Square Enix is a popular Japanese video game company that produces the RolePlaying Games (RPG) types of games

. Square Enix is born from two companies merged into a single company. These companies are Squaresoft and Enix Co. Squaresoft is known for producing games such as the popular Final Fantasy series which earns multiple awards including the RPG Game of the Year awards. Enix Co. also produces some of the best RPG games called Dragon¶s Quest. Dragon¶s Quest also earned many multiple awards and the game also has multiple series due to its popularity. The reason behind the merging of the two companies is because they had agreed that they are both on financial trouble and also they would like to both cooperate in order to be able to compete with the international market. After the merging of both companies to Square Enix, the company continued to produce the games originated from the Squaresoft which is Final Fantasy. Square Enix has earned the majority income starting from Final Fantasy 10 to 13, where Final Fantasy 10 has earned critical acclaim amongst the fans and from the reviewer with the exception of Final Fantasy 14. Final Fantasy 14 has not met the customers¶ expectations due to the low review from the game and user reviewers. Square Enix wrote on their report that they are deeply sorry for not be able to produce the game to meet the expectations of the customers and they will do better for producing the next game that they are going to produce.

1A. Income Stream and Costs
The income trend of Square Enix has been increasing from year 2006 to 2007. The income of the company declines from the year 2008 to 2009. In 2010 the income of the company rises to its peak. The income of Square Enix comes from various segments of entertainment ranging from games, amusements, publications, mobile phone contents and other merchandises. The majority of income of Square Enix originated from their games segments. It comprises of 57.2% of the company¶s total income. The income of the games segment is mostly derived from the company¶s known Final Fantasy series, Dragon Quest series, and Kingdom Hearts. While other games such as Batman: Arkham Asylum where Square Enix published the game for Japan release also made one of the million sellers in Japan. The Final Fantasy and Dragon Quest series are still considered as one of the top million sellers of Square Enix. ³FINAL FANTASY, which has sold over 96 million units worldwide, DRAGON QUEST, which has sold over 53 million worldwide.´ (Yuichi Wada, CEO of Square Enix). According to Square Enix, as of the year 2010, there are five major titles of games that have become million sellers. These games are Final Fantasy 13, Dragon Quest 9: Sentinels of the Stary Skies, Batman Arkham Asylum, Kingdom Hearts: 358/2 Days and Dragon Quest 6, where Final Fantasy 13 had sold 5.55 million copies worldwide and Dragon Quest 9 sold over 4.26 million copies in Japan.

8%. The total net sales of this segment are decreased from the previous year¶s sale and as well as the operating net income.299 million (a decrease of 12. It comprises of 27. ³Net sales in this segment totaled ¥52. CEO of Square Enix). One of the other segments is the amusement segments where Square Enix produces arcade games.Besides the income coming from the gaming segment. to ¥2.892 million. there are also some segments that Square Enix has also been working on. .7% from the same period in the prior fiscal year). Square Enix¶s arcade game Dragon Quest monster battleroad 2 did perform very well as of the other arcade games where there are still on low levels where there is a difficulty on competing with the amusement markets.´ (Yuichi Wada. and operating income decreased 11.2% of the total income of the company.

Lastly. Square Enix has supported in the airing of both series of Full Metal Alchemist anime as well as Soul Eater anime. Square Enix also licensed in some other merchandise. gaming. development of portal services. ³Consequently. The company receives 7. to ¥4.6% from the prior fiscal year). this segment receive an increase of 46. The diagrams above shows the amounts of costs spend on properties and equipments. While the maintenance costs of the equipments of the arcade machine are high. Most of the losses are from the Amusement equipments whereby maintenance costs of the arcade machine are relatively high. net sales in this segment totaled ¥14. the loss to the costs of the structure maintenance is also considered high.1% from ¥4. Being the smallest of the income.171 million while the net operating income has increased 8. Two of the most famous portal services of Square Enix are the ³FINAL FANTASY´ and ³DRAGON QUEST´ portal services have leveraging the users for its original content.´ (Yuichi Wada. and operating income increased 16.120 million.827 million. Square Enix has supported many strong mangas by broadcasting it on TV in a form of animation.367 million (an increase of 10. . This merchandise is included the CG-animated film of Final Fantasy VII Advent Children and soon the ³COMPLETE´ version of the animated film released in April 2009.4%.5% of the income from publications. game strategy magazines and comic magazines.5% from the previous year as well as the operating income has also increased 124. There is an increase of the income from the previous year as well as the net operating income. These mobile content services provide the user with a planning. This is the only product that contributes to the entire sales and profit of this segment with only 2.2% to ¥1. These are the cause of Square Enix major losses which added up to a total of ¥389 million in 2010. ringtones and wallpapers.593 million.9% to ¥10.Square Enix also supports manga comics. The net income of the mobile content services has decreased from its previous year¶s income by 6. Square Enix also receive income from the mobile content services. CEO of Square Enix).8% of the total income of Square Enix.

