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Business
- General Environment
Globally, it seems that Brazil is in a recession, its economy has contracted in the last 6 months. Eurozone is very close to a recession and the outlook looks very pessimistic. However, there are also certain positive indicators that could help stay recession for a while. They include indicators like trade surplus, lower Euro, lower levels of unemployment, easier lending standards and banks eager to lend. Faltering growth worldwide, increasing geopolitical risks, are pushing the US growth rates southwards. As the dollar inched way up north the commodity prices have nosedived. The stock markets have rallied for long now and the investors want to book profits. The US data is looking rock solid.
The US population is expected to expand by about 100 million people by 2050 to 400 million and it is expected to age slightly more from the current 13% of 65 year olds and above to 20% of them. The America is likely to grey.
There are a lot of social issues involved in the online gaming and this has been rightly identified as “Kompu Gacha” – an effort made by the gaming company to buy virtual products to be used in the game. The games have become so addictive and the expenditure on Gacha was beginning to grow out of proportions. This is where there was an intervention made by the government. Japan’s Consumer Affairs Agency intervened and interpreted that the practice of Gacha was in violation of the Law for Preventing Unjustifiable Extra or Unexpected Benefits and Misleading Representation. This impacted the stock price of GREE negatively and its stocks crashed 23% in a single day.
- Industry
The gaming space is a very attractive industry and is estimated to grow positively and the some of the industry leaders are gung-ho about it. In a recent interview the COO of Electronic Arts Inc. One of the leaders in the industry says "I think we're going into almost a golden age of gaming, where it doesn't matter where you are, at any time, any place, any price point, any amount of time, there's a game available to you.”
The industry is at the doorstep of a growth and consolidation phase. This means that in terms of the life cycle stage the industry is maturing into steady growth phase and is expected to be there for the next couple of years, giving the existing players the much needed fillip and boost. The industry is still in the innovation stage and there is a large scope for disruptive innovation.
There have been a number of key success factors in the gaming industry. According to one study the fundamental aspect is the game itself, that is, a good game is a key success factor on which others can be built to influence it further. Other factors include bringing novelty to the game and innovating constantly. Finally creating a recognizable brand or characters and being able to generate advertisements and the positive word of mouth.
There are a number of trends, including the fact that the hardware is likely to follow the software into more experimental territories. As the computing technology has moved gaming also is going the cloud way and it is already evident. New gaming consoles will be worth a try in terms of the experiences that they deliver.
- Competition
GREE and DeNA are the two important players in the Japanese markets in the gaming space. DeNa is larger than GREE. Both of them are successful in monetization and increasing their average revenue per user (ARPU). The ARPU of these two companies is much larger – almost 4 times – than their nearest American rival Zynga. GREE and DeNA are also much more profitable than Zynga. GREE faces three key challenges in the competitive space – a. The international space is much more complex than the domestic Japan market; b. GREE will have to convince that they will not go the failing Zynga way, and; c. GREE’s revenues in Japan will likely to have an impact due to Kompu Gucha.
GREE multiplied the number of games it offered to the users by creating a gaming platform and throwing it open to developers, who can use it to develop games. This boosted the revenues as well as the profitability for GREE. This platform strategy has catapulted GREE into a far higher sphere of activity, revenue and profits.
- Opportunities and Threats
GREE is no longer a company that is restricted to one economy or one zone, with an establishment of an overseas office in the USA, it has entered the global market. USA is a hotbed of technology companies of all shapes and sizes which includes gaming too. Rubbing shoulders with the most competitive market itself is an opportunity for GREE. The GREE gaming platform is again a unique concept that will help GREE in the long run. GREE also gets exposed to the Western Manpower and their style of work creating a great East-West Fusion and culture.
Changes and flux in the gaming industry are a serious threat to GREE there is a serious threat of the type of Kompu Gacha is yet to become prevalent in the global markets. However, many countries could take the lead from Japan and implement it, which will definitely impact GREE negatively. Also the competition that comes from emerging technologies could challenge GREE. If GREE is not ready for change constantly one disruptive innovation could wipe away the complete company into oblivion.
- Internal Audit
The supply side is one thing that GREE Inc. has managed to successfully ensure it has a perpetual supply or so it seems now with its gaming platform available to developers. The innovation can come from the whole world of game developers. There is no dearth for GREE from this angle.
The conversion process for the GREE platform is done already because the game developers use GREE platform. Also internal developers obviously would be using the same technology.
GREE has a large distribution network and they are available on a wide set of platforms. Being an online service that they offer, there is no apparent restriction on the distribution network and they are available to every individual connected to the net either through a smart phone, tablet or a computer.
The risks with GREE’s products are as with any other online platform. They run a risk of being infected with malware, becoming a Trojan for rival companies. More importantly, as mentioned earlier if there is a disruptive innovation that happens in the technology platform they will be very severely negatively impacted. They also face competition from smaller and more agile companies that can change the competitive environment pretty rapidly.
Customers – GREE has no dearth of the target customer base. The entire internet and smartphone users are their prospective customers. Once a customer likes a game or a service offered by GREE it is very likely that the customer will keep coming back. The choice of customers and segmentation is difficult as the gaming prospects are not restricted to any gender, geography, age group or even education. A certain amount of churn happens in the customer base that is normal and is to be expected, some customers come back and some don’t, but the number of customers, especially for organizations like GREE that offer excellent quality products the customers keep coming back and growing.
