Harvard Case - Electronic Arts in 2002
"Electronic Arts in 2002" Harvard business case study is written by Robert A. Burgelman, Frederic Descamps, Philip Meza. It deals with the challenges in the field of Strategy. The case study is 35 page(s) long and it was first published on : Sep 23, 2003
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At Fern Fort University, we recommend Electronic Arts (EA) adopt a multi-pronged strategy focused on disruptive innovation, strategic acquisitions, and global expansion to solidify its position as a leading interactive entertainment company. This approach will leverage EA's existing strengths in game development and publishing while capitalizing on emerging opportunities in the rapidly evolving gaming landscape.
2. Background
Electronic Arts (EA) was a leading video game publisher in 2002, facing increasing competition from both established players and new entrants. The company's core business model relied on console-based games, but the rise of the internet and personal computers presented new challenges and opportunities. The case highlights EA's struggle to adapt to these changes while maintaining its market dominance.
The main protagonists of the case study are:
- Larry Probst, CEO of EA, grappling with the need to innovate and navigate the changing gaming landscape.
- John Riccitiello, CEO of Electronic Arts (2007-2013), who implemented a new vision for the company and oversaw a period of significant growth and change.
- The EA team facing the challenge of adapting to new technologies and market trends.
3. Analysis of the Case Study
To analyze EA's situation in 2002, we can utilize several frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the gaming industry, especially with the rise of indie developers and digital distribution platforms.
- Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices, but the high cost of game development gives EA some pricing power.
- Bargaining Power of Suppliers: Low, as EA has a strong negotiating position with game developers and platform providers.
- Threat of Substitutes: Moderate, with the rise of alternative forms of entertainment, such as mobile games and online social games.
- Competitive Rivalry: High, with intense competition from established players like Activision and Ubisoft, as well as new entrants.
b) SWOT Analysis:
Strengths:
- Strong brand recognition and established market position.
- Experienced game development teams and strong publishing infrastructure.
- Diversified portfolio of games across multiple genres and platforms.
- Strong financial position and access to capital.
Weaknesses:
- Dependence on console-based games, which were facing increasing competition from PC and online games.
- Limited presence in the emerging online gaming market.
- Challenges in adapting to new technologies and platforms.
Opportunities:
- Growing online gaming market, with potential for new business models and revenue streams.
- Expansion into new markets, particularly in Asia and emerging economies.
- Development of new technologies, such as online multiplayer gaming and mobile games.
Threats:
- Increasing competition from established and new entrants.
- Rapid technological advancements and evolving consumer preferences.
- Economic downturn and potential impact on consumer spending.
c) Value Chain Analysis:
EA's value chain consists of:
- Research & Development: Developing new game concepts and technologies.
- Game Development: Creating and producing games for various platforms.
- Publishing: Marketing, distributing, and selling games to consumers.
- Customer Service: Providing support and resolving issues for customers.
d) Business Model Innovation:
EA's core business model was based on selling physical copies of console games. The rise of the internet and online gaming presented opportunities for new business models, such as:
- Subscription services: Offering access to a library of games for a monthly fee.
- Free-to-play games: Offering games for free, with in-game purchases for additional content or features.
- Microtransactions: Selling virtual items and services within games.
4. Recommendations
To capitalize on the opportunities and address the threats, EA should implement the following recommendations:
a) Disruptive Innovation:
- Invest in online gaming: Develop and acquire online games, leveraging EA's existing strengths in game development and publishing.
- Embrace new platforms: Expand into mobile gaming and other emerging platforms, reaching new audiences and diversifying revenue streams.
- Experiment with new business models: Explore subscription services, free-to-play games, and microtransactions to tap into the growing online gaming market.
b) Strategic Acquisitions:
- Acquire promising studios: Identify and acquire companies with expertise in online gaming, mobile gaming, and new technologies.
- Expand into new genres: Acquire studios specializing in genres where EA has limited presence, such as massively multiplayer online role-playing games (MMORPGs).
- Strengthen core competencies: Acquire studios with expertise in areas where EA needs to enhance its capabilities, such as game engine development or online infrastructure.
c) Global Expansion:
- Target emerging markets: Focus on expanding into high-growth markets like China, India, and Brazil, where the gaming industry is rapidly developing.
- Localize games and services: Adapt games and marketing materials to local preferences and languages to increase appeal and market penetration.
- Establish strategic partnerships: Collaborate with local distributors, publishers, and developers to gain access to new markets and build local expertise.
5. Basis of Recommendations
These recommendations are based on several key considerations:
- Core competencies and consistency with mission: EA's core competencies in game development and publishing are highly relevant to the opportunities in online and mobile gaming. The recommendations align with EA's mission of creating and delivering 'the most engaging interactive entertainment experiences' for a global audience.
- External customers and internal clients: The recommendations address the evolving needs of gamers, who are increasingly demanding online and mobile experiences. They also cater to the needs of internal clients, such as game developers, who require access to new technologies and platforms.
- Competitors: The recommendations aim to position EA as a leader in the rapidly evolving gaming landscape, by staying ahead of competitors in terms of innovation, market reach, and business model diversification.
- Attractiveness ' quantitative measures: The recommendations are expected to generate significant revenue growth and profitability, as the online and mobile gaming markets are projected to continue expanding rapidly.
6. Conclusion
By embracing disruptive innovation, strategic acquisitions, and global expansion, EA can solidify its position as a leading interactive entertainment company. This approach will enable EA to navigate the changing gaming landscape, capitalize on emerging opportunities, and deliver engaging experiences to a global audience.
7. Discussion
Other alternatives not selected include:
- Focusing solely on console games: This would be a risky strategy, as the console market is facing increasing competition from other platforms.
- Ignoring online and mobile gaming: This would leave EA behind the curve in a rapidly evolving market.
- Organic growth only: This would be a slower and less aggressive approach, potentially hindering EA's ability to keep pace with competitors.
Key risks and assumptions:
- Competition: The gaming industry is highly competitive, and new entrants are constantly emerging. EA needs to maintain its innovation and agility to stay ahead of the curve.
- Technological advancements: The gaming landscape is constantly evolving, and EA needs to invest in research and development to keep pace with new technologies.
- Consumer preferences: Gamer preferences are constantly changing, and EA needs to adapt its games and services to meet these evolving needs.
8. Next Steps
To implement these recommendations, EA should:
- Develop a comprehensive strategic plan: This plan should outline the company's vision, goals, and key initiatives for the next few years.
- Allocate resources to key areas: Invest in research and development, acquisitions, and global expansion.
- Monitor progress and make adjustments: Regularly assess the effectiveness of the strategy and make adjustments as needed.
By taking these steps, EA can position itself for continued success in the dynamic and competitive gaming industry.
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Case Description
Electronic Arts (EA) is a highly successful creator of video games for consoles and PCs. The company also creates content for online gaming. EA occupies a unique place in the information processing industry. The company must have the skills of a Hollywood studio to create compelling content, while at the same time negotiate the technological change and uncertainty associated with the platforms (e.g., consoles, PC, Internet) used to operate and distribute the games.
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