In-Depth Strategic Analysis of Konami Gaming Inc - Case Study Example

STRATEGIC AUDIT: KONAMI GAMING COMPANY Name: Course: Instructor: Institution: City: Date: Executive Summary This paper performs an indepth strategic analysis of Konami Gaming, Inc. First, it employs the use of Porter’s Five Forces model to perform its analysis. Secondly, the company’s Value Chain Analysis for Konami Company. Thirdly, the paper demystifies the Boston Consulting Group Matrix in relation to Konami Gaming Company. Fourth, the paper analyses the company based on the Industry Attractiveness Matrix. Fifth, the TOWS Analysis and VRIO Framework are equally used to analyse Konami. Eventually, recommendations for action are proposed for Konami Gaming Company based on the findings of the analyses. Table of Contents Executive Summary 2 Introduction 4 Audit Tools 4 Porter’s Five Forces 4 Value Chain Analysis 6 Boston Consulting Group Matrix 7 Industry Attractiveness Matrix 8 TOWS Analysis 9 VRIO Framework 10 Recommendations for Action 11 Conclusion 12 References 12 Introduction Konami Gaming, Inc. is an established company in the gaming industry whose main business is concerned with the design and development of slot machines and gaming enterprise management systems both for local use as well as for export to international markets. Some of its products include video game series such as Contra, Suikoden, Pro Evolution Soccer, and Castlevania. In terms of revenue generated, Konami is ranked number twenty globally (Wolf, 2015). With its headquarters in Tokyo, Japan, Konami Gaming, Inc. has maintained a reputation in the gaming industry that is yet to be tainted since 1969 when it was founded by Kagemasa Kozuki (Konami Gaming, Inc. 2015). This report seeks to perform a strategic analysis of Konami Gaming, Inc. using various analytic techniques. Broadly, this analysis report explores Konami’s strategy, analyses the reasons for its success/ failure in the gaming industry, how Konami achieved its international expansion, the role of strategic alliances, and the company’s future survival projection. Specific tools used for this analysis are Porter’s Five Forces Model, Value Cain Analysis, Boston Consulting Group Matrix, Industry Attractiveness Matrix, TOWS Analysis, and VRIO Framework. Audit Tools Porter’s Five Forces Threat of New Entrants The threat of new entrants in the gaming industry is quite low due to a number of factors. First, this is a capital intensive industry and not every interested player would be able to get in. Secondly, Konami as an existing player in the industry already benefits from brand loyalty hence edging out any new entrant from the market (Wolf, 2015). Intensity of Competitive Rivalry The gaming industry has dwindled in terms of attractiveness in the recent years. For that reason, the already existing players such as Microsoft, Sony and Nintendo are fiercely competing in order to thrive in the industry (Schrier, & Gibson, 2011). With respect to Konami, competitive rivalry here is high and poses as a possible threat to the company’s survival in the gaming industry. Bargaining Power of Buyers The gaming industry is characterised by the fact that buyers have a high bargaining power mainly because they are few. In order to thrive in the industry despite this threat, Konami takes advantage of its slogan, “Born from funTM” to conceive excellent ideas and then design and develop high quality gaming products that win the customers’ hearts (Konami Gaming, Inc. 2015). Its cutting-edge technology is also fundamental in helping Konami manipulate the buyers’ bargaining power. Bargaining Power of Suppliers While the suppliers might not necessarily have a high bargaining power particularly to the major players in the gaming industry such as Sony, Microsoft, and Nintendo, the converse is true for smaller players such as Konami (Wi, 2009). Ideally, suppliers would want to identify with industry giants whose stability is somewhat predictable leaving out the smaller players. For Konami Gaming, Inc., this makes it suffer from unpredictable price changes in gaming supplies. Threat of Substitutes According to Wolf (2015), the gaming industry players such as Konami are currently facing high threat of substitutes to their gaming products. This is mainly because of the availability of similar games in smartphones and tablets at far much lower prices than what the gaming industry players offer (Schrier, & Gibson, 2011). This poses as a threat to Konami. Value Chain Analysis Konami’s Primary Activities Operations: Currently, Konami has operations in Japan, Australia, America, Europe, and the better parts of Asia (Konami Gaming, Inc., 2015). Marketing and Sales: Konami spends very little investment in marketing as the gaming industry is majorly characterised by brand loyalty (Kohler, 2015) which it instils by expanding its regions of operations. Service: Konami’s main objective