Square Enix has shown in great success of supporting the manga called Full Metal Alchemist into an animation. Square Enix also produces a CGAnimated Film to impress the curiosity of the audiences and gamers who have played the game called Final Fantasy VII. ³And these audiences are already engaging with platforms like Facebook and iPhone as games platforms -. Based on the amount of income generated in the amusement segment. Since animation from the manga drawn by the artist receive strong reception. Measures of Performance Square Enix also has other segments to cover besides their major is in gaming for consoles. A publication of manga and animation that is broadcasted on the TV is also an important sector to strengthen up.whether or not they think of themselves as gamers. it is shown that although there are declines in income for the segment. It can be done by producing flash games to interact with the customers online.1B. This application is produced to allow Square Enix to build a foothold in the social networking market. The quote above tells us that customer who does not have to be gamers are the main targets for Square Enix to gain more customers¶ trust. Square Enix should maintain this segment in order to thrive and experience in the gaming world. Square Enix also produce service portals for the mobile users to be able to experience gaming through mobile phones. Many of the companies are looking forward into this activity. Not only Square Enix are able to impress the gamers but also anybody who does not have to be a gamer. Since mobile phones in today¶s age are advancing. In April 2009. ringtones and wallpapers for the user to further enjoy the product of Square Enix. Besides gaming. Square Enix has produced games. Square Enix produced a new CG-Animated Film called Final Fantasy VII Advent Children. These segments are the creation of arcade games for the others who prefer playing the arcade games to consoles. the arcade game created by Square Enix called Dragon Quest monster battleroad 2 receive quite an excellent review both from the gamers and the reviewer. CEO of Square Enix). "I think that's a remarkable difference between our industry and the other entertainment industries. Square Enix also created two flash games to be applied in Facebook. ." (Yuichi Wada. Customers will be further impressed of the product of Square Enix and eventually gaining trusts from the customers. it is very important if they turn the hand drawn manga to an animation that is broadcasted on TV nationally and internationally.

In order for the products tobe successfully accepted into the western market. CEO of Square Enix) The example of the games that is targeted for the Western audiences is The Last Remnant and Supreme Commander 2. ³we need to appeal to a Western audience and the best way to do that is to work with development studios that understand the culture of the West. Square Enix has been aiming their product not only to the Asian audiences but also to Western audiences as well.1C. Square Enix will have to co-operate with the western gaming companies to achieve their goal. and to develop those titles that cater to the Western audience. The Last Remnant has ³failed´ to appeal the audiences in the Western market.´ (Yuichi Wada. The major goal for Square Enix is to become the global publisher. Construct the value chain Firm Infrastructure Human Resource Management Technology Development(R&D) Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Services Square Enix has a long-term objective and goal to be fulfilled. With these goal established. Square Enix has to undergo some changes.´ (Yuichi Wada. These changes are to diversify their products. that are born and raised here in North America and also in Europe. CEO of Square Enix). It is because the game is supposed to be targeted to worldwide audiences but it is . ³One of the things that Square Enix really wanted to establish itself as a global publisher in the interactive business.

CEO of Square Enix)." (Yuichi Wada. There are some key economic and environmental factors that cause Square Enix to experiment with the cross-media strategy.´ As The Last Remnant failed to establish a foothold to the western market. ³The Last Remnant was heralded as being a role-playing game with worldwide appeal. Cross-media or "polymorphic content.focused more to the Eastern style of RPG gaming. But there are also some weaknesses found in the company. Square Enix is able to bring itself a step to the Western market. It is done so by co-operating with the western developer called the Gas Powered Games. This will cause the consumer expenditure to fall. One of the example of cross-media is the adaptation of the 3D animation of Final Fantasy VII from the original to DVDs and UMDs. The 3D animation of the adaptation is called Final Fantasy Advent Children. With the co-operation with the western developer. which will lead to the lack of demand. Square Enix has long prepared for this risk by turning to a new strategy called the cross-media strategy. Such circumstances may lead to adverse impact on the Group's business performance.´ (Yuichi Wada. This due to the fact that mobile phones can be used for different purposes ranging from contacting .and character-related aspects. What are the key economic and environmental factors that influence this industry and what is causing (or has caused) the competitive structure and business environment in the sector to change? (Can you identify any Strategic Inflection Points that have affected the sector?) Square Enix has realized their strengths are the production of their RPG (Roleplay game) types of games and has decided that they should turn to cross-media strategy to deliver the games to other forms media. This is their inexperience in delevoping other types of games especially the fighting games. Supreme Commander 2 has successfully established Square Enix to the western gaming market. ³In the event of a harsh downturn in the economy causing consumer expenditure to fall. CEO of Square Enix) means the adaptation of the original media to the other forms of media. Nowadays. 2A. yet it still held very tightly to JRPG clichés in nearly all story. demand for the Group's products and services in the entertainment field may decline. Key Economic Factors The key economic factor that causes the company to adapt to a new strategy is the fear of the economic downturn on the video game industry. mobile phones are very popular amongst the society.

