Palm Case Study

Case Study Report, Palm Inc.

BACKGROUND:

Jeff Hawkins founded Palm Computing Inc, a hand-held computer business, in 1992 which has since changed names (Yoffie & Kwak, 2001). In 1999 it changed to Palm Inc (Yahoo Finance, 2006). The case study concentrated on Jeff Hawkins, the founder of Palm, and Donna Dubinsky the former CEO of the company. These two left Palm in 1998 and founded a company called Handspring, the only company as of 2001 to take a meaningful share of the market away from Palm (Yoffie, 2001). Currently the CEO at Palm, Inc is Edward T. Colligan. For the period ending May 31, 2006, Palm had sales of $1.578 billion and a net income in excess of $336 million (Yahoo Finance, 2006). This is a significant increase over the previous two years.

SWOT ANALYSIS:

Strengths: The biggest strength that the case study focused on was strategy. Palm employed a judo strategy starting with the "puppy-dog ploy" (Yoffie, 2001, p. 56). This strategy allowed Palm to stay in business and stay undetected as a threat to their competition, especially Microsoft, for quite some time. Yoffie (2001) stated that strength of Palm was their "tightly integrated software and hardware design" (p. 59). Because they were so integrated, they were allowed to stay simple and move faster which was a definite strength.

Weaknesses: Ironically, their strategy also seems to be their biggest weakness. As Yoffie (2001) said, "By investing over time in specific skills and strengths, you create opportunities that perceptive rivals can exploit. In other words, you risk becoming the target of another and possibly better judo strategist" (p. 62). Another weakness was the slowing pace of innovation and the lack of coordination between marketing and production at Palm. Marketing announced the anticipated release of the m500 and m505 which caused a decrease in demand of Palm's older products (Yoffie, 2001, p. 62).

Opportunities: Palm had plenty of opportunities; the biggest of course was to develop models to satisfy the growing demand for hand held computing capabilities. After time, Palm had further opportunities to extend the Palm brand (Yoffie, 2001). They did take some of these opportunities to form alliances with other companies and expand their offerings in the market.

Threats: The biggest threat to Palm was always competition. Their biggest competitor, Microsoft, had much more money to allocate to competing against them. They also had a very trusted and recognized name in the computing world. More recently they also have a threat from Handspring, which is the only company, as of 2001, to take significant market share from Palm (Yoffie, 2001, p. 63).

STRATEGY USED:

Palm employed a judo strategy focusing on movement. They started off with the "puppy-dog ploy" to keep themselves under the radar of their competition while building up market share. They then focused on movement to help "define the competitive space" and force Microsoft to compete in a new arena. The last part of their movement strategy was to "follow through fast" to capitalize on their initial advantage and keep a continuous attack (Yoffie, 2001, p. 56). This strategy was highly successful for Palm allowing them to keep the lead spot in the market for six years until Handspring came around. It also allowed them to continually beat out their competition from Microsoft despite the fact that Microsoft is an industry giant.

Judo strategy lends itself to small companies that are trying to break into a market that is "dominated by a large incumbent" (Yoffie, 2001, p. 56). They can use this strategy to be undetected as a threat to the larger company, and then further use it to turn the competitor's strengths into "strategic liabilities" (Yoffie, 2001, p. 56). As the company grows however, the strategy does have potential to become a weakness. As previously mentioned, Yoffie (2001) said, "By investing over time in specific skills and strengths, you create opportunities that perceptive rivals can exploit. In other words, you risk becoming the target of another and possibly better judo strategist" (p. 63). This risk is the biggest weakness of the judo strategy. The Judo strategy is very similar to the focus strategy described in our textbook (Dess, Lumpkin & Eisner, 2007, p. 175-177).

COURSE OF ACTION RECOMMENDED: The problem that a technology start up such as Palm always encounters is that when their product captures enough market share,