Future orientation – GREE is, as of now, well positioned for the future. The competitive landscape is tough and demanding. But it is not impossible. The kind of products that the company is well protected now. There is no imminent danger to the organization internally and externally as of now that can endanger the survival of the organization. GREE seems to be well entrenched even in terms of technology is a leader as of now.
Ethics, corporate culture and legal aspects of the organization are comfortably poised. The company is not in a gray area as far as Ethics and legal aspects are concerned and it looks like the company is fully compliant and respects the law of the land. They do not seem to be under any kind of a negative scanner as of now. The Corporate culture also suggests that they are a law abiding corporate citizen and expect their employees to follow suit while it comes to abiding laws and remaining on the right side of the ethical boundaries.
The company seems to be having well organized HR culture and seems to be attracting good talent. The organization has a clear cut flat organizational structure and is well designed. The command and control systems are clear and the job roles and responsibilities well defined to achieve the organizational objectives. The culture is professional and is fully aligned to performance. The HR systems are ready to take any challenges. The learning and development function is geared to meet the current and future challenges that the company may face in terms technological development that are linearly foreseen.
GREE Inc. is a primarily a technology company. It has the best of hardware and software that is required for development. The company possesses the state-of-the-art equipment required for the development.
Since they need to remain competitive they cannot afford not to have the best in of equipment and software. All the software are licensed and are properly used within the legal and ethical limits.
The leadership of GREE Inc. are acknowledge leaders in the industry and are known for their clarity of thought and vision. They are known to practice ethical leadership. Their visionary approach has led to the creation of GREE gaming platform that gives them an immense advantage in the market at least as of now. The organization leadership leads from the front and are in the thick of things. The fact that they built 9 locations out of Japan and localized content for the respective geographies itself is an indication of the maturity and ability of the leadership. GREE had gone to places that other Japanese companies did not get or did not even make an effort to go.
The key success factors identified for this industry are a good game, novelty, game characters, branding and ability to attract. The most innovative practice that GREE has is its platform an acknowledge success factor that the likes of Sony and Nintendo have. This gives GREE a great advantage. Its game characters are unique, innovative and captivating thereby retaining the customer interest. GREE also has a brand and a kind of positive market aura around it and attracts good advertisement. The very fact that they are fully compliant with the Kompu Gacha restrictions indicate the corporate culture of compliance at the risk of losing revenue. The KSF for GREE especially after expansion to 9 other global locations is the ability to create one game with characters localized for that country. If the create global content with local characters more than half the challenge is successfully won. This must be integrated into their platform so that they can do it for all the games and it looks like that will be their success mantra.
The main competitive advantage GREE Inc. has is its gaming platform and it looks like it is a sustained advantage for some time to come. The strategy has been greatly successful. The innovation in the platform itself is something that GREE constantly looks at and it is therefore safe to infer that the advantage is here to stay for some time.
- Summary of Strengths and Weakness
GREE Inc. is a leader in the Japanese gaming scene and have managed to expand to nine global locations, something that no other Japanese gaming company has done so far. This gives it an opportunity to rub shoulders and be visible almost globally in the gaming and the game developer community. The GREE gaming platform is unique and has made GREE games to be developed by anyone who is willing to use the platform creating a latitude like none other.
While all this is great about GREE, there are also issues like the changes in gaming regulation that could negatively impact the organization especially that restrict gaming becoming a social addiction. Another major weakness is the possibility of disruptive innovation that can come from anyone, however, this threat is real and valid for all gaming companies.
- Problem identification
GREE is now a global organization with global presence, culture is one major problem and the other major problem could be a change in technology. The predominant competitive advantage continues to be the GREE gaming platform. It looks like it is a sustained advantage for some time to come.
- Alternative Options
As far as the technology disruptive innovation is concerned, this is a threat to all the gaming companies, however, each of the companies has their own way of keeping their ear to the ground and keeping abreast of the changes that are happening and looming on the horizon and so is GREE inc. Developing sustained and excellent partnerships with technology and telecom providers will pave way for success and there cannot be a better strategy for sustained competitive advantage.
- Recommendations
GREE Inc. is a great gaming company with global presence with ambitious goals into the future. It is highly recommended that this organization develop sustained relationships and partnerships with a variety of providers across. Also, it must keep its ears to the ground to be cognizant of the changes that are happening in the technology sphere.
References
Bob Baur, R. A. (2014). Other on the Other Hand Economic Insights. Global Investors.
Hatmaker, T. (2014, January 10). Gaming Trends to watch out for in 2014. Retrieved from readwrite: http://readwrite.com/2014/01/10/gaming-trends-2014
Kotkin, J. (2014, August). The Changing Demographics of America. Smithsonian Magazine. Retrieved from http://www.smithsonianmag.com/40th-anniversary/the-changing-demographics-of-america-538284/?no-ist
Sinclair, B. (2014, July 1). Core gamers uncomfortable with industry growth - Moore. Retrieved from Games Industry: http://www.gamesindustry.biz/articles/2014-07-01-core-gamers-uncomfortable-with-industry-growth-moore
