Introduction
Video game world is fast growing with GameStop being the largest retailer. It sells both old and new software and hardware, accessories that can be used to play games in your PCs, game consoles, action figure, DVDs, Strategies guide and other gaming merchandise. To ensure that the corporation retains its status, it is appropriate to do a SWOT analysis with the help of Michael Porter’s Five-Force Industry analysis (Porter, 2008). This helps the management discover the strengths and weakness of the corporation.
It has strengths in that it is the leading retailer of video games with a strong growth on the top line. The company has a low debt burden which is favorable to the company. Its weakness is that its main concentration is on the supplier and the geography. Gaming market is booming and growing daily hence creating a vast opportunity for GameStop. The storage is also growing. The company is at threat due to the increased piracy and intense competition with other video game retailers.
Question one
With the increased growth of the Gaming industry, GameStop had to come up with the most generic competitive strategy available. The main aim of the company was to ensure that the company has an increased advantage over the other rivalry companies. Their strategy is to beat the competition out of the Video Game industry. This has been done through lowering the cost of their products hence drawing the attention of their target audience. They have also lowered their production price and produce different products from those of their competitors (Porter, 2008).
The target segment for GameStop is divided into three. They have the devoted gamers who are 41% of the targeted customer. They play video game for long periods for up to seven days in a week. They prefer categories like action games, role playing games, sports and stimulation games. They mostly play using many consoles and prefer new games and hardware. Social gamers represent 31% of gamers and play video games for short periods four or five time a week. They mostly play sport and fighting games categories. They use either one or two consoles. The last segment is the casual gamers who represent 28% of gamers and play video games twice a week for short periods. They prefer puzzles and strategic games and use only a single console.
Just like the marketing segments, the targets customers are also divided into three. The Electronic Game Enthusiastic lies in the devoted segment. They do not care about the price and look for specialized products (Porter, 2008). The value oriented gamers, lie in the casual segment, prefer used games and other promotions available in the GameStop stores. Seasonal Gift Givers prefer new games and are most common during peak seasons due to the numerous promotions.
With such a diverse target customers, GameStop has had to diversify their activities to ensure that every customer acquires what they need. They allow customers to trade in games and consoles. They also sell new and old games in retail and online. They also target international gamers hence the increased growth of retail shops all over Europe, Mexico and South Korea. Through identifying their preferred game category, they are sure that they reach the gamers.
Question two
Managers of GameStop have ensured that they are different from their competition. Having retailer shops nationally is one of the main differences from their competitors. In this retail shops, they ensure that they offer a wider game selection both new and old. The other thing that makes GameStop different from their competitor is their trade-in process. They allow their customers to exchange their games and consoles for others or money. They are inspected either through diagnostic computers for consoles or through looking for scratches for games. The monetary price is lower than the trade-in price and the customers accept it in cash form.
Trade-in is most common in times when the gamers are awaiting the release of a new software or game. While this is advantageous for the customers as they can use the trade-in credit to purchase other systems and games, it also benefits the corporation in that it is a source of revenue in off seasons.
GameStop had employed knowledgeable employees who help the customers during their visits to the retail shops. Before being hired, they are tested on their knowledge on games and consoles. To keep them updated on the products, they are allowed to take games home. They cater well for casual and seasonal gamers during purchase. Employees also attract devoted gamers as they know that they are gamers like them and have the knowledge of the most recent system.
Video games will over time shift to online action. To move with the growing trend, GameStop have set up online rental and purchase sites. In rental sites, customers are allowed to rental up to five games at a time and can receive a new game when they return the old one. They also have many purchase sites with the used ones being cheaper.
Question three
Video gaming industry is rapidly growing hence the number of new entries and competition is increasing. Some of the competitors are the Best Buy Co., Inc, which operates in USA, Europe, Mexico and Canada, Barnes and Noble and Wal-Mart stores, a worldwide operator of retail shops.
In the aim of beating their competition, GameStop has applied different strategies. One of them is lowering their cost of product. This has drawn reasonable attention to the company because though the price is lower than the other companies, the quality is still high. The other way is through reducing the cost of production. Instead of creating one expensive mega hit Video game they have opted to produce numerous games that are hits like the Sudoku.
They have also made different products that can be imitated by their competitors. This can be seen when they first invented the right-left-top-bottom-button control. Another strategy is through segmenting their marketing. This is done through targeting a larger mass through producing a childish game for kids, educational games that can target the parents and others targeting different customers.
During trade-in, customers acquire credit that they can store and use for buying more games in the future. This model ensures that with the growing digital trend, the customers will be grounded to GameStop retailers (McKinsey Quarterly 2012). This is another way the company had used to keep the competitors out.
Video gaming world and technology is fast growing and hence this changes have to be improved over time so as to ensure that the company holds its part in the Gaming investment. Keeping the quality of the high ensures that the competitors will be kept out and there will be no new entry to the gaming world (GameStop 2012).
Question four
GameStop started as a small retailer for software called Baggage. It merged with many other companies but the greatest merger was with the EB Games in 2005. The merger between the two companies had huge impact on the number retailer centres they had. The retailers became larger than those of their competitors and had control of around 25% of the whole gaming World market.
GameStop believes that the next generation of gaming system will revolve around the digital world. Due to this, they are taking a huge advantage of the situation to use this as an opportunity to acquire more customers. Through online retailer shops, customers can download different games. The credit gotten during trade-in can be used to purchase games either online or physically in stores. They have acquired a website, Kongregate.com, and an online distributer company, impulse, to help them acquire new customers (GameStop 2012). They also bought Spawn Labs, a company that will allow customers to stream purchased games between different devices.
To ensure that the employees are up to date with the upcoming technology, GameStop allows them to take new games home to familiarise with them for four days. This ensures that they will be having the available knowledge needed while dealing with the customers.
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