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Spotfire Managing a Multinational Start Up Case Solution
Spotfire Company is an entrepreneurial software venture that was started in 1996 by Ahlberg in order to solve the data visualization problem of the companies. Initially the company had its office only in Sweden, but as the customer base expanded, company established another head office in United States. Most of the customer base of the company was located in U.S and were the ones who were using the software at small scale. The case basically discusses the problems that the company faced while going from the status of a national company to a multinational company. Other than this, case also discusses the need of the company to manage its early stage of growth and develop new customers and products.
Following questions are answered in this case study solution
Introduction and Problem
Strategy Alternative 1
Strategic Alternative 2
Strategic Alternative 3
Recommended Action Plan
Case Analysis for Spotfire Managing a Multinational Start Up
1. Introduction and Problem
Spotfire Company was established in 1996 by Ahlberg. The core product of the company aimed to help the researcher to visualize the data in an intuitive format, and it was inspired from Ahlberg’s PHD thesis on data visualization. During early years, the customer base of the company included a wide variety but later ‘vertical strategy’ was adopted, and pharmaceutical/biotech industry was chosen to be the focal customer. Initially the company had its head office only in Sweden, but as it expanded, another headquarter was setup in Cambridge, Massachusetts. Even though the company has expanded its network, but internal infrastructure of the company is still under developed and both offices lack proper communication. Also, company requires second round of financing for its operations. With the first seeds of company financed by a Swedish venture capitalist, Ahlberg must decide now whether it wants to remain a Swedish company and target Swedish financers or would it acquire the status of a multinational company in order to target international venture capitalist.
2. Strategy Alternative 1
In order to survive its early stages of growth and to find new finances, the company must decide its status. The first strategy that the CEO Ahlberg can pursue is to declare the company as Swedish. This means abandoning the headquarters at United States and moving the marketing department back to Sweden. Since the product development department already wants the label of Swedish company, this move will promote the sense of loyalty in them, and they will work better. Furthermore, the salary rates in Sweden are far less than that in United States. If company moves its head office to Sweden, it will be able to hire people at low wages, which will increase net profit of the company. This increased net profit can then be invested back in the company. Through this, company will also be able to reduce its requirement of financing from external sources. As a result, more equity will be under CEO than under external financers or venture capitalists.
However, having the headquarters back in Sweden has its disadvantages too. More than half of the customer base of Spotfire is located in United States. Moving back from United States means losing immediate contact not only with the customer but also with the market in which they are mainly operating. After pursuing this strategy, the company might not be able to keep a check on new products being launched in the market. The people in Sweden might not have a very good know how of the U.S market and might fail to understand the needs of that customer base.
3. Strategic Alternative 2
The second strategy that the company can pursue is to abolish its headquarters in Sweden and move the development team to United States office and declare itself as U.S Company. Since more than fifty percent of the customer base of Spotfire is in United States, by pursuing this strategy Ahlberg will be able to provide his software development team a better access to their target market. Furthermore, the company will be able to hire programmers from U.S Talent pool too. The president of the company believes that currently most of the programmers working in the company are simple program developers and have no prior experience of working in product marketing or as end users. This makes their work with the marketing department harder. If company relocates its development team, not only it would help the programmers to better understand end users but also the company would be able to recruit people from U.S talent pool too. This strategy also has few drawbacks. Firstly, the salaries in U.S are considerably higher as compared to the one in Sweden. Relocation means giving the developers a higher salary i.e. U.S salary rate. Secondly, the program developers in U.S are high in demand. Large companies are able to attract the trained developers with high salaries and other fringe benefits. This results in lower retention rate of the employees and high turnover rate for the company. If Spotfire, relocates, it would have to take proper steps in order to deal with this problem of retention not only with U.S developers but also with Swedish developers whom it relocates with itself from Sweden.
4. Strategic Alternative 3
The third alternative that CEO Ahlberg can pursue in order to survive its early stages of growth is to declare itself as a multinational company with its head office located both in Sweden and in United States. Regional offices can then be established in other countries where company plans to start its operations. The major benefit that the company can avail by pursuing this strategy is the access it will gain to international venture capitalist for financing purposes. A multinational status would affect the valuation of the company, and as a result, it might be able to attract finances not only form West Coast but from around the globe. Moreover, through this strategy the company will be better able to tap both in European as well as in American market. This strategy too has few drawbacks associated with itself. Firstly, the company lacks proper infrastructure and management that is required for a multinational in order to function effectively. The company already is facing communication problem among the two offices. Declaring a multinational status and opening other offices would only add to the communication problem. Secondly, most of the seed capitalist of the company are of Swedish origin and have more than fifty percent of the equity. If the company decides to go global it might face serious hindrance from the shareholders. Lastly, it would require extensive travelling on Ahlberg’s part and will divide his time among two offices. As a result, he might not be able to focus on either one of the office and to add value to the company.
5. Recommended Action Plan
The CEO of the company along with his president must decide the strategy that best suits his company. In the given circumstances, the best strategy for the company is to declare itself as a multinational company and carry on its operations with head office in both United States as well as in Sweden. At this point of time, the major challenge that Spotfire is facing is of finances.
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