History and Growth
In the 2016’s World’s Biggest Public Companies Ranking, Forbes placed Oracle Corporation in the eighty-second position. Additionally, the corporation emerged 226th in sales, 40th in profits, 256th in assets, and 33rd in market value (Forbes, 2016). Most importantly, the Oracle ranks 16th in terms of the world’s most valuable brands. As of May 2016, the company had a net worth of US$ 168.9 Billion. All these achievements did not come to oracle in one night, but through years of growth and development through innovation and expansion into new markets. Today, the company boasts of 420,000 customers located all over the world and deployments in not less than 145 countries (Oracle, 2016).
The history of Oracle Corporation started in 1977 when the Larry Ellison discovered an opportunity in commercializing the relational database management system (RDMBS). He shared it with his workmates at Ampex, Bob Miner and Ed Oates, and the trio founded Oracle. They founded it the name Software Development Laboratories. In 1978, they developed oracle version 1 and a year later (1979) developed Oracle version 2. Additionally, they wound the 1970s with a change of name to Relational Software Inc. (Oracle, 2007). In the following decade of the 1980s, RSI achieved tremendous success through innovation and expansion. A major change in the company came in 1982 when it changed its name to Oracle Systems. Oracle Systems developed new versions of Oracle, starting with oracle version 3 up to version six.
A major developed during the decade was in 1986 when it made an initial public stock offering of on NASDAQ exchange. It offered 2.1 million shares. As the decade came to an end, Oracle systems was preparing itself for the internet boom in the 1990s by developing the database that supports online transaction processing (OLTP). In the 1990s, oracle focused on the internet boom. The company developed products in anticipation of customer demand. Having built customer-ready products in advance, oracle become a market leader as soon as fully functioning internet-powered offering were made the standard offering of the market (Oracle, 2007). In the 2000s, the company continued to be successful on the internet platform despite the decline of the internet economy. A major development was that the company acquired its rival PeopleSoft in 2005. Since then, oracle has actively acquired many companies. In the event making itself a giant in the technology industry.
Strengths and Weaknesses
Oracle has the advantage of being the first mover because it was the first to introduce relational database into the market. Due to this advantage, the company was able to organize its information early enough and also improve its business processes. The company’s innovation strategy is uniquely different. Oracle develops products and waits for the demand to rise. This appetite for risks is what many rival companies are unwilling to take. As an advantage to oracle, when others are busy developing new products to meet the new demand, Oracle has customer-ready products which it supplies immediately (Oracle, 2007). By the time the others are ready, Oracle has already dominated the market and won customer loyalty. Succinctly, this advantage that Oracle enjoys boosts its ability to develop new products. In addition, Oracle is keen on developing the internet enabled solutions because it is a cost-effective strategy that enables it to improve the business process efficiencies. This strategy allows the company to provide services and products cheaply enabling the company to penetrate the market and provide IT infrastructure to small and medium business (Olofson, 2016).
A major of weakness of oracle Corporation is with the marketing. The company uses the developed brand image to market its products. Additionally, it actively engages in brand extension activities through acquisitions and takeovers. Currently, the brand is among the most valued in the world. However, if anything goes wrong, the sales of the company will fall drastically. Regarding the issue of brand extension, in the last one decade, the company has been acquiring other firms some of which are specialized in different activities. While the brand extension is a clever way of increasing brand visibility and spreading risks, its negative impacts can be dire (Aaker, 2009). It can dilute the brand image which the company depends on for business (Aaker, 2009). It can cannibalize the existing brand because the market of these products is very close. Lastly, it can cause a big disaster that Oracle will take time to recover, or worse fail to recover (Taylor, 2006).
External Environment
Just like any other company operating in a market that is full of competitors, Oracle also faces stiff completion from other industry players such as IBM, Microsoft and Teradata (Olofson, 2016). Currently, oracle is the market leader in the low-medium level servers. However, IBM DB2 takes the lion’s share in the high-end mainframes and servers. Recently, IBM has intensified its efforts to increase its market share in the midrange market. In 2001, IBM acquired Informix Corporation. Following the acquisition, the distributed database business of IBM doubled (IBM, 2002). Then, the doubling of the business created the largest opportunity in the middleware segment (Armonk 2001). Since then, the market share of IBM in the low-medium range server has been increasing.
