 $32 billion, or 39% of the total, was spent on self-study options

 In the United States, the industry generated $5 billion in consumer spending in 2007, of which $2
billion was for selfstudy.
 Over 90% of the $83 billion was spent outside the United States
 We are excited about hardware trends and the potential of educational technology in general. We are
working in new ways with online socialization. We see our primary opportunity as growing through
our own innovation. . . (W)ith added financial resources we can entertain mergers and acquisitions
down the line (Tom Adams, President and Chief Executive Officer)

Situational Question

1. How should the company move forward in order to sustain its momentum?
2. Would it be appropriate for Rosetta Stone to offer products like audio books or services such as
language classrooms in order to increase market share?
3. Which international markets would provide the company a strategic and guaranteed return?
4. Could changes in the company’s advertising and financial strategies improve Rosetta Stone’s position?
5. Should the company maintain anti-piracy initiatives as a priority or could its efforts be better allocated
elsewhere?

External and internal policy

 Companies that depend on technology face environmental risks which include economic conditions;
federal, state, and local regulations; and taxes and supplier or vendor concerns
 To effectively compete, Rosetta Stone will have to push product and service development as well as
attract and retain talented personnel
 Marketing, sales, and distribution efforts were highly integrated and focused on customer interaction
with Rosetta Stone products.9 Each marketing and distribution channel was meant to complement
and support the others. This ensured greater awareness across channels, cost-effective consumer
acquisition and education, premium brand building, and improved convenience for customers.

Strategy (low price-differentiation)

 The company presented the language-learning market with a trusted name-brand solution that was
more convenient and affordable than classroom courses, and more effective, interactive, and engaging
than other self-study options
 The company’s growth strategies centered on expanding its offerings and target market. Rosetta Stone
planned to develop advanced course levels and add new languages. The company also recognized that
adding skill development and remediation courses to its product line could attract advanced language
learners to the brand. In addition, the company could develop customized versions of its programs for
industries like healthcare, business, real estate, and retail. (product & market development)

Strengh

Its shares were priced at $18, above the estimated $15 to $17 range. The price for RST jumped 42% from $18 to
$25.55 in latemorning trading.17 Rosetta Stone sold 6.25 million shares for a total of $112.5 million. Analysts
tied the company’s success to a lack of publicly held competitor

In November 2009, Rosetta Stone acquired assets from SGLC International Co. Ltd., a software reseller in
Seoul, South Korea. The purchase price consisted of an initial cash payment of $100,000 followed by three
annual cash installment payments, based on revenue performance in South Korea.19 Rosetta Stone’s total
revenue for the year ended December 31, 2009, was $252.3 million.

For the year ended December 31, 2009, the company made 87% of its revenue from CD-ROM sales and 13%
from online subscriptions.
Customers could choose to purchase each language level separately or pay a discounted price by purchasing all
available levels of a language together.

Inovatif : The company had Version 2 and Version 3 of its programs available at the end of fiscal year 2009.
Version 2 of its software was available in 31 languages and Version 3 was available in 25 languages. The newer
version of the program featured improvements in the images and audio samples used, as well as in the
organization and presentation of content. Other benefits of Version 3 included: speaking activities, grammar and
spelling components, simulated conversations, advanced speech recognition technology, and Adaptive Recall.22
Adaptive Recall referred to algorithms developed by the company that had students review problem areas at
longer and longer intervals, thereby improving language learners’ long-term retention.23 In July 2009, the
company introduced Rosetta Stone TOTALe. These online offerings of integrated courses with coach-led
practice sessions included language games, encouraged interaction with native speakers, and provided live
support from customer service

Customize product

The company also developed Rosetta Stone products for the exclusive use of Native American communities to
help preserve their languages. Examples included: Mohawk, Chitmacha, Innutitut, and Iñupiaq.25 In addition,
the company offered a customized version of its learning solutions which focused on military-specific content
for the United States Army.