Executive Summary
Zoom has emerged as one of the leading providers of video-conferencing services for various institutions around the world. The outbreak of the novel coronavirus provided this firm with a unique growth opportunity. Currently, it is considered the most preferred brand in the video-conferencing market, as shown in the case study. However, it is necessary to understand that the company is faced with various strategic issues and problems that the chief executive officer and his entire management team must address. The case shows that the company is struggling with capacity issues, which made it necessary for its employees to work extra hours to avoid disruptions in their services. The company is forced to suspend new product development plans to focus on efficient delivery of the current products. Competition in the market is also stiff and as other small firms continue to grow in this market, the situation may become even worse. It is recommended that this company should use its revenues to expand its capacity. It should hire more workers and ensure that it continues being innovative even as it struggles to enhance service delivery using the current products. Being innovative will also enable the company to overcome the problem of stiff competition in the market. Its unique products will continue to attract both local and international customers. The management should ensure that it protects its current culture of maintaining a team of happy and highly motivated employees despite the pressure that everyone currently goes through at the firm. Employees should feel that they are valued and respected despite the extra hours that they have to dedicate to their work during this period of rapid growth.
Introduction
When Eric Yuan founded Zoom Video Communications in 2011, one of his primary concerns was to create a company where both employees and customers were happy. He believed that it was essential to have a team of highly motivated and happy workers capable of meeting their targets without feeling pressured. The company created a unique organizational culture where every employee had a unique role to play and everyone was given the opportunity to express their views and concerns to the top management whenever it was necessary. When the novel COVID-19 pandemic struck, it created a perfect growth opportunity for the company. Education institutions, government entities, large business corporations, newsrooms, and many other opportunities started using products offered by the company to facilitate virtual meetings. The last six months have seen the company experienced exponential growth. However, the firm has been facing some challenges that the chief executive officer (CEO) must find a way of addressing.
Strategic Issues and Problems
When Zoom was founded, it experienced sluggish growth in its early years because the brand was relatively new and most of the targeted customers preferred using services of already established companies such as Microsoft, Apple and Amazon. However, the management made an effort to promote the brand and to offer unique products for the targeted customers. Its decision to use a freemium model of operation attracted small-scale business entities, which enabled the company to strengthen its position in the market. The outbreak of the COVID-19 pandemic offered it the perfect growth opportunity. As shown in figure 1 below, the company started experiencing rapid growth from January 2020 to June of the same year.
The rapid growth in share prices of the company was as a result of many factors, including a rapid growth in revenue. As shown in figure 2 below, for the last one year, the company has experienced consistent growth in its income through its operations in the market. The growth has been rapid within the last six months when many organisations relied on its services to conduct videoconferencing.
The management must understand that despite the impressive growth that the company has registered, it also faces some challenges that may compromise its ability to achieve sustainable development. Understanding these issues and problems that the company faces can help the management to find a way of addressing them effectively. The challenges and issues can be categorised into two classes, internal and external problems. The case study shows that one of the major issues that the management has been concerned about is the capacity to meet the huge demand for its services. The company was not prepared for the sudden surge of demand for its products. As such, its employees have been forced to work for extra hours to ensure that the company has the capacity to meet its customers’ demand. The management is concerned that the new work schedule for employees may lead to exhaustion and happiness among its workers, which goes against its culture.
It is also evident that the company has limited resources as it seeks to achieve the desired growth. The case study shows that the management of company has suspended all plans to add new features to its current products and instead, the resources has been channelled to expanding the capacity of the company (Kominers et al. 19). It is a demonstration that the current financial position of the firm cannot allow it to engage in new product development while at the same time increasing access to its current products. In the technology industry, it is critical for a firm to ensure that it maintains an innovative environment. The decision to stop creating new features may leave the firm vulnerable, especially if rival firms are able to improve the quality of their products during this period of the coronavirus pandemic. Figure 3 below shows the current Zoom user interface.
In the external environment, the company also faces some challenges that may jeopardise its growth. Competition is evidently the biggest challenge that the firm will have to overcome, as shown in the case study. Some of its main competitors in this market include Microsoft, Cisco Webex, GoToMeeting and Google. The industry also has some small-scale players. The case study shows that Microsoft has the largest market share, at 24.8%, followed by Cisco Webex at 14.8%, while Zoom has 9.4%. It means that this company has to overcome the market dominance of its rivals as it seeks to achieve growth. The rapidly changing technology and the dynamic customer demands are the other concerns that the firm has to address.
Analysing Approaches to Solving the Issues
Zoom Video Communications must addressed the identified challenges to ensure that it achieves sustainability in the market. The case has identified both internal and external challenges that the CEO and his team of managers must address. In each case, there are strategic options that it can consider to enhance its sustainability. To address the issue of capacity, the management should consider hiring additional engineers, customer service employees and other relevant experts needed to enhance its ability to deliver the current services. The increased capacity will also enable the firm to maintain its innovative culture despite the current pressure. The management must find a way of protecting its culture that emphasises the need to ensure that both employees and customers are happy. Despite the current pressure that the company has to handle, the management should ensure that its workers always feel valued and cared for at all times.
The company will also need to find effective ways of solving external challenges that it faces in its normal operations. Competition has been identified as one of the major market challenges that it has to address. In fact, Zoom is the third largest company in terms of market share in this industry. The company has to strengthen its brand image to attract more customers in the market. Events during the COVID-19 pandemic made Zoom Video Services the most preferred option in telecommunications services. The firm should use this strength in the brand to expand its market share both in the home and international market.
The management should target the North American, European and Asian markets because of the huge opportunities there. However, that does not mean that emerging markets in Africa, South America and other parts of the world should be ignored. It is also necessary for the company to maintain its innovative culture. The case shows that the CEO has suspended any new product development projects and other innovative initiatives. As a technology firm, the management must understand the fact that it cannot afford to avoid change. Instead, it should be the driver of the same as it seeks to entrench its position as a market leader in the industry. It should invest in innovative projects even as it struggles to ensure that its current products are delivered in the best way possible. The proposals can be implemented alongside the current plans of the company shown in figure 4 below
Conclusion, Recommendations and Financial Implications
The COVID-19 pandemic has destroyed many business entities around the world. However, it offered a unique growth opportunity to Zoom and other companies offering video-conferencing services. These services have become relevant because of the need for people to avoid physical gatherings that is blamed for the rapid spread of the virus. The case study shows that the company has since become one of the most preferred brands in this industry because of its unique products. However, the case has also highlighted some challenges such as the need to meet increased demand, the decision to suspend new product development and stiff competition in the market. The following are some of the recommendations that the CEO should consider:
- The management should increase the workforce so that the company can meet the increased demand for its products;
- The firm should invest in innovation to ensure that its products meet customers’ needs in the best way possible;
- The company should maintain a culture of innovation even as it struggles to meet the current demand for its products.
The recommendations above may have a major financial implications that the management should understand. Increasing the size of the workforce would mean spending more on recurrent expenditure. It will also mean that the CEO will have to find time to assess both new product development and the delivery of the current products. Despite these challenges, the firm’s revenues will increase if these recommendations are taken seriously.
Work Cited
Kominers, Scott, et al. “Zoom Video Communications: Eric Yuan’s: Leadership during COVID-19.” Harvard Business School, vol. 9, no. 1, 2020, pp. 1-21.