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Strategic Analysis Presented By:

Strategic Analysis Presented By: . KnightLine, Inc. Preview. Parag Shah: Corporate Information Chellene Alferez: External Analysis Carla Coleman: Internal Resources Wessam Kaddoura: Financial Analysis Jabez Park: Major Rivals and Key Success Factors Jennifer Hartzler: Strategic Direction.

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Strategic Analysis Presented By:

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  1. Strategic Analysis Presented By: KnightLine, Inc.

  2. Preview • Parag Shah:Corporate Information • Chellene Alferez:External Analysis • Carla Coleman:Internal Resources • Wessam Kaddoura:Financial Analysis • Jabez Park:Major Rivals and Key Success Factors • Jennifer Hartzler:Strategic Direction

  3. Corporate Information

  4. Activision, Inc. • Mission to be one of the largest most profitable and well respected interactive entertainment software companies in the world • 70% of sales from games it publishes or distributes for play on console systems • The Tony Hawk franchise has brought nearly a billion dollars over the years for Activision

  5. Key Goals and Objectives • Primary Objective:Invest in and obtain Intellectual Property Rights and Licenses • Secondary Objectives: • International Market Penetration • Emerging Opportunities: • Wireless Gaming • In-Game Advertising • Online Gaming

  6. Highlights • Timeline: 1979 - Activision is formed 1981 - Activision releases games for Atari 1998 - Alliance with LucasArts and Disney 2001 - Gets rights to Spiderman 2003 - Teams up with Dreamworks • Competitors: • Electronic Arts • Take-Two Interactive (Rockstar)

  7. Portfolio Snapshot • Games • Tony Hawk • Doom • Call of Duty • Licenses • Dreamworks Animation: Shrek • LucasArts: Star Wars • Marvel: Spiderman • Disney

  8. External Analysis

  9. Industry • Interactive entertainment software • Publishing business • Design and development • Marketing • Sales and distribution • Product categories and segments • Action, adventure, sports, racing, fantasy, role-playing, simulation and strategy • Console, online, mobile and serious gaming

  10. Broad Environment

  11. Broad Environment • Next-generation systems and games • Xbox 360, PlayStation 3 • Advanced graphics and new concepts • Stable brand recognition • Growth through acquisitions and alliances • Vicarious Visions Inc. in January 2005 • Toys For Bob Inc. in April 2005 • Beenox, Inc. in May 2005

  12. Porter’s Five Forces Model Threat of Buyers Threat of Substitutes Threat of Suppliers Competition in Industry High Threat of Rivalry Threat of New Entrants Medium Low

  13. Internal & Competitive Analysis

  14. STRENGTHS Company's diverse product selection outsells it’s category Exclusive rights to popular brands and titles Development of premium mobile games WEAKNESSES Seasonal sales peaks Portfolio of products underperforming market Increased spending on consumer and trade activity Internal Resources

  15. Value Chain Analysis Primary Functional Area Secondary Functional Areas Marketing Developers Publishers Production Consumer Distribution

  16. VRIO Framework Valuable Rare Costly to Imitate Organization Temporary Advantage

  17. Financial Analysis Financials: Net Revenue 2005 1.4 B Cost/Expenses Product 660 M Other 563 M Total Cost/Expenses ‘05 1.2 B Operating Income 185 M Investment Income +13 M EBT 198 M

  18. Financial Analysis Net Sales-Platform (publishing): █ =Console █= PC █= Handheld

  19. Financial Analysis • Z-score: 2.79 |-------BAD-------l--------OK--------|------GOOD-------| 1.81 2.675 Operating Margins: • Publishing High (Development / Production Costs) • Distribution Low • Hardware Sales Low • Software Sales Higher

  20. Major Rivals

  21. Major Rivals – Electronic Arts • Revenues: $3.1 billion for fiscal 2005 • 31 titles sold over 1 million units • Employees: 6,500 worldwide • EA Brands:Four Brand Logos • EA SPORTS™ • EA SPORTS BIG™ • EA™ (Brands and Movie Licenses) • POGO™

  22. Major Rivals –Take 2 • Revenues: $1.128 billion in 2004 • Labels: Rockstar Games, Global Star Software, 2K Games, 2K Sports, Joytech • Jack of All Games: Distribution subsidiary • Licenses: Mafia, Conflict: Desert Storm, Stronghold, Hidden & Dangerous • Focus on brand franchises: Grand Theft Auto, Max Payne, Midnight Club

  23. Major Rivals –Take 2 • Mature Audience • Primary Market: Men aged 18-34 • Genres: Action, Racing, RPG, Simulation, Shooter, Strategy, Sports

  24. Key Success Factors • Innovative Packaging • Maintain Brands and Licenses • Create New Franchises • Capitalize on Environment

  25. Strategic Direction

  26. Primary Generic Strategy • Product Differentiation: Specialized products that serve various markets; brand recognition is key • FOUR Key Initiatives: • Increasing Operating Income • Obtaining Intellectual Properties • Greater International Market Penetration • Emerging New Opportunities • Wireless gaming, in-game ads, online gaming

  27. Strategy Evaluation • Strong and Appropriate Strategy • We suggest . . . • Capitalizing on “lag time” in console market • To further enhance brand: • Aggressively engage in-game ads • Enjoy first-mover advantages in online gaming • Expand internationally, i.e. China • Be frontrunner in license race

  28. We welcome you to ask . . .Questions

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