Wednesday, April 1, 2015

EA’s Competitive Factors

Electronic Arts has maintained the position of one of the largest and most popular game development companies for years. However, the company faces unique challenges and specialized forces within the game industry. In connection to the article “Five Competitive Forces That Shape Strategy” by Michael Porter, EA has dealt with established rivals, a changing and frustrated customer base, diversifying game development, the rise in popularity and accessibility of indie games.

Established competition within the game industry rarely competes on price. Consistent price standards are a trademark for new console and pc games. Rivals do compete on content and market influence.  There are many niche games in the market with their own loyal consumers. Sometimes EA competes with known brand games, such as with their rpg games like Mass Effect in contrast to The Witcher by Project RED or the Diablo series by Blizzard.  Other times,
EA seeks to compete in new game genres, such as the moba market currently dominated by Valve and Riot Games. The competition for customers relies on game content and quality instead of price.

Unfortunately for EA, customer relations are by far their weakest link. Customers loyal to specific games may not greatly influence the company, but negative opinions in growing gaming communities have led to surprising reforms. With the introduction of at-launch pay-for DLC for their games, EA has distanced themselves from their consumers. Loyal players have continued to follow sequels to specific games, but are now more hesitant to engage any of EA’s newer games. When quality diminishes in EA’s games, these now hesitant customers are quick to complain; complaints which often directly impact the game’s sales.  This was demonstrated in Mass Effect 3, where complaints about the ending created brief boycotts against the game and stagnated its sales permanently.  EA needs to abandon practices which are distancing customers and instead seek ways of locking in their customers from rivals.

EA is a supplier. They don’t need to worry about suppliers constraining their profits nearl as much as retail stores. They do need to worry about their ever expanding supply of games. EA’s supply constraints is less cash orientated. Instead, supply constraints relates more to the company spreading itself too thin, connecting a brand name across too many unrelated game genres and nullifying its appeal. With its current spread in sports, rpgs, sims, racing, and mmo genres, EA is making it easier for completion to specialize and remove consumers from any one of the genres.

Similarly, EA has to worry about new entrants in the industry. Large companies rarely come by, but new software such as Steam and the Greenlight campaigns have led to mass influx of small indie game developers. While the large mass has nominal impact on EA’s sales, a few propose games which serve as cheaper and more unique substitutes. The best way for EA to handle the forces of new entrants and substitutes is for them to increase their R&D to develop more unique games.

EA still faces the five competitive forces, but their efforts to resolve them need to lead to internal changes rather than external pressure.

Daniel Johnson

Further Reading Related to EA:

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