is to provide the highest level of customer service to its customers. Inbound Logistics: This entails all of the sourcing processes in order to procure and standardise Konami’s gaming products such as game consoles (McGowan, 2001). They competitively advertise for suppliers for economies of scale. Outbound Logistics: This entails Konami’s four main divisions i.e. Konami Digital Entertainment Co., Ltd.: Japan division, established on 2006-03-31, Konami Digital Entertainment, Inc.: North American division, established on 2003-10-13, Konami Digital Entertainment GmbH: European division, established on 2003-04-01, and Konami Digital Entertainment Limited: Hong Kong division, established in September 1994 (Konami Gaming, Inc., 2015). Konami’s Support Activities Infrastructure: For Konami, this includes all the physical and virtual processes in the company’s operations such as legal support, finance, and management. Human Resources: Konami’s one of the most treasured asset are the various innovative training initiatives for their staff. Such trainings are done from time to time for the benefit of Konami’s staff. However, its human resource management is not up to scale, and should be further looked into (Ebsco Publishing, 2002). Procurement: At Konami, the purchase of raw materials from suppliers is done through competitive bidding amongst the suppliers before settling on the most cost-effective but highest quality provider (Konami Gaming, Inc., 2015). Technological Advancements: Konami uses cutting edge technology in the design of most of its gaming products so as to save on costs and ensure high quality standards. Boston Consulting Group Matrix Question Marks: With the gaming industry being a low-growth market in the recent years, Konami’s Question Marks indicate a low market share, and its gaming products require relatively higher investment for it to capitalize on the available segments in the gaming industry. Dogs: Konami’s gaming products have a low market share in a low growth gaming industry. This has forced it into diversifying into the movie industry by producing such movies as the Silent Hill and A Metal Gear Solid (Wolf, 2015). Stars: Konami’s movies have a high market share in a high growth market. Consequently, high capital input is needed in order to achieve relevance in the market. Cash Cows: Due to their ability to generate cash in the company, Konami’s gaming products have a higher market share in the unstable gaming industry. Industry Attractiveness Matrix Gaming Industry Attractiveness: Despite the rapid technological advancements in the gaming industry, the industry does not show positive future prospects in terms of growth (McGowan, 2015). A once extremely lucrative industry, the gaming industry has been relatively stagnant in the recent years for various reasons. First, the capital intensiveness for any interested player to get into the market shies away infant investors in the industry that may not have the necessary financial muscles (Wi, 2009). Secondly, the gaming consoles produced by this industry are facing high competition from such competitors as the smartphones and tablets who seem to be providing similar games in their gadgets at negligibly lower costs (Wolf, 2015). As a result, therefore, the existing players as well as the interested new players might not be as much profitable as they used to be initially. Due to the low profitability, the end result of that scenario is that the existing players such as Konami, Sony, and Microsoft are likely to be drawn into other non-gaming income generating products such as movies. On the other hand, the new entrants would shy away from the gaming industry. Generally, the gaming industry is fast becoming unattractive (Kohler, 2015). Strength of Konami’s Business Units: The recent couple of months have not been quite sound for Konami’s profitability. This has been attributed to the cancellation of Silent Hills which was then followed by the departure of experienced and talented production employees such as Norman Reedus and the renowned games director Hideo Kojima (Grant, 2010). In terms of total market share in the gaming industry, Konami’s position is far much smaller in comparison to the key industry players such Microsoft and Sony who hold more than 50 percent of the total market (Wolf, 2015). Ideally, this suggests a weaker performance of the company’s business units. TOWS Analysis Threat Even though it’s good to be innovative, the constant changes in Konami’s strategy may turn out to be a threat. Also, lower priced gaming products from such companies as Nintendo may be a threat to Konami’s moderately priced products. Opportunity Konami’s dominance in the Asia has been primarily characterised by its presence in Japan. In the years to come, the company has the potential of venturing into new markets in the Middle East and Africa as well so as to take advantage of the