STOCK VALUATION PROJECT Case Solution
It is generally believed that when executive holds some concentrated equity, they perform well. This is precisely what is happening in Activision Blizzard. The comparison of 5 year cumulative total returns is as follows.
Furthermore; the market/industry environment within which Activision Blizzard operates is analyzed using Porter Five Forces Model, which will point out any potential risks that Activision Blizzard might be exposed to.
BARGAINING POWER OF BUYERS
According to one new research, the total population of gamers is 1.2 billion in the entire world and there are also a lot of gaming and interactive entertainment companies, which produce new games every year. This means that customers can buy similar games from other gaming companies and whenever the switching cost of customer is low, it reflects high bargaining power. Apart from some specialist games like Call of Duty and World of War Craft where the customer has to buy the game from the company manufacturing it like Activision Blizzard Inc. and in case of FIFA that is produced by EA games. Otherwise, the customer base is saturated and divided between gaming industry.
BARGAINING POWER OF SUPPLIERS
Supplier in this gaming industries are the distribution companies to which gaming companies pays huge fees when they launch new games. In this case, the competitive position of Activision Blizzard is strong because they have their own distribution channel, which they use when launching new game unlike its competitors and other gaming companies, which pay huge fees before the official launch of their games and the distributer have high power to exercise their terms on these gaming companies.
THREAT OF SUBSTITUTE
There is always an ever present threat whenever someone talks about technology and the companies dealing with technological products. Since the time of Sega and Atari, these two companies developed a number of games and set premise of what gaming is today, gaming world has grown tremendously with the introduction of 4th and 5th generation gaming consoles and full HD graphic intensive gaming experience. The gaming industry operates on various segments like console gaming, pc gaming, mobile gaming they have their own markets. However, the shift of gamers from one of these markets to another or disappearance of gamers from any of these segments will damage the gaming market. So in short, there is an ever present risk of any substitute product, which can tarnish the current growth of this industry. Mobile devices are a growing threat of substitute to traditional gaming on consoles and desktop computers.
THREAT OF NEW ENTRANT
Threat of new entrant is directly linked with the barriers to entry in terms of capital required to operate in gaming industry and the complexity of distribution channels. Although initially, the capital requirements were quite low but now as the company wants to become popular, they need significant funds to operate effectively in the industry. The threat of new entrants in the industry where ATVI operates is quite low but the change in the mobile phone gaming is rapidly changing the external environment. This can change the dynamics of gaming business and may create chances for new entrants to operate and discover a new industry, which will directly affect the current gaming and interactive industry that is focused on pc and consoles gaming.
Game development industry is operating globally. With this trait of this industry/ global competition, the companies of countries are not restricted to the boundaries of their own countries but they also compete with companies from other countries…………..
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