This action might not be possible to undo. Are you sure you want to continue?
Group 9: Li Shuguo, Liu Yazhuo, Tanda Song, Han Jie
Since resources and capabilities are the primary sources of profitability, we first identify EA‟s resources and capabilities and find its competitive advantage through primary and support activities. EA‟s human resource and knowledge management is their key advantage. EA make efforts to go across multiple platforms to make easier transplant and deploy globally. EA‟s in-store distribution helps to gain higher margin and better market awareness. EA has a good cooperation with other companies to work more effectively. The main difficulties faced by EA to sustain the competitive advantage sourced from two aspects. On one hand, from the external perspective, the first problem is how to hold the talents in the acquisition company; even though the elitist can be hold, the concretizing of two different company‟s culture can still be a critical issue to handle. At last, it is so hard to find the right person with both the entertainment background knowledge and the experience in game industry. And on the other hand, from the internal perspective, the communication within the company is still one of the biggest blocks to the development of the company, which cannot easily solved by email. In internal part, we analyze the communication and Intellectual capital. To sustain the competitive advantage in the future, we propose analysis and implementation in the following three ways, First, make it more efficiency and fully, Second, identify opportunities, online game and Asia
Third, correct the weakness, Wii
Considering the fact that the rules are partly sourced from the movie industry and these two industries indeed have lots of characters in common, we decide to apply the rules to the movie industry. Because of the inherent advantages over content and marketing owned by the movie industries, we mainly focus on the part of process management of the rules this time. Firstly, separating the roles more clearly by responsibility; secondly, setting up the milestone for the developing process; and finally, increasing the feedback during the production
process. These “rules” can be a new guide to the developing of movie; meanwhile, to overcome the limitations of these measures, we have to balance all the factors and make the right trade-off at the right time.
The source of EA’s competitive advantage
The video game industry is a hit-driven business, where small number of blockbuster titles generates most of the profits. No firm produced more hits than EA.1A firm‟s resources and capabilities offer a more secure basis for strategy than market focus, they are the primary sources of profitability. 2
Step 1: Identify firm's resources and capabilities
We first identify firm's resources and capabilities in table1 and table 2. Apprising EA’s Resources RESOURCE CHARACTERISTICS Tangible Resources Financial Cost efficiently Physical Intangible Resources Technology Artist and Technical employees Reputation 'the world's leading video game publisher' Good brand loyalty to customers Human Resources Talented and creative producer & director Training, experience, adaptability EA's experience Commitment and loyalty of employees Training rules Table1 Identifying EA’s Organizational Capabilities FUNCTION CAPABILITY Corporate Management Affiliated companies CRM companies Movie companies MIS Knowledge sharing R&D Produce hit titles Manufacturing Multiple Platform Flexibility Design Innovation Marketing EA Labels Sales, Distribution In-store Distribution Table 2
MICHAEL A. ROBERTO, GINA M. CARIOGGIA, Electronic Arts: The Blockbuster Strategy, 2004 Robin slide page 43
Step 2: Explore linkages between resources and capabilities to find competitive advantage
Michael Porter argues that an organization can enhance its competitive positioning by performing key internal activities in the value chain at a lower cost and better than its competitors3. Since activities are basic units of competitive advantage, we use Porter‟s value chain to look for EA‟s competitive advantage through major and support activities and come to the following conclusion as source of competitive advantage: Good Human Resource and Knowledge Management EA‟s human resource and knowledge management is their key advantage. EA has very good reputation for its talent executive small group. All of these cumulated successful experiences are the huge treasure. Actually; EA‟s internal network is kind of an informal but more opening organization which makes it easier and more convenient for the employees to learn and share knowledge. The new releases of products are mainly due to the successful coordinating of human resource. In addition, EA also launched the Field Guide Initiative- a project intended to leverage the knowledge present in EA studios so as to maintain and enhance its advantage furthermore.4 They develop an internal web site to share art and design tools and combine experts‟ knowledge in the way of listing rules for training and sharing. They also have a mobile e-mail solution to make information access work better. Multiple Platform to make easier transplant As a global company, EA make games across PlayStation 2, XBOX 360, GameCube to make easier transplant. Gibeau said: "Our basic competitive advantage is that we can publish games across multiple platforms simultaneously in a cost effective way and in multiple languages and deploy it globally better and bigger than anybody else"
In-store distribution (market & sales) to gain higher margin and better awareness and reduce cost EA distribute games directly to retailers and launched EA Affiliated Labels. EA's in-store distribution capability became one of the firm's distinctive capabilities.6 Cooperation with other companies to work more effectively Cooperating with RightNow® to optimize its customer relationship management (service), EA recently gained the Gartner CRM Excellence Award.7 In order to work more effectively, EA usually make core productions itself such as sports games, and cooperate with other small companies to complete some other productions, which can turn complex jobs into simple ones.
