Rosetta Stone Case Study Strategic Analysis

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• Two examples (properly referenced from the case text) of Rosetta Stone’s strategies (make sure you mention the level) that would befit a successful Hidden Champion, naming the Hidden Champions’ Lessons that they exemplify;

Competitive Strategies:

Differentiation:

p544 Military-specific

p5455 Customized versions for healthcare, business and real estate

p545 Also supports a peer-to-peer practice environment

Evidence from the case supports the notion that one of Rosetta Stone’s competitive strategies was differentiation. This includes the development of different products to meet the needs of alternative market segments (such as customized versions for companies in different business sectors) and the development of altogether new products such as the peer-to-peer practice environment. As a company fitting the description of a Hidden Champion, these company attributes are indicative of their competitive advantages.

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Operational Strategies:

Internalization of core-competencies and outsourcing of non-core competencies:

p545 “Rosetta Stone develop most of its own technology”.

p547 “Sales and marketing expenses were 46% of total revenue for the year ended December 31, 2009”

p546 “[Rosetta Stone] obtained most of its products and packaging components from third-party contract manufacturers. [They] focused on minimizing costs and achieving efficiency as it met its production goals.”

These references from the case study support the argument that Rosetta Stone pursue a deep value chain. Their core competencies such as R&D, product development and marketing channel management are conducted internally, with only non-core competencies such as packaging outsourced to third parties.

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• Two observations – well formulated - regarding the company’s financial situation, where you show how well you master financial analysis skills (ratio’s, which ones, why those, what do they reveal).

Debt Ratio:

The debt ratio measures the proportion of total assets financed by a firm’s creditors. The ratio equals total liabilities divided by total assets. Rosetta Stone’s debt ratio in 2009 was 0.306.

Debt Ratio       [pic 9][pic 10][pic 11][pic 12]

The higher this figure, the greater the firm’s reliance on borrowed money. In this instance, Rosetta Stone financed 30.6% of their assets with debt. The fact that a significant majority (~70%) of their assets were acquired through internal investment suggests that the company represents an attractive opportunity to investors.