Box Inc. Analysis
The company
Box Inc was founded in 2005 after Aaron Levie, one of the founders, discovered an unexploited and extremely unfounded opportunities in the data storage field for businesses. The opportunities arose from the need by businesses and individuals to be able to access data from various places at a given time (Box Inc., 2017, 1). Levie decided to create a cloud-based storage system where in his imagination; the data would be stored in a virtual box. The firm became a leader in management platform for cloud content, and helps users in accessing, managing and sharing of their data from any place using any device. The firm developed the EFSS software, which allows the users to collaborate in terms of content, automate their enterprises into process that are data driven and also build custom applications (Box Inc., 2017, 1). The firm was publicly traded in 2015 and by January 2017, its registered user base had grown to more than 52 million. In addition to the large user base, the firm has more than 71000 organizations that pays for the services and these comprises of government and educational institutions, companies and big companies business units. More than half of revenue from subscription services was obtained from customers with over 1000 employees. The services also extends to offerings that are specific for an industry like financial services , legal services , health care , energy , education, media and entertainment and government services. The firm also engages in creating partnership ecosystem through integration of applications from various providers such as IBM, Apple, Google and Microsoft. The firm operates in Synch and files sharing market that is very fragmented with many firms competing for a piece of the market share (Box Inc., 2017, 1).
Box Inc. Strategy and competition
Box operates in a market where there are many firms providing the similar services and many buyers in need of the same services. This means that the market is competitive and the availability of substitute products in the market arises from the various firms that are providing the data storage, management and sharing services. A competitive market involves many producers or providers for products that are the same in nature and hence, there are many substitutes which define the pricing of the product. In this industry, some of the barriers for new firms include the demand for the services and its supply. This competition in the industry has informed the marketing strategy for the Box. Inc, how it operates in the market and the kind of products it provides (Basso, Mann &Smulders, 2014, 23).The aim of the competitive strategy adopted by the firm has been to enable it to remain the leader in cloud based content management and in enabling customer to have internal and external collaboration and all this in a secure manner. The various strategies have lead to a cloud startup that is money-burning but also successful IPO. Having a savvy leadership has been enabled by various funding efforts, as the firm aimed at sharpening its mission of being more than just any other site for sharing cloud file.
The similarity of the product offered by Box to other major consumer cloud-based share and sync services like Drop box , together with its embracing of a market driven pricing model has brought the confusion between the two (Marko, 2015, 1). This means that even those customers who have been using cloud service since its emergence find it hard to differentiate since Box, which entered the market before Dropbox, presented itself an effective way for people to access files from any place using any system. In the beginning, the competition was between the two service providers but later the market for cloud-file storage was crowed which led to commodification. The results were price wars that were defined by the implied free-tier capacity expansion. Box Inc. had to come up with a more differentiated and substantive product, one that is not just a freemium share and sync service (Marko, 2015, 1). Lack of a unique product meant that Box could not compete with more resourceful and established firms like Microsoft, Google and Amazon especially for the low end market. On the understanding of this predicament, the firm under the leadership of Levie –CEO- used the capability brought by more private funds to have a more sharpened mission (Market Research Store, 2016, 1). This strategy placed at the lead in the management of enterprise information. In addition, there were various strategies adopted by the firm including focus on big businesses and then information management. The unique product from BOX includes various features like automation in workflow, central user, project and policy management and the integration of third-party application that is more appealing to the large businesses. The improvement of the tag line so that it has become “manage, share and collaborative “has improved the positioning of the firm in the crowded market (Marko, 2015, 1).
Price and demand changes due to elasticity
The prices for EFSS may be high, especially for the offering of public offerings that comprises of cloud storage in a bundle. The responsiveness of EFSS demand can be attributed to prices changes for particular services offered by firms in the market. Price elasticity of demand is a measure of how demands respond to change in price of a product (MANKIW, 2014, 93). The price elasticity of demand for the EFSS products including those offered by Box Inc is high considering the increasing rate of adoption by various large, small and medium enterprises in the market. Prices for EFSS are dropping in part because various large firms providing the services like Microsoft and Google are able to provide large quantity of cloud storage for lower prices and even in some instances free of charge. The majority of these offerings are founded on subscription method – per user, per month – and on the basis of other parameters like user number and storage for each user (Marko, 2015).
