on Skype, a revolutionary Voice over Internet Protocol (VoIP) company founded in Tallinn, Estonia. Skype?s success created a ?place surplus? in Tallinn, attracting investment, talent, and other businesses, contributing to a thriving tech ecosystem. The case explores the factors that contributed to this success and the challenges faced by Skype and Tallinn in sustaining this momentum.
The main protagonists are:
- Skype: The innovative company that disrupted the telecommunications industry.
- Tallinn: The Estonian capital that benefited from Skype?s success and became a hub for tech startups.
- Estonian Government: Played a crucial role in supporting the development of the tech sector in Estonia.
3. Analysis of the Case Study
The case study can be analyzed through the lens of several frameworks:
Strategic Framework:
- Porter?s Five Forces: The case study demonstrates the impact of Skype?s innovation on the telecommunications industry, highlighting the threat of new entrants and the bargaining power of buyers (consumers).
- Competitive Advantage: Skype achieved a competitive advantage through its innovative technology, low-cost pricing, and global reach.
- Growth Strategy: Skype?s success fueled the growth of Tallinn?s tech ecosystem through job creation, investment attraction, and the development of supporting industries.
Financial Framework:
- Financial Analysis: The case study showcases Skype?s rapid growth and profitability, driven by its disruptive business model and global expansion.
- Capital Budgeting: Skype?s acquisition by eBay and subsequent acquisition by Microsoft demonstrate the importance of capital budgeting in strategic decision-making.
- Risk Assessment: The case study highlights the risks associated with rapid growth and the need for effective risk management strategies.
Marketing Framework:
- Viral Marketing: Skype?s success was fueled by its viral marketing strategy, leveraging its free service and user-friendly interface to attract a large user base.
- Brand Building: Skype built a strong brand image through its association with innovation, affordability, and global connectivity.
- Pricing Strategy: Skype?s pricing strategy, offering a free basic service and premium features for a fee, proved successful in attracting a diverse user base.
Operational Framework:
- Technology and Analytics: Skype?s success was built on its innovative technology and data analytics capabilities.
- Operations Strategy: Skype?s efficient operations and global infrastructure enabled its rapid growth and scalability.
- Activity-Based Costing: Skype?s cost structure and pricing strategy were based on activity-based costing, allowing for efficient resource allocation and profitability.
4. Recommendations
To sustain Tallinn?s ?place surplus,? Skype and the Estonian government should focus on the following:
- Strategic Partnerships: Skype should collaborate with the Estonian government to create a more attractive environment for tech startups and investors. This could include tax incentives, infrastructure development, and talent development programs.
- Startup Ecosystem Development: Skype should actively support local startups through mentorship programs, funding opportunities, and access to its network and resources.
- Talent Acquisition and Development: Tallinn should invest in education and training programs to develop a world-class talent pool in technology and related fields. This will attract and retain skilled professionals, further strengthening the tech ecosystem.
- International Business Development: Skype and the Estonian government should work together to promote Tallinn as a global hub for tech innovation and investment. This could involve targeted marketing campaigns, international conferences, and partnerships with foreign companies.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Skype?s core competency lies in its innovative technology and its ability to build a global user base. Supporting startups and building a strong tech ecosystem aligns with Skype?s mission to connect people and foster communication.
- External Customers and Internal Clients: These recommendations cater to the needs of both external customers (investors, startups, and talent) and internal clients (Skype and the Estonian government).
- Competitors: The recommendations aim to maintain Tallinn?s competitive advantage in the global tech landscape by fostering a dynamic and attractive ecosystem for startups and investors.
- Attractiveness ? Quantitative Measures: These recommendations are expected to lead to increased investment, job creation, and economic growth in Tallinn. While quantifying the exact impact is challenging, the potential benefits are significant.
- Assumptions: These recommendations assume that the Estonian government is committed to supporting the tech sector and that Skype will continue to play a leading role in the development of the tech ecosystem.
6. Conclusion
Skype?s success in Tallinn created a ?place surplus? that has significantly benefited the Estonian capital. By fostering a vibrant tech ecosystem, attracting investment, and developing a skilled workforce, Tallinn can sustain this momentum and become a leading global hub for technology and innovation.
7. Discussion
Other alternatives not selected include:
- Focusing solely on internal growth: This would limit the impact of Skype?s success on Tallinn?s broader tech ecosystem.
- Relocating to a larger city: This would potentially lead to a loss of talent and investment in Tallinn.
The key risks associated with these recommendations include:
- Government support: The success of these recommendations depends on the continued support of the Estonian government.
- Competition: The global tech landscape is highly competitive, and Tallinn needs to constantly adapt to stay ahead of the curve.
- Economic downturn: A global economic downturn could negatively impact investment and growth in Tallinn.
8. Next Steps
To implement these recommendations, the following steps should be taken:
- Establish a joint task force: This task force would include representatives from Skype, the Estonian government, and other stakeholders to develop a comprehensive strategy for the development of Tallinn?s tech ecosystem.
- Develop a funding plan: This plan would outline the necessary resources to support the initiatives outlined in the recommendations.
- Launch marketing campaigns: These campaigns would target investors, startups, and talent, promoting Tallinn as a global hub for tech innovation.
- Implement talent development programs: These programs would focus on developing the skills needed to support the growth of the tech sector in Tallinn.
By taking these steps, Skype and Tallinn can ensure that the ?place surplus? created by Skype?s success continues to benefit the Estonian capital and its tech ecosystem for years to come.
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Case Description
An Estonian success story, this case examines why Skype's Scandinavian founders chose Tallinn to establish their hi-tech start-up. We investigate the factors that contributed to their choice of location and the subsequent success of the venture. Skype's journey is discussed against the backdrop of post-Soviet Estonia's economic and industrial resurrection.
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