Harvard Case - Electronic Arts in 1995
"Electronic Arts in 1995" Harvard business case study is written by Robert A. Burgelman, Carrie C. Oliver. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : Aug 1, 1997
At Fern Fort University, we recommend Electronic Arts (EA) pursue a multi-pronged growth strategy focused on leveraging its core competencies in game development and publishing to capitalize on the burgeoning PC gaming market and emerging console platforms. This strategy will involve a combination of organic growth, strategic acquisitions, and strategic alliances to achieve market leadership and establish a sustainable competitive advantage.
2. Background
Electronic Arts, founded in 1982, was a leading developer and publisher of PC games. By 1995, the company faced a rapidly evolving gaming landscape, with the rise of new consoles like Sony PlayStation and Nintendo 64, and the increasing popularity of the internet. The case study highlights EA's CEO, Trip Hawkins, grappling with the company's future direction, particularly in light of the increasing competition and the potential of new technologies.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces:
- Threat of New Entrants: High, due to low barriers to entry in the gaming industry.
- Bargaining Power of Buyers: Moderate, with consumers having a wide range of game choices.
- Bargaining Power of Suppliers: Moderate, with game developers having some leverage.
- Threat of Substitutes: High, with alternative forms of entertainment like movies and television.
- Competitive Rivalry: High, with numerous established players and new entrants.
SWOT Analysis:
Strengths:
- Strong brand recognition and established reputation in the PC gaming market.
- Experienced and talented game development team.
- Strong distribution channels and marketing capabilities.
- Financial resources to invest in new technologies and acquisitions.
Weaknesses:
- Limited presence in the rapidly growing console market.
- Dependence on the PC gaming market, which was facing increasing competition.
- Lack of a clear strategy for leveraging the internet.
Opportunities:
- Growing console market with significant potential for expansion.
- Emerging internet technologies offering new distribution and marketing channels.
- Potential for strategic acquisitions to expand market share and capabilities.
Threats:
- Increasing competition from established and new players.
- Rapidly evolving technology and changing consumer preferences.
- Potential for piracy and copyright infringement.
Value Chain Analysis:
EA's value chain consists of:
- Research and Development: Creating innovative and engaging game concepts.
- Game Development: Designing, coding, and testing games.
- Publishing: Marketing, distribution, and sales of games.
- Customer Support: Providing technical assistance and resolving customer issues.
Business Model Innovation:
- Subscription Model: Explore offering online subscriptions for access to a library of games.
- Microtransactions: Incorporate in-game purchases for virtual items and content.
- Freemium Model: Offer free-to-play games with optional paid features.
Strategic Planning:
- Strategic Intent: Become the leading global game developer and publisher.
- Strategic Positioning: Focus on developing high-quality games across multiple platforms.
- Strategic Alliances: Partner with other companies to expand into new markets and technologies.
4. Recommendations
1. Aggressive Expansion into the Console Market:
- Acquisitions: Acquire established console game developers to gain immediate market share and expertise.
- Product Development: Develop new console games leveraging EA's core competencies in game design and development.
- Marketing: Invest heavily in marketing and advertising to reach console gamers.
2. Embrace the Internet and Digital Distribution:
- Online Distribution: Develop a robust online platform for game distribution, updates, and community engagement.
- Digital Marketing: Utilize online advertising, social media, and search engine optimization to reach target audiences.
- Online Gaming: Explore opportunities for online multiplayer gaming and esports.
3. Strategic Alliances and Partnerships:
- Technology Partnerships: Collaborate with technology companies to integrate new technologies into games.
- Distribution Partnerships: Partner with online retailers and distributors to expand reach.
- Marketing Partnerships: Collaborate with other companies to cross-promote games and reach new audiences.
4. Focus on Innovation and Quality:
- Product Development: Invest in research and development to create innovative and engaging game experiences.
- Talent Acquisition: Recruit and retain top game developers and designers.
- Quality Assurance: Implement rigorous quality control processes to ensure high-quality games.
5. Develop a Strong Corporate Culture:
- Innovation: Foster a culture of creativity and experimentation.
- Collaboration: Encourage teamwork and cross-functional collaboration.
- Customer Focus: Prioritize customer satisfaction and build strong relationships.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of EA's strengths, weaknesses, opportunities, and threats. They align with the company's core competencies in game development and publishing, and address the evolving gaming landscape. The recommendations are also supported by quantitative measures, including the potential for increased revenue and market share, as well as the reduction of risks associated with dependence on a single platform.
6. Conclusion
Electronic Arts in 1995 was at a crossroads. By embracing innovation, expanding into new markets, and leveraging strategic partnerships, the company could solidify its position as a global leader in the gaming industry. The recommendations outlined in this case study solution provide a roadmap for EA to navigate the challenges and opportunities of the rapidly evolving gaming landscape.
7. Discussion
Alternatives:
- Focusing solely on the PC market: This would have been a risky strategy, as the PC market was facing increasing competition.
- Ignoring the internet: This would have missed out on the potential of new distribution channels and online gaming.
- Over-reliance on acquisitions: While acquisitions could be beneficial, relying solely on them could lead to integration challenges and a lack of organic growth.
Risks and Key Assumptions:
- Competition: The gaming industry is highly competitive, and new players could emerge to challenge EA's market position.
- Technology: Rapidly evolving technology could render existing games obsolete.
- Consumer Preferences: Consumer preferences are constantly changing, and EA needs to adapt to stay relevant.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| Aggressive Expansion into Console Market | Increased market share, access to new audiences | High investment costs, potential for integration challenges | Competition, consumer preferences |
| Embrace the Internet and Digital Distribution | New distribution channels, reduced costs | Technical challenges, potential for piracy | Technology changes, consumer adoption |
| Strategic Alliances and Partnerships | Access to new technologies, markets, and expertise | Dependence on other companies, potential for conflicts | Partner performance, market changes |
| Focus on Innovation and Quality | Competitive advantage, customer loyalty | High investment costs, potential for failure | Consumer preferences, technology changes |
8. Next Steps
- Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation for each recommendation.
- Identify key performance indicators (KPIs): Track progress and make adjustments as needed.
- Build a strong leadership team: Recruit and develop leaders with the skills and experience to execute the strategy.
- Invest in technology and infrastructure: Develop the necessary systems and tools to support the company's growth.
- Monitor the competitive landscape: Stay informed about industry trends and competitor activities.
By taking these steps, Electronic Arts could have positioned itself for continued success in the ever-evolving gaming industry.
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Case Description
Discusses the strategic challenges facing Electronic Arts in 1995 as they try to maintain their leading position in the video game industry. Addresses the evolution, competitive environment, and key trends in the industry, as well as the position and strategy of Electronic Arts.
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