Harvard Case - Bigpoint
"Bigpoint" Harvard business case study is written by Arar Han, Jeffrey Chambers, Mike Child. It deals with the challenges in the field of Strategy. The case study is 13 page(s) long and it was first published on : Feb 23, 2012
At Fern Fort University, we recommend Bigpoint pursue a strategic diversification strategy focused on expanding into new markets and verticals while leveraging its core competencies in game development, online community building, and monetization. This strategy involves a multi-pronged approach encompassing organic growth, strategic acquisitions, and strategic partnerships. Additionally, we recommend Bigpoint prioritize digital transformation to enhance its competitive advantage in the rapidly evolving gaming landscape.
2. Background
Bigpoint is a German-based online game developer and publisher, known for its free-to-play browser-based games. The company has experienced significant success with titles like 'The West' and 'Farmerama,' attracting a large player base and generating substantial revenue through in-game purchases. However, Bigpoint faces challenges in a rapidly evolving gaming market with increasing competition from mobile and console games. The case study explores Bigpoint's options for growth and expansion in the face of these challenges.
The main protagonists of the case study are:
- Michael 'Mike' Brohm: CEO of Bigpoint, responsible for guiding the company's strategic direction.
- The Bigpoint Management Team: Responsible for executing the company's strategy and navigating the competitive landscape.
- Bigpoint's Investors: Seeking a strong return on investment and driving growth for the company.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition: Bigpoint has established a strong brand in the browser-based gaming market.
- Experienced team: Bigpoint boasts a team with extensive experience in game development, online community management, and monetization.
- Strong financial position: Bigpoint has a solid financial foundation, allowing for investments in growth initiatives.
- Established user base: Bigpoint has a large and loyal player base for its existing games.
Weaknesses:
- Limited reach in mobile and console gaming: Bigpoint's focus on browser-based games limits its reach in the rapidly growing mobile and console markets.
- Dependence on in-game purchases: Bigpoint's revenue model relies heavily on in-game purchases, which can be volatile and susceptible to market shifts.
- Limited international expansion: Bigpoint's primary market is Europe, leaving untapped potential in other regions.
Opportunities:
- Growth in mobile and console gaming: The mobile and console gaming market presents significant growth opportunities for Bigpoint.
- Expansion into new markets: Emerging markets in Asia and Latin America offer substantial potential for Bigpoint's games.
- Partnerships with other companies: Collaborating with other companies can provide access to new technologies, audiences, and distribution channels.
Threats:
- Increased competition: The gaming market is highly competitive, with established players and new entrants vying for market share.
- Changing consumer preferences: Gamers' preferences are constantly evolving, requiring Bigpoint to adapt its offerings.
- Technological advancements: Rapid technological advancements can disrupt the gaming industry, requiring Bigpoint to invest in innovation.
Porter's Five Forces:
- Threat of new entrants: High, due to the low barriers to entry in the browser-based gaming market.
- Bargaining power of buyers: Moderate, as players have multiple options for games and can choose to switch platforms.
- Bargaining power of suppliers: Low, as Bigpoint can leverage its size to negotiate favorable terms with suppliers.
- Threat of substitute products: High, due to the availability of alternative forms of entertainment, including mobile and console games.
- Rivalry among existing competitors: High, as many companies compete for market share in the browser-based gaming market.
Value Chain Analysis:
Bigpoint's value chain includes:
- Research and Development: Developing and designing new games.
- Game Production: Creating and deploying games across various platforms.
- Marketing and Sales: Promoting games and acquiring new players.
- Customer Service: Providing support to players and addressing their issues.
- Monetization: Generating revenue through in-game purchases and other means.
Business Model Innovation:
Bigpoint can explore innovative business models, including:
- Subscription-based models: Offering premium features or exclusive content through subscriptions.
- Freemium models: Providing a basic game experience for free and offering in-game purchases for enhanced features.
- Hybrid models: Combining different revenue streams, such as subscriptions, in-game purchases, and advertising.
Corporate Governance:
Bigpoint should strengthen its corporate governance practices by:
- Establishing clear ethical guidelines: Ensuring transparency and accountability in all business operations.
- Implementing robust risk management practices: Identifying and mitigating potential risks to the company's operations.
- Promoting diversity and inclusion: Creating a workplace that values different perspectives and backgrounds.
4. Recommendations
Strategic Diversification:
- Market Development: Expand into new markets, particularly in emerging regions like Asia and Latin America, by adapting games to local cultures and languages.
