Harvard Case - King Digital Entertainment
"King Digital Entertainment" Harvard business case study is written by Jeffrey Rayport, Davide Sola, Federica Gabrieli, Elena Corsi. It deals with the challenges in the field of Entrepreneurship. The case study is 32 page(s) long and it was first published on : Apr 14, 2017
At Fern Fort University, we recommend that King Digital Entertainment (KDE) focus on a multi-pronged growth strategy to maintain its leadership position in the mobile gaming market. This strategy should prioritize strategic acquisitions of complementary game studios, expansion into new markets with a focus on emerging economies, and continuous innovation in game development and monetization models. By leveraging its strong brand, robust financial position, and proven expertise in mobile gaming, KDE can capitalize on the burgeoning global mobile gaming market and achieve sustainable long-term growth.
2. Background
King Digital Entertainment, a leading mobile game developer, achieved phenomenal success with its flagship game, Candy Crush Saga. However, the company faced challenges in diversifying its portfolio and maintaining its growth trajectory. The case study explores the company?s journey from a successful startup to a publicly traded company, highlighting the challenges of scaling a mobile gaming business and navigating the competitive landscape.
The main protagonists of the case study are:
- Riccardo Zacconi, CEO of King Digital Entertainment, who played a pivotal role in the company?s success and navigated its transition from a startup to a publicly traded company.
- The King Digital Entertainment team, which included game developers, marketing professionals, and business executives who contributed to the company?s growth and innovation.
3. Analysis of the Case Study
We can analyze King Digital Entertainment?s situation using the Porter?s Five Forces Framework:
- Threat of New Entrants: The mobile gaming market is highly competitive, with a constant influx of new entrants. However, KDE?s strong brand, established user base, and financial resources create a barrier to entry for new competitors.
- Bargaining Power of Buyers: Players have a high degree of choice in the mobile gaming market, leading to a high bargaining power. KDE?s strategy of offering free-to-play games with in-app purchases helps mitigate this challenge.
- Bargaining Power of Suppliers: The bargaining power of suppliers (game developers, technology providers) is relatively moderate as KDE can leverage its size and reputation to negotiate favorable terms.
- Threat of Substitute Products: The availability of various entertainment options, including other mobile games, social media, and streaming services, represents a significant threat to KDE.
- Competitive Rivalry: The mobile gaming market is highly competitive, with established players like Zynga, Supercell, and Tencent vying for market share. KDE needs to continuously innovate and differentiate its offerings to stay ahead of the competition.
4. Recommendations
To achieve sustained growth, KDE should implement the following recommendations:
1. Strategic Acquisitions:
- Target complementary game studios: KDE should acquire studios specializing in different genres and target audiences to diversify its portfolio and reduce reliance on a single game. This will allow KDE to expand its reach and appeal to a broader audience.
- Focus on studios with proven track records: KDE should prioritize acquisitions of studios with successful games and established user bases, minimizing the risk of integrating new studios and products.
- Leverage financial resources: KDE?s strong financial position allows it to pursue strategic acquisitions and expand its reach in the mobile gaming market.
2. Expansion into New Markets:
- Target emerging markets: Emerging markets like India, China, and Brazil offer significant growth potential for mobile gaming. KDE should tailor its games and marketing strategies to these markets, considering cultural nuances and local preferences.
- Partner with local distributors: KDE should collaborate with local distributors to navigate regulatory hurdles, understand local market dynamics, and effectively reach target audiences.
- Invest in localization: Translating games and marketing materials into local languages is crucial for success in emerging markets. KDE should invest in localization to enhance user experience and build brand loyalty.
3. Continuous Innovation:
- Invest in game development: KDE should continue investing in research and development to create innovative and engaging games. This includes exploring new genres, incorporating emerging technologies, and improving game mechanics.
- Experiment with monetization models: KDE should explore alternative monetization models beyond in-app purchases, such as subscription services, advertising, and cross-promotion.
- Embrace data analytics: KDE should leverage data analytics to understand player behavior, optimize game design, and personalize marketing campaigns.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: KDE?s core competency lies in developing and publishing highly engaging mobile games. The recommendations align with this competency by focusing on acquiring complementary studios, expanding into new markets, and investing in continuous innovation.
- External customers and internal clients: The recommendations address the needs of external customers (players) by offering a diverse portfolio of games, expanding into new markets, and continuously improving the user experience. They also cater to the needs of internal clients (employees) by providing opportunities for growth, innovation, and professional development.
- Competitors: The recommendations acknowledge the competitive landscape and emphasize the need for strategic acquisitions, market expansion, and continuous innovation to stay ahead of competitors.
- Attractiveness ? quantitative measures: The recommendations are expected to generate positive returns on investment through increased revenue, market share, and brand value. The financial attractiveness of these recommendations can be evaluated through financial modeling and analysis.
- Assumptions: These recommendations are based on the assumption that the mobile gaming market will continue to grow, that KDE can successfully integrate acquired studios, and that the company can adapt to changing market dynamics.
6. Conclusion
King Digital Entertainment is well-positioned to capitalize on the growth of the mobile gaming market. By pursuing a multi-pronged growth strategy that includes strategic acquisitions, expansion into new markets, and continuous innovation, KDE can maintain its leadership position, diversify its portfolio, and achieve sustainable long-term growth.
7. Discussion
Other alternatives not selected include:
- Organic growth: KDE could focus on developing new games internally rather than acquiring studios. However, this approach could be slower and more risky, especially in a highly competitive market.
- Licensing its intellectual property: KDE could license its popular game franchises to other developers, generating revenue without directly managing the development and marketing of these games. However, this approach could limit KDE?s control over its intellectual property and potentially dilute its brand.
The recommendations are subject to the following risks:
- Integration challenges: Acquiring and integrating new studios can be challenging, requiring careful planning and execution.
- Market volatility: The mobile gaming market is subject to rapid changes in trends and preferences, which could impact the success of KDE?s strategy.
- Competition: The competitive landscape is constantly evolving, and KDE needs to be agile and responsive to maintain its competitive edge.
8. Next Steps
To implement these recommendations, KDE should take the following steps:
- Develop a detailed acquisition strategy: Identify potential acquisition targets, assess their financial and operational performance, and develop a plan for integration.
- Conduct market research in emerging markets: Identify target audiences, understand local preferences, and develop tailored marketing strategies.
- Invest in research and development: Allocate resources to develop innovative games and explore new monetization models.
- Establish a data analytics team: Leverage data to understand player behavior, optimize game design, and personalize marketing campaigns.
By taking these steps, KDE can position itself for continued success in the dynamic and competitive mobile gaming market.
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Case Description
Riccardo Zacconi was the co-founder and CEO of King Digital Entertainment, the video game company which had quickly established itself as the world's leading maker of casual games for mobile devices after the sensational success of its game "Candy Crush Saga." Zacconi had only a few days left to decide what to reply to Activision Blizzard, one of the largest video game publishers in the world, which had offered to acquire King for almost $6 billion. King had already managed to successfully adapt to disruptive technological changes in the course of its history, could it continue to go solo? Or would an acquisition by a complementary video game maker like Activision be the best choice for King to continue to thrive? The clock was ticking but Zacconi knew that whatever the final decision, it had to satisfy one condition: Player was King.
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