Overview
EA is an international developer, marketer, publisher and distributor of video games. Competing in a $35 billion global market, EA is one of the leading companies in the video game industry. Focusing on delivering games in all four of the leading consoles, (PS3, Xbox, PC, and Wii) they achieve to simultaneously launch titles in each of the platform in order to provide a game quality gaming experience to every possible gamer out there.
EA, along with its competitors, faces the challenges of rising costs brought by the high demand of quality graphics and game play, a numerous game selection, rapid evolution of game consoles, and a highly contested but promising E-market segment brought by the online gaming trend.
Driving Forces
PESTEL Analysis (Macro environment)
- No major political factors in this industry.
- Social: The rising trend in online gaming brings new business opportunities. Large groups of gamers are within this segment, making it an important target for video game companies. With the age of the average video game player on the rise the gaming industry has created new niches that desire a more demanding adult gaming experience.
- Technology: Great leaps in the quality and game play brought by the new platforms demand more complex gaming by the consumers resulting in increases in R&D costs. The new trend of online gaming has given birth to digital distribution and Massive multi-player online games (MMOG). The release of high capacity mobile phones has expanded mobile gaming to cell-phone users.
- Economic: EA is an opening market to many enterprises giving a distribution channel with an edge on sales and distribution of video games.
- No major Environmental or legal factors in this industry.
Competitive Forces
- Threat of Substitutes: The number and variety of video games has greatly expanded, creating many niche segments composed by all age groups. A large selection of titles released by large competitors every year, provide the buyer with many alternatives when it comes to choose a game.
- New Entrants: The possibility of new entrants is low. Technological barriers such as well-funded R&D departments and a very limited software engineer work force make entry to this industry costly. Major competitors have already been established; hence entry can only be expected from large companies with vast capital and a work force with competitive media-technology proficiency. This market is attractive to present competitors.
- Possible Prospective Entrants. Diversified media companies with capital strength (Disney, Viacom, Fox).
- Intensity of Competition: High. With three major competitors (Sony, Microsoft, and Nintendo), 20 other independent developers, diversified media companies (Disney, Viacom, Fox), and over four Internet engines the video game industry is highly saturated. Again not an attractive industry for new entrants
- Bargaining Power (Buyers): Buyer power is high due to the extensive variety in possible substitutes. With 100s of titles been added to each platform every year the consumer has many options.
- Bargaining Power (Suppliers): Supplier power is high due to Sony, and Nintendo being the exclusive producers of DVDs and cartridges for their respective platforms. Microsoft also required pre-approved manufacturers to be used for the Xbox titles.
Key Success Factors (KSFs)
- Game Design Personnel: A well compensated set of digital animators, programmers, and creativity staff is necessary to hold an edge in quality games.
- Location: Due to the cultural differences regions differ in gaming preferences. Establishing design studios in regions with high market segment and growth provides direct exposure to local markets.
- Multiple Brands and Product Lines: Due to emerging niche markets, a broad product line must be made available in order to reach more consumers
- Distribution Channels: Agreements with mass-retailers, electronic specialty stores, and specialty retailers provide quick and extensive output for Inventory. Digital Distribution has also become essential due to the downloading of titles over the Internet rising. Contracts with carrier services also serve as an outlet to mobile games.
- Interactive Systems: easy to use, friendly and attractive interfaces play a big role and as key factor to consider future systems are becoming more interactive in comparison to the static systems.
- Technological Advancement: EA has maintained updated technology with real-time updating to the new emerging trends
SWOT Analysis
Strengths
- Good reputation among customers: By releasing game franchises EA has an upper hand in Customer loyalty on gamers that purchase games from the same product line. Every year EA sports releases a new version for each of their sport titles. By having multiple Brands they are able to reach many niches.
- Console Versatility: Games are capable of operating in multiple consoles, allowing the consumer to buy any game EA releases without depending on their console.
- Intellectual Property: EA has been able to collect intellectual property from sports leagues, player associations, movie studios, book authors, and performing authors. This gives them the license and rights to many games based on sports franchises (MLB and Madden), movies and books.
