Company Strategy

According to Porter’s Generic Strategies, the strategy that Activision is following is

Differentiation (Porter's Generic Competitive Strategies 2019). The company offers different

products from its competitors and always seek new and innovative ways to keep its customers

engaged. Its games like Call of Duty and Candy Crush have to keep engaged billions of people

for billions of hours. It also conducts online tournaments to keep its customers engaged and

always brings out innovative products and innovation to the existing games to attract new

customers as well as retaining the old ones. (Gamers from Around the World Gather for Gaming,

Esports, and More This Week at BlizzCon® 2017)

Industry Analysis

Five Forces Analysis

Activision Blizzard is an important player in the Multimedia and Graphics Software industry.

This industry can be analyzed using Michael Porter’s five forces analysis.

Threats of New Entrants- High

The threat to entry in the industry is high. This is because the entry to this industry does not

require much investment in terms of financial resources. The major resource is intellectual

resources and anyone with relevant skills can enter into the Multimedia & Graphics software

industry. Moreover, these new entrants often enter with a lower pricing strategy and thus often

capture the market share of existing players. In order to tackle the threat of new entrants,

Activision needs to continuously provide new and innovative products in order to retain old

customers as well as attracting new customers. It also needs to reduce its costs through

economies of scales in order to improve its products. However, innovate products is the main
reason for success in this industry and so Activision needs to keep investing in research and

development in order to offer new and exciting products to the customers. (Zhuo 2017)

Bargaining Power of Suppliers- Low to moderate force

The companies in the industries mainly rely on intellectual resources and that is the main selling

point for them, the innovative gaming and multimedia products. The companies in the industry

purchase their raw materials form numerous suppliers like computer manufacturers and other

technology products and service providers. There are numerous suppliers of these components

and therefore the supplier power is quite low. Moreover, the sheer size of Activision also

increases its own power as a buyer. However, the suppliers in the dominant position like those

with the breakthrough innovation in product or service can charge premium prices for their

product or service and Activision would be compelled to buy from those suppliers on their terms

because of need to compete effectively in the market. (Zhuo 2017)

Bargaining Power of Buyers- High

The bargaining power of buyers is high in the industry. This is because the buyers in the market

are very demanding and always want innovative products and there are numerous competitors in

the market competing with ever more innovative products. Therefore, each company needs to

keep in introducing new products in accordance with the market trends and the buyer’s demands.

Moreover, companies also need to offer discounts and products at a lower margin in order to

retain their customers. (Depersio 2018)

Threats from Substitute Products and Services- Low

Threat from substitute products is quite low in the industry because most of the game producing

companies are offering games on all platforms. The substitute for the video games can be

physical games or other entertainment like movies and dramas. Therefore, the threat of substitute

products is quite low in the industry. (Depersio 2018)

Rivalry among the Existing Competitors- High

The rivalry among the existing competitors is very high in the video games and Multimedia and

Graphics Software industry. The competition in the industry is mainly on the basis of innovative

products. The intense rivalry brings down the prices, that can also increase the demand for the

industry products. However, it can also decrease the profitability for the industry participants.

Another reason for the high rivalry is that there is not much customer loyalty in the industry and

the customers can easily exit and go to another supplier if they are not satisfied with the product.

Activision needs to stay ahead of the competition through innovative products and keeping the

customers engaged. (Depersio 2018)

Reference:

Porter's Generic Competitive Strategies (2019). Retrieved from:

https://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/

Gamers from Around the World Gather for Gaming, Esports, and More This Week at BlizzCon®

(2017). Retrieved from: https://investor.activision.com/news-releases/news-release-

details/gamers-around-world-gather-gaming-esports-and-more-week-0

Depersio, G. (2018). Porter's Five Forces and Electronic Arts (EA). Investopedia. Retrieved

from: https://www.investopedia.com/articles/markets/012716/analyzing-porters-five-forces-

electronic-arts-ea.asp

Zhuo, K. (2017). Porter’s five forces analysis — Video game. Retrieved from:

https://medium.com/@keyue.zhuo.14/porters-five-forces-analysis-video-game-2478241ebe41