making notes. Square Enix also adapt the cross-media strategy to develop Final Fantasy for online play whereby it is originally a Playstation console exclusive which receives well in the 11th of the series. Front Mission has also been developed for online play. In response. By applying the cross-media strategy. Front Mission Online is also a form of cross-media strategy which the game is usually developed for the Playstation console. web browsing and gaming. The boom of the arcade games in Japan is the cause of Square Enix to apply the cross-media strategy to use. Square Enix has also developed games for the mobile phone platforms. As arcade games are popular in Japan. and Code Age Commanders.´ (Yuichi Wada. Besides Final Fantasy XI. there is also a boom in a new type of gaming called the MMORPG (Massively Multi-player Online Role-Playing Game). Besides the boom of arcade games in Japan.2% of the income. This franchise will launch with three properties: Code Age Archives. Therefore. In Japan. CEO of Square Enix). Key Environmental Factors There are also some key environment factors that cause Square Enix to adapt the cross-media strategy. a PS2 game. Square Enix has taken interest in the MMORPG games and also had produced several MMORPG games to snatch a position in the market. The boom of the MMORPG game does not only affect Japan but also in the worldwide gaming environment. It is shown that video game arcades are one of the targets of video game companies to establish a foothold onto the market. ³The company also introduced its next polymorphic content property: Code Age. Square Enix also has been developing games for the arcade to cover the income from that segment which is 27. This type of gaming is also very widely known to the gamers as they are able to play alongside with friends. Square Enix¶s game called Dragon Quest is originally developed for console platforms. GameSpot). For the mobile phone market. Square Enix is able to produce the game title called Code Age which will be released in multiple platforms not only on mobile phones. Square Enix used the cross-media strategy to port Dragon Quest to the arcade and named it Dragon Quest Monster Battleroad which also has its sequel. Code Age Brawls. One of these well-known games is Final Fantasy XI. a game for the North American mobile market. The development process used is also considered one of the cross-media strategies. One of the environmental factors is globalization. Square Enix has taken the response to MMORPG successfully has also placed itself in the MMO (Massively Multiplayer Online) market. a manga series.contacts.´ (Dan Tochen. video game arcades are very popular amongst the public where students and adults often taking their break by playing the arcade games in plazas. ³An increased focus on online play will mark a sharp change from Square Enix's projects in the current generation. "The media .

One of the examples is the Compilation of Final Fantasy VII to several media. With that character is included in the combine Disney and Square Enix game. Besides releasing the series on CG-Animated.entertainment markets are increasingly becoming more and more global in nature. the original media which is technically efficient in a decade back will be presented in better graphics. the better the quality the game is. Square Enix also released Final Fantasy VII Crisis Core and Dirge of Cerberus: Final Fantasy to the PSP and PS2 respectively with both are graphically better than the original. Assess the competitive position of the company by reviewing the strength of each of the five competitive forces. Under this environment. With better graphics presented. and his appearance as a swashbuckling skeleton earned a laugh from everyone in the room--the crowd was obviously excited to see some new faces included with the company's old standards. ." (Yuichi Wada. it receive the biggest crowd reaction. Jack Sparrow is originated in a movie called Pirates of the Caribbean and it is been crossed with the Kingdom of Hearts 2. The most popular media that is been released on is the DVDs of the title of which is called Final Fantasy VII Advent Children. The Strategic Inflection Point of Square Enix is the advancement of graphical technologies. but also the theme from the other media as well. 2B. it is very important factors for the gaming industry to not only apply the theme of the game itself. With the advancement of technology. GameSpot). we are speeding up our globalization strategy aimed at transforming our Group into a truly world-class enterprise. The CG-Animated film received a very well review from the fans of Final Fantasy. Square Enix has adapted the characters in the Pirates of the Caribbean called Jack Sparrow in their Kingdom Hearts series.´ (Dan Tochen. ³Kingdom Hearts II features Johnny Depp reprising his Pirates of the Caribbean role. CEO of Square Enix) With the globalization has settled today.

Jockeying Positions with rivals Square Enix has been very competitive to other video game companies especially on the companies that publish most of the products.000 copies published worldwide. They also gain rivals not only in Japan but worldwide rivals as well. The table below shows the rank of Square Enix under the top 30 publishers. Square Enix has become an international game developer and publishing video game company. We also see some new players from outside the videogame industry coming in. This is shown that Yuichi Wada of whom is the president and CEO of Square Enix is worried on the takeover of Take-Two video game Company by Electronic Arts. ³We face competition not only from Japanese videogame companies but from game companies worldwide. before the merging of Square Enix. CEO of Square Enix) Originally. Square Enix is placed on the 14th rank with 20." (Yuichi Wada. Since the merging of the two companies. Squaresoft¶s main rival is Enix whereby Squaresoft is a publisher while Enix is a game developer. This is because it is stated in the vision of Square Enix that they will become the top three global publishes. .030.