The other firms such as Box Inc. are forced to lower the price for their services so as to be able to compete with the more established firms. The demand for EFSS is perfectly elastic in this case since it is affected greatly by reduction in prices. The reduction in prices for a typical offering of public cloud has been high with price range being $10 to $ 40 for each user for every month. The many number of firms providing these services means that the consumers, both business and individuals have a wide range to choose from which is helping to push the prices lower (MANKIW, 2014, 93). This also means that due to many substitutes offering the same services, the demand for EFSS is more elastic. In a normal market, the demand of a product will be more elastic of there are close substitutes. For Box Inc. to have a competitive edge it has been offering its services at a Freemium so as more organizations can afford it. The firm has also shifted focus to paying buyers, who comprises of large public and business organizations.
The Supporting Industry – Enterprise File Sync & Share
The competitive advantage of Box Inc is being influenced by various product suppliers in the marker especially products whose target is large businesses. The industry is made up of various companies whose operations fit these criteria including Box, Dropbox, Egnyte, Sharefile and Nomadesk , Syncplicity and SugarSync (Basso, Mann &Smulders, 2014, 23). There has been market consolidation over the past few years even though it was less than expected in a market that is very crowded. The market has seen various changes as solutions for the customer needs evolve and explode. The largest competitor for Box, Dropbox has seen its users grow to over 300 million most of who are consumers of their services (Bourne, 2017, 1). The market has seen expansion as more businesses adopt Enterprise File Sync and Share in part of their operations. The driving factor in this case is the fast rate at which firms are adopting new technology in their operations. On that basis, Box Inc. has developed solutions that enable users to share data easily and even sync that data.
The firm is being forced to constantly improve its services as changes in devices such as laptops getting lighter and smaller but with less capacity for storage. The other aspect in the industry is how more functionality is being integrated into mobile solutions as the use of productivity devices that are lightweight such as tablets increases. The users of these services want a situation where access to file is not limited to time and place or the device being used. In addition, more users want for such services want to use them for disaster recovery and even backup so that they can use these solutions to restore past files’ versions. The revolution in this market, in terms of increased use of mobile devises and related applications, has changed how businesses operate (Basso, Mann &Smulders, 2014, 26). The providers of such services have increased but what is defining their competitiveness is their ability to offer services that fulfill the changing needs of the market.
The increasing demand for cloud-based integration and mobility adoption trend are major factors that are driving the sale of file sharing and sync services and are defining the mode of operation for the firms in the industry. However, the concerns for privacy and security of data are some of the factors that are likely to reduce the rate of adoption of Enterprise File Sharing and even synchronization among the domains and vertical of the industry. There is increasing consumer preference for the cloud-based services; the growth in demand for Small and Mid-sized businesses offers many opportunities for the different players in the market. The increasing number of businesses embracing the benefits of EFSS, the market size should be expected to continue enlarging. The market expansion is likely to favor the large businesses that use the paid services, and the gap between the smaller consumers and large consumers (all businesses) is expected to grow (Basso, Mann &Smulders, 2014, 25). A widening gap between firms competition for this market is expected to take shape as EFSS consumers tend to prefer the brands that they are familiar with which means that new entrants may not be able to catch up with large firms. This means that Box Inc is likely to continue enjoying its large market as marker barriers prevent new firms from emerging or new entrants’ from expanding.
Conditions affecting Box Inc. positioning
Cost and technological changes are the major factors that influence the positioning of Box in the market. These factors are affecting the efforts employed by the firm so as to impact on the perception of consumers on its brand relative to competing products.
High Costs
The growth of Box Inc. has come with increased costs and such costs have led to a big loss. The filing of this firm with Securities and Exchange Commission before the Initial Public Offering was, therefore, a surprise given the kind of loss it experienced. The operational costs that have contributed to these challenges are largely made of human resource costs. By 2014, the rate of staffing was increasing at 25 each month as more employees are hired to serve the increasing number of customers including more than 34,000 business clients (Box Inc, 2014). The firm is unable to remain competitive against its major competitor – Dropbox, with relatively less employees serving a larger number of users who are mostly individuals. This increase in the costs presents a strategic problem to the, management given that the firm is unable to grow sales team that is large enough at the time when it is needed. The market opportunities are quite big while competition is increasing fierce, and increase in the size of sales teams seems to be the only option available to the firm. In this market, the buyers have a strong bargaining power given the many substitutes available in the market.
Technological environment
The constantly changing environment means that firms have to remain relevant in the industry as they provide their services. The growing functionality integration in mobiles and light weight tablets and computers has led to changing needs for storing, managing and sharing of cloud-based content (Bourne, 2017, 1). The market is seeing increased consolidation so that the expanding offerings for EFSS are going beyond fundamental features on some paths. These include management and integration for resources and enterprise systems. This comes with more support for replacement of file share, more concerns for security and safety of data and governance and e-discovery. In addition, there is more improved collaboration, operations applications and even business enablement (Basso, M., J. Mann, and C. Smulders, 2014, 27). Such offerings are evolving beyond EFSS to include wider suites for improved content collaboration and even corporate governance and management of data. With such improvements, the current EFFSS products will be perceived by businesses as being rigid and unable to change with time. The buyers in the market will be focusing more on flexibility in terms of deployment and integration between stored and the one in the cloud.