Another important competitor is the Microsoft’s SQL server. The SQL server came with the acquisition of Sybase which was an important rival of Oracle in the 1990s. The stiff competition from the rivals avails more options to the consumers. In turn the bargaining power of Oracle in the market is projected to decrease since they have to be conscious of the reactions of the rivals when making business decisions. Their bargaining power is likely to worsen with the entry of new competitors from India and China. These competitors can compete successfully with Oracle in a price competition since they have access to cheaper labor (Dawar & Chattopadhyay, 2002). Lastly, substitutes are available but are incapable of delivering the very high performance of the RDMBS. Nevertheless, most of the substitutes are not fully exploited and Oracle can leverage on them to increase their competitive ability.
Analysis
The present market condition places Oracle at a precarious position. Nevertheless, oracle has proved to be resilient by outdoing competitors and registering continuous growth despite many economic turmoils. In the 1990s, Oracle experienced fierce competition that threatened the survival of the company. However, through continuous innovation, Oracle has proved to be resilient. One key strength of Oracle is in its ability to predict or anticipate future demand and developing products before the actual demand arises. In most cases, they are the first movers when there is an opportunity. Specifically, Oracle has research and development capabilities that enable that gives it the unbeatable competitive edge. The company has well established Oracle Labs that are capable of developing a wide range of products. Lastly, new opportunities exist in the emerging economies which in the near future will provide a large market for technological products (Dawar & Chattopadhyay, 2002).
Corporate Level Strategy
Oracle’s corporate level strategy is congruent with it mission which is to ‘Deliver the best information with the highest quality of service at the lowest cost”. To achieve this, the company aims at making its products the fastest, most reliable, most scalable, the easiest to use and most secure for information of all types (Oracle Corp, 2010). To achieve this, the company is actively engaged in acquisition activities whose purpose is to increase the product offerings of the company, expand partner opportunities, meet the demands of customers more rapidly and accelerate innovation. The acquisitions strategy focuses on four main categories; applications, middleware, industry solutions, and servers, networking and storage. The advantage of this acquisition strategy is that it increases product visibility and brings particular expertise and experience on board enabling the company to serve its customers better. However, the disadvantage of the acquisition strategy is that it can cause the dilution of the brand and cannibalization of the original product which is the RDMBS (Taylor, 2006).
Business Level Strategy
The products that oracle offers are categorized into four groups according to the business groups it serves. They are Oracle application software, database and middleware software, hardware systems and cloud infrastructure (Oracle 2016). The cloud infrastructure is about cloud computing that offers a wide portfolio of products and services including the broad base of subscription-based, enterprise-grade cloud services that is able to build and manage several types of cloud deployment models. This is where, oracle cloud derives its competitive advantage. On the other hand, the business level strategy for database and middleware software is offering a wide range subscription and license that are designed to achieve high-performance and cost-effectiveness (Oracle Corp, 2014). This segment targets the midsize businesses but also serves global enterprises. The application software segments aim at automating and managing core functions of businesses. Additionally it aims at helping the customer differentiate different processes in their work environment and consequently automate them because processes are unique across different industries. Finally, the hardware systems’ business strategy is to provide a wide selection of hardware systems including other related services that will improve the experience of the customer (Oracle Corp, 2014).
Implementation
Fox (2014) explains the management of Oracle as worst-governed but best-run. The reason is that although the organizational structure is not clear and the company is virtually run by one man, Larry Ellison, its performance is very impressive. Oracle organizational management follows the hierarchical model but with reduces layers. The chief executive officer is at the top followed by heads of each business divisions. In turn there are more managers below the heads of the business units. The structure reduces the layers of communication between the lower level managers and the top level management. The advantage is faster communication and direct supervision that makes innovation possible (Garicano, 2000).
Recommendation
- Oracle Corporation should consider intensifying its activities in the emerging markets since they have huge potential for growth. The emerging markets are unlike the developed markets that are almost at near stagnation point.
- Oracle should not entirely focus on acquisitions and the creation of newer versions of products. New products attract an extra cost in switching to the new product. Instead, Oracle should reconsider its innovation strategy to focus more on developing integrated products. This will reduce the risk of losing customers who are not willing or are unable to purchase new or multiple versions of a product.
References
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Garicano, L. (2000). Hierarchies and the Organization of Knowledge in Production. Journal of political economy, 108(5), 874-904.
IBM. (2002). Seven days at IBM. Web.
Olofson, C. (2016). Competitive analysis: Worldwide relational database management systems 2007 vendor share. Framingham: IDC.
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Oracle. (2010). Annual Report 2009 ‑ 2010: Oracle Financial Services Software Limited. Oracle Financial Services Software Limited.
Taylor, D. (2006). Brand stretch: Why 1 in 2 extensions fail and how to beat the odds: A brandgym workout. New Jersey, NJ: John Wiley & Sons.