. Square Enix¶s president Yuichi Wada has stated that the reason behind the failure of the game is due to the consumers is getting more selective on games. Square Enix apologies at least twice to the consumer that the product of Final Fantasy 14 is not up to the consumer¶s expectation. "Consumers are getting more selective. After Square has learned that Electronic Arts have taken over Take-Two video game Company. ³Demand for the products can be so high that it doesn¶t matter what the cost is. With this response.´ (Zane Ewton. Square Enix will also invest more on good quality product to recover from the loss of Final Fantasy 14 and customers¶ trust.Bargaining Power of Consumers The buyers¶ powers in bargaining in the video game industry are relatively high. the company meets many competitors both in Japan and worldwide. it receives poor sales and meets with many negative receptions from both reviewers and fans." (Yuichi Wada. Square Enix increased their overseas video game software sales to 80% from the original 50%. it is an opportunity for all the game companies to earn the consumers¶ trust by providing their most high quality games to the society. Threat of new Entrants Since Square Enix has placed itself on the international market. This is because most video games are targeted between the audiences in the age group of 13-25. Yahoo! Contributor Network. The table below shows Square Enix top competitors. With this negative reception many consumers refuses to purchase their product. Specifically for the targeted demographic (13-25 years old) who have a large sum of expendable income. 2006) With this amount of demand flowing to the gaming industry. and there's a big difference between games that sell and games that don't. When Final Fantasy 14 is released. Final Fantasy has 14 series while Dragon Quest has 8 series. The barrier of entry is high it is due to its high profitable sales in their well-known Final Fantasy and Dragon Quest series. This sparks many competitors especially Electronic Arts of the Western countries. CEO of Square Enix). Square Enix has gained many consumers¶ trust since the development of Final Fantasy series and Dragon Quest which both of the franchise spawned many series.

Japan Tokyo. While both purpose of the industries are to appeal massive amount of audiences worldwide. 2009) Square Enix has started to offer users authentication to the user who used and purchased Vasco¶s method of one-time security authentication devices. Japan Tokyo. One of these games is Final Fantasy 11. With a more secure online security devices applied. Square Enix is able to compete with not just the gaming industries but also movie industries. With the advancement of technology that is applied in the CG Animated movie. ³On April 7. Square Enix plans to begin offering user authentication using this technology to users who purchase Vasco's authentication devices. Square Enix recognized that they have to produce games on multiple platforms as well as a CG Animated Movie called Final Fantasy VII Advent Children. This is includes the authentication of accessing Square Enix¶s content and services. Square Enix has been developing MMORPG games for the society to experience. Many techniques are shared amongst developing games and movies in the gaming industry and movie industries. Square Enix gains a supplier named Vasco. Vasco is the supplier of Square Enix that provides the services of online gaming security to users who gain access to Final Fantasy 11 online play. playing online games on the internet will be safer. 2009.Top Square Enix Competitors Company Capcom Konami SEGA Location Osaka. This made the substitution of video gaming into Hollywood movies. Final Fantasy 11 will be a much secure online game and also will help the growth of the market in that industry. These techniques are the motion capture. Threat of Substitute Products The future video gaming industry is developed and produced similar to the movies in the Hollywood are being produced. Japan Bargaining Power of Suppliers Since the booming of MMORPG games in the society. using CG for better presentation and also hiring Hollywood¶s actor/actress. Audiences .´ (CBR Systems & Networks Security.

