External Analysis of Gree, Inc
Porter’s Five Forces Model
Bargaining Power of buyers
The bargaining power of buyers for a social gaming network is considered very high due to the zero switching cost for a user and the easy access available for users in switching to another company. The majority of the players in the social gaming market is offering similar products and games which makes it easier for a user to switch and increases the buyer’s power. The online gaming companies are dependent on the number of their users as they make innovations in their gaming experience to retain their customers. In order to prevent consumers to switch to a different gaming network, Gree acquired OpenFeint which is the largest platform for mobile social games which acquire more users and to retain them as well.
Bargaining Power of Suppliers
The bargaining power of a supplier in the social gaming industry depends upon the platform for in-house gaming for the third party developers. Most of the players in the industry have their own platforms or are still in the process of developing the platform. In the case of Gree, the company has its own platform where external developers’ display their online games and make payments for the services provided by Gree. However, Zynga has its own platform, but still is dependent upon Facebook because it drives the majority of users and revenues from the same social media platform. However, the overall bargaining power of supplier is high in the industry.
Threat of Substitutes
The threat of a substitute in social online gaming is high as users have other similar products offered by Zynga and Steam to cater a similar set of the target market. The in-house gaming consoles, PC games, and the game circle of kindle fire are the most prominent substitutes for social gaming network. These threats have been continuously haunting the company because the major players of these substitutes are giants in their respective markets. These companies have a significant amount of investment to spread their roots in different market segments by acquiring other companies in the similar market. The interest of users in switching to a substitute is high because of the new prospects and experience are provided by the company.
Threat of a New Entrants
The threat of a new entrant is very low in the in-house social gaming market due to the high capital investment required in maintaining the database of consumers. A high operating cost is also incurred in the maintaining of the company’s website. Due to the technological advancements in the online industry, many new players hesitate in entering the market for the fear of outdated technology unless the company has enough investment and a new product concept to sustain itself in the market. The market for online social gaming is becoming saturated and the growth of players in the market is comparatively slower than previous years. The existing players have widened their feathers to a much greater extent and does not allow new competitors to survive in the market. The most probability for the new entrant is that they can easily be acquired by a much bigger player.
Competitive Rivalry
While considering the Japanese market, the only fierce competitor of Gree is DeNA. Together, both these companies have dominated the social gaming market of the country. In the year 2012, Gree had $610.5 million in net income as compared with $437.2 million for DeNA in the same year. However, Gree had a comparative edge against its fierce rival as it was successful due to two key pillars. The first pillar is based upon in-house gaming and the second pillar is the third party developers. DeNA had entered the in-house gaming market and developed its own platform in the year 2006 before Gree. Gree and DeNA’s rivalry has been very constructive as both competitors have been learning from each other in catering the market. Gree competes with Zynga, Facebook, Steam and other competitors on a global stage. Gree’s stock market price for a single share exceeds than that of all these competitors. While competing in international markets, Gree faces a problem of either expanding, its social gaming platform for external developers or sticking with the same in-house gaming due to increased competition...................................
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