Gree International Inc encounters several challenges in its attempt to expand the market share. The competitive nature of the global firms, especially due the technological advancement has affected the company’s success strategies. Most international markets have diverse operational and marketing tactics, which hinders Gree from acquiring an extensive market share. Most modern companies have embarked on creating competitive advantages to enable them succeed in the competitive markets. The emerging challenges in the gaming industry affected the market venturing strategies set by the Gree Inc‘s management team. The firm had to compete with globally established entities, which had a vast knowledge on marketing and distribution tactics. It is essential to conduct adequate market research before implementing the extension plans.
Industrial Analysis
Barriers to Entry
International entities encounter challenges that hinder free entry into the market setting. Gree Inc’s attempt to expand its ventures was faced by various hindrances in the global setting. The barriers to entry may render the market uncompetitive, which leads to the creation of a monopoly entity. The barriers to entry differ in accordance to the nature of the industry involved; Gree Inc belongs to the social gaming industry, which has become substantially competitive due to the advancement of the modern technology.
Brand loyalty to competitors’ products has created a barrier for Gree Inc to penetrate in foreign markets, as most customers in the international market associate the firm with Zynga, whose stock price has reduced over the last years. The company faced challenges in establishing a reputable image for its brand, which prolonged the duration for the targeted customers to become loyal. The firm had to convince potential investors that the revenue creation process would not be altered by the regulations that hindered excessive usage of ‘Complete gacha’. Investing in establishing a strong brand presence in the global market has altered the company’s entry plans.
The economies of scale attained by competing firms in the global market setting hindered Gree Inc’s penetration strategies. Other gaming developers in the international market had the advantage over Gree, for instance, due to the extensive usage of Ios and Android; this measure forced the company to increase its investments to attain substantial economies of scale. The latter helps a firm to minimize on its production costs, which sequentially improves the profitability margin. Companies with relatively high productivity capability tend to minimize their overall average costs; this situation helps them to attain economies of scale in the production process. Gree International Inc faced difficulty in achieving high profitability margins in the new setting as the production volumes reduced significantly. The inability to attain large economies of scale hindered the firm from being competitive, which reduced its success mission, as experienced in Japan.
Bargaining Power of Suppliers
The ability to suppress suppliers’ bargaining power is vital in increasing a company’s profitability. Gree focused on opening a platform to enable the external developers leverage the company’s user data. Ensuring that the firm has control over its suppliers has helped the management team formulate and implement development strategies, which have contributed to the overall success, especially in Japan. Most of the supplies are locally produced, which reduces the production costs for Gree Inc.
Bargaining Power of Buyers
The customers’ bargaining power in the online gaming industry has increased over time; this can be attributed to the emergence new trends in the market. Most clients have adequate knowledge regarding the industry’s performance, which has increased their overall expectations. Potential clients can bargain for price cuts and high-quality services, which tends to increase the competitive rivalry among the existing firms. Gree Inc has been successful in attaining substantial revenue from the Japan market, especially since the year 2012. This, however, has not been the situation in the international market, as Gree Inc has achieved lower profitability than in the domestic market. According to studies, the modern companies have embarked on advertising to retain relevance in the market. Gree International Inc spends approximately $152, 000 million on its marketing strategies; the company has to ensure that the advertising measure are comprehensive since the targeted clientele has full information of the products and the market.
Threat of Substitutes
The presence of substitutes in the global market has intensified the level of competitive rivalry in the gaming industry. The emergence of cheaper and similar games is one of the most common substitutes in the industry. Gree has focused on product differentiation measures to retain its competitive advantage. The firm ensures that its products compete among each other; this aspect enables the developing team to gain useful ideas, which improve the differentiation aspect. Brand loyalty, especially in Japan has enabled Gree Inc to overcome the substitute threat. It is imperative to enhance loyalty among the international customers to ensure that the substitutes do not pose a threat to the company’s objectives.
