Harvard Case - Epic Games: Nineteen Eighty-Fortnite
"Epic Games: Nineteen Eighty-Fortnite" Harvard business case study is written by Andy Wu, Miaomiao Zhang, Christopher Zhang. It deals with the challenges in the field of Strategy. The case study is 40 page(s) long and it was first published on : Oct 20, 2020
At Fern Fort University, we recommend Epic Games adopt a multi-pronged strategy to solidify its leadership in the gaming industry and capitalize on the burgeoning metaverse. This strategy hinges on:
- Expanding the Fortnite ecosystem: Leveraging the game's immense popularity to create a robust platform for content creation, social interaction, and virtual commerce.
- Investing in cutting-edge technologies: Embracing AI, machine learning, and blockchain to enhance gameplay, foster innovation, and explore new business models.
- Strategic acquisitions and partnerships: Expanding into adjacent markets and acquiring complementary technologies to strengthen its competitive position.
- Building a sustainable and responsible business: Prioritizing ethical practices, environmental sustainability, and community engagement to foster long-term growth.
2. Background
Epic Games, founded in 1991, has emerged as a gaming industry powerhouse through its iconic titles like Unreal Tournament and, most notably, Fortnite. The game's free-to-play model, constant updates, and engaging social features have propelled it to global phenomenon status, attracting millions of players worldwide. However, Epic faces increasing competition from established players like Activision Blizzard and Tencent, as well as emerging disruptors in the metaverse space.
The case study focuses on the company's strategic choices in 2018, particularly its decision to develop its own online store, Epic Games Store, and challenge the dominance of Steam. This move, while bold, has implications for Epic's future growth and its ability to navigate the evolving gaming landscape.
3. Analysis of the Case Study
Competitive Landscape:
- Porter's Five Forces:
- Threat of New Entrants: High due to the accessibility of game development tools and the growing popularity of indie games.
- Bargaining Power of Buyers: High, as players have numerous options for games and platforms.
- Bargaining Power of Suppliers: Moderate, as game developers have several distribution channels.
- Threat of Substitutes: High, with alternative forms of entertainment like streaming services and social media.
- Rivalry Among Existing Competitors: Intense, with established players like Tencent and Activision Blizzard vying for market share.
SWOT Analysis:
Strengths:
- Strong brand recognition: Fortnite's global popularity and cultural relevance.
- Innovative technology: Unreal Engine's advanced capabilities and its use in other industries.
- Strong community engagement: Active player base and a thriving esports scene.
- Free-to-play model: Attracts a wide audience and generates revenue through in-game purchases.
Weaknesses:
- Dependence on Fortnite: Risk of declining player base or competition from similar games.
- Limited game portfolio: Compared to competitors with diverse offerings.
- Potential antitrust concerns: Epic's aggressive business practices could attract regulatory scrutiny.
Opportunities:
- Growth of the metaverse: Expanding into virtual worlds and immersive experiences.
- Emerging markets: Expanding into new regions with high growth potential.
- Strategic acquisitions: Acquiring complementary technologies and studios to expand its portfolio.
Threats:
- Increased competition: From established players and emerging disruptors.
- Regulatory scrutiny: Antitrust concerns and potential government intervention.
- Technological disruption: New gaming platforms and technologies could challenge Epic's dominance.
Value Chain Analysis:
Epic Games' value chain is characterized by its focus on:
- R&D and Innovation: Developing cutting-edge game engines and technologies.
- Content Creation: Producing high-quality games and supporting user-generated content.
- Distribution and Marketing: Leveraging its own platform and partnerships for global reach.
- Community Engagement: Building a loyal player base through events and social features.
Business Model Innovation:
Epic Games has successfully innovated its business model through:
- Free-to-play model: Attracting a large player base and generating revenue through in-game purchases.
- Direct distribution: Controlling its own platform and reducing reliance on third-party stores.
- Cross-platform compatibility: Expanding its reach and fostering a more inclusive gaming community.