0 million copies in PAL regions. many of the viewers especially the veterans of Final Fantasy VII is pleased.5 million copies by December 2005. many of Square Enix¶s products has become a successful products. Besides releasing it on DVDs ad UMDs Advent Children is also released in BluRay which also makes a ranking of #2 best seller of Blu-Ray. 2006). 2C. By using the method ³polymorphic content´. As the year progresses. ³As of September 2008. the most well-known success of ³polymorphic content´ is Final Fantasy VII. the sale of the copies have increased dramatically. Kingdom Hearts is a game that is produced because of globalization whereby there is a collaboration by Walt Disney Interactive Studios with Square Enix.6 million copies in North America. The CG-animated movie did not only impress the local viewers but also the audiences around the globe which makes Advent Children to be gain worldwide fame especially in the United States. 2007). There are many surveys regarding the CG-Animated movie. One of Square Enix¶s games called Kingdom Hearts is also one of the polymorphic contents game. and 5. with 2. and which companies are in the strongest and weakest positions? (Apply the performance indicators introduced in Activity 1.´ (Square EA. One of which is. 3. The survey in Japan called Oricon gives Advent Children the twelfth ranking of best seller animation. 2009). The Blu-Ray product also place their rank on the eighth of the best-selling Blu RayThis is due to the ability of the Blu-Ray displaying of the movie¶s advanced graphics. How well is the present strategy of your chosen company working. Kingdom Hearts has received a critical acclaim amongst the public and fans. It is a result of applying the new strategy called crossmedia. With the CG-Animated movie is produced.2) The current strategy has been proved to be effective where Square Enix has succeeded in applying this strategy to strengthen the company.0 million copies in Japan. One of the survey conducted by Neilson ranked the 3D Animation on the top best selling of all time. With the new strategy applied the animation has earned many best seller awards with more than 1 million copies only in Japan. (Anime News Network. the series has shipped over twelve million copies worldwide. These surveys mostly raked the CG-movie the top selling of all time. ³Nielsen's survey "Top Selling Anime Releases of 2006" had Advent Children ranked at the top´ (Nielsen VideoScan. The series has started many shipments worldwide at a total of 8. The movie is to be titled as the best selling Japanese animation in the United States while having the most units sold in the North America continent. the Bluray was #2 on the bestseller list. It is proved in the quote that Kingdom .of who are not a gamer will also be able to enjoy the movie of which is equal to the standard of Hollywood graphics. During its initial week.

In conclusion. The earlier Final Fantasy series were only sold in Japan. 2009) The game eventually turned out to be successful throughout 2 decades which boost Square Enix from a company that faces impending bankruptcy to a powerhouse. the Final Fantasy franchise is one of the strength core values of Square Enix. Kingdom Hearts 2 has sold about 1 million copies on America.´ (Tor Thorsen. Final Fantasy is originally the last game to be developed by Squaresoft before they are faced with the impending bankruptcy though it turned out to be a successful franchise. 2009) According to the quote above. The series¶ sequel called Kingdom Hearts 2 has shipped many copies in both Japan and North America where 1 million copies to Japan. further development of the franchise will be shipped more to the western countries especially in North America and Europe. ³As the company faced possible bankruptcy. ³Square Enix has revealed that global sales of leading RPG series Final Fantasy have reached 85 million units. the NPD Group reported that Kingdom Hearts II was the highest-selling console game in North America. ³International appeal is one reason that we rank the Final Fantasy franchise above Electronic Arts¶ NFL football games. while Dragon Quest is more to Japan. 2009) As of 2010. IGN. 2007). This is shown that the idea of merging both Eastern and Western style of themes has been successful which it received very well not only in Japan but also in the Western countries.´ (Computer and Video Games. Final Fantasy receives worldwide fame which receives best-selling awards.´ (Travis Pahs. These two games are Final Fantasy and Dragon Quest. with 614. Final Fantasy franchise is sold more in North America then Japan. the Final Fantasy franchise is sold for 85 million copies worldwide. Since Final Fantasy 7 gain world popularity. Final Fantasy beats Electronic Arts NFL games for the 2nd rank of the most anticipated games. The success of the franchise of Final Fantasy is to gain international appeal of the audiences. 3 A. What are their resource strengths and weaknesses of the company? Strength Square Enix is known for the developing the games from the RPG (Role Play Game) genre from which two of them gained worldwide applause. It is proved that the western audiences are pleased by the products that Square Enix has produced. While the copies 60% sold from the shipments in Japan.´ (Computer and Video Games.000 copies. It is also proven that Square Enix have adapted the strategy due to globalization whereby collaborating with the western developers to place the company to the international market. and he realized his next game would likely be his last.6 million copies. This is because it is this franchise that .Hearts has shipped the most copies in the North America Continent with the total of 5. ³By the end of March 2006.

Besides relying on the other companies for publishing. It is also stated that Square Enix¶s games have been exclusive on Sony and Nintendo. This is due to the fact that some of their games are mostly been released on the Playstation and Game Boy platforms. Square Enix also has been weak in the marketing capabilities. Most of Square Enix¶s games especially Final Fantasy is mostly released on Sony Playstation. The game appeals well internationally. It is a result of the collaboration between Square Enix and Walt Disney Interactive Studios. we must fulfill all three elements in order to be a successful developer. 3B. and the hardware platform. They intend to specialize in the genre to produce better RPG games. Square Enix realized that their potential strength of game developing lies on the RPG (Role-Play Game) genre. Sony published Square Enix¶s game for the Playstation platform while Nintendo published its products to Game Boy platforms. Some of its products will have to rely on other companies to be published. These companies are Sony and Nintendo. A strong gameplay within the game requires multiplayer of which most of the Japanese developers are lack of. He stated that his creative team have been exploring this element and still have not found the answer yet. ³Platform diversity has not been one of Square Enix¶s strength and the key products have generally been exclusive to a specific Nintendo or Sony platform. Square Enix also has been faced with the same weakness similar to most of the Japanese game developer companies. Weakness One of Square Enix weaknesses is that they are very platform dependable.´ (Yuichi Wada.´ This gives the company very platform dependable as there are none of their products are released on other platforms. The Kingdom Hearts franchise is also a well-known RPG game. Yuichi Wada the CEO of Square Enix has stated that in game designing. With its products are published by Sony and Nintendo. What are the external opportunities and threats facing them? Opportunities . some of the marketing is also done by those two companies.revitalize and saves Squaresoft from the impending bankruptcy and turning the company into one of the most powerful developers in Japan and eventually worldwide. After the success of the Final Fantasy franchise. it means that it does not focus on the graphics presentation or the physics of game but a very strong gameplay as well. If the game has fulfilled the core gameplay element. community features. ³Core gameplay. CEO of Square Enix) He stated that all Japanese developers have fulfilled the community features and hardware platform but have been missing the core gameplay element. Besides its weakness on publishing and marketing its products to its exclusive platform.

