Discussion Forum 7
How might a SWOT analysis have helped Electronic Arts assess its slippage in the video-
game market?
A Strengths, Weaknesses, Opportunities, and Threats analysis allows a manager to
capitalize on a business’s strengths, while mitigating or altogether avoiding threats
and weaknesses. Robert Kotick, CEO of Activision Blizzard, may very well have
used this strategy when he sought to increase profitability to the organization in 1990
(Griffin, 2013, p. 8-e). Electronic Arts could have prevented Activision Blizzard from
acquiring some of its market share by using the SWOT analysis to detect the
company’s own internal flaws. Some of EA’s weaknesses included: feuding between
managers and developers, the practice of a predictable and counterproductive strategy
of game acquisition and homogenization of future franchises, and an overall lack of
imagination within the brand. All of these negative traits might have been identified
and modified if management had decided to perform a SWOT analysis (Griffin, 2013,
8-8c).
How might Porter's generic strategies theory help to explain why Electronic Arts lost its
leadership in the video-game market to Activision Blizzard?
Porter proposed three generic strategies, all of which are applicable to the Electronic
Arts/ Activision Blizzard story:
Differentiation strategy –
Using the differentiation strategy, a company attempts to create a unique perception
of its brand, separating it from competitors through the overall quality of its products
or services. Activision Blizzard most certainly set itself apart as a video game
design/manufacturing firm, by highlighting and enhancing a specific set of the
company’s proven franchises, and by offering customers an interactive, subscription
based gaming service (Griffin, 2013, pp. 8-3a, 8-8e).
Overall cost leadership strategy –
In this model, an organization seeks to achieve a competitive advantage by cutting its
costs below those of its competitors. Activision Blizzard CEO Robert Kotick
developed a unique financial approach that included the overall cost strategy, when
he decided to allow each of his game design studios to compose their own financial
statements and to manage their own, in-house profits and losses. This strategy seems
to have paid off, as Activision Blizzard earned $3.8 billion in revenues in 2007, as it
became the number one video game publisher in the world that year (Griffin, 2013, p.
8-8e).
Focus strategy –
Using the focus strategy, a firm “concentrates on a specific regional market, product
line, or group of buyers,” while applying either a differentiation or overall cost
leadership strategy to that specified group (Griffin, 2013, p. 8-8e, para. 3). Again,
CEO Kotick applied this strategy at Activision Blizzard, when he targeted gamers in
specific genres, using the differentiation strategy mentioned above. I believe Kotick
also sent a message to gamers with his unique approach used to acquire developers,
telling prospective partners that unlike EA “We won't absorb you into a big Death
Star culture” (Kotick qtd in Griffin, 2013, p. 8-8e, para. 6). Many video game
enthusiasts are vehement about their relationship with specific designers, and Kotick
inadvertently brought those fans on-board with this indirect focus strategy.
How would you use the Miles and Snow typology theory to advise Activision Blizzard on
the best way to maintain its leadership in the video-game market?
Employing the Miles and Snow typology, I would encourage Activision Blizzard to
follow the prospector strategy. As a video game manufacturer, the company should be
focused on innovation and the pursuit of new markets at all times (Griffin, 2013, p, 8-
3b). Now that Kotick has mastered the art of enhancing a small subset of profitable
titles and franchises, he should pair that strategy with an eye toward the future.
Moore’s law dictates that computer storage and processing capabilities will double
every two years, meaning that video games become obsolete even faster. As high-
speed rendering and reduced pixelization become paramount in the gaming industry,
Activision Blizzard must continue to explore the horizon of what is possible for its
developers. By producing familiar fan-favorites while constantly testing new ground;
the company will enjoy brand recognition of its innovative products, but those games
will also need to overshadow the competition if Activision Blizzard is to remain the
global king of video games.
If you ran a small video-game start-up, what would be your strategy for competing with
EA and Activision Blizzard?
If I were at the helm of nascent video game manufacturer, I would begin by
performing extensive marketing research. By creating a perceptual map, I could paint
a vivid picture of the industry landscape, developing a better understanding of
existing competitors’ positions in the marketplace. Discovering that Activision
Blizzard (ATVI) and EA collectively retain 100% of the “Total Console” market
share, I would then seek to create a niche market, by creating a small set of unique
games that appeal to a specific demographic (“CSI Market,” 2014). Overall, my firm
would follow the analyzer strategy, pursuing “tight accounting and financial
controls as well as high flexibility, efficient production as well as customized
products, and creativity along with low costs” (Griffin, 2013, p. 8-4b, para. 3). Using
this balanced approach, I might have a chance as a new market entry, up against the
towering giants who currently own the industry.
If you're a video-game player, what aspects of Activision's strategy have led to your
playing more (or fewer) of its games? If you're not a video-game player, what aspects of
Activision Blizzard's strategy might induce you to try a few of its games?
Although I no longer have the time for video games, I do have a profound respect for
ATVI’s strategy, and its leader, CEO Robert Kotick. By fundamentally differentiating
his organization from its main competitor, in areas of business-to-business
partnership, strategic market segmentation, and gamer culture, Kotick succeeding in
making Activision Blizzard the most profitable game developer on the planet. Though
I may never have a chance to play any of his games, I will certainly modify some of
my own approaches to business, based on Kotick’s example.
References
"CSI Market." (2014). Retrieved from http://csimarket.com/stocks/competitionSEG2.php?
code=ATVI
Griffin, R.W. (2013). Management (11th ed.). : Cengage Learning.
