This essay is a critical analysis of Rovio Company which includes a swot analysis based on its strategical structures and operations. This essay is divided into two sections which are section A and section B. I will be critically writing on each of this sections one after the other with few examples.
SECTION A: Identify 4 global megatrends and assess their potential impact on Rovio Entertainment’s strategic position. From your analysis what are Rovio’s major threats and opportunities? Justify your stance.
Four global megatrends are: Shift in global economic power, Demographic and social change, Technological breakthroughs and Rapid urbanisation.
The megatrends listed have threats and opportunities which plays a major role or impact on Rovio Entertainment’s strategic position.
Shift in global economic power: the company is based in Finland and have the ambition to be the leading mobile gaming entertainment enterprise. Rovio’s strategic plan of opening theme parks around the globe in the hope of moving beyond Angry Birds mobile game and become an entertainment powerhouse, combining both physical and digital media is a good positive impact of shift in global economic power.
Demographic and social change: as part of its strategy, Rovio announced at the beginning of 2016 the spinoff of their education business which includes a preschool concept and digital learning tools and licensing out the Angry Birds playground.
Technological breakthroughs: the rise of internet penetration through mobile gaming downloads by fans is one of the major strategies Rovio used to generate funds for the company. Angry Birds came out top one in the UK and was also top of the charts in the US as well.
Rapid urbanisation: Rovio has collaborated with many entertainment companies and hired Sony pictures image works to produce a video. Rovio has a budget of 100m for marketing and 75m for production cost, with high hopes that the animate (movie) will boost the company’s licensing business.
Threats: Rovio was founded in 2003 by Niklas Hed and two class-mates at Helsinki University of Technology. One of Rovio’s major threat date back to 2005, the company’s ambition is to create a major game success of its own. Niklas Hed thought it would take about 15 tries to create a world-beater, but Angry Birds turned out to be Rovio’s 52nd attempt. However, as time goes on, fans complained about Angry Birds games because it was not originally designed for freemium model. Fans complained about intrusive in-app purchase offers and also limited gaming time which affected the growth and loss of numerous gaming fans because the game was designed for a different model and this resulted to a heavy crises in the company because excessive monetisation and a more complicated game environment are driving away the casual gamers and younger players. According to Niipola 2012:p.135, “freemium as a business model is a model in which the consumer can download the game itself for free but has to pay for the additional content, which is called the premium (free+ premium)”. Rovio faced a lot of threats and disadvantages which almost brought the downfall of the company. For example, as of 2015, Rovio launched the new game Love Rocks, featuring the celebrity singer Shakira, eventually this did not go smoothly because Rovio did not get the expected revenue as predicted. According to mobile-app analytics firm App Annie, the game got to number 21 in the top grossing charts during the first month of release and later fell to a ranking of 304 in the next month. As of 2013, Rovio reported operating profits of 36.5m which fell to 73 percent in the next year to 10m. As a result of the fall in percentage, Rovio was forced to dismiss 110 employees in 2014 and in 2015 another big lay off of workers of about 260 people which happens to be one third of all employees in the organisation. The company faced lots of criticism from fans for failing to introduce new characters and industry experts and gamers wondered and started comparing if Angry Birds have the same characters as appealing to that of Mickey Mouse or Donald Duck. Moreover, the mobile App organisation is very ‘fragile’ just as Mikael Hed would say. If Rovio do not produce new games that can compete with rival gaming companies there could be the possibility of selling the company or could go into merger and acquisition just as the majority owner Kaj Hed announced back in 2015, although there have been no information about any public share offering.
Opportunities: despite the challenges Rovio had encountered in the past, the company still have opportunities based on its structure and formula. In 2009, the company had an opportunity with the new Apple IPhone and its App store. The collaboration of new Apple IPhone and the striking Angry Bird characters created a winning formula. In 2010, Rovio made a deal with Chillingo (British games) publisher to negotiate a deal with Apple to make Angry Birds known globally and also feature Angry Birds as the game of the week on the App store’s front page. Angry Birds had the opportunity it’s been looking for by appearing as the number 1 in the UK, apart from that, it became top of the US charts. Angry Birds saw opportunities from its brand in winning two million downloads in three days after the launched of the free Android Angry Birds. In 2012, Rovio’s strategic plans became broad as they partnered with Samsung to include Angry Birds game on the Samsung televisions. Users of Samsung TV could download games including Angry Birds Toons show and a comic-book series. The launching of Rovio channel created a success on YouTube channels, moreover, this attracted over two billion views at the end of 2015. So far, Rovio have released and sold hundreds of licensed books in over 50 countries. Other major opportunities are the idea of creating a movie series based on the Angry Birds characters and increased internet and gaming penetration of smart and android phone users.
SECTION B: Using the Business model canvas and relevant academic theory, critically analyse Rovio Entertainment’s business models over the period covered by the case study. What are the strengths and weaknesses of its key business models? Support your arguments with both theory and relevant examples.
A critical analysis of Rovio Entertainment’s business as covered by the case study is an analysis from 2003 when the company was first established to 2015 as the company strategizes to become the best of world’s entertainment mobile game come 2016 as predicted by the majority owner Kal Hed.
Strength: the strength of Rovio business models are basically through collaboration with other bigger companies like the Chillingo, Apple, Samsung, Sony pictures image-works, and other gaming and entertainment companies worldwide. According to (Kapferer, 2012:12), “brand is a name that symbolizes a long-term engagement, crusade or commitment to a unique set of values, embedded into products, services and behaviours, which make the organisation, person or product stand apart or standout”.
Rovio’s brand have become famous and strong due to the release of Angry Birds and the announcement of launching a video animate with voice covers of using Hollywood celebrities as the characters of the animate. Though the company is focused on producing the best mobile games but they still have bigger plans by opening the first theme park in Finland in 2012, thereafter, they also opened another theme park in China in 2013. The company planned to open theme parks all around the world with the ambition of becoming more than what they are and becoming the most powerful entertainment gaming firm, in both physical and digital aspects. The strategies displayed by Rovio over the years and what they aspire to become in the future happens to be their strength. Rovio enjoys tremendous success with Angry Birds. Rovio, on the other hand, has demonstrated with the success of Angry Birds that it has a potent competency in doing a lot with a little, and has a budget to the tune of 175m for its future project. Rovio is being positive with high expectations that the animate (movie) will be another major source to boost the company’s licensing business. Moreover, Rovio brand is big and famous and therefore Rovio can make amendments with new development as time goes on with the invention of new ideas and knowledgeable assets in addition to Angry Birds.
Weaknesses: weaknesses of Rovio on the other hand basically occurs when the company start putting all hopes and depending on Angry Birds to sell and win more future titles. This is because at the moment, Rovio seems to focus almost all its resources on Angry Birds rather than bringing out new games like other gaming companies like Gameloft, Ubisoft and etc. There were disagreements over strategy between Mikeal Hed and his father (Kaj), whom he accused of trying to control everything based on decisions carried out in the company. As of 2008, Rovio cut employment from 50 to 12. Reducing workers can be seen as a very big threat and set back because for any organisation to dismiss a huge some of workers it means the firm is not making the expected profit and as a result of this cannot pay its workers may be due to less demand and less importance of the particular services provided. Most companies become unproductive once consumers stop demanding for their products due to improper coordination and failure to meet up with new trending innovations.
Conclusion: In conclusion to the above, Rovio is one of the leading games company in the world with its addictive Angry Birds gameplay and characters. Rovio became successful from the release of Angry Birds of which the company is still depending on it and this might affect the development of the company in a long time run i.e. if the company do not produce brand new games with innovative gameplay.
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