This model fits the category of Chinese players. These companies are Chinese ShanDa Entertainment and Korea¶s NCsoft.5 billion yen($53 million).6 billion yen income while NCsoft has increased their income to 10. CEO of Square Enix). Wada agreed to that Japan entered late in the online gaming world and therefore making Japan the ³third-world country´ in the online gaming world. After the consumers have bought the packet. Wada will want to see his company compete with these two markets in the Asian market. It is because if an online game is introduced in China. Besides attracting the players. Wada has produced the strategy for delivering the online games to the society. Wada stated that these two companies have been dominant in the Asian online game market of which both of them has earned a considerable high amount of net income. One of the games that used this model to deliver to the consumer is Final Fantasy XI. CEO of Square Enix) He also stated that within a year these two companies have made a drastically increased of income of which doubled the initial income of the previous year. arcade model and derived model. he decided to deliver his game based on the arcade model. Square Enix¶s online-game sector made 2. After Wada researched on the pattern of the Chinese players.3 billion yen($22 million) in operating profits. CEO of Square Enix) Consumer income model is the method of delivery that uses packaging of the product into a packet that is sold in the retail stores.9 billion yen. The arcade model of delivering requires consumer not to pay subscription fees. and Korea¶s NCsoft made 5. With these two large companies dominated the Asia online gaming market. With many chain linked internet cafes are build to support the game. This strategy is consist of three types of models ³Consumer model. ³The consumer model is based on games like Final Fantasy XI´ (Yuichi Wada. He stated that online game based company in the Asian market has been very competitive which they have comparable profits. Wada stated that China has eventually becoming a target for the international online gaming publishing.8 billion yen ($27 million). Since Chinese . He wants to explore and produce games that are have online capabilities to possibly lift the terms of ³third-world country´ in online gaming. ³In 2003. Wada stated that Chinese players played their online games through internet cafes. while China¶s Shanda Entertainment made 2.´ (Yuichi Wada. These increased made the ShanDa to have a 6. but they will have to pay the fees every time they played the game.´ (Yuichi Wada. it will attract about a million players into playing it. it will eventually set the company a foothold to the market.Square Enix has two major opportunities to explore. These opportunities are developing ³Online gaming´ and ³Mobile game platform´. they are required to pay the subscription fees to cover the network costs and some additional content being added to begin playing the online game.

One of the games that is released by Square Enix of which are applied the arcade model is Crossgate. The derived model allows the consumer to sell the items that is purchased within the game. But he also stated that it has been a problem for console game publishers to venture into the online gaming world which takes their time to get used to the change. Western developers have grown stronger in years due to the fact that they continue in developing the core gameplay element aspect of which the Japanese game developers are lack of as well as Square Enix. Here are some of the lists: (1) Changes in the Economic Environment One of the risk factors that are identified by Square Enix is the economic downturn. He also stated that Square Enix¶s games in the future will more likely to contribute multiplayer mode.the game element.players seldom purchase the games in retail stores and played the games in the internet cafes. However. CEO of Square Enix) According to his comment above. Wada stated that the next generation gamers will more likely to play online games. Threats One of the threats from Square Enix is the lack of core gameplay design. Wada concludes that releasing games by the arcade model fits the Chinese players. After the production of Final Fantasy XI Online and Crossgate. "Western developers have become much stronger. It can also be considered as a threat to the company because it is the element that most of the Japanese game developers are lack of. in this aspect . The risk that they have identified is ranging from the economic environment to individual risks which are the ability to respond to changes to innovative technology to accidents. Square Enix will also be able to compete in the international market besides only compete with the Asian market. Square Enix also has confirmed ad identified their threats which are a number of risk factors. When this happens all the demand for its . which Square Enix will have to strengthen their production of online gaming for the future. Square Enix has been known for one of the best producers of online game in Japan. during the past five years. This will cause the consumer expenditure to fall. Yuichi Wada further comments on how the Western developers have advanced in their development. He stated that this model has been facing legal issues but it has been applied to the successful business model." (Yuichi Wada. With the strengthening of online games. This brings the company a step in having the core gameplay aspect applied to Square Enix. With their lack of core gameplay elements. it will be difficult for these Asia developers to compete in the Western market. It is originally a weakness of Square Enix as they are unable to find an answer to the solution.

