Vivendi
Introduction
Vivendi is a content and integrated media group that is operating its business throughout the value chain of entertainment industry. The company incorporates its business operation from talent discovery to the development, production and distribution of its content. The company owns the Universal Music Group, which is the world leader in music industry, whereas it also owns the Canal+ Group which is a leading television group in France. It also produces international television series and movies and owns a French TV channel, which is also the biggest pay TV in France. Vivendi has also initiated its investments in Ubisoft and Gameloft and hence, it has enhanced its business prospects in gaming industry (Vivendi, 2016a). The company holds 80% shares in Dailymotion and has acquired 64.4% shares in Radionomy, which is the online radio aggregator for media content (Vivendi, 2016d). The current paper aims to enlighten the strategic mission, vision and objectives of the company and incorporate the internal and competitive analysis of the company. The external environment will be analyzed by conducting the PESTEL analysis in order to forecast the macro-economic trends, whereas the competitive analysis will be conducted by using the Porter’s Five Force analysis. The information to conduct the internal and external analysis will be acquired from the company’s official website and publications in order to ensure the validity of the information.
The mission of the company incorporates the sustainable development of the company by means of making the present and future generations to satisfied with their communication needs with adequate response towards their desire of feeding their curiosity, entertainment, talent development and exchange (Vivendi, 2016b). It eventually indicates that the company wants to provide a holistic means of entertainment to its audience. The company is also addressing the need of its customers who seek for the opportunities to acquire talent to work in the entertainment industry. It eventually indicates that the company is strengthening its future prospects by training new talent for the entertainment industry. The company tends to address the need of present, as well as future generations which indicates the inclination of the company towards innovation and technological advancements.
Vision
The vision of the company incorporates the transformation of the company from a financial holding to an integrated organization that is focused on the media content and become the global media force (Vivendi, 2016b). The vision is adequate enough to define that the company is focused on enhancing the depth of its operations, developing synergies and identifying new markets to attract and retain its customers by means of producing the media content. The company has been engaged in acquiring entities like Dailymotion, Gameloft, Ubisoft and Radionomy, which are the online streaming, gaming and radio services and hence, the company is moving on the path of becoming the global media force.
Strategic and Financial Objectives
The strategic objective of Vivendi is to finance 40% of Ubisoft acquisitions using its cash equities by October 2016, and sustain its growth in gaming industry with the average increase in market share of 5% over the period of 1 year. (Vivendi, 2016c). Moreover, the financial objective of Vivendi indicates that the company expects to its earnings per share by 30% by 2017 (Vivendi, 2016c).
The mission and vision of the company has indicated that the company is focused on expanding its business operations in the entertainment industry and hence, the company is trying to acquire and maintain its governance in Ubisoft in order to ensure its prevalence in the gaming industry. The strategic objective of the company is enlightened using the SMART analysis, which is discussed below:
Specific
The company is focused on the short term objective of increasing its market share in the gaming industry by financing its Ubisoft shares with cash, which will enhance the corporate governance of the company in Ubiloft. Moreover, the company will acquire market standing in the gaming industry due to the acquisition of Ubiloft in the long term. The company is focused on increasing its shares in Ubiloft which will make the company eligible to account for a higher rate of profitability due to its large number of shares, which eventually indicates the long term inclination towards its financial objectives.
Measurable
The company has incorporated the measurable objective because its earnings per share and market share can easily be measured over the period of 6 months and 1 year.
Achievable
The strategic objective is also achievable due to its investment of 3,802 Euros in money market, which is identified as ‘cash and cash equivalent’ in the balance sheet of the year 2016. The company’s growth strategy has indicated the increase in the value of company which makes the financial goal achievable.
Relevant
The strategic objective is considered relevant because it is supporting the vision and mission of the company which states the provision of holistic entertainment solution to its customers. The relevance is also observed because it is able to provide its stockholders with the idea of company’s reinvestments by 4.4% and initiatives that support the increase in its market share. Moreover, the financial objective is also considered relevant due to the possible financial prospects of the company that indicates increase in market share, which will eventually increase the earnings per share of the company.