markets there (Konami Gaming, Inc., 2015). In addition, Konami may want to partner with Hollywood studios for its new movie venture. Weakness The Konami brand is generally not as established as other major players like Sony and Microsoft. This may deny it new customers whose loyalty in other established brands like Sony is strong. Strength According to McGowan (2001), Konami has recently diversified into the production of movies. This strategy might be helpful in providing alternative sources of revenue streams. Additionally, Konami’s gaming products are usually lower priced than those of their competitors such as Sony and Microsoft. This might attract customers interested in saving. VRIO Framework Value: The value of Konami’s gaming products matches the value of their prices in the market. As a matter of fact, Konami’s product prices are much cheaper than those of Sony and Microsoft despite their similarity in terms of standards (Kohler, 2015). Rarity: The gaming industry is currently (and has been so for the longest time) controlled by two main companies i.e. Sony and Microsoft (Ebsco Publishing, 2002). While the gaming products are themselves not rare, the difficulty in entrance of new market players makes their general availability relatively lower. Imitability: In the gaming industry, there have been a lot of copyright issues (Ebsco Publishing, 2002). Konami’s products, however, have not been so easy to imitate since the other major industry players are in fact the source of much of the technology used in the gaming industry. Organisation: Konami Gaming, Inc. seems to be doing very little in organising itself in order for it to exploit its available resources including human resource. Even after seeing its renowned games director Hideo Kojima and Norman Reedus, the company bothered less to ensure the same doesn’t recur in future (Wolf, 2015). Recommendations for Action First, Konami should invest in aggressive marketing initiatives so that its relevance in the gaming industry can be felt in the midst of the industry giants such as Sony and Microsoft. Apparently, the gaming industry has seemingly been dominated by these giants for the longest time. Secondly, Konami should re-evaluate their human resource management strategies. They could do so by implementing staff motivation schemes through such strategies as salary increments, staff get-togethers, training programs, and staff appraisals. Thirdly, Konami should partner with Hollywood Studios so that they could boost their market share in the movie industry. This is tandem with their recent diversification into the production of movies in order to boost their revenue streams. Fourth, the company should diversify further into other revenue streams aside from its traditional production of gaming products and the recent venture into the movie industry. As it is, the gaming industry is largely becoming unattractive due to low profitability. Finally, Konami should reduce their frequency of merging with other companies, acquiring other firms, and changing its divisional names. The company has had numerous mergers and take-overs which seem to have put its customers into some kind of confusion. By maintaining a single name, the company will most likely establish and maintain a brand that will attract customers’ loyalty in the long-run. Conclusion In conclusion, therefore, despite the fact that Sony and Microsoft have continued to dominate the gaming industry, there still so much that could be done by industry dwarfs such as Konami. The company can still sustain itself in the coming years especially if it assesses its strategies for business. All it takes is good management, dedication, excellent motivational human resource strategies, and investment in technology. All these options are at Konami’s disposal. The video games industry, however, seems to be collapsing in general. As was mentioned before, this is mainly because of the smartphones and tablets that come with such games at negligibly lower prices. References Ebsco Publishing (Firm). (2002). Wireless Gaming Industry Profile: Japan. [S.l.], Datamonitor Plc. Grant, R. M. (2010). Contemporary strategy analysis and cases: text & cases. Hoboken, N.J., Wiley. Kohler, C., (2015). Power Up How Japanese Video Games Gave the World an Extra Life. Dover Pubns. Konami Gaming, Inc. (2015). Available at: https://www.gaming.konami.com/ McGowan, R. (2001). Government and the transformation of the gaming industry. Cheltenham, U.K., Edward Elgar. http://public.eblib.com/choice/publicfullrecord.aspx?p=716133 Schrier, K., & Gibson, D. (2011). Designing games for ethics: models, techniques and frameworks. Hershey, PA, Information Science Reference. Wi, J. H. (2009). Innovation and Strategy of Online Games. Singapore, World Scientific. http://public.eblib.com/choice/publicfullrecord.aspx?p=477267 Wolf, M. J. P. (2015). Video games around the world. Read More