One of the examples is the sales of Final Fantasy XIV. Square Enix will have to produce the games which are politically and culturally acceptable in some areas of the countries.product will be lowered which will affect the net income of the company as well. Square Enix has been developing games for Sony and Nintendo which comes to Sony Playstation and Game Boy respectively. it will cause an impact on the product that Square Enix has produced. In. (4) Exchange Rate Fluctuations Since Square Enix has entered in the international market.´ (Yuichi Wada. . The president of Square Enix blamed the product failure because of the consumers are being selective. ³The risk of foreign exchange loss has been reduced as foreign currency gained by those subsidiaries is expended for settlement or reinvestment in the applicable countries. The changes of market shares on console platforms are normally caused the changing strategies on console manufacturers¶ market. Since there are cultural differences in both areas. conclusion. they also meet the risk in the currency exchange rate especially in North America and Europe. religious and cultural factors and economic climate. (3) Expansion in the Group's International Business Operations Square Enix also stated that they gain risks as they are expanding outside of Japan to the international market especially the Western gaming market. political situation. If there are changes in the marketing sales on the console platforms. it may cause a huge impact on Square Enix¶s business performace. Square Enix identified that currently the foreign exchange loss is reduced. (2) Changes in Game Platforms Market Square Enix is known for developing home-use console games. different laws and regulation. president and CEO of Square Enix) The form of sales currency is converted to Japanese yen for calculation in the financial reports. This forces Square Enix to reshuffle their development team. Square Enix will have to analyze the factors that will have an impact on their business performance. Such factors are the market trends. With such event. There are a variety of factors will affect Square Enix¶s business performance. the exchange rate fluctuation will have an impact on the business performance of Square Enix.

online games and social networking games. CEO of Square Enix) According to Yuichi Wada. CEO of Square Enix) and age restriction of entering a particular area. ³All future Square Enix games will include some multiplayer or social gaming elements. The laws also manage the facilities which include the interior of the facilities. If there are any changes in the law above. Final Fantasy XI and Final Fantasy XIV. how may the company seek to achieve cost competitiveness? Square Enix has been pursuing the opportunities of producing games that has multiplayer mode. ³The operation of amusement facilities is subject to government control under the Law for Proper Control of Entertainment and Amusement Businesses and other related laws and regulations. One of the infamous natural disasters that struck Japan is the earthquake. This disaster is not avoidable and thus Square Enix will have to take extra pre-cautions in order to not reduce their performance dramatically during these disasters strike. Besides managing the laws of the facility and age restriction. In a result the MMORPG Final Fantasy games are out. even those that have traditionally been single player. . Yuichi Wada has stated that all of Square Enix¶s future console games will most likely to combine the elements of ³Core Gameplay´. The company has been putting extra costs in these areas of opportunities to be able to grow on these areas for competition in the future. like Final Fantasy. there will be an impact on the company¶s business performance. restrictions on the areas such as an ³Open Outlet´ (Yuichi Wada. Square Enix has strictly followed the rules of the laws applied. CEO of Square Enix) The laws and regulation approves the license of any entertainment facilities. (6) Natural Disasters Natural disasters are also one of the threats that will impede the performance of Square Enix. Earthquake that ranges from a medium to high Richter scale will dramatically impede Square Enix¶s business performance. games like Final Fantasy that is traditionally produced for single player will be undergone some changes.´ (Yuichi Wada.(5) Entertainment Industry Laws The amusement facilities are normally subject to government control under a couple of laws. Looking into the future. 4A. These changes will apply some of the core gameplay elements of which the multiplayer mode is applied. they also look for any misbehavior of the staffs which are fighting and noise.´ (Yuichi Wada.