3 4 5 6 7
Bartol et al, 1993: 211 MICHAEL A. ROBERTO, GINA M. CARIOGGIA, Electronic Arts: The Blockbuster Strategy, 2004 Jeffrey Fleming, we see father: a history of EA, 2007 MICHAEL A. ROBERTO, GINA M. CARIOGGIA, Electronic Arts: The Blockbuster Strategy, 2004 Electronic Arts relies on RightNow® to cost-efficiently support global growth and brand dominance, RightNow®
Step3: Appraise firm's resources and capabilities
To appraise EA‟s resources and capabilities, we analyse the strategy importance and EA‟s relative strength by hypothetical only.
R1. Financial R2. Technology R3. Reputation R4. Talented people R5. Traing Rules
Importance EA‟s Relative Strength 6 5 7 8 8 6 7 7
C1. Corporate 9 Management C2. MIS 8 C3. R&D C4. Manufacturing C5. Design C6. Marketing C7.Sales, Distribution 7 8 9 7 7
EA‟s Relative Strength 8 7 4 6 6 5 6
Appraising EA‟s Resources and Capabilities
Relative Strength R3
Zone of Irrelevance
Strategic Importance Figure 3
Factors which make it difficult for EA to sustain its competitive advantage
As considered that human resource management is the most significant competitive advantage, it might be most difficult to sustain this advantage. In this part, we analyze the difficult factors in two perspectives. The first one is from the external of the firm to identify, such as the acquisition the other companies in the industry and franchise in the entertainment industry. The other one is internal view; we also use Porter‟s value chain8 to examine each part.
The acquisition of dozens of game companies has contributed 15 percent revenue for EA.9 Since it mainly depends on the financial capability, it‟s also effectively reduced the competitive leader position at the same time. On the other hand, the affiliated companies faced the human resource management problem. Keeping the talent employees still work in the company sometimes is difficult, and the game creators usually don‟t like constraint by others. In our opinion, to get the talent team of the original hit titles might be the most important merit of acquisition. Another difficult question is that although we get the core team of the acquisition company, we also have to integrate the team‟s capability to EA. It‟s even more difficult to reveal the creative and successful management experience to the whole corporation.
Entertainment licenses provide 16 percent revenue in all, which is the second largest one (Sports 42%).10 Human resource management is also very important in this part. Firstly, we have to find out the suitable people to coordinate the relationship between the movie industry and game industry. Also we should create a team to negotiate with movie industry about the co-enhancement of both titles and details. So it‟s a difficult factor to create a team to deal with the relationship with movie studios.
Competitive Advantage: Creating and Sustaining Superior Performance, 1985 Adapted from Banc of America Securities research report, March 13, 2003 10 Adapted from Banc of America Securities research report, March 13, 2003
The organization of EA is quite a huge and kind of formal organizational corporation. As an innovation and creative game company, it should use the information organization to communicate with each other.11 It should high degree of learning and knowledge sharing.12 And it also encourages an open innovation attitude;13 it will lead to „disciplined creativity‟.14 But it‟s quite difficult to communicate in an efficient way. Game design and producing is an art work, so we think the old way is too formal and lack of flexible and interactive.
After studied the notable games published by EA, we find out nowadays most of those are created based on the former products and continue to make sequel. (About 12 series of the total amount 17) 15 It‟s both the capability of EA to achieve succeed until today and also become more and more difficult to sustain. To inherit the success hit titles is not only to make the series of game upgrade in the picture quality and some relevant adaptation with the hardware, but also creative some tangible or intangible features. We particularly focus on the improvement by human resource management perspective. It‟s hard to transfer the information to the other team which takes over the project in the future. Also maintains the essential idea of the original game need quite a lot of work to do. There are many gamers complain the game‟s quality is not as good as before. 16 Some analysis display the market share loss is questionable by the series games, sometimes the sequel almost destroy the game image established before.17
EA’s management to ensure that it sustains its competitive advantage going into the future
To sustain the competitive advantage in the future, we propose analysis and implementation in the following three ways, first, make it more efficiency and fully, second, identify opportunities, third, correct the weakness. [Grant 2008]
11 12 13 14 15 16 17
Teigland et al. 2005 Robin, Strategy slide 3 page 14 Chesborough 2003 Case, Page 9 Wikipedia, Electronic Arts, 2008,3,4 18:19 Brendan Sinclair, GameSpot gamedaily.com & Rob Perchese, eurogamer
Efficiency and fully
Although the human resource management in EA is already efficiency, there still have room to improve. For example, we suggest giving the employees the opportunity to join into different affiliated companies in one year time, such as the exchange student between universities. It may increase the interest and work motion of employees and the information and experience transferred to the other part of the corporation. Furthermore, we invent the gamers come in to the company, participant in the process of game design and producing. In this way, we modified the value chain; from the traditional one to a new one which introduced the consumer contribute the intelligence to our product.
