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Strategic Management

Although their expertise lies in creating games it is definitely serious business for the video game industry. For two years straight U.S. computer and video game revenues surpassed domestic movies box office receipts. In this industry when customers are fickle, as well as demanding and the competition is intense, One company Electric Arts.(EA), has managed to prosper. AS the world's largest independent video game software maker, EA lives and dies by its innovations. Its product lineup includes over 100 titles, including Def Jam Vendetta, The Sims Madden NFL Football, The Lord of the Rings, And Harry Potter. The company has created over 50 best sellers, each with over 1 million copies sold since 1998. Revenues in 1993 reached over 2.5 billion dollars, up almost 44 % over 2002, the previous best year where up 30% over 2001. Net income in 2003 was up 212 %, as it also was in 2002. In addition the company was included on Fortunes list of the 100 best companies to work for. It would appear that this was a company that knows its game.

With its record of accomplishment you would think that there would not be much anxiety or stress at EA. Yet the reality is that paranoia is a critical part of its success. A top game title takes anywhere from 12 to 36 months to produce, and cost between 5 and 10 million dollars. That is a significant investment risk riding on the company's ability to innovate. John Ricitello, President and Chief Operating Officer, says, "The forgotten aspect of creativity is discipline." The hard part and the part that Ea relentlessly pursues, "is identifying the right idea, assembling the best development team, solving the inevitable technical problems, creating a game that people want to play, getting it to the market at the right time, and knowing how to generate buzz about it in an increasingly crowded market." How Does EA do it?

It starts with the discipline of understanding ideas. Game designers try to identify the creative center of the game, what they call the creative x, so that they understand what the game is about. Then it is the discipline of understanding the customers by using focus groups to pin point desires and likes and dislikes. And it is the discipline of sharing best practices and technologies through the company's intranet library. As one employee said," if somebody develops a better blade of grass in one game, that grass will be in somebody else's game the next day." Then there's the discipline of developing the next generation of creative leaders. The company's "emerging leaders" program gives the participants first hand experience in departments outside their own. And there is the discipline of studying the competition. Employees are encouraged to know the features of the competitors products. Then, it's disciplined project management. Ricitello says, "if your working on a game and you miss your deadlines you won't be working here very long." Although the discipline of creativity is very important at EA you can overlook the passion of the company's game designers. Nearly everybody at Ea grew up playing games. They love what they do and are inspired to look for new and creative challenges. Not only for the hard core gamers, but for the casual gamers as well.

Questions;

1. Describe EA's competitive advantage from each of the three perspectives on competitive advantages.( The I/O view, Resource based view, and the Guerilla View.)
2. Does Ea exhibit the critical success factors for the new business context? Explain.
3. Describe the types of resources Ea appears to have. Do you think any of these resources might be unique? Explain.
4. What stakeholders might Ea have to be concerned with and how might these stakeholders affect EA's strategic decisions and actions?

This is an opinion based problem solving exercise and requires short but thorough answers to each area. References are not necessary but always welcome if you use outside sources. Thanks.

Solution Preview

1. Describe EA's competitive advantage from each of the three perspectives on competitive advantages.( The I/O view, Resource based view, and the Guerilla View.)
Input/Output view: Electric Arts has the advantage that its personnel put in the best innovative inputs, study competitive gains and invest large sums in the games so Electric Arts has a competitive advantage.
From the Resource based view: Electric Arts has a competitive advantages because it has superior resources and these are in a way isolated so that they do not spread through out the industry. The resources of Electric Arts are that there is a substantial investment, there is great creativity and discipline that goes into games, Electric Arts goes to great ...

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