Harvard Case - Stratus Computer
"Stratus Computer" Harvard business case study is written by Philip H. Thurston, Richard O. Von Werssowetz. It deals with the challenges in the field of Entrepreneurship. The case study is 22 page(s) long and it was first published on : Oct 1, 1981
At Fern Fort University, we recommend that Stratus Computer pursue a strategic shift towards a hybrid business model, encompassing both hardware and software solutions. This approach will leverage their existing strengths in server technology while capitalizing on the burgeoning market for cloud-based services. This strategy involves a phased approach: initially focusing on developing a robust cloud platform, followed by strategic acquisitions and partnerships to expand their product offerings and market reach. This will position Stratus as a leading provider of comprehensive, reliable, and scalable IT solutions, catering to both traditional and cloud-centric clients.
2. Background
Stratus Computer, founded in 1982, was a pioneer in the fault-tolerant computer systems market. Their focus on high-reliability servers catered to industries demanding uninterrupted operations, such as financial institutions and telecommunications. The company enjoyed early success but faced challenges as the industry shifted towards more cost-effective and scalable solutions, particularly with the rise of cloud computing. The case study focuses on the company?s strategic decision-making in the late 1990s, as they grapple with declining market share and an increasingly competitive landscape.
The main protagonists are:
- Robert ?Bob? Freiburghouse: CEO of Stratus Computer, tasked with steering the company through turbulent times.
- The Stratus Management Team: A group of experienced executives grappling with the changing market dynamics and seeking a path to future growth.
- Potential Investors: Seeking to understand Stratus?s vision and potential for future success before committing capital.
3. Analysis of the Case Study
The case study highlights several key challenges faced by Stratus:
- Declining Market Share: The traditional fault-tolerant server market was shrinking as customers increasingly embraced cloud-based solutions.
- Competition: Stratus faced fierce competition from established players like IBM and Sun Microsystems, who were aggressively expanding into the cloud computing space.
- Financial Pressure: Stratus?s financial performance was declining, leading to pressure to reduce costs and find new revenue streams.
- Strategic Direction: The company needed to define a clear strategic direction to navigate the rapidly evolving IT landscape.
To analyze Stratus?s situation, we can apply the Porter Five Forces framework:
- Threat of New Entrants: High, due to the relatively low barriers to entry in the cloud computing market.
- Bargaining Power of Buyers: High, as customers have a wide range of choices and can easily switch providers.
- Threat of Substitutes: High, as cloud computing offers a viable alternative to traditional server solutions.
- Bargaining Power of Suppliers: Moderate, as Stratus relies on a diverse range of suppliers for components and software.
- Rivalry Among Existing Competitors: High, as several established players are vying for market share in the cloud computing space.
4. Recommendations
Stratus should adopt a hybrid business model, encompassing both hardware and software solutions, to cater to the evolving needs of the IT market. This strategy involves the following key elements:
Phase 1: Building a Robust Cloud Platform
- Develop a Cloud-Based Platform: Invest in developing a secure, scalable, and reliable cloud platform, leveraging their expertise in fault-tolerant technology.
- Offer Managed Services: Provide managed services to customers, offering support and expertise in deploying and managing their cloud infrastructure.
- Focus on Niche Markets: Target specific market segments with high demand for reliability, such as financial services, healthcare, and critical infrastructure.
Phase 2: Expanding Product Offerings and Market Reach
- Strategic Acquisitions: Acquire companies with complementary technologies and expertise in cloud-based solutions, such as software development, data analytics, and security.
- Partnerships: Form strategic partnerships with leading cloud providers, technology companies, and system integrators to expand their reach and offer comprehensive solutions.
- International Expansion: Explore opportunities in emerging markets with high growth potential in cloud computing.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Leveraging Stratus?s existing strengths in fault-tolerant technology and high-reliability servers.
- External Customers: Meeting the evolving needs of customers who are increasingly adopting cloud-based solutions.
- Competitors: Differing from competitors by offering a comprehensive suite of hardware and software solutions.
- Attractiveness: Capitalizing on the high growth potential of the cloud computing market.
6. Conclusion
By embracing a hybrid business model and strategically expanding their offerings, Stratus can position itself as a leading provider of reliable and scalable IT solutions in a rapidly evolving market. This strategy will require significant investment and a commitment to innovation, but it offers the potential for long-term growth and profitability.
7. Discussion
Alternative strategies include:
- Focusing solely on hardware: This carries the risk of further market share decline as the cloud computing market continues to grow.
- Selling the company: This could provide a quick return on investment but would result in a loss of control and potential future growth.
Key assumptions:
- Continued growth of the cloud computing market: This is a key assumption, as the success of the strategy relies on the continued adoption of cloud-based solutions.
- Ability to develop and acquire necessary technologies: Stratus needs to invest in research and development and make strategic acquisitions to build a robust cloud platform.
- Effective execution of the strategy: The success of the strategy will depend on the company?s ability to effectively manage the transition and execute its plans.
8. Next Steps
- Develop a detailed business plan: Outline the specific steps, timelines, and resources required to implement the strategy.
- Secure funding: Obtain the necessary capital to invest in research and development, acquisitions, and marketing.
- Build a strong team: Recruit and retain talented individuals with expertise in cloud computing, software development, and business development.
- Monitor progress and adapt as needed: Continuously evaluate the progress of the strategy and make adjustments as necessary to ensure success.
By taking these steps, Stratus can navigate the challenges of the evolving IT market and establish itself as a leading provider of innovative and reliable IT solutions.
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Case Description
Bill Foster has assembled a team to begin a new computer company. He must now develop a financing strategy in view of the various kinds of capital available for new ventures.
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