- Competitive: with other prospective entrants in place, EA has been able to remain comparatively on the competitive edge by ensuring that their video games are up-to-date and are enhanced with the latest technology, their intellectual property also enhance the embracement of the current social and political activities
Weakness
- Customer Certification: with independent upcoming developers and suppliers of the same product, there are varieties of substitute.
- High cost structure: EA have remained competitive in market giving independent developers to seek alternative means of lowering their pricing structure, lower prices on same product in the market leaves EA on edge of the competitor.
- Distribution Channel: Distributed channels having games operating in multiple console mislead customer to product specification requirements, this may be viewed more of lack of access to key distribution.
Tarcy (1996), simplified Strategies planning states that, “weakness may be the flip side of the strength”. Analysis of both strengths and weaknesses shows the EA greater weakness are flip to their strength being an internal comparative that can be overcome by the opportunities that includes well established market, easy networked channels and advanced technology.
Competitive Strengths
For competition, the strategies Electronics Arts requires to implement entails:
- Offering the free or price friendly versions of downloadable products as demos and prototypes before the release of the full package.
- The company has to allow the customers a chance to preview upcoming products through the Net for instance the Xbox live or Play station networks for an affordable and considerable fee. This enhances the marketing strategies because the demo versions are too cumbersome to handle virtually. The prior marketing strategies of allowing pre-views of upcoming products enable the company to overcome the need for marketing the complete version.
- Beside lowering the marketing costs and strategic needs, the prototypes/demos is an excellent test for the future expectations and opportunity to shape products
Issues
Competition is a key issue the company has to face. They have to come up with strategies of expanding the game versions in the markets and enhancing the technology in improvement of products.
Summary
- S-O, the company should pursue opportunities that are within their strength.
- W-O, the company to minimize on any of their internal weakness and try to utilize external opportunity coming their way.
- S-T maximizes the strength available and avoids threats from the external environment.
- W-T these are external environment factors that should fully be minimized to enable the growth of the company.
Recommendation for Electronic Arts
As a business enterprise for computer games production the EA poses the commitment to confront technological advancement through increasing capacity of software especially on the exiting games such as Alice, FIFA, NBA, NHL, Sim City, Ultima among others.
The consumer demands are increasing and the only measures for ensuring satisfaction is by increasing the efficient methods of technological advancement. The aim of the actions is to improve business growth strategies by promoting better and more reliable electronic skills, which enhances better energy usage to boost economical developments.
The company should aim at addressing the problem concerning the family games. The acquisition of other co-related firms or merge with others assists in ensuring some measures are put in place to reduce activities that lead to the service or products dislikes.
There is equally the need to fight the issues of consumer concerns that relate to the negative effects. The key drive for economical growth is the number of hours people spend on the games. The aim of any production company ought to be creation of ways such as new technologies that emphasizes on benefits to the users as the key strategies for increasing opportunities for business establishments.
The company associates the initiative to its consumptions such as the three dimension games and mobile products. New fascination technologies means that increase of demands are inevitable for the company, considering the growth of the mobile telephony and increased internet demands especially in developing countries. For this reasons, the company has to come-up with strategies to combat the demands associable to growth.
More proposals falls upon the three-dimensional games played in a game battlefield. Then reality created by the vehicles, maps, multi-player approaches and regalia offers differences in tactical measures. The main aim of any introduction is on delivery of spectacular and impulsive outcomes for the consumer.
The recommendable solutions that the company seem to continue implementing entails acquisition of other smaller outstanding companies’ in the aim of fostering expansion to a multi-million selling units internationally. Value chain enhances marketing of franchise as well as ensuring production of user-friendly franchise such as products that are acceptable for the family leisure time. The brand names and portfolios such as EA Sports, POGO or the EA Mobile provide high quality brands this enhancing consumer focus.
Reference
Tarcy, b. (1996). Advanced Selling Strategies: The Proven System of Sales Ideas, Methods, and Techniques Used by Top Salespeople, New York, NY: Simon & Schuster Publishers. Print