or it could simply mean that Deus Ex: Human Revolution will post your achievements to Twitter. It is because the development teams who specialize in developing single-player games are normally hard to adapt to the change of the games that emphasize more to core game play such as multiplayer mode. Games that will post their achievements in the social networking sites are also possible. It will happen in the entire industry.´ (Yuichi Wada.. It is proven that Square Enix is trying to expand . He stated that the Chinese casual gaming giant called ³Tenchent´ is doing micro transactions on some of the free-to play games and will eventually win out Electronic Arts." (Yuichi Wada. With these improvements that Square Enix is proposing in the future. After acquiring Eidos. Square Enix¶s is only well-known for producing Role-Playing Games (RPG). He has stated that shifting development from console games to developing online games and games that have multiplayer will be tough. Square Enix will be able to reach cost competitiveness amongst other rival companies which includes the development costs of these products. Such of these products are the possibility of an MMOG Final Fantasy that encourages user to purchase items and quests to be added into their game. ³While Square is generally seen as an RPG house. he stated the in the future the Chinese gaming industry will be able to compete and takeover the gaming market. these are the examples of the future hybrid games that are created by Square Enix.´ (The Escapist) According to the website The Escapist. Square Enix takes its opportunities seriously to develop games that emphasizes on multiplayer and social networking games. "The distribution channels will change and the revenue model will change . and we want to stay on top of this trend. Besides exploring the opportunities in developing new types of game play.According to Yuichi Wada. Square Enix is able to expand their catalog title. It will produce games that are originally a single-player franchise to a multiplayer game franchise. acquiring the likes of Western franchises like Tomb Raider and Hitman will expand their catalog of titles. Square Enix also invests on some game companies and bought them. It is also stated that some of Square Enix games in the future will be a hybrid of the original culture with the newly adapted style of game play. With these changes. ³It might mean a free-to-play Final Fantasy MMOG in which players pay for new items or quests. the company will have a chance to compete with the rivals of the other game companies that is growing rapidly in these areas of gaming in the future. CEO of Square Enix) It is stated by the quote above that Square Enix is generally a RPG developer and publisher company. By buying the other compaies. CEO of Square Enix) Yuichi Wada is aware of the changes that will take place in the gaming industry and he wants his company to stay on the top of the trend by increasing the production of games in those areas.. Square Enix also spend most of the costs on the developers who will also have to adapt in developing online games. Square has expanded their game catalogs to RPG and shooter.

their catalog title from only a RPG based game developer and publisher to different types of catalogs. After a few years of acquiring Eidos. Alan Tan. Alan Tan. The president of ShanDa Entertainment Mr. Square Enix also hopes that by partnering with ShanDa Entertainment will focus on their games in the rapidly-growing Chinese market. Alan Tan has the confidence that Final Fantasy XIV will please the Chinese customers and will sell exceptionally well in the Chinese market. The partnership is announced because Square Enix wants to promote Final Fantasy XIV and the licensing of its product to mainland China. Square Enix has formed a strategic partnership with ShanDa Games in hopes of exploring the catalog of online gaming. ³Since its debut in 1987. CEO of ShanDa Entertainment) .´ (Mr. Mr. Alan Tan identified Square Enix¶s Final Fantasy franchise is wellknown after the very first of the series is released. CEO of ShanDa Entertainment) With these results being shown. ³The strategic partnership with Square Enix will further advance its strategy to provide high-quality. the FINAL FANTASY franchise has attracted many devoted fans worldwide and. based on our experience and expertise in the China market. He also stated that he is looking forward for the collaboration of the two companies. It has started to strengthen the catalog by announcing the partnership to ShanDa Entertainment which is famous for developing online games. Square Enix hopes to strengthen and expand their catalog title in the online gaming catalog. On September the 16th 2010. "We are excited to have Square Enix as a partner and I look forward to leveraging our capabilities and synergies for the benefit of both companies. The partnership of the two companies works flawlessly as both company trusts each other to provide high quality online games. Square Enix has announced its partnership with the Chinese ShanDa Gaming Company for expanding Square Enix¶s catalog in online gaming. CEO of Square Enix) While ShanDa Entertainment will receive a better quality and innovative games being produced while partnering with Square Enix." (Mr. Square Enix has identified globalization as the key environmental factors and will develop and offer games that are based on Japan and the Western style cultures. we are confident in the success of FINAL FANTASY XIV as well as other future collaborations with Square Enix in China.´ (Yuichi Wada. diverse and innovative game content to Chinese gamers and to expand its user base.

. Strength Producing RPG Games. Yuichi Wada has stated that the future of all Square Enix¶s games will support online capabilities and contain multiplayer even to Final Fantasy a game that is traditionally created for single-player. Weakness Platform dependable. Therefore it relies on other companies for some publishing as well as marketing.4B. develop a SWOT matrix to determine a set of strategic options for the company. These online games are Final Fantasy XI and XIV. Dragon Quest ad Kingdom Hearts franchise. Opportunities Online-gaming market and mobile based game. Threats Changes in the economic environment Changes in game platforms market Expansion in the group's international business operations Exchange rate fluctuations Entertainment industry laws Natural disasters It is stated on the strength section that Square Enix¶s strength is on producing RPG and it¶s critically acclaim franchise is the Final Fantasy franchise. opportunities and threats identified in Activity 3. Weak in areas of marketing. Square Enix has identified that their strength is the Final Fantasy franchise and therefore using that franchise to produce online games. weaknesses. Final Fantasy XI has receive worldwide critically acclaim. Worldwide fame products ± Final Fantasy. Using the strengths.

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