Zoom is a pure example of being in the right place at the right time. A recent startup that grew on the tails of
necessity during the pandemic. They grew significantly more than sustainable-growth would have calculated. In
the past two years revenues and users have soared but as the pandemic slows down and remote
videoconferencing declines, the battle over market share and hanging on to consumers/businesses alike will be the
key. The concern for Yuan is that this success could be more related to the pandemic success rather than the
business model. Waiting to find out where that line lies is not an option. People are going back to the office to
work and students are returning to class. Other activities that have been remote ranging from catching up with a
friend to practicing yoga is quickly reverting to pre-pandemic in-person style. On the other hand, there will still be
more people/businesses using remote conference calling compared to pre-pandemic levels and the opportunity is
to solidify this change and contain the share from it (while it will be significantly less than mid-pandemic levels). It
is safe to say that the decisions for strategy over the next year will be the determiner whether this return to the
norm is an opportunity or a ticking time bomb.
Looking at the surrounding competition and industry is an initial key to this strategy. The most transparent is
looking at the competitors that have also seen this new-found success during the pandemic. In terms of market
share the most serious includes Microsoft (Teams currently), WebEx, GoToMeeting, Slack, Google, among others.
The list is substantial so the competition is fierce. Google and Microsoft integrate their products with other
applications in their business which is a battle in and of itself. New entrants are not such an issue (at least moving
forward), as the capital requirements and entry expenses are high and the size of the competition would keep this
risk relatively low. Substitutes on the other hand, are high as prices are competitive in other companies and
simplicity has been worked out throughout the last couple years. The main supplier to zoom (and competition) is
the data centers and there are many different suppliers that can be chosen. These third-party cloud services are
many and this is proven by the fact that Zoom uses three at once including AWS, Oracle Cloud, and Microsoft
Azure. It is agreeable that while there is some power held by these technology companies, the threat and leverage
isn’t severe. The power of users on a consumer level are quite low but Zoom still likes to provide customers a
great experience. Enterprises/businesses have more power (such as universities and job suppliers) but Zoom
provides the platform across many industries so threat is on the lower side in reference to leverage. The other
consideration is complementors and Zoom needs to consider their role with integrated apps as they could
potentially be a significant differentiator especially when they are dealing with the likes of Microsoft Teams and
Google.
The internal environment that Zoom has been based on over this overly-successful period has been a key to
success in a time that has seen exponential growth. Erik Yuan, having experience in the industry, knew exactly
what he wanted when he created Zoom because he had seen what had worked efficiently and what were serious
hinderances in Cisco and WebEx. The failure points could be argued were the catalyst of this invention. The first
piece of this success was the corporate culture that Yuan created. He wanted to “lead happy”. He did not just
mean being content but he wanted his employees to be happy and if they were not, they are instructed to stay
home and figure it out. He made it a priority to lead with humility and respect. Yuan’s idea was not just words as
Zoom was voted the #2 Best Place to Work on Glassdoor and he had a 98% CEO approval rating. It is also important
to mention that this culture was reflected in customer service, and he made sure through this growth spurt that
there was immediate and knowledgeable help to assist customers that were struggling. To build on this solid
cultural foundation was the platform itself in all of its glory. The products were comprehensive from video, chat,
and audio products along with conference room management and third-party developer tools. The most important
to Yuan (not surprisingly) was that it be a simple operation that allows the best user experience. Throughout any
upgrades and development, he wanted it to be quick to sign up and quick to get a meeting started. This was key.
Beyond this was the technology and the ability to produce the best product for all types of consumers and
businesses. The setup included 17 different data centers to make sure that everything was fluid and that it could
handle influxes and large meetings. Also, they made sure that there were pieces that made the video experience
better using AI. The fact that Zoom was optimized for so many different types of clients was substantial in the
success during the pandemic, as well. Enterprises, education customers, financial institutions, government
agencies, and healthcare organizations all jumped onto the platform. The structure from the ground up was truly
staggering to be able to handle alongside such a quick jump in users.
