Harvard Case - Snap Inc. Goes Public (A)
"Snap Inc. Goes Public (A)" Harvard business case study is written by Lynn Sharp Paine, Will Hurwitz. It deals with the challenges in the field of General Management. The case study is 29 page(s) long and it was first published on : Oct 4, 2017
At Fern Fort University, we recommend that Snap Inc. focus on a three-pronged strategy to address its challenges and capitalize on its opportunities. This strategy involves: 1) Reinforcing its core strengths in innovation and user engagement, 2) Expanding its business model through strategic partnerships and diversification, and 3) Cultivating a strong corporate culture that fosters creativity, inclusivity, and ethical decision-making.
2. Background
Snap Inc., the parent company of the popular messaging app Snapchat, went public in 2017 amidst high expectations and a rapidly evolving social media landscape. The company's core strength lies in its innovative features, particularly its ephemeral messaging format and augmented reality capabilities. However, Snap Inc. faced several challenges: declining user growth, increased competition from established players like Facebook, and concerns about its monetization strategy.
The case study focuses on the company's initial public offering (IPO), its subsequent performance, and the strategic decisions it needs to make to navigate a competitive market. The main protagonists are Evan Spiegel, CEO and co-founder of Snap Inc., and the company's board of directors, tasked with guiding the company's growth and ensuring shareholder value.
3. Analysis of the Case Study
Strategic Analysis:
- SWOT Analysis: Snap Inc. possesses strengths in its user engagement, innovative features, and a strong brand identity. However, it faces weaknesses in its monetization strategy, declining user growth, and competition from established players. Opportunities lie in expanding into new markets, developing new features, and leveraging its technology for advertising and e-commerce. Threats include regulatory scrutiny, privacy concerns, and the evolving landscape of social media.
- Porter's Five Forces: The social media industry is characterized by high rivalry, low barriers to entry, strong bargaining power of buyers (users), and moderate bargaining power of suppliers (technology providers).
- Competitive Advantage: Snap Inc.'s competitive advantage lies in its unique features, strong user engagement, and its focus on younger demographics. However, maintaining this advantage requires constant innovation and adaptation to evolving user preferences.
Financial Analysis:
- Financial Performance: Snap Inc. has struggled to achieve profitability despite its large user base. Its revenue growth has been inconsistent, and its expenses have been high, particularly in research and development.
- Monetization Strategy: The company's primary revenue stream is advertising, but its monetization strategy has been criticized for being less effective than its competitors.
Marketing Analysis:
- Target Audience: Snap Inc. primarily targets younger demographics, but it needs to expand its reach to older audiences and diversify its user base.
- Brand Positioning: The company's brand is associated with youthfulness, creativity, and innovation. However, it needs to reinforce its brand image and differentiate itself from competitors.
Operational Analysis:
- Product Development: Snap Inc. needs to continue investing in research and development to maintain its innovative edge and introduce new features that resonate with users.
- Operations Strategy: The company needs to optimize its operations to improve efficiency and reduce costs.
4. Recommendations
1. Reinforce Core Strengths:
- Innovation: Continue investing heavily in research and development to introduce new features and functionalities that differentiate Snap Inc. from competitors. Focus on augmented reality, privacy-focused features, and innovative content formats.
- User Engagement: Prioritize user experience and engagement by developing features that enhance user interaction, encourage content creation, and foster community building.
- Brand Management: Reinforce the Snap Inc. brand through targeted marketing campaigns, influencer partnerships, and strategic collaborations that resonate with its target audience.
2. Expand Business Model:
- Strategic Partnerships: Explore strategic partnerships with other companies to expand into new markets, leverage complementary technologies, and access new revenue streams. This could include partnerships with e-commerce platforms, content creators, and other social media companies.
- Diversification: Explore new revenue streams beyond advertising, such as subscriptions, e-commerce, and content licensing. This diversification can mitigate reliance on a single revenue source and provide greater financial stability.