Time Oriented
The strategic and financial objectives are also time oriented because it provides the time duration 6 months and 1 year to achieve its objectives.
External Analysis
PESTEL Analysis
The PESTEL analysis of the company is conducted to enlighten the external environment of the company and determine the extent to which it effects the strategic direction of the company. The PESTEL analysis is discussed in accordance with the following viewpoints:
Macro-Environmental Trends
Economic Challenge
The increasing recession can reduce the buying power of the customers which can effect the customers’ ability to spend on the leisure products like gaming consoles and interactive games. It will restrict the company to charge premium price for its games regardless of the fact that game development requires high cost due to its customization, interactive features and 3D effects. Moreover, the changing customer demands will outdate the company’s games in a short duration of time and hence, the company will not be able to generate adequate profits at low cost in a limited timeframe.
Technological Development
The technological developments increase the standard of features at which the company needs to produce its games. Moreover, the company needs to ensure that its games are in accordance with the system acceptability of the new operating systems and gaming consoles. The differences in operating systems and gaming consoles needs the game software to be compliant with them otherwise such games are not installed, however, the compliance with such software and operating systems increases the cost of production and licensure expenses for the installation and effective execution of the games. The customers prefer such games that are compliant with the gaming consoles and hence, the company has to address its games’ compliance with all the available operating systems to ensure its sustenance in the market.
Legal Constraints
Germany, Australia, Japan, United States, United Kingdom and Brazil have restrictions against the violent media content due to which the company cannot incorporate sales from its interactive games that incorporate violent fights. Moreover, more countries are inclined towards restricting the prevalence of violent media in order to reduce the rate of juvenile delinquency. On the contrary, customers are more inclined towards the violent media that depicts the action figures and hence, this situation can cause major dilemma for the company in accordance with the customer demand and restricted distribution of its products.
Competitive Analysis
Porter’s Five Forces
Industry Rivalry (2)
The rivalry in the gaming industry is considered very high because there are many game developing companies that are producing games in accordance with the local preferences. For example, Tencent, Perfect World and Yodo 1 are Chinese game companies that are targeting their local and international customers and are more efficient in developing games. However, the development costs of games are very high and not every game yields excessive profits for the company and hence, economies of scale are incorporated by the gaming giants. In this manner, it reduces the cost to the minimum but does not provide adequate competitive advantage to attract and retain customers in accordance to their preferences for the long-term. It also increases the availability of countless games in the market which eventually increases the competition in the industry. Moreover, the gaming industry is comprised of the companies that are similar in size and possess almost equal market share due to which these companies tend to focus on the diversification due to which the rivalry is amplified in the industry. The prevalence of free online games has also effected the gaming industry because customers tend to incline towards the free games and hence, the sustainability and profitability of the premium games becomes jeopardized.
Threat of New Entrants (2)
The threat of new entrants is considered low because game manufacturing requires a cost by means of game design, development, production, distribution, after-sales support and maintenance. In this manner, it becomes difficult for the new entrants to invest in the game industry. However, the companies that are already operating in the era entertainment media can consider the decision of diversification and incorporate the production of games. Therefore, the threat of new entrants resides to the entry of big companies that possess the adequate technical skills and infrastructure to operate in gaming industry. It eventually indicates the low threat of new entrants because there are not many companies that are adept at engaging in such business and their decision to operate in gaming industry will take time to be executed due to the high cost and required infrastructure. In this manner, by the time new entrants enter in the industry, the current players would have acquired the learning curve and incorporated an extensive market share and hence, their profitability will not be threatened.