There is a place in this efficient, well-built culture and platform to improve and to get a step-ahead to either hold
on to market share or to propel ahead as businesses and consumers begin to go back to pre-pandemic lifestyles
that do not use the remote conferencing platforms as much. The first idea to combat these changes is the
simplest. Zoom has been competitive in the pricing strategies, but they could lower their prices across all tiers
which would be a strategy in cost leadership. The second option would be to improve and grow the third-party app
side of Zoom so there are more tools to use during a “Zoom call” which would be key in differentiation and third
option would be acquire Slack from Salesforce to become a bigger force in the industry.
The plan to lower prices could be a possibility to combat the significant amount of competition. Currently Zoom
is dealing with margins of over 30% so they could reduce their subscription prices significantly and still be in the
black. I would recommend a strategy plan that would determine elasticity but I believe 5% reduction in prices from
consumers to businesses to begin with is a conservative but solid start. I believe this will create leverage against
the competitors. In many cases, subscription tiers in businesses can add up depending on how many hosts so any
rate adjustment would be looked gladly upon. For consumers, pocketbooks are getting tighter with inflation and
volatility so any extra funds would be sentimental. The top competitors are efficient, simple, and practical, so the
price could be the factor to move people over from other contenders. The risk for this plan could be significant if
competition response was strong but after an elasticity study, the implementation would be quick and the first
quarter results would determine the truth behind any improvement in market share in contrast to the loss in
revenues so they could back out quickly before getting too invested. The bottom-line would be able to be analyzed
quickly after the strategy rollout. The determiner would be how much margin Zoom would be willing to give up to
hold onto (and possibly build) their customer base as users across the industry begin to dwindle. While the
customers would be more than happy for any reduction in price while all other products and life expenses are
going up employees, on the other hand, would not be affected unless it attracted such an influx of new customers
that they were overloaded (leading to hiring). The largest issue in this simple change is the idea that others in the
market could lower their prices as well to avoid this competitive advantage for Zoom. Price wars can be hurtful to
a business and it is a process that is not easily undone if taken too far (for too long). Microsoft Teams could lower
their price to match. Google could reduce their prices by 6% (for example) and then the cycle begins where nobody
is gaining any advantage and margins are slowly being taken away. Besides the fact that reversing the strategy is
difficult if competitors copy, there isn’t a surefire way to prevent it from happening. The only process could be to
slowly begin the price advantage by lowering prices by 1% and seeing the response from competitors. If taken
conservatively and observed closely against competition response, this could be a decent plan of attack.
The second option is the most complicated. Many businesses and professionals have become accustomed to
Zoom over the pandemic and have worked with the tools that they have been given. The best idea to differentiate
from other video conferencing platforms is to invest significantly into developing tools, interfaces, and/or physical
instruments that work with the Zoom platform. The market platforms have limited tools currently that are able to
be used during a call but there are consumers that will continue to use the video conferencing calls to be more
efficient with time and resources even after the pandemic so making peoples’ lives easier with this strategy could
pay off. If Zoom could develop (both internally and externally) ways for people to avoid having to show in-person
for certain responsibility and tasks, this would put them a shoulder above the competition. Example of this could
be sports trackers to bring people together who are used to not having to go to the gym, health-related monitors
for doctors to check patients over zoom and even teaching tools for tutors/teachers that will remain remote. The
risk in this process, however, is quite high for several reasons. The first is the road to development. Zoom could
hire developers to work it out internally or they could pay for specific industry-related tools to be created on a
contract basis. The first decisions would be what industries to focus on when creating these apps/tools for their
marketplace. Who actually wants them, is willing to pay for them and will continue to use them. Deciding on the
industries, the best tools and the most effective developers would be a serious financial investment, as well.
Additionally, it would take time which they do not necessarily have and it could create complications/difficulties
for a platform that is based on simplicity and ease of use. After the tools/apps began to be offered it would take
some time to see the difference it made in the financials and kinks would have to be worked out to make sure that
the reliability difference didn’t work against Zoom. Besides the complications, however, it is an opportunity to
change people’s lives. If done properly, commuting to tutors and classes would be reduced even more, doctors
could reach more patients and do more comprehensive testing, and yoga could be nearly as immersive as in
person with the right integrated VR compatibilities. As briefly mentioned, employees would have a challenge on
their hands. Hiring would become a central theme and management of these operations would be considerable
but it is all part of the financial investment and can be done. Competitors would be interested in this subject and
might very well try to develop in the same way but Zoom already would have a head start in this space. The
Marketplace already has over 500 software applications so they are on their way and this would scale it to a
serious level. The resources and market share that Zoom has would be beneficial. Zoom is known for external
communications which they would be improving through these upgrades. Microsoft Teams, for example, is a
serious competitor, but they are more known for internal communications (in a business) so this would not apply
to them as much. The world is becoming more and more virtual and it is time that Zoom consider this and invest in
both its own future and its customers’ future through the development program. That would be a multiyear
process to begin. The idea is a real contender that is risky but at such a crossroads, risk might be the only way to
reward.
