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

Introduction

The company started its operations in 2004 as a social networking organization. At the initial level, Green had not any expertise associated with the gaming functions when a prototype was developed. Gree Inc. was the premier social networking service in Japan, which had led to three decades. Chief Financial Officer of the company, Naoki Aoyagi had made the important strategic decision related to alliance with the second leading mobile operator in Japan, KDDI. Strategic alliance entire changed the Gree business model in Japan. At the end of 2007, the growth and demand of mobile advertising revenues were declining, that forced the company to organize a new business model.

The company’s management realized that several changes practices needed to adapt in order to increase the market share. They identified that free mobile games were one of the effective ways to engage the customers and build user traffic. As a result of it, the company started expanding its operations via implementation of social games. The management used TV advertisement for social games. The company also facilitated the external game development by introducing a portal in order to expand the business. The customer base of the company had increased rapidly and around 18 million free registered users had enjoyed the gaming services for external game developers. Externally developed, utilized user data and software development tools to offer the services to the registered users.

The company had two major sources of revenue: paid services and advertising. Advertising services contributed around 10 percent of the revenues in 2012 and involved banner advertisement within the organization’s games and the social network division. Paid services contributed above than 90 percent of the company’s revenue. It consisted avatars sales for company’s social network, virtue goods sales within in-house social mobile games, and platform services sales to external developers.

At mid of 2010, Gree’s sales had reached at a saturation point in the local market. Though the demand had increased rapidly as far as users are concerned, but it raised issues for the companies to face while strategy implementation. The demand for smartphones also increased as well as well as feature phones had begun to corrode. The competition level in the industry also increased significantly in the domestic market particularly Facebook and Zynga. The rising competition and external threats forced the company to revise the business strategy to compete in the market.

External Analysis

External environment can easily be examined by practicing PEST analysis. The analysis consists of four major factors, i.e., political, social, economic and technological. Analyzing all these factors will be beneficial for the company to consider in the long run.

PEST Analysis

Political Factors:

Politics in Japan entirely different as compared to the other countries. Though, there are some favorable policies for the gaming industry in the country that facilitates the companies to operate in the market. There is also a policy in Japan regarding age limit of media and reduces Nintendo’s customers. The policy does not impact on the Nintendo and other games due to a rapid interest of the people.

Social Factors:

People in Japan prefer gaming in a huge number and demand is rapidly increasing as well. Companies have an opportunity to expand their business with a variety of gaming services for the users. Though, country believes that gaming generally signifies a negative impact towards society, so sometimes games are considered as “unfavorable” for the average citizens. Though the gaming is very popular in Japan, but it is not the only factor that the companies may consider to operate in the industry. In addition, there is an immense competition level within the industry and Sony has accounted for the majority of market share with its PSP.

Economic Factors:

The country is the third major biggest economies in the world, and the gaming industry in Japan is tremendously vital because of the popularity among the people. Though, the earthquake impacted severely on the economy of the country and it causes a decline in the industrialization and privatization.

Technological Factors:

The demand of social networking and video games have increased rapidly in Japan over the last couple of years. There is a massive development in the video gaming technology that increases users. Usually Japan offers the latest technology for its people, including social media, video gaming etc.

PEST Analysis clearly indicates that it is beneficial for the Gree to implement the latest technologies in order to expand their business. Video gaming industry in Japan is having ample opportunities for development........................

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