Dropbox Case Study

Introduction on Dropbox

Dropbox was launched in 2007 as a startup. From then, the users of the company have continued to grow to hundreds of million users and currently has a value of $10 billion dollars. It is a cloud storage service which enables people to store their data and large files and access them from anywhere using internet. In this report a case study of Dropbox is provided. It provides a brief company background. Additionally, it analyses the external environment using the PESTLE framework. Moreover, it evaluates the internal environment using the SWOT framework. Finally, depending on these analyses, it provides some recommendations.

Company background

Dropbox was founded by MIT students Drew Houston and Arash Firdowsi. It is an American company based in San Francisco, California. They offer services like cloud storage, personal cloud, file synchronization and client software. They received initial seed funding from Y Combinator and later from Sequoia. Their competitors are Box.net and Mozy. The company has over 500 million active users and more than 11 million paid users. Despite their success, there has been some criticism and controversy related to security and privacy breach issues. Dropbox uses a freemium business model. This means that users are initially offered a free account with a limited storage size. With paid accounts one gets more storage capacity and advanced features.

External analysis

For the external analysis of Dropbox, a PESTLE framework is used.

Political

The political factors that affect Dropbox are governmental stability, tax policies and competition regulation and trade blocks.

1. Government stability

A strong and stable government is beneficial for the business growth of any company like Dropbox. A stable government indicates strong political structures and institutions. The stable governmental system of America has been one of the many reasons for the growth of Dropbox. USA has good traderelations which helps Dropbox to maintain offshore business affiliations smoothly and easily. A stable government like USA also attracts investors and industry resources which benefits companies like Dropbox.

2. Tax policies

Favourable tax policies help companies like Dropbox to expand. Governments also provide subsidies which helps them maintain the competitive advantage by cost control. With good tax policies, the customers also do not have to bear the costs of doing business and thus, they can enjoy favourable pricing.

3. Competition regulation

Governments can control competition in the market. They ensure fairplay in products, business strategies and tactics. It also ensures that the government is able to monitor, regulate and restrict imports so that local businesses continue to grow and expand. Competition regulation also helps in protecting groups and stakeholders as well as maintaining the interests and rights of the stakeholders.

4. Trade blocks

Existing trade blocks causes hindrances to companies like Dropbox. They can take the advantage of trade blocks by lowering cost of doing business, increasing the supply of talented individuals as well as lowering resource cost. It also allows the company to make their service easily accessible through different channels and agencies to the customers. Trade blocks allow strong industrial ties across borders and other countries thus benefitting from advanced knowledge, technology and knowhow.

Economic

The economic factors affecting Dropbox are inflation rate, interest rate, consumer spending trends and unemployment trends.

1. Inflation rate:

Moderate inflation in the economy is beneficial for companies like Dropbox. It increases overall disposable income, boosts economy and improves consumer confidence and spending trends. If the inflation rate becomes high, the disposable income decreases and consumers spend less. This can harm such companies and reduce consumer confidence. Lower inflation rate would increase disposable income leading to increased competitiveness through pricing strategies resulting in unethical price wars.

• Interest rate

Moderate interest enables companies to take loans for growth and development. This helps in building of infrastructure. It also enables people to take personal loans increasing purchase and consumption. This would boost sales and market penetration.

3. Consumer spending trends

Higher consumer spending leads to higher purchases and consumption of products sold by the companies. It also indicates higher purchasing power increasing overall consumption patterns and healthy economy. Product quality and marketing strategies can positively influence consumer trends.

4. Unemployment trends

High unemployment trends reduce disposable income and that affects the performance of the company directly. It also indicates a gap in skills and knowledge. This increases the production cost as labours need to be imported from other sources leading lower purchase power.

Social

The social factors affecting Dropbox are demographics, education, family size and structure and health consciousness.

1. Demographics

The younger population aged between 18 to 35 are the most avid users of the Dropbox services. This population also promises more skilled and educated workers and human resources, increasing the talent pool. The moderate to high middle class are the current consumers, advocates and brand ambassadors of the services encouraging young population to become niche customers.

2. Education

Higher rate of education is desirable for many reasons. Higher education means more talented, skilled and knowledgeable talent pool that companies can use. This also means that consumers are more aware of their purchases and consumption patterns. They focus more on positive consumption, preferring quality and promises of the products, leading to repeat purchase. This gives Dropbox an advantage as focus more on quality.

3. Family size and structure

Family size determines the frequency and nature of purchase, consumption patterns. For Dropbox, nuclear families with one or more children are the target market. The decision makers of the family are parents. However, the suggestions and requests of children are considered by them. This has led Dropbox to apply push and pull marketing strategy for them.

4. Health consciousness

People are becoming more health conscious with time and Dropbox has capitalized on this trend and gone on to collaborations for CSR initiatives. They focus on physical, mental and emotional health and wellbeing.

Technological

The technological factors that affect Dropbox are technological infrastructure, internet penetration, use of social media, investment in research and development.

1. Technological infrastructure

USA has strong technological infrastructure and high rate of technological development which helps businesses like Dropbox to provide constant upgradations and innovations that increases the efficiency and affectivity of their service. This ensures their competitive advantage, attracts foreign direct investment and continuous progress.

2. Internet penetration

Internet penetration has enabled companies like Dropbox to reach more people. The use of smartphones has also enabled this. It has increased their quality, delivery and communication to customers.

3. Use of social media

With the increase in use of social media, the target market, the youths and the middle class have become easy to reach. Social media also enables feedback, interactions and customer relationship building.

4. Investment in research and development

Increased level of investment in R&D enables innovation, international investment, advancement of the industry, effective operation and competitive edge for Dropbox.

Legal

The legal factors affecting Dropbox are health and safety laws, employment laws, anti-discrimination laws and data security and privacy issues. Most countries have varying laws related to these aspects and Dropbox needs to be mindful and aware of these laws while operating. USA has strict laws regarding these and has to ensure that they conform with the laws.

Environmental

The environmental factors that affect Dropbox are recycling, waste management, green consumption and renewable energy investments. Consumers are becoming more aware and informed of the brands that they use. They prefer brands that are socially and environmentally responsible and Dropbox considers that in their investment and strategies.

Internal analysis

Strengths	Weaknesses
· Open and thriving ecosystem of Dropbox keeps users loyal and makes products more desirable ·Robust technology infrastructure and operational efficiency ·Unique product features of Dropbox differentiate it from the competitors ·Larger user base of Dropbox leading to substantial number of paid users.	·Strong dependence on paid users who generate 90% of the revenue ·The business is vulnerable to data security breaches and cyber attacks ·Overdependence on third-party data centres and infrastructure for daily operations is vulnerable to disruptions · Declining revenue growth rates over the years and the history of net losses.
Opportunity	Threats
·Reducing prices for cloud storage and rise in digitization promises long term growth of Dropbox Inc. ·Internet penetration is rising globally leading to new users gaining access to Dropbox’s services	·Intense competition with tech giants like Google and Microsoft offering similar solution · Increased focus on data privacy laws limits growth of cloud storage in future as operational costs increase

 

Conclusion

From the above analysis, it can be concluded that Dropbox is presently at a favourable situation owing to the increase in internet use, smartphone use and focus on innovation. Their users and revenue are increasing continuously and they continue to satisfy their consumers for more a decade. They have some weaknesses and areas that could threaten their competitive edge. Dropbox need to be aware of these aspects and take necessary steps to ensure that they remain the leaders in the market. However, they have many strengths and opportunities that can help them in becoming more effective and efficient, thus, continuing to provide seamless service to their customers.