These changes have significant implications on the operations of Box Inc. and the various EFSS offerings to the market. The market will continue to be dynamic and buyers will not require having long-term commitment with a specified seller as they look forward to embrace any new technological changes. Box has sensed these changes and tailored its offerings on content -collaboration platforms that extend beyond EFSS to enhance content workflows and collaboration of teams.
Major policy affecting EFSS industry
There have been recurring revelations related to surveillance activities that can be considered pervasive which have made some organizations in the market not to have trust with cloud solutions. For instance, the PRISM program by National Security Agency or Central Security Service that relate to data mining, networks and Computer surveillance has contributed to such mistrusts (Basso, M., J. Mann, and C. Smulders, 2014 ,25). There are increasing concerns for safety and security for individual and business data as file sharing across different people and even devices increases. This includes granular controls that will protect the date shared within and outside organizations and their use. In any regulated market such tools may go beyond the current compliance protections to include risk control by individuals and organizations (Basso, M., J. Mann, and C. Smulders, 2014, 25). For the firms offering EFSS services like Box Inc., the evaluation of data security is necessary so as to avoid any compliance risks related to failure to control the clients stored and shared data. The EFSS offerings market will continue demanding for improved management capabilities in terms of security and policy compliance. In addition, the suppliers of public cloud will continue adding safety and security measures like key solution that enables customers to control encryption keys for cloud data.
Box Inc. future strategy in relation to zero marginal cost
In a global market that is largely driven by capitalism, there are various technological innovations and innovations related to information communication technology that are wipe out capitalism and its economic driving forces (Rifkin,2015, 24). The innate dynamic nature of competitive markets that propel increment in productivity while reducing marginal costs have enabled firms to lower the prices of products they offer; this has acted as a strategy to attracted more customers and hence, gain larger market share than competitors. Marginal cost refers to the cost incurred in production of additional units of some services or products when fixed costs are excluded (MANKIW, 2014, 97). In such a scenario , Box Inc has play a large part in the reduction of marginal cost driven by a technological revolution that may reduce this cost to almost zero. The EFSS products by the firm will have to assist the producing forms to make their goods or provide services that are priceless or almost free, in abundance and not subject to the various market forces.
The challenge that the firm has to overcome involves how to tailor the cloud-based content, related sharing and collaboration so that a platform is created that connect everyone and all things. This involves integrating the products with utilization of natural resources, the electricity grids, production and operation lines, recycling processes and even logistics networks (Rifkin, 2015, 24). The strategy may involve feeding Big Data – cloud data – into a neutral network with a global reach. The producers and consumers can then connect to such network by using data analytics, enhance efficiency and thereby increasing productivity (Rifkin, 2015, 24). The final result is a reduction in the marginal cost incurred in production and sharing of various products at almost zero prices the same way is done with information. In this case entrepreneurs will bypass barriers such as banking establishments and use crowd-funding in financing their businesses. The collaborative content or platform offered by Box Inc could bring great assistance.
References
MANKIW, N. G. (2014). Principles of microeconomics. 91-93 Box Inc., 2017.Full Feature Index. Retrieved from: https://www.box.com/products-and-features Marko, K., 2015.Box Wisely Used IPO Delay to Refocus Strategy, But It Still Has No Competitive Moat. Retrieved from: https://www.forbes.com/sites/kurtmarko/2015/01/26/box-refocus-on-enterprise/#7a187dac48beBOX Inc. FORM 10-K. 2014
BOX Inc. FORM 10-K. 2016
Bourne J. 2017.Gartner changes EFSS Magic Quadrant to content collaboration with Box and Microsoft leading. Retrieved from: https://www.cloudcomputing-news.net/news/2017/aug/04/gartner-changes-efss-magic-quadrant-content-collaboration-box-and-microsoft-leading/
Market Research Store, 2016. Global Enterprise File Sharing and Synchronization (EFSS) Industry 2016 Market Growth, Trends and Analysis by 2020. Retrieved from: http://www.marketresearchstore.com/report/global-enterprise-file-sharing-and-synchronization-industry-67517Basso, M., Mann, J. and Smulders, C., 2014. Magic quadrant for enterprise file synchronization and sharing. Gartner Research. 23-25
Rifkin, J., 2015. The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitialism. New York: Palgrave Macmillan. 23-24
