Abstract
The report presents the feasibility of setting up a new gaming lounge in Atlanta, London or Seoul. It provides a criterion to use for selecting the preferred location. It also discusses the main concerns of the business as a new entrant in a competitive market.
Introduction
The company is seeking a new store location for expansion. It targets the 18 to 30-year-old gamers. It provides console gaming venues with the latest gaming platforms and best screens and pads on the market. The company also develops its gaming lounges in an iconic themed way that appeals to the target group. Its business proposition is that gamers can opt to play in real-time with other games in a game-friendly environment that afford them access to virtualization technologies. Many of the gamers would not afford to purchase the gaming rigs and virtualization tools on offer for a fee at the gaming lounge. The report is evaluating the suitability of cities to host the gaming lounge business.
In 2012, the gaming industry was worth about 66.3 billion dollars. TV/Console games hold the highest share of gaming industry sales. The Asia-Pacific region is the most active in revenue generation at 36% followed by North America at 32% then Europe, the Middle East, and Africa as a region commanding 28% while Latin America controls 4% (Newzoo.com par. 1). Projections for 2016 show that the gaming industry would be worth 86.1 billion dollars. Besides, there is a growing active gamers’ population in all the regions of the world. For example, West Europe has a gaming population of about 180 million people against a total population of 400 million (Newzoo.com par. 1). The Middle East and Africa region have a gamer population of 145 million against a population of 880 million. Thus, there are lucrative opportunities for expanding into the gaming market in Europe and North America, where the industry is well developed. The Asia Pacific region is also promising. Notable gaming cities under consideration are Atlanta, New York, London, Dubai, and Seoul.
Table 1: Summary of gaming locations.
Methodology
The analysis of the feasibility of a new gaming lounge location will focus on the collection of data about all the potential locations that the business can expand. This was followed by a weighting of each location according to its characteristics that fit the criterion used for determining the right location. After weighing the good points of a location, additional weighting was done on the level of competition currently available. Also, weighting was done based on the ability of the business to meet the lease demands of the location owners or the acquisition costs for the property. With all the weighted points in place, a decision was made based on the highest scoring location regarding the key features that the business is looking for. This was reviewed against the biggest concerns for the growth of the business such as competitive pressures and internal resources to support the growth.
Criteria
The location should have customers who are embracing a gaming culture. They should be young, liberal, having a high disposable income and willing to hang out in social places. There is no discrimination between male and female genders. Preferably, the location should be at a high street location where there is high foot traffic. A well-known mall is a good example. A popular street intersection where there are classy restaurants is also another viable place.
The business will be known mainly as a place to hang out. Customers will be interested in bringing out foods from outside and having the business near classy restaurants and well know retail coffee outlets will be a plus. Besides, there is a need for a good supply of water, washroom amenities, electricity and backup generators, and natural light. For storied building locations, the preferred locations will not be anywhere on the third floor. Preferably, the lounge should be located on the ground or first floor.
Conclusions
Cities that have to host competitive gaming events are the most preferred because they already have the sizeable number of aware gamers. Besides, cities that already have some world-class gaming lounges where amateur and professional athletes prefer to play will be the ones that carry the highest weight. In this regard, the company should be looking into Seoul, Atlanta, and London. These cities are located in regions that dominate the gaming industry in revenues. They also have sizeable population sizes of gamers. Thus, the advertising costs for creating awareness of the new gaming lounge to be opened in the cities will not be so much in comparison to raising awareness in a non-gaming city. Atlanta and London lose out because most of the gamers in these cities are yet to be exposed to pubic gaming as a recreational activity. The marketing costs for the company will significantly be significant when entering into these markets.
Seoul comes closest to a lucrative location for the business. It has held events where more than 40,000 people attend a video game live event in a stadium. This shows that there is a high population ready to watch or play games in a healthy environment for gaming. It also shows that the city is prepared to embrace the advancement of the culture such that gaming becomes a mainstream activity just as other competitive sports other recreational activities. So far, the Seoul market is very lucrative and an ideal place for the business to set up its gaming lounge. In addition to a sizeable gaming population, it has an extensive infrastructure for internet communication and gaming and is also having a sizeable middle-class population that can afford most of the costs associated with gaming services and gaming accessories.
Recommendations
The company should look into Seoul for immediate expansion and then it should focus on additional game lounges in other upcoming gaming cities. Many cities in the United States have the potential. There is already a high population of casual gamers who mainly place at home. Los Angeles has held public events for electronic gaming, and the reception has been good. Other cities have also done the same, although the size of the games was not very large. The company is looking for about one hundred people to patron its gaming lounges on a daily basis. In peak times, it can expect about 200 people. In this regard, most cities already qualify. However, the company also needs to make sure that the first city to set up is also going to market the business to other gaming cities (CBS News par. 1-10).
It should go to Seoul. Being an American company, there will be complications with culture and setting up a foreign subsidiary of the business. Finding a location in Seoul will also be daunting. The recommendation here is that a foreign consultant is hired to help set up the company in a foreign country (Fletcher and Crawford 282). The consultant will help with cultural and legal adjustments that are needed. Also, any negotiations for leases and other suppliers will be done by the consultant and the company representatives so that the best deal is reached. In addition, the company is looking for a long-term business opportunity and it should be open to a collaborative venture with an experienced local company. This collaboration will have to be restricted to the provision of local resources (Fletcher and Crawford 283).
