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Harvard Case - Gobi Partners and DMG

"Gobi Partners and DMG" Harvard business case study is written by G. Felda Hardymon, Josh Lerner, Ann Leamon. It deals with the challenges in the field of Entrepreneurship. The case study is 25 page(s) long and it was first published on : Jan 28, 2010

At Fern Fort University, we recommend that DMG, a leading mobile game developer in China, should accept Gobi Partners? investment offer. This strategic partnership will provide DMG with the necessary capital and expertise to scale its operations, expand internationally, and solidify its position as a dominant player in the global mobile gaming market.

2. Background

This case study focuses on DMG, a Chinese mobile game developer experiencing rapid growth and facing the decision of accepting an investment offer from Gobi Partners, a leading venture capital firm in Asia. DMG, founded by entrepreneurs with strong technical expertise and a passion for gaming, had achieved significant success in the Chinese market with its popular mobile game, ?Legend of the Dragon.? However, the company was facing challenges in scaling its operations, expanding internationally, and navigating the complexities of the rapidly evolving mobile gaming landscape.

The main protagonists of the case are:

  • DMG Founders: Driven entrepreneurs with a deep understanding of the mobile gaming market and a strong track record of success in China.
  • Gobi Partners: A prominent venture capital firm with extensive experience in investing in and supporting high-growth technology companies in Asia.

3. Analysis of the Case Study

This case study presents a complex situation requiring a thorough analysis of DMG?s strategic options. We can analyze the situation using the following frameworks:

a) SWOT Analysis:

  • Strengths: Strong technical team, successful product in the Chinese market, proven business model, strong brand recognition in China.
  • Weaknesses: Limited resources for international expansion, lack of experience in navigating global markets, potential for competition from established international players.
  • Opportunities: Growing global mobile gaming market, potential for international expansion, access to new technologies and partnerships.
  • Threats: Increased competition from established global players, evolving market trends, potential for regulatory changes.

b) Porter?s Five Forces:

  • Threat of New Entrants: High, due to the low barriers to entry in the mobile gaming market.
  • Bargaining Power of Buyers: Moderate, as users have many options for mobile games.
  • Bargaining Power of Suppliers: Low, as the technology and resources required for mobile game development are readily available.
  • Threat of Substitute Products: High, as users can choose from various forms of entertainment.
  • Competitive Rivalry: High, as the mobile gaming market is highly competitive, with many established and emerging players.

c) Business Model Canvas:

  • Value Propositions: Engaging and addictive gameplay, high-quality graphics and sound, social features, regular updates and content.
  • Customer Segments: Mobile gamers in China and potentially internationally.
  • Channels: App stores, social media, online advertising.
  • Customer Relationships: In-game events, community forums, customer support.
  • Revenue Streams: In-app purchases, advertising, licensing.
  • Key Activities: Game development, marketing, customer support, technology infrastructure.
  • Key Resources: Technical expertise, creative talent, intellectual property, marketing resources.
  • Key Partnerships: Technology providers, marketing agencies, distribution partners.
  • Cost Structure: Development costs, marketing expenses, infrastructure costs, personnel costs.

4. Recommendations

DMG should accept Gobi Partners? investment offer. This partnership will provide DMG with the following benefits:

  • Capital Injection: Gobi Partners? investment will provide DMG with the necessary capital to scale its operations, expand its team, and invest in new technologies.
  • Strategic Expertise: Gobi Partners? extensive experience in the technology sector, particularly in the mobile gaming industry, will provide valuable guidance and support to DMG.
  • International Network: Gobi Partners? global network will open doors for DMG to expand into new markets and forge strategic partnerships with international players.
  • Brand Recognition: Gobi Partners? reputation as a leading venture capital firm will enhance DMG?s credibility and attract talent and investment.

Implementation Timeline:

  • Month 1: Finalize investment terms and sign the agreement.
  • Month 2: Develop a detailed business plan for international expansion, including market research, competitor analysis, and marketing strategy.
  • Month 3: Begin hiring key personnel for international operations, including marketing, business development, and customer support.
  • Month 4: Launch ?Legend of the Dragon? in selected international markets, focusing on regions with high mobile gaming penetration and cultural relevance.
  • Month 6: Continuously monitor market performance, analyze user feedback, and adjust the international expansion strategy based on data and insights.

5. Basis of Recommendations

This recommendation considers the following factors:

  • Core Competencies: DMG?s core competency lies in its strong technical team and its ability to develop engaging and addictive mobile games. Gobi Partners? investment will allow DMG to leverage these strengths to expand into new markets.
  • External Customers: The global mobile gaming market presents a significant opportunity for DMG to expand its customer base and increase revenue.
  • Competitors: Gobi Partners? expertise and network will help DMG navigate the competitive landscape and differentiate itself from established international players.
  • Attractiveness: The potential for significant growth in the global mobile gaming market makes this investment highly attractive. Gobi Partners? investment will accelerate DMG?s growth trajectory and increase its valuation.

6. Conclusion

Accepting Gobi Partners? investment offer is a strategic decision that will allow DMG to capitalize on the global mobile gaming market opportunity. This partnership will provide DMG with the necessary resources, expertise, and network to achieve its ambitious growth goals and become a leading player in the global mobile gaming industry.

7. Discussion

Alternatives:

  • Bootstrapping: DMG could attempt to grow organically through internal resources and reinvesting profits. However, this approach would be significantly slower and riskier, limiting DMG?s ability to compete with established players.
  • Seeking Funding from Other Investors: DMG could explore other venture capital firms or angel investors. However, Gobi Partners? expertise and network in the Asian market make them a particularly attractive partner for DMG.

Risks:

  • Cultural Differences: Expanding internationally requires DMG to adapt its marketing and product development strategies to different cultural contexts.
  • Competition: The global mobile gaming market is highly competitive, and DMG will need to differentiate itself to succeed.
  • Regulatory Challenges: Different countries have varying regulations regarding mobile gaming, which DMG will need to navigate.

Key Assumptions:

  • The global mobile gaming market will continue to grow at a significant rate.
  • DMG?s product will resonate with international audiences.
  • Gobi Partners will provide the necessary support and guidance for DMG?s international expansion.

8. Next Steps

  • Develop a comprehensive international expansion plan: This plan should include market research, competitor analysis, marketing strategy, and financial projections.
  • Recruit key personnel for international operations: DMG should hire experienced professionals with expertise in international marketing, business development, and customer support.
  • Build relationships with key partners in target markets: DMG should establish partnerships with technology providers, marketing agencies, and distribution partners to facilitate its international expansion.
  • Continuously monitor market performance and adapt its strategy: DMG should track key metrics, analyze user feedback, and adjust its strategy based on data and insights.

This case study demonstrates the importance of strategic partnerships for startups seeking to scale their operations and expand internationally. By accepting Gobi Partners? investment offer, DMG can leverage the expertise and resources of a leading venture capital firm to achieve its ambitious growth goals and become a global leader in the mobile gaming industry.

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Case Description

Thomas G. Tsao, founding general partner of Gobi Partners, an early stage venture capital firm in China, must decide how to manage his firm's largest investment after the departure of the CEO. Tom has temporarily stepped in as CEO, but finding a replacement with the necessary technical and language skills is difficult. Moreover, the company is facing significant challenges in winning business and restructuring its own operations. Should Tom stay on as CEO? Revisit one of the candidates who had withdrawn? Try harder to sell the company? At what price? The case provides an opportunity to discuss the issue of active investment management in an emerging market from the perspectives of the many stakeholders involved.

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