Intensity of Rivalry among the Competitors
Gree Inc faces direct competition for firms, such as, DENA, Zynga, Facebook, and steam. Increased competition reduces the market share for a firm, and it, therefore, is imperative to improve the performance level to increase the competitive advantage. Gree has acquired the Japan market strategically, since, in 2012, its revenue was four times what Zynga was attaining in the American market. Improving the quality of the products by adopting creative and innovative measures can help the company overcome the rivalry of the prevailing competitors. The management team placed a stable emphasis on the external developers’ platforms, which differentiated the development strategies from those initiated by DENA.
Internal Market
The management of the internal market plays a significant role in defining the performance of the company. The management treats the employees as internal customers of the entity; this measure helps them to derive useful information relevant in the product development strategies. The employees tend to gain a sense of belonging to the company’s operations, which improves their innovative traits.
Gree has focused on promoting the ideas to its developers; this aspect has enabled them to develop new games within the existing platforms. The internal market development has enabled the company’s developers provide promotion programs to the intended external clientele. Maintaining healthy relationships with the members of the internal market helps the company to formulate comprehensive approaches essential in venturing into the external market. Gree can use the platform to test and approve its products before releasing them to the external market, which improves the quality of its operations.
The company’s developers attain the morale to produce high-quality games for the potential customers. Gree’s management team ensures that the employees’ efforts are valued to enhance healthy business relationships. The key performance indicators( KPI’s) of the company improved rapidly when the firm set the games to compete among each other. The internal developers gained useful knowledge, which enabled them to improve on their products. The Gree’s internal market has sufficient knowledge regarding their input into the company’s success.
A Suitable Option
Gree should expand its markets into the global scene. One of the main reasons for embracing the expansion strategy is the fact that the company’s market in Japan has reached its saturation point. Most of the clients have used the company’s products, and the segmentation strategies have achieved the set objectives. Failure to venture into new markets may have negative effects on the company’s performance as clients are likely to switch to other products in an attempt to test the difference. According to statistics, Gree Inc had attained 20 million users locally in the year 2010.
The main rival firm, DENA, had initiated the global expansion measures; Gree should adopt the same strategies to increase its competitive advantage in the global market. Employing similar marketing strategies and retaining its strong organizational culture can help Gree attain the targeted objectives in the international market. Other competing companies can attain the Japan market in case Gree fails to adopt an expansion strategy. Global players, such as Facebook, have launched their operations in Japan, which poses a major threat to Gree’s performance locally. Zynga, a global competitor, established a joint venture with Soft bank in the year 2010.
The expansion measure can enable Gree Inc to match up with the changing trends in the global market. The technological advancement has influenced the occurrence of several changes, for instance on the use of smart phones. The traditional trends of Japanese production have faced global competition; Gree has to strategize on how to improve its gaming features to fit the new mobile technology. Statistics reveals that smartphones sales in the year 2009 grew to 100%, among which 6.8% represented the overall mobile handsets sold in Japan. The international market can expose Gree’s to the emerging demands of modern clientele.
Recommendation
Relevant segmentation strategies should accompany the expansion measure of the company. Market segmentation is a vital element in identifying the feasible market ventures; this aspect enables a company to minimize its production costs, and focus on satisfying the targeted clientele. The global market allows a company to design a business plan according to the demands of the people at the target market. Gree Inc can segment its target markets based on behavioral, socioeconomic, and demographic data; this measure can enable the company to achieve high sales, customer attraction, and huge profit margins. The company can identify possible business opportunities and future investment plans in the global market once it embraces the segmentation strategy.
Tailoring the games in accordance with the client’s specifications can help Gree Inc to retain a relevant sense of competitiveness. Building a team development team in each location can help the company satisfy the segmentation requirements. The segmentation process can enable Gree to tailor the products according to the local clients’ preferences, which increases the level of brand loyalty in the international market. Other Japanese companies, especially in the automotive industry have succeeded in the segmenting global markets. Retaining the organizational and brand culture has played a key role in enhancing the efficiency for such firms. Market segmentation can help Gree become the leading gaming company in the global market today.
Graphs and Exhibits
Exhibit 5 Market Capitalization of Gree and DENA (2009-2012)
