Rosetta Stone 2011 Annual Report Download - page 17
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Table of Contents
Sourcing and Fulfillment
Our strategy is to maintain a flexible, diversified and low-cost manufacturing base. We use third-party contract manufacturers and suppliers to obtain
substantially all our product and packaging components and to manufacture finished products. We believe that we have good relationships with our
manufacturers and suppliers and that there are alternative sources in the event that one or more of these manufacturers or suppliers is not available. We
continually review our manufacturing and supply needs against the capacity of our contract manufacturers and suppliers with a view to ensuring that we are
able to meet our production goals, reduce costs and operate more efficiently.
We package and distribute our products primarily from our fulfillment facility in Harrisonburg, Virginia. We also contract with third-party fulfillment
vendors in Munich, Germany, and Tokyo, Japan.
Competition
The language-learning industry is highly fragmented and subject to rapidly changing consumer preferences and industry trends. We expect competition
in the markets that we serve to persist and intensify. We face varying degrees of competition from a wide variety of companies providing language learning
solutions including:
language learning center operators;
audio CD and MP3 download providers;
pre-packaged software producers;
textbook publishers;
online tutoring service providers; and
online community practice providers.
Our competitors include Berlitz International Inc., Simon & Schuster, Inc. (Pimsleur), Random House Ventures LLC (Living Language), Disney
Publishing Worldwide and McGraw-Hill Education.
We believe that the principal competitive factors in our industry include:
product differentiation, including:
teaching method,
effectiveness,
accessibility and convenience,
availability and quality of speech recognition, and
fun and likelihood of continued engagement,
brand recognition and reputation;
price; and
effective advertising.
Intellectual Property
Our ability to protect our core technology and intellectual property is critical to our success. We rely on a combination of measures to protect our
intellectual property, including patents, trade secrets, trademarks, trade dress, copyrights and non-disclosure and other contractual arrangements.
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