The BOSS World

Age Groups
6-21 yr olds 22-35 yr olds 36+ yr olds
Market Volume 45% 35% 25%
Gender Split (M:F) 50:50 70:30 85:15
Disposable income No Yes Yes
as a way to escape from teenage & post- as a kind of "stress reducer" from the as a way to remember a bygone era,
Why Gaming?
teenage relationship and development issues combined tension and boredom refuse to grow old
Avg Unit Price (Fig 3) $421 $481 $520
Key Competing Factors 6-21 yr olds 22-35 yr olds 36+ yr olds
Somewhat important
Most important
Price [ want quality + all-in-one multimedia Not important at all
[ shop 4 best deals ]
capability ]
Console power Most Important Important
Not paramount
(Sophistication of Game [ faster, better, and complicated game [ value the sophistication of gaming
[ primarily online gaming ]
Experience) experience ] experience ]
Not paramount Not as important Most important
Graphic Sophistication
[ play on old TV sets ] [ can't afford HQ displays ] [ visual appeal is everything ]
Quite Important & not price sensitive Not important & not price sensitive
Important but price sensitive
Controller Sophistication [ many buttons controller, wireless or [ appreciate the simplicity and
[ many buttons controller, wireless or haptic]
haptic] familiarity of controllers ]
Very important
Not important Not important
Audio Sophistication [ game experience must match with
[ not disturbing others at home with noise ] [ not disturbing others with noise ]
HQ audio system ]
Internet connectivity + Ability to play music Very important
Multimedia Add-ons [ home entertainment system 4 other features [ doubles as CD/DVD/Blu-ray player + Not important at all
] internet connectivity + video streaming ]
Utmost importance Moderately important Interest is very low
Online Gaming [ 'latch-key' kids = socializing in cyberspace [ virtual community becomes extended [ interest in online gaming increasing
with friends, after school] network of 'family & friends' ] slowly ]
The BOSS World
Roundland = North America, pop 125 million, HQ of all major competitors, new products launch
Starland = Europe, pop 130 million, fragmented markets: many countries, multiple language, financially rewarding but high investment requirement
Total Video Gaming Market = 50% Hardware + 50% Software. Hardware market = $4.2 bln and declining, peaked 5 yrs ago. (Fig 4)
The Household penetration for console is 53%, true for both Roundland and Starland. Sales peaks with each launch of new console and then valleys.
Driver of Consumption = Technological novelty + Sophistication, especially among core consumer group; thereafter the rest of industry will follow suit.
Core Consumer Group = 20% total market, M:F ratio 63:37. Majority between age 10-45, 45% under 21. Very internet savvy, enjoy online gaming.

Distribution Channels
Description Low Price-Oriented Channels Specialized Electronic Stores Video Game Chains
TVs, Computers, Printers, MP3/DVD pre-recorded CD/DVDs, consoles,
Products sold wide variety of goods & services
players, Cameras, Appliances games
hypermarkets, catalog companies, online from single store to national brand Regional/Local chains, focus on
Distibutors type
electronics stores, & auction sites distributor with nationwide footprint electronics or consoles/games
Service non-existent n/a yes
Exchange policy yes, immediately n/a n/a
Advice or guidance given
none none yes
at POS
Discount pricing many sales deals n/a discount on used games
most extensive range of 'bundles'
Game console most basic packages, low variety ltd number of 'bundled' packages from low end to high deluxe or all
items are sold separately also
Avg Sale Price (Fig 6) $428 $518 $518
Shopping preference Low Price-Oriented Channels Specialized Electronic Stores Video Game Chains
6-21 yr olds 70% 20% 10%
20-35 yr olds 20% 10% 70%
36+ yr olds 10% 70% 20%
Brand Shiny Apple Purple Plums Yellow Bananas
Console Shiny Station Purple Player Yellow Console
Console power the fastest chip in the business Mid-range Low-range
Graphic sophistication high quality Good quality Low-range, relies on PC card
Controller sophistication has the blast/jump button at base of controller Mid-range least sophisticated in the biz, joystick
Audio sophistication high quality Good quality Low-range, relies on PC card
1 HDMI, 4 Controller ports, 2 USB3 ports, 1
Ethernet LAN port, 1 Component & 2
Multimedia Add-ons n/a USB2 port
SCART connection points, 1 7.1Sound
connection port.
Internet access Ethernet cable Wireless via PC connection
Storage 500 Gb n/a n/a
Price $649 $550 $309
Strategy Supply the best machine online gaming experience online gaming experience
Development of online Responsibility of main developers (Shiny The games are bought and
n/a
community Apples' Achilles heel) downloaded online

Brand Blue Buddies Blue Buddies [new console….]