Importantly, the company should be a clear majority owner of the foreign subsidiary to ensure that branding, marketing and administrative issues are handled from the headquarters. This is important in ensuring that the lounge business and subsequent lounges opened in the city are reflective of the corporate culture and vision of the company. Upon approval, a project office will be set up to ensure that all company concerns are addressed in setting up the gaming lounge in the chosen city, which here is Seoul Strategic Direction 36).
Discussion
The only viable ways of competing are to gain a substantial market share or to focus on differentiation. The Boston Consulting Group thinking where a large market share allows a business to have low costs of operations mostly promotes the first option. The company can then use the low costs to drive prices lower and displace the competition that cannot afford to provide low prices (Martin par. 13).
In the second case, the Michael Porter school of thought argues that with differentiation, the generic strategies allow a company to successfully defend a niche in a market and hold on to loyal consumers even as a rival business is reducing their prices. Both cases are good for different kinds of business. For a business that is entering an already established market, taking the market share of the incumbents can be difficult. However, where there is a disruptive technology provided by the new business, then its costs can be significantly lower, and it will, therefore, be able to pursue the BCG strategy of focusing on the large market share (Martin par. 13).
The gaming and electronic sports market are growing. The high growth rate of revenues for the industry in the last five years shows that there is additional potential for growth. Therefore, the demand will increase for the rise in the population of gamers. Another factor worth considering is the increasing income status of many countries. This allows citizens to embrace middle-class lifestyles. The lifestyle includes spending time and money on recreational goods and services outside their homes. They also shift their social interaction to devote more time to social amenities to catch-up and get along with their lives outside work (Spath and Fähnrich 188).
Customers will likely judge the company based on its reputation. Given that, it is offering a service; customers will be less inclined to use price as a criterion for their purchases. However, the price can be a factor when it is outside the acceptable range for most customers and from what the competition is offering. For a new entrant, disrupting prices help to attract customers to try out the service. The business can then gradually increase prices as it amasses a sizeable number of loyal clients who are already working as brand ambassadors. Customers who value distinctiveness will prefer premium goods and services, and they will not have a problem with paying higher prices.
As a result, there is an opportunity for the business to embrace a successful differentiation strategy when going into the Seoul gaming lounge market. It can focus on keeping more or less the same costs as its competition and then convince its customers that are providing meaningfully dissimilar services from the completion. This is one of the reasons for the company to retain control of the foreign subsidiary.
This will allow it to infuse a westernized corporate culture that is in line with the globalization of electronic sports. It will also be in line with the introduction of Western-based games that dominate the industry as the most widely played sports on conventional gaming platforms. in the gaming market, the fundamental source of competitive advantage is the services offered to gamers. Other than customer services, the availability games to play and the accessories put in place in the gaming lounge also serve to attract and keep players. The essential thing is to ensure that players find amenities and gaming equipment that they would not be able to have at home (CBS News par 3-14).
The business should also expect the incumbents to become fierce upon its entry. They will likely copy its differentiation strategy so that they provide similar services and deny it the ability to attract new customers. In addition, the competition may also lower prices as a way to keep out the new entrant. These threats are real and they have to be considered in the course of making an entry. Having a long-term perspective and working with minimum operational thresholds for the business will be a good way to offset the threats. As long as the company is breaking even or is gradually moving towards its break-even point, then there will be sufficient reason to keep on with the business.
Another notable factor in the business is information distribution. Information affects business rivalry by changing the industry structure. Moreover, information shifts the rubrics of competing to render firms competitive or not.
Companies that have relevant information outcompete their peers. In addition, new forms of businesses can form from existing ones because of the availability of new information. In this regard, the use of information communication technologies will allow the company to defeat the incumbents in getting new customers. By focusing on online forms of communication and marketing, it can reach a sizeable portion of the market at a relatively low cost. This will, therefore, allow it to channel the equivalent of traditional marketing funds to the online channel and achieve remarkable results (Spath and Fahnrich 230).
In addition, technologies will allow the company to keep administration costs low as it can securely manage customer subscriptions and access to its gaming lounge. It can also remain connected to them and market different promoted games directly to them. Other than merely offering a subscription service for accessing the gaming lounge, the company can also use smartphone apps and Web 2.0 technologies to interact with customers and sell them gaming accessories and special promotions for gaming at its lounge another competitive event organized in their cities. It can offer these value-added services that allow it to remain different from the competition.
150-word topic explanation
The situation behind the study is that a company that specializes in gaming services is seeking to expand. It has hired a consulting firm to advise it on where it can expand to across the world. It is interested in growing its network of gaming lounges across the world to take advantage of the growing popularity of gaming products. The topic of the study will be comparing locations for gaming lounges. Notable ones are presented and then the best one for the company is discussed. The project is treated as if I am working for the consulting company that has been given the mandate to find a suitable location. Some of the criteria used include the potential consumption of gaming lounge services and awareness of leisure and professional electronic gaming activity in the city chosen. I plan to consult websites that talk about gaming revenue, awareness and opportunities around the world.
Works Cited
CBS News. “The Competitive World of eSports.” 2014. CBS News. Web.
Fletcher, Richard and Heather Crawford. International Marketing: An Asia-Pacific Perspective. Frenchs Forest NSW: Pearson Australia, 2014. Print.
Strategic Direction. “Getting Closer to the Customer.” Strategic Direction (2014): 35-38. Web.
Martin, Roger L. “They Are Still Only Two Ways to Compete.” 2015. Harvard Business Review. Web.
Newzoo.com. “Global Games Market Report Infographics 2013.” 2013. Web.
Spath, Dieter and Klaus-Peter Fahnrich, Advances in Services Innovation. Berlin: Springer-Verlag, 2008. Print.