Gree Inc. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

MAIN PROBLEMS AND THEIR SYMPTOMS

The company is currently facing three main problems (refer to Exhibit 1);

First one is, the competitive landscape in mobile social gaming is far more complex and challenging in international markets than in Japan. Gree had to contend not just with a slew of game developers focused on global mobile platforms but also with the mobile platform providers themselves. The management had to decide whether the company’s international strategy should rely primarily on developing great in-house games or on maximizing adoption of Gree’s platform by external developers.

The platform could provide additional revenues and a safeguard against the onslaught of many other game developers that were ramping up their investments in mobile social games. On the other hand, being in the platform game was equal to competing with international platform players like Apple, Google and Amazon. This places Gree on a potentially dangerous position, since both its games and its platform relied on Apple’s iOS, Google’s Android and their App stores.

Secondly, it had to convince its investors that Zynga’s rapidly declining market value did not apply to Gree.

Thirdly, it had to alleviate investors’ concerns that its revenues in Japan would not be severely affected by a new regulation prohibiting the excessive use of “Kompu gacha”, a type of in-game mechanism that induced users to spend more time and money on virtual goods. On May 18, 2012 concerned about the risk of undue addiction to social games leading to overspending on virtual goods, Japan’s Consumer Affairs Agency deemed the practice a violation of the Law for Preventing Unjustifiable Extra or Unexpected Benefits and Misleading Representation. As a consequence of this regulation the stock price of Gree dropped by 23 percent. The drop in revenues was almost 13 percent. In this context, Gree’s leaders had to convince their investors that the new law would not significantly impair the company’s ability to monetize social games in the long run.

Another problem that Gree is facing is that it’s offering required significant localization. By July 2012, Gree had already established nine subsidiaries around the world, each building its own local game development team in order to best address local consumer preferences. Most of Japan’s successful companies were in the area of products, which were mostly designed and developed in Japan but these were absent in the arena of services and software. In this arena, the major part of consumer value came from the ability to adapt products to local consumer preferences.

PROBLEM STATEMENT

Thus the main problem statement for the given case can be;

Whether the company’s international strategy should rely primarily on developing great in-house games or on maximizing adoption of Gree’s platform by external developers.

GREE INC.’S KEY CAPABILITIES AND RESOURCES

Gree has following main capabilities and resources, which may help it in gaining domestic and international market share (refer to Exhibit 2).

Platform for External Game Developer:

In February 2010, Gree decided to open up a platform for external game developers. Gree’s platform enabled third party developers to leverage Gree’s user data and software development tools in order to provide Gree’s games over 18 million registered users.

Before opening up their platforms, Gree had only four in-house games. Given limited game-development resources and registered users in excess of 10 million the platform strategy gave Gree large additional growth and revenue potential.

Gree’s platform offered two key benefits to external developers. The first was lower development costs achieved by using the application programming interfaces (APIs) and software development kit (SDK) provided by Gree. The second benefit was the enhanced ability to attract, retain, and monetize users. In 2012, Gree’s platform had reached more than 230 million registered users of mobile social games globally, making it the world’s leading mobile social gaming community.

Advertising:

Gree has an effective advertising strategy. In May 2008, Gree began to advertise on national TV. Over the following year, it spent JPY 300 million on TV commercials. The combination of social games based on in-depth customer research and aggressive advertising became a recipe for growth.

Gree also established an internal model that it used to calculate the expected profitability of advertising through various media channels. Gree recruited marketing and advertising experts from ad agencies and developed sophisticated marketing methodologies to reduce costs and improve effectiveness. The development of such a system was possible because Gree’s social games were provided via internet connected mobile handsets. Interested users after TV commercial immediately downloaded the advertised games within seconds......................................

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