Console Red Box
Console power
Graphic sophistication one generation behind Shiny Apple and
Controller sophistication Purple Plums
Audio sophistication
Multimedia Add-ons only play CD, no MP3 & DVD function
Internet access n/a
Storage n/a
Price $399
Strategy best value for game console
Development of online
few & very primitive online titles
community
Brand Shiny Apple Purple Plums Yellow Bananas
Expected Date Year 42 Year 41 Year 44
Major improvements in console power,
Major improvements in console power Major improvements in audio
New features announced graphics and audio sophistication as well as
and controller sophistication sophistication
multimedia add-ons.
Pricing trends $650 → $620 $580 → $500 $320 → $250

3.7 Services and Delivery

The industry competes primarily on product differentiation and price, rather than on service and delivery
differentiation, with the exception of the commentson the quality of online gaming experience discussed above…
[ All of the main players will have similar service and delivery strategies ]

Virtually the same strategy is followed for delivery by all of the main players .
* Manufacturers regularly subsidize deals and promotions (price discounting) to increase sales volumes.
* In addition, game consoles, accessories and games are bundled in packages where a small financial incentive
exists for customers to buy them all together.
* Additionally, manufacturers do contribute towards the training expenses of the salespersons.

A similar convergence of strategy amongst the main players in the industry exists for services.
* The length of warranties (one year) is a standard for the industry and extended warranties can be purchased.
* Since Yellow Bananas first introduced a loyalty and reward card system, the other competitors followed suite.
* The operation and reward system for the loyalty cards is virtually identical.
* Manufacturers also offer accidental damage insurance for an extra charge, except where distributors have a scheme of their own on offer. This is
because they believe that making a move into the financial services industry is quite lucrative.
* Finally, all manufacturers offer an average level of online support to their customer, with a contact center (not
opened 24/7/365), live webchat, e-mail help and a database of FAQs accessible through a search engine.
3.8 Introduction to the Blue Buddies Organization
 Blue Buddies was originally a family business and the Dexter family is still the largest single shareholder even though their shareholding is under
5%. Their presence on the Board is largely honorary now.
 Frank Dexter was a solid state physics graduate who specialized in the development of hard drive storage and access protocols.
 Both his son and nephew, best friends from their earliest years, had graduated with majors in mathematics and physics respectively. These two,
Marc and Stephen, were among the earliest gamers and had a vision for the industry. They built the company into a profitable and successful one and
largely liquidated their shareholding in the mid-25’s.
 The organization still holds strongly to the values of fairness, integrity and innovation that the original founders had.
 Organizational Structure and Cultural issues: Blue Buddies appears to new employees as an organization which can achieve good outcomes but can
be rather sloppy and unsystematic in the way that it got there: it marches to its own drum. In the past, new console launches have been delayed by up to 6
months. When it has mastered something as an organization, it can be quite good at ongoing execution.
 Lack of Project Management Capability: However, when it needs to do something quite different from business as usual it struggles. It lacks a
project management discipline which is usually taken for granted in most organizations in the technology industry.

Blue Buddies employs over 5,500 staff.

 85% are in the Roundland continent (4,675), the majority being located in three factory sites linked to distribution hubs – East Coast, Mid-
Continent and West Coast. Head office consists of 500 people, and the Research Centre 800 people. The remaining Roundland employees are in Sales
(3,375), spread across the Roundland continent.
 The 825 employees located in the Starland continent are mainly in Sales with some minor local support functions.

Challenges Facing Blue Buddies

CEO: downward trend in profits experienced over the last 3 quarters
CFO: increasingly concerned by the drop in unit sales, although he realizes that this is mostly due to the trend in the industry overall. He believes that
what the industry needs most is novelty, a new technological breakthrough which will “wow” customers to such an extent that they will be happy to
replace their existing consoles, as they have done for each new generation of gaming console in the past.