Type of paper: Case Study

Topic: Company, Internet, United States, America, Customers, Model, Industry, Market

Pages: 3

Words: 825

Published: 2021/02/19

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Identification of Key Issues/problems or Opportunities

Analyzing the given case scenario, it seems that Fotolia is facing a series of issues/problems while at the same time the company is exposed to a number of potential opportunities. According to Grant and McCutcheon (Case study), although the company implemented an expensive advertising campaign through a professional design magazine, it failed to generate adequate user responses. In the absence of sophisticated image recognition and filtering software, it involved huge costs and considerable manual effort in removing objectionable content from the image database for the non-designer business users (4). It was really a difficult task for the company to identify the occasional buyers in advance of a purchase because they buy images only for special purposes such as a party invitation or family newsletter. In addition, it was not practical for the Fotolia to estimate the actual size of the North American royalty-free microstock industry.
As a result of the changes in consumer habits and online advertising pricing models, it became increasingly expensive for the company to use the tools of web-based advertising. To illustrate, the cost of AdWords increased five to ten times compared to what it was in 2005 (5). Although online banner ads were a potential alternative, they were also unaffordable. Hence, microstock companies including Fotolia struggled to reach potential customers. Geographic differences in buying habits significantly limited the market competitiveness of the organization. The consumer behavior and buying trends in North America were entirely different from that in Europe, where Fotolia was dominant. With the introduction of Google Images, tens of millions of images were accessible to users at free costs, and this situation notably affected the business sustainability of the Fotolia. Even when the firm faced intense competition from the market rivals, it was reluctant to cut down commissions to its supplier groups. Hence, the organization often struggled to maintain a balance between the inflow and outflow of money. The ‘white label reselling’ model ruined reputation of the company to a large extent because Fotolia was never recognized as the source of images under this model (9).
One of the major opportunities for the company is that the emergence of the royalty-free business model in the microstock industry offers “virtually unlimited use in exchange for a one-time fee, with few restrictions on use” (Grant and McCutcheon 3). In addition, the communities of amateur and semi-professional photographers make it possible for the company to obtain images for as low as $1 each (6).

Impacts of Issues or Opportunities

As it was a cumbersome task for the Fotolia to accurately estimate the size of the royalty-free microstock industry in North America, the company could not identify what would really take it to an increase of $100 million in revenues. As a result of the rise in the cost of web-based advertising, the company could not use online promotion techniques effectively, and hence it failed to strengthen its customer base. To be fair, lack of online advertising caused the company to lose its market competitiveness to some extent. Geographic differences in buying habits are the major reason that led to Fotolia’s fledgling operations in North America even when it was the dominant player in the European market. Fotolia failed to realize the pulse of the North American microstock industry. The case writer specifically indicates that the ‘white label reselling’ was a worse move from the part of the company. Although this business model assisted the Fotolia to attain 75% of the revenue from the end customer, it contributed poorly to the firm’s brand recognition (9). However, the introduction of the royalty-free licensing benefited the organization to broaden its image database at extremely cheap costs.

Creating its own network of affiliates appears to be a potential alternative for the company to achieve its strategic goals in the North American royalty-free microstock industry. This strategy can assist the Fotolia to reach diverse market segments because this option can give the company high level operational freedom. Adopting a combination of outright ownership and royalty-free licensing models may be a potential strategy for the company to meet the interests of different customer segments effectively. Although royalty-free licensing model may be appealing to majority of the customers, some top executives or reputed professionals would want to get some exclusive rights on the use of the image they purchased and therefore they may be more interested in an outright ownership licensing model.

Recommendations

In order to improve its market operations in North America and to achieve the revenue targeted, it is recommendable for the organization to create its own network of affiliates. Since none of Fotolia’s competitors run affiliate networks currently, this policy can aid the company to distinguish itself from the competitors and to make its brand well-recognizable. Reports indicate that the Amzon.com had been successfully deploying affiliate networks to promote its sales. Fotolia can surely make Amazon a model in this regard.

Work Cited

Grant, Rebecca and McCutcheon, David. “Fotolia N.A.: Acting like a Start-Up in a Mature Industry”. International Journal of Case Studies, (2012),10 (3), 1-16.

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WePapers. (2021, February, 19) Example Of Alternatives Case Study. Retrieved June 25, 2021, from https://www.wepapers.com/samples/example-of-alternatives-case-study/
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"Example Of Alternatives Case Study," Free Essay Examples - WePapers.com, 19-Feb-2021. [Online]. Available: https://www.wepapers.com/samples/example-of-alternatives-case-study/. [Accessed: 25-Jun-2021].
Example Of Alternatives Case Study. Free Essay Examples - WePapers.com. https://www.wepapers.com/samples/example-of-alternatives-case-study/. Published Feb 19, 2021. Accessed June 25, 2021.
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