3. Cultivate a Strong Corporate Culture:
- Creativity and Innovation: Foster a culture that encourages experimentation, risk-taking, and a willingness to embrace new ideas. Create an environment where employees feel empowered to contribute their unique perspectives.
- Inclusivity and Diversity: Promote a culture of inclusivity and diversity by creating a welcoming and supportive environment for all employees. This includes hiring practices, employee development programs, and fostering a sense of belonging.
- Ethical Decision-Making: Emphasize ethical decision-making at all levels of the organization. Establish clear guidelines for data privacy, content moderation, and responsible use of technology.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Snap Inc.'s strengths, weaknesses, opportunities, and threats. They consider the company's core competencies, its target audience, its competitors, and the evolving landscape of social media. The recommendations are also aligned with the company's mission to 'improve communication' and its long-term goal of achieving profitability and sustainable growth.
Assumptions:
- The social media landscape will continue to evolve rapidly, requiring Snap Inc. to adapt its strategy accordingly.
- User preferences will continue to shift, necessitating constant innovation and product development.
- The regulatory environment for social media companies will become more stringent, requiring Snap Inc. to prioritize data privacy and ethical practices.
6. Conclusion
Snap Inc. faces significant challenges in a competitive market, but it also possesses the potential for continued success. By focusing on its core strengths, expanding its business model, and cultivating a strong corporate culture, Snap Inc. can navigate these challenges and achieve its strategic goals.
7. Discussion
Alternative Options:
- Acquisition Strategy: Snap Inc. could consider acquiring smaller, innovative companies to gain access to new technologies, user bases, or revenue streams. However, this strategy carries significant risks and requires careful due diligence.
- Focus on Niche Markets: The company could focus on specific niche markets, such as gaming or education, to gain a competitive advantage. However, this strategy could limit its overall growth potential.
Risks and Key Assumptions:
- Competition: The competition in the social media industry is intense, and new players are constantly emerging. Snap Inc. needs to be agile and responsive to maintain its competitive edge.
- User Engagement: User engagement is crucial for Snap Inc.'s success. If the company fails to retain users and attract new ones, its revenue growth will be severely impacted.
- Monetization Strategy: The company's monetization strategy needs to be effective and sustainable. If it fails to generate sufficient revenue from advertising or other sources, its financial performance will suffer.
8. Next Steps
- Develop a detailed strategic plan: This plan should outline the company's vision, mission, and key objectives for the next 3-5 years.
- Implement a comprehensive innovation program: This program should focus on identifying and developing new features and functionalities that meet evolving user needs.
- Expand into new markets: Explore opportunities to expand into emerging markets with high growth potential.
- Build strategic partnerships: Identify and cultivate partnerships with companies that can complement Snap Inc.'s offerings and enhance its market reach.
- Cultivate a strong corporate culture: Implement initiatives to foster creativity, inclusivity, and ethical decision-making within the organization.
By taking these steps, Snap Inc. can position itself for long-term success in the dynamic and competitive social media landscape.
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Case Description
Snap Inc.'s chairman must decide how to address investor concerns about the company's unprecedented plans to issue only non-voting shares in its upcoming IPO. The case is set in early 2017 following the public availability of Snap's IPO filing with the U.S. Securities and Exchange Commission (SEC). It describes the company's meteoric rise from its conception by its young founders in 2011 to its multi-billion dollar valuation. When Snap filed for its long-anticipated IPO that could value it at more than $20 billion, it described its plans to go public with three share classes providing public investors shares with no votes on matters customarily put to a shareholder vote and allowing its two co-founders control over such matters. The case details the checkered history of multiple share class structures, highlights arguments for and against them, and explores the potential implications for index funds. Investors managing over $3 trillion sent a letter to Snap Chairman Michael Lynton and Co-Founders Evan Spiegel and Robert Murphy asking them to reconsider the share structure just one day after the company's S-1 was made public. As controversy mounted and with the IPO possibly just a month away, Lynton must decide how to respond to the investors' letter.
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