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Electronic Arts

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  1. Electronic Arts PEST and Industry Analysis Kenny Erskine

  2. Electronic Arts • Three Main Divisions • EA Sports, EA Games, EA Play • Published 158 titles in the fiscal year of 2010 across all platforms (including mobile) • Total assets remained unchanged from 2009-2010 ($217M)

  3. Electronic Arts • No title accounted for 10% or more of total revenue • 55% of total net revenue generated in North America • Key International Markets Include: • Europe (39%) • Asia (6%)

  4. Political Analysis • Laws being passed that limit young people’s access to mature video games • European Union continues to pass protectionism laws

  5. Economic • The video game industry grew 10% from 2005-2009, faster than the overall economy. • The overall economy is rebounding in the US and around the world.

  6. Social • Older gamers continue to play games • Younger people get involved in gaming every day • Consoles like the Wii, Kinect, and Playstation Move introduce older people and families • With these advances, mothers and others are now playing games

  7. Technological • Technologies are always expanding and making more opportunities. • Upcoming advances like 3D and improvements on the Wii will bring more people. • Online gaming becoming a much more popular trend. • Mobile gaming is surging, accounting for 48 published titles in 2010.

  8. PEST Analysis Chart

  9. Industry Analysis • Industry • Video Game Software Industry • Participants • Buyers are Playstation, Xbox, Wii, and PC Owners • Suppliers are the software companies that create programs EA uses in development

  10. Industry Analysis • Participants (cont.) • Competitors are any other video game making companies. Major ones include: • 2K Sports, Blizzard Entertainment, Ubisoft • Substitutes are anything else people do for leisure, serious threat. • With the advent of Facebook games and mobile phone apps, the threat of new entrants is very high.

  11. Porter’s Five Forces – Buyer Power .

  12. Threat of New Entrants • Threat of new entrants is high. • There are many established big players in the industry. • However, due to social media (Facebook) and mobile games being incredibly inexpensive, it is cheap to enter this industry.

  13. Bargaining Power of Suppliers

  14. Threat of Substitute Products

  15. Intensity of Rivalry

  16. Porter’s Five Forces • Buyer Power • Positive force for EA because buyer power is very low • Threat of new entrants • Facebook and mobile gaming make an inexpensive entry possible. • Supplier Power • Low switching costs and differentiation give EA a very positive outlook towards their suppliers.

  17. Porter’s Five Forces • Threat of Substitute Products • An area of concern due to consumers buying used products or finding other hobbies that are not electronic. • Intensity of Rivalry • A concern for EA due to the amount and size of competitors in the industry as well as a high exit barrier.

  18. Blue Ocean Strategy? • Currently this industry is very set in its ways. • Players are set and industry is defined. • Carving a new path would be difficult, but not impossible. • Expanding virtual reality and 3D gaming could open up market segments currently not used.

  19. Conclusion • Industry Analysis • Industry is favorable to EA, but there are definite threats. • Many competitors surging to the industry with the ease of creating mobile and social media applications. • Very high market share of sports video games • PEST Analysis • The industry and economy overall is growing. • More families and non-traditional gamers are picking up games.

  20. Conclusion • Porter’s Five Forces • Very favorable overall to EA • Threats do exist, however • Rivalry with 2K Sports could be an issue • Threat of substitutes is very high • The industry and forces favor EA very much to continue their path in the video game industry.

  21. Electronic Arts Competitor and Market Analysis

  22. Key Competitors

  23. Key Competitors

  24. Activision Blizzard Est. 1991

  25. Konami Est. 1969

  26. Ubisoft Est. 1986

  27. Zynga Est. 2007

  28. Gameloft Est. 1999

  29. Market Analysis North America

  30. Video Game Sales By Genre

  31. Market Analysis • EMEAA Region • Europe, Middle East, Africa, Asia • Projected to grow 10.2% in 2011 • 4.7 million consoles purchased in 2010 • Analysis • Big opportunity to keep a hold in this major market region. • EA is very strong in this region already.

  32. Market Analysis • Mobile Gaming • One of the biggest growing markets. • EA produced 12 of the top 20 downloaded iPhone games. • $55 million mobile revenue in the first quarter of 2010 • Projected to grow $18 billion by 2014. • Apple and Android’s AppStores have made purchasing and installing games easy.

  33. Social Media Gaming • Facebook is essentially the biggest game platform in the world. • 350 million Facebook users per month • 100 million play Facebook games • Acknowledging this, EA Purchased Playfish for $400 million • Facebook has traditional “non-gamers” playing feverishly with titles like FarmVille.

  34. Software Sales by Region • Main focus should continue to be on the Americas. • Be wary of these figures, they do not include Mobile games and free Facebook applications

  35. Demographics

  36. Conclusions • Mobile Gaming • EA needs to continue to increase its share of the mobile gaming market. • Facebook • EA needs to break into this market. It is the fastest growing market. • Facebook gaming is huge because of the attraction of non-gamers.

  37. Conclusions • Must be wary of competitors. • Blizzard/Activision continue to grow daily in the major North American markets. • Konami will attempt to increase its share of the North American market. • Zynga will be very tough to knock off its Facebook throne, but the market is wide open to new entrants. • Gameloft will be a mobile threat, but EA has a strong hold in the industry currently.

  38. Electronic Arts Internal/SWOT Analysis and Competitive Positioning

  39. Internal Analysis • EA became incredibly successful with a brilliant business model. • Base a product on a popular sport or movie • Market the item effectively • Publish a new version of the game every year. • Ex: FIFA, NHL, NBA, Tiger Woods, James Bond series

  40. Internal Analysis • EA has suffered setbacks along this strategy and is now adopting a new style. • EA Los Angeles Implemented a “cell system” for their developers to become more innovative. • Development staff broken up into 6-8 person “cells” to rotate on projects • Helps reward innovation and new ideas

  41. Internal Analysis • President Peter Moore acknowledged disc-based games as a “burning platform” • Can stay on the platform and face certain death • Jump into the water and face possible/probable death • Working to innovate towards more disc-less features. • Acknowledges the likelihood of a console without a disc drive in the near future

  42. Electronic Arts Operating Figures

  43. Change In Distribution/Sales • Published 48 mobile game titles in 2010. This is a 60% increase from the 30 published in 2009. • Acquired Playfish Limited to gain a larger share in the free-to-play social gaming market.

  44. SWOT Analysis

  45. SWOT Analysis

  46. BCG Matrix By Division

  47. Value Chain

  48. Value Chain

  49. Strategy Clock

  50. Electronic Arts Strategy • Focused Differentiation • Competes by making products superior to that of their competitors. • This justifies the premium price EA charges for their products. • Why Focused Differentiation? • As an established brand with brand-loyal customers, EA can charge a higher price. • High prices allow EA to continue to create high-quality products