Palm, Inc. Case Analysis (The title of your paper)
Karen Smith (Your name)
BUSN412 Business Policy (Course name and number)
January 15, 2008 (Date of submission) CASE ANALYSIS
PALM, INC.

COMPANY NAME: Palm, Inc.
INDUSTRY: Technology Palm, Inc.
COMPANY WEBSITE: (www.palm.org)
COMPANY 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).
PORTER’S FIVE FORCES MODEL: Threat of new entrants: As pointed out in Chapter 2, technology has a big impact on every industry. And since technology is always changing, developing, expanding, and improving, the threat of new entrants is high. Technology has changed the way businesses interact with each other, the way businesses interact with consumers, and the way consumers interact with each other. (Dess, p. 58) Barriers to entry are low. Bargaining Power of Buyers: Buyer power is high when there is a high concentration of buyers relative to suppliers. This could go either way for Palm. Bargaining Power of Suppliers: Supplier power is greater when there is a greater differentiation of the product or service, switching costs are high, or concentration relative to buyer industry is high. Palm was using a focus strategy, but as others enter the market, Palm will have to differentiate. Facing a competitor like Microsoft is very difficult. Substitute Products/Services: As Microsoft has the resources to develop substitutes, it may be difficult for Palm to sustain a competitive advantage over time. Intense Rivary: As pointed out in the chart on page 59 of our textbook, rivalry is intense when the number of competitors is high or industry growth is slow. Palm is in a rapidly growing industry.
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).
ISSUES AND CHALLENGES FACING THIS COMPANY: The purpose of any strategy is to create and sustain a competitive advantage. The problem with any strategy is that in a continuously changing industry where rivalry is fierce, there is always the danger of new competitors and new, improved products to serve the customer. We live in a society where the customer is always looking for something better, and at a better price. As the product moves through its life cycle, market share may go down. The issue remains: How long will Palm be able to sustain its competitive advantage? How long can it outperform Microsoft? What must it do to stay on top?
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, the large competitors begin developing their own products and competition becomes fierce. If I were in Palm’s position I would take the following steps:
1. Look for a corporation that was interested in my product and propose that they acquire Palm. I would look for a corporation in the electronics industry that had a reputation for purchasing smaller companies and allowing them to flourish while providing them with additional funding, research and development (Dess et al. 2007, p. 205-207). Our text discussed several companies with this type of related diversification strategy including Johnson and Johnson and 3M. I would have to look for a company in the electronic industry that had the same type of reputation such as General Electric, Hewlett Packard and Sony (Dess et al. 2007, p. 205-207).
2. I would select one company and propose a friendly buy out of Palm.
3. Part of the proposal would be that the current President and CEO remain with the firm after acquisition.
This would allow my company to continue to generate a profit while forming a synergistic alliance with a larger, more powerful corporation.
OPINION:
I found this case study very interesting. We had talked about the focus strategy and how a small company has to go after a specific market segment; however, it became clearer and was interesting to me to see how Palm used it by calling themselves a mere organizer at first. Their subtle way of introducing the product was also interesting. Furthermore, the case study did a good job of showing how Palm defined the competitive space. I could easily see where companies might get swallowed up easily by trying to compete directly with a big competitor. Palm’s insistence on keeping things simple and not adding tons of bells and whistles to their product helped them keep an edge over Microsoft. This made an impact on my thinking and made it more clear as to how a company truly needs to keep focus and not allow competition to dictate where they are headed. I think perhaps the biggest lesson from this study lies in avoiding tit for tat principle. Palm did not take every opportunity that came their way. They thoroughly analyzed each one and did not spread themselves too thin. Overall, I think this case study was very helpful. I believe I now understand the judo strategy much better. I also believe that if employed successfully, it can definitely be a strength to any small company. References
Dess, G., Lumpkin, G., & Eisner, A. (2007) Strategic Management (3rd ed.). Boston: McGraw-Hill Irwin.
Yoffie, D., & Kwak, M. (2001). Mastering Strategic Movement at Palm. MIT Sloan Management Review, 43-1, 55-63.
Yahoo Finance, Edgar Online, Palm Inc. (PALM) (n.d.). Retrieved December 30, 2006, from < http://finance.yahoo.com/q/is?s=PALM&annual>.