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Group #6
Rosetta Stone Case #7
Rosetta Stone brings to the market a new way of learning languages by honing in on
consumers needs to differentiate themselves from others in a way that can accommodate their
schedules and needs. The firm is the first to bring software developed specifically for language
learning without the need for a formal teacher or school. During the economic recession while
times were tough, Rosetta Stone proved themselves with some of their highest earning years
yet. The lack of jobs and the increase in unemployment enabled Rosetta Stone to prosper as
those unemployed sought out ways to differentiate themselves from other candidates seeking
employment. Rosetta Stone enables users to learn a language through various techniques in a
way that is at the pace of the user. The firm is also able to prosper, and would continue to do
so, as globalization becomes more and more apparent and firms begin to move or open
operations in countries around the world and seek employees with the ability to communicate in
multiple languages.
The firm's forecasted revenue flows for the future show astonishing numbers, but may
be overly optimistic. At the time Rosetta Stone is the first of its kind, and while barriers to entry
in the software industry are high, competitors with established software brands could venture
into the idea of language software. Competition is low for Rosetta Stone at first making it an
optimal venture for another firm to consider going into. Other firms could arise which will reduce
Rosetta Stones pricing power, especially if the competition offers similar products at lower
prices. With the rise in technological advances other forms of language learning may soon come
to be in the language market and will directly compete with Rosetta Stone. Apps for cell phones
could be offered at incredibly lower prices, and would also bring about an even more convenient
way for users to learn a language. The forecasted revenues of Rosetta Stone do not seem to
take into consideration the potential of a competitor delving into language software and thus
taking away from some of Rosetta Stone's revenues. The forecasted revenues also assume that
since the firm is doing well during the recession, it must do even better after the recession when
there is more disposable income available to consumers. However, the firm is highly dependent
upon consumer preference and despite globalization consumers may consider other ways to
learn a new language or not desire to do so at all.
When a firm goes public, the first advantage that comes to mind is an increase in capital.
In Rosetta Stones case, this capital can be used to fund a move into a different market or
product stream. Going public makes it easier to gain more capital in the future via new stock
offerings. An IPO can also be thought of as a marketing tool. This increased publicity can further
enhance Rosetta Stones recognition in the marketplace. The stature that comes with being a
publicly traded company can enhance its competitive advantage. Suppliers, vendors, and
lenders may perceive Rosetta Stone as a better credit risk. Customers may also perceive
Rosetta Stone as a better product. The recognition and stock available to compensate
employees can attract top talent to Rosetta Stone. Stockholders can also bring new diverse
views and ideas to the firm through board meetings.
There are many risks and disadvantages to consider. First and foremost, it is costly and
time consuming. It is very hard to find a perfect time to go public. The 90 to 120 days often
required to go public is a lifetime in todays financial markets. There is the risk that a new
product is released or a problem regarding management arises while preparing for the IPO.
Rosetta Stones management team must devote substantial time to the IPO and operations can