- Product Development: Develop new games for mobile and console platforms, leveraging existing expertise and resources.
- Strategic Acquisitions: Acquire smaller, innovative game studios to expand into new genres and markets.
- Strategic Partnerships: Collaborate with other companies in the gaming industry, such as mobile game developers, console manufacturers, and online platforms, to access new audiences and distribution channels.
Digital Transformation:
- Invest in AI and Machine Learning: Utilize AI and machine learning to analyze player data, personalize game experiences, and enhance monetization strategies.
- Develop a Cloud-Based Infrastructure: Migrate to a cloud-based infrastructure to improve scalability, flexibility, and cost efficiency.
- Enhance Data Analytics Capabilities: Implement advanced data analytics tools to gain insights into player behavior, market trends, and competitor strategies.
- Embrace Social Media and Influencer Marketing: Leverage social media platforms and influencer marketing to reach new audiences and promote games.
Strategic Planning:
- Develop a comprehensive strategic plan: Outline clear objectives, strategies, and action plans for achieving growth and expansion.
- Implement a balanced scorecard: Track key performance indicators (KPIs) across financial, customer, internal processes, and learning and growth perspectives.
- Conduct regular scenario planning: Analyze potential future scenarios and develop contingency plans to adapt to changing market conditions.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Bigpoint's strengths, weaknesses, opportunities, and threats, as well as the competitive landscape and industry trends. They align with Bigpoint's core competencies in game development, online community building, and monetization, while also addressing the need to expand into new markets and verticals. The recommendations consider the importance of digital transformation to enhance competitive advantage and ensure long-term growth.
Assumptions:
- The global gaming market will continue to grow, particularly in mobile and console gaming.
- Bigpoint can successfully adapt its games and business model to new markets and platforms.
- Technological advancements will continue to create opportunities for innovation in the gaming industry.
Quantitative Measures:
- Return on Investment (ROI): Evaluate the financial viability of each recommendation based on projected revenue and costs.
- Net Present Value (NPV): Determine the present value of future cash flows generated by each recommendation.
- Break-Even Analysis: Calculate the point at which each recommendation becomes profitable.
6. Conclusion
Bigpoint has a strong foundation for growth and expansion in the global gaming market. By pursuing a strategic diversification strategy focused on new markets, verticals, and digital transformation, Bigpoint can leverage its core competencies and capitalize on emerging opportunities. This approach will require a commitment to innovation, strategic planning, and a willingness to adapt to the ever-changing landscape of the gaming industry.
7. Discussion
Alternatives:
- Focusing solely on browser-based games: This approach carries the risk of stagnation in a declining market segment.
- Merging with a larger competitor: This option could provide access to resources and markets but may lead to loss of control and autonomy.
- Liquidating the company: This option would provide a return to investors but would result in the loss of jobs and a valuable brand.
Risks:
- Failure to adapt to new markets and platforms: Bigpoint may struggle to attract new players in unfamiliar markets or with unfamiliar game genres.
- Increased competition: The gaming market is highly competitive, and Bigpoint may face challenges from established players and new entrants.
- Technological disruption: Rapid technological advancements could render Bigpoint's existing games and platforms obsolete.
Key Assumptions:
- The global gaming market will continue to grow.
- Bigpoint can successfully adapt its games and business model to new markets and platforms.
- Technological advancements will continue to create opportunities for innovation in the gaming industry.
8. Next Steps
Timeline:
- Year 1: Develop a comprehensive strategic plan, identify target markets and platforms, and begin developing new games for mobile and console platforms.
- Year 2: Launch new games for mobile and console platforms, explore strategic acquisitions and partnerships, and invest in digital transformation initiatives.
- Year 3: Expand into new markets, continue to invest in innovation and technology, and monitor progress towards achieving strategic objectives.
Key Milestones:
- Develop and launch a successful mobile game.
- Acquire a smaller, innovative game studio.
- Enter a new market, such as Asia or Latin America.
- Implement a cloud-based infrastructure.
- Develop a data-driven approach to game design and marketing.
By taking these steps, Bigpoint can position itself for sustained growth and success in the rapidly evolving gaming industry.
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Case Description
Bigpoint was a leading online gaming company with vast international operations. One country that it wanted to enter was the United States, where existing players EA and Zynga, as well as dominant social gaming platforms and the Apple App Store posed considerable challenges. It also needed to restructure its top management to better manage its growth.
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