According to the market share, EA‟s online game is only 4.5% revenue of market share,18 while online game is growing rapidly. On the other hand, online game is much more time consuming than others. The development, services and business model of online game is quite different compare with the one which EA is familiar with. And if EA change business model to cost based on time or other ways, the revenue might be significant grown with the online game trends. We propose acquisition some online game company to accelerate to this market, especially learn the business model from them.
There is no doubt that Asia might be the largest game consuming area of the world.
Adapted from Banc of America Securities research report, March 13, 2003
Take china game market (China‟s online game‟s market hit 12.8 billion yuan in 2007) as an example, to go to this market we faced two main problem, one is culture across, the other is „game crack‟. For the first one, we propose to employ the local background game designers, artists and gamers to assistant the producing of the game. We also want to cooperate with the local movie studios to negotiate the industry cross develop. It‟s rarely entertainment licenses in this market. After studied the communication difficult within the corporation, we find it might be even harder to communication with the outboard department. It is suggested the internet meeting and mobile communication should be used to make management and knowledge transfer more effective and efficiency.
We choose Wii as the most important weakness for research. Nearly 85 percent revenue in game industry is contributed by video game software,19 and Wii is the fastest growing game console. In this platform, EA grab not much market share, while Nintendo hold both the advantage of hardware and software. However, the sports game is EA‟s main advantage, as well as driving games and Sims are all suitable to be transplanted to Wii. In the future, we propose to make the Nintendo game team stronger and specially create a team focus on the action controller such as the Wii remote which can detect the acceleration and orientation in three dimensions. According to our research, this kind of game console might predict the next generation game platform. Access into the market earlier might establish a R&D fundamental for the future competitive.
Critically examine the rules of successful development set by the creative directors at EA and discuss whether these can be applied to another media industry of your choice
Game industry is a kind of combination of both software and art, which determines its special developing process. It has to possess both the creative from art perspective and disciplines from software developing perspective. After examining
HooVers, 15% revenue from PC game
the rules set by the creative directors, we found out it can be briefly induced to three aspects. The first one is content selection; main concept and idea of the content must be highly extracted and articulated, which means you have to understand it very well, especially concerning to the advantages. The second one is developing, which stressed the importance of milestone and feedback, ensure the measuring and management and also avoid the unnecessary loss. Thirdly, when it comes to marketing, the core concept is to be as much comprehensive as possible in spite of the target group or the environment. The most valuable part of the rules is the way it controls the developing process. Having taken an extensive observation of the media industries, we would like to look into the movie industry intensively. Firstly, although there are a lot of common characters between the processes of making movies and games, it is still very common to hear about budget or managing problems of a movie, for example, An Lee's Lust Caution failed to attend the Cannes Film Festival due to the problem of delaying and over budget. With the trends of professionalization in the movie industry, the core capability of movie companies should be their capabilities of managing the process of selection, production, promotion and release but rather merely making good movies. To make this idea into practical, several measures could be taken: Assign the roles more clearly by responsibility. There are always conflicts between the director and executive producer. In fact, it is executive producer who decide when to begin or cut and where to spend the money. 20 So it is necessary to re-define the role‟s responsibility and implement it completely. In addition, it is very common that some irrelevant person such as an authority to play this vital role especially outside Hollywood.21 However, as an executive producer, the person should be qualified and competent enough to be professional, he or she must have strong capability to manage, finance and communicate so as to supervise and control the production process better. Set up the milestone for the developing process Setting the milestones of the whole process means the whole team should make much better plan before making the movie. After taking as much possibilities into consideration and optimizing all the resource, the main production members including director, producer and executive producer should make out a reasonable plan by setting several milestones of the pre-production, production, and post-production and also observe it strictly. It is the way to make the process measurable and increase the producing efficiency and reduce the risk of exceeding the budget or deadline. Increase the feedback during the production process. Movie is a kind of subjective art, making it attractive to everyone is impossible. But we can broaden the target group as larger as possible by increasing the feedback
http://en.wikipedia.org/wiki/Executive_producer Executive Producer: the Core Figure behind the Big Screen
during the production process. Before the movie is finished, we could also make a kind of “finished thread” of the movie and ask for the feedback from the minority from different segmentations. It will be especially valuable for the commercial ones, because it is easier for the film makers to meet the mainstream‟s taste, which will have positive impact directly on the box office. The biggest merit of the rules in the game industry is the process management. However, there are still some limitations; for example, shooting itself is restricted by lots of factors such as the weather and personnel. Furthermore, as a kind of art, it cannot be treated merely as a commercial production. As a result, the key to successful process management is either the right person or the rigid rules and perfect plans but the degree of balancing all the factors and make the right trade-off22 at the right time.
What is Strategy Michael E. Porter
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.