4. Recommendations
1. Expanding the Fortnite Ecosystem:
- Transform Fortnite into a metaverse platform: Develop a persistent virtual world with social features, virtual commerce, and opportunities for content creation.
- Invest in user-generated content: Empower players to create and share their own experiences, fostering a vibrant community and attracting new users.
- Partner with brands and creators: Integrate brands and influencers into the Fortnite universe, creating unique experiences and generating revenue.
2. Investing in Cutting-Edge Technologies:
- Embrace AI and machine learning: Enhance gameplay, personalize player experiences, and optimize game development processes.
- Explore blockchain technology: Develop new business models for in-game economies, digital ownership, and decentralized governance.
- Invest in research and development: Continue pushing the boundaries of gaming technology and explore new frontiers like VR and AR.
3. Strategic Acquisitions and Partnerships:
- Acquire complementary studios and technologies: Strengthen its portfolio and expand into new genres and markets.
- Form strategic alliances with other companies: Collaborate on projects, share resources, and leverage each other's strengths.
- Expand into adjacent markets: Explore opportunities in esports, entertainment, and digital media.
4. Building a Sustainable and Responsible Business:
- Prioritize environmental sustainability: Reduce its carbon footprint and promote responsible practices throughout its operations.
- Promote ethical practices: Foster a diverse and inclusive workplace, uphold ethical standards, and address social issues.
- Engage with the community: Support local communities, contribute to charitable causes, and foster positive social impact.
5. Basis of Recommendations
These recommendations are grounded in:
- Core competencies: Leveraging Epic's expertise in game development, technology, and community engagement.
- External customers: Meeting the evolving needs of gamers and attracting new audiences.
- Competitors: Staying ahead of the curve and differentiating itself from rivals.
- Attractiveness: Potential for significant growth, revenue generation, and long-term sustainability.
6. Conclusion
Epic Games is at a pivotal moment in its history. By embracing innovation, expanding its ecosystem, and building a sustainable business, it can solidify its position as a leader in the gaming industry and capitalize on the opportunities presented by the metaverse.
7. Discussion
Alternatives:
- Focusing solely on Fortnite: This strategy could lead to stagnation and vulnerability to competition.
- Acquiring a large established game company: This could be expensive and disruptive to Epic's culture.
Risks and Key Assumptions:
- Technological advancements: Rapid technological changes could render Epic's investments obsolete.
- Regulatory landscape: Changes in regulations could impact Epic's business model and growth.
- Consumer preferences: Shifts in gaming trends could affect Fortnite's popularity.
8. Next Steps
- Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation.
- Invest in research and development: Prioritize emerging technologies and innovation.
- Build a strong leadership team: Recruit and develop talent to support the company's growth.
- Engage with stakeholders: Communicate the company's vision and strategy to employees, investors, and the public.
By implementing these recommendations, Epic Games can navigate the evolving gaming landscape, capitalize on the metaverse opportunity, and create a sustainable and impactful future for its business.
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Case Description
In the midst of intensifying public and political attention towards the market power of big technology, Epic Games in 2020 challenged the status quo that has existed for years in the Apple iOS and Google Android mobile application marketplaces and payment systems. Apple and Google removed Fortnite from their app stores after its developer Epic Games intentionally introduced an unauthorized payment system. Epic Games sued Apple and Google, alleging their monopolistic control over the distribution of apps and the unreasonable commission rate for in-app purchases. Epic rallied other application developers and its 350 million Fortnite users in its fight. The case begins with a brief history of Epic Games and some background on the antitrust issues around mobile platforms. Then, the case details the many actions taken by each side in the ensuing legal and public relations battle. The case provides context on future technologies, like cloud gaming, that will hinge on the issues already being fought over in 2020. The case challenges students to think about strategy for both the smaller complementor and the larger incumbent platform, and how to challenge and maintain market power respectively, in the context of looking forward to the future.
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