The last option is not necessarily a simple process, but it is a simple idea and this would be for Zoom to acquire
the competitor Slack. The combination of Slack and Zoom under one roof would bring two key players in the
industry and would create a perfectly rounded-out platform that would have competitive advantages for each of
their successful attributes meaning that as a whole, they would be able to combat all competitors on the same
level of playing field. In general terms, Zoom has been the suite for the people and Slack has been a choice for
many business users (internally). Zoom has been built on simplicity and customer satisfaction and Slack is known
for business organization. According to the slack website, “Slack organizes conversations into channels, where
everyone can come together in one place to share ideas, make decisions and move work forward. It helps teams
operate faster and stay in sync, wherever they are.” The process, if the SEC allowed it, would be quick, but there is
always a chance that they wouldn’t approve over antitrust policies. Currently Slack holds under 3% of market share
so antitrust should not be an issue. The price to acquire would be an important factor but it is a great time for such
a purchase after the years of profitability and growth. The reputation of both are positive and practical so the
combination could only be better. In the long term, profitability would be unmatched because between market
coverage and competitive advantage, the two would be unrivaled. I believe Google and other significant players
would lose some share over time and profits would reflect this. Customers could use Zoom for schooling, their
doctors, and in their office to communicate with others in the firm. Simplicity at its finest. Employees would not be
affected because the separate entities would work on their separate pieces. All this to say, if the SEC and antitrust
division allowed the M&A process to go through it would be a conclusive and dominant brand that had few who
could compete. No response would be a threat at that level. One other issue to consider is the cost and if Zoom
could afford the cash flow and increase of debt on the books without putting itself at risk. When the purchase
went through, the main battle would be with the two tech giants but at this level, it would be more of a fighting
chance.
The three options could each lend a helping hand to Zoom and its outlook over the next five to ten years but I
believe that optimizing and introducing more intuitive tools and programs to the Zoom structure will be the most
effective in creating separation and distinction between itself and rivals. The main consideration is that it is a risky
endeavor that involves a lot of capital investment. Additionally, it will take time and Yuan does not have time on
his side at this rate. The rebuttal is the fact that competition is fierce currently and as remote use dwindles over
time, it will only increase. The time for action and serious change is now to set themselves above and beyond the
competition in the near future. It would be safe to say that that this is a risk capital investment and the current
situation warrants it.
Appendix
Figure 1: Alternative Matrix
Criteria
Price leader
Product differentiator
Acquisition
Reasoning
Reasoning
Reasoning
Score
Competitive
Advantage
Less cost
equals
more users
2
Build on current
market products
will be strong
6
Combination of
benefits would
create synergy and
strength against
competition
7
Risk
Price war
3
High risk/reward
due to cost
2
Large investment
amongst many firms
3
Profitability
Reduce
profit for
gained
market
share
3
Success would
mean higher
profits/more
market share
6
Conjunction of
benefits creating
wider net of
users/customer base
5
Sustainability
Current
margins
provide
sustainable
option
4
Sustainable if
correct industry
related products
are created
4
Perfect time for
acquisition due to
recent successes
6
Customers
Less $ =
happy
customers
6
Proper
integration=
7
Combination of
teams and benefits =
better experience
6
Employees
Neutral
unless a
big
success
7
Much higher
workload/
innovation/hiring
3
M&A deals are
stressful/complicated
2
Competitors
Comp.
can easily
adopt
same plan
2
Difficult for
comp. to
catchup once
designs/
products are
established
6
Integrated Google
and Microsoft suites
are significant
competitor
4
Total Score
Score
Pleased
consumers
27
34
Score
33