Threat of Substitutes (3)
The substitute for the games mainly comprise of real-life sports, board games, music, events, movies and television series because they provide entertainment to their audience in their leisure time. These substitutes incorporate an indirect competition in the industry. The technological advancements have increased the dependability of the individuals whereas, the increasing legal constraints due to the prevalence of violent media has increased the social reforms that are intended on developing healthy leisure activities among the customers of gaming industry. The real-life sports and events provide the individuals with the ability to reduce their stress and increase their healthcare status by means of engaging in the healthy and competitive activities. The legal constraints have imposed the prevalence of such activities via the social services and educational institutions. The ever-changing technological changes outdate the gaming consoles at a higher pace, for example Nintendo was famous in 90s but it lost its market standing when Play station was introduced and hence, its games became outdated with the hindered prevalence of its gaming console. In this manner, the threat of substitutes is observed to be moderate in effecting the profitability and sustenance of the gaming industry.
Bargaining Power of Buyers (2)
The buyers in the gaming industry are comprised of the retailers and gamers, and are considered as the key customers of the gaming company. The customers are being offered with the numerous gaming products from local and international gaming companies that also vary in price. In this manner, the customer has loads of games to select and incorporate the decision of purchase and hence, the buying power of the customer is considered very high. The customers are highly likely to switch to another games when they lost interest in them regardless of the fact if the game is outdated or not. The switching cost is very low due to the prevalence of number of games in the market. The brand loyalty is also considered very low because customers switch at a higher pace if they not receive the perceived value from the trial versions of the product. The brand image of the company may intrigue customers to consider the installation of the trial version of games but does not ensure that they customers will buy the product on the basis of the company’s brand image, which eventually makes the gaming industry at a high risk of fluctuations in sales and imposes a high extent of buyer’s bargaining power.
Bargaining Power of Suppliers (4)
The bargaining power of suppliers in the gaming industry is mainly comprised of the gaming developers who tend to charge high cost due to their innovative ideas for action fugues, game design and interactive content. These copyrights of these ideas are being purchased by the gaming companies due to which it becomes highly costly for the company. Similarly, the increasing trend of interactive games has increased the demand of games in the market due to which the companies have to hire the competitive and innovative game developers who can meet the customer requirements and preferences. Similarly, game maintenance also requires the on-going technical support from the game developers which bounds the companies to ensure the scheduled maintenance of games regardless of the decreasing number of players / customers because the companies have to maintain their integrity with their product. In this manner, the technical staff is paid regardless of the fact the games are profitable of the company. However, the game developers are usually integrated in the gaming company with respect to their employment contract which bounds them to switch their jobs for a short duration of time and hence, it provides the company with the advantage over its suppliers. In this manner, the bargaining power of suppliers is considered moderate in the gaming industry.
Summary of Analysis and Conclusion
Vivendi is highly inclined towards enhancing its business operations in the gaming industry in order to provide interactive entertainment media to its customers. The company is strategically focused on achieving its objectives, which are highly in accordance with its competitive mission and vision. The external environment of the company indicates the challenges related to the government legislations, high cost of game development and technological advancements, however, the company possesses adequate finance to keep pace with the high cost and technological changes. The competitive analysis of the company indicates that the company is encountered with high competition but it is not threatened by the prevalence of new entrants due to the high costs related to the production. The buying power of suppliers is considered favorable for the company because it can attract competitive workforce to provide it with a competitive advantage over its competitors. However, the company is highly threatened by the prevalence of substitutes and bargaining power of buyers. The overall analysis indicates that moderate effect of porter’s five forces in the gaming industry, which eventually indicates that the industry is moderately favorable for Vivendi.
References
Vivendi (2016a). Vivendi in Brief. Vivendi. Available from: http://www.vivendi.com/vivendi-en/vivendi-in-brief-2/
Vivendi (2016b). Innovative Positioning. Vivendi. Available from: http://www.vivendi.com/social-responsibility/vision-challenges/our-sustainable-development-policy/our-specific-innovative-issues/
Vivendi. (2016c). Financial Report and Unaudited Condensed Financial Statements for the first quarter ended March 31, 2016. Vivendi. Available from: http://www.vivendi.com/wp-content/uploads/2016/05/20160511_Vivendi_Financial_Report_and_Statements_Q1.pdf
Vivendi. (2016d). Our History. Vivendi. Available from: http://www.vivendi.com/vivendi-en/our-history/
