0
Proposal for GREE
~Be a Big Data Science Company~

Team K
Agenda

1

Background

2

Issue

3

Option

4

Recommendation

5

Execution Plan

2
Preconditions for our proposal
Issues
1. Whether GREE’s international strategy rely on
developing great in-house games or ...
Background

GREE

Issue

Option

Recomm
endation

Execution
Plan

[Company Overview]
One of the biggest on-line game provi...
Background

GREE

Issue

Recomm
endation

Option

GREE

Financial issues compared to DeNA (Main rival)

(Mil JPY) (Mil JPY...
5 Forces

Background

Issue

Option

Recomm
endation

Execution
Plan

Game business is highly competitive market
Threat of...
Environment

Background

Issue

Komp gacha crisis
Industrywide agreement
prohibiting Komp gacha

Recomm
endation

Option

...
Current status

Background

Issue

Option

Recomm
endation

Execution
Plan

GREE`s current status is worse than June 10th...
Case Issue

Background

Issue

Option

Short-term

Recomm
endation

Execution
Plan

Mid-term
1

Management

Corporate

Org...
Issue

Background

Issue

Option

Short-term

Recomm
endation

Execution
Plan

Mid-term
1

Management

・ High dependence o...
Background

Vision

Issue

Option

Recomm
endation

Execution
Plan

【Mission】
Making the world a better place through the ...
Strategy Option

Background

Short-term Strategy

[Emergency plan]
Improve financial
performance
1. Focus on game
business...
Short-term

Background

Issue

Option

Recomm
endation

Execution
Plan

Business Selection and Concentration
Business

Mar...
Short-term

Background

Issue

Option

Recomm
endation

Execution
Plan

Actions for Komp gacha issue
The countermeasure fo...
Short-term

Background

Issue

Option

Recomm
endation

Execution
Plan

Focus on releasing selected games in domestic mark...
Short-term

Background

Issue

Recomm
endation

Option

Execution
Plan

Speedy cost reduction is a mandatory option

Fixed...
Strategy Option

Background

Short-term Strategy

[Emergency plan]
Improve financial
performance
1. Focus on game
business...
Opt Analysis

Background

Issue

Option

Recomm
endation

Execution
Plan

Qualitative analysis
Value

Organization

Unique...
Domestic
Market

Background

Issue

Recomm
endation

Option

Execution
Plan

Quantitative analysis: Market
Online Game
100...
Opt Analysis

Background

Issue

Option

Recomm
endation

Execution
Plan

Quantitative analysis: Sales & Profit Plan
(Mil ...
Opt Analysis

Background

Issue

Option

Recomm
endation

Execution
Plan

Quantitative analysis: Financial forecast
(Mil J...
Strategy Option

Background

Short-term Strategy

[Emergency plan]
Improve financial
performance
1. Focus on game
business...
GREE

Background

Issue

Option

Recomm
endation

Execution
Plan

Where can we go with GREE platform?

?1 way
Option

Much...
Recommendation

Background

Issue

Option

Recomm
endation

Execution
Plan

1st step: make our platform more diverse and a...
Background

Recommendation

Issue

Option

Recomm
endation

Execution
Plan

What big data can achieve
Money flow
Supply da...
Recommendation

Background

Issue

Option

Recomm
endation

Execution
Plan

Key differentiation 1: strong relationship bet...
Recommendation

Background

Issue

Recomm
endation

Option

Execution
Plan

Key differentiation 2: GREE platform is the on...
Execution plan

Background

Short-term Strategy

2013 – 2014Q2
Strategy

Actions

Focus on improving
Financial situation

...
We can become a big data science company
to reach TOP10 Internet service provider.

Thank you.
Team K

29
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GREE inc., in JMBACC

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Transcript of "GREE inc., in JMBACC"

  1. 1. Proposal for GREE ~Be a Big Data Science Company~ Team K
  2. 2. Agenda 1 Background 2 Issue 3 Option 4 Recommendation 5 Execution Plan 2
  3. 3. Preconditions for our proposal Issues 1. Whether GREE’s international strategy rely on developing great in-house games or on maximizing adaption of GREE`s platform by external developers Corporate Strategy 2. Ability to compete in international markets with a product required significant localization International Strategy 3. Contend with the uncertainty in the domestic market cast by industrial wide agreement prohibiting kompu gacha Domestic Strategy Without GREE’s clear mid-term direction, these issues will not be fundamentally solved. Propose mid-term vision 3
  4. 4. Background GREE Issue Option Recomm endation Execution Plan [Company Overview] One of the biggest on-line game provider with 45 Mil users in Japan (Mil JPY) 180,000 Net Sales Established GREE International Released Zombie Jombie (US) 160,000 Ads (6%) 140,000 120,000 100,000 Released Fishing★Star Listed on 1st Tokyo stock exchange Listed on Mothers 80,000 Paid users service (94%) 60,000 40,000 20,000 0 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Paid users service - Game - Platform - Licensing - Venture capital 4
  5. 5. Background GREE Issue Recomm endation Option GREE Financial issues compared to DeNA (Main rival) (Mil JPY) (Mil JPY) (# of employees) 108 4,500 120 91 4,000 100 40,000 35,090 30,000 20,000 3,500 64 3,000 2,500 1,730 2,000 2,364 592 12,406 80 10,000 60 0 40 1,500 1,000 DeNA Free Cash Flow Sales per employee 5,000 vs Execution Plan 20 FY2010 FY2011 FY2012 (10,000) (20,000) (20,379) 500 0 0 FY2010 FY2011 (30,000) FY2012 • Number of permanent employee has been increased rapidly (400% vs 2010). • Free cash flow was negative in FY2012 due to M&A and venture capital fund. • Sales per permanent employee has been decreased (-40% vs 2010). 5
  6. 6. 5 Forces Background Issue Option Recomm endation Execution Plan Game business is highly competitive market Threat of New Entrants Technologically no entry barriers, but acquiring users is difficult Supplier Power - Strong - Internal Rivalry - Strong - Buyer Power - Weak - Attracting game / appli developers is difficult Fierce competition (DeNA, iOS, Android, Zynga) High switching cost (Accounts, Connection) People spend time on Facebook, LINE, & etc… Threat of Substitute - Strong - 6
  7. 7. Environment Background Issue Komp gacha crisis Industrywide agreement prohibiting Komp gacha Recomm endation Option Execution Plan Skip GREE platform Game developers want to skip GREE platform to minimize the cost. Game developer +15-30% +30% GREE +30% Android, iOS User 7
  8. 8. Current status Background Issue Option Recomm endation Execution Plan GREE`s current status is worse than June 10th, 2013 June 10, 2013 Performance No data of financial result for the full year of 2012 Oversea Branch 9 counties Number of Employee 1,762 Unconsolidated basis November 17, 2013 Revenue 152.2 B JPY ( -4% vs 2011) OP 48.6 B JPY( -41% vs 2011) Net income 22.5 B JPY (-53% vs 2011) 4 counties Close UK, USE, Brazil, and Netherlands 1,557 Leave 205 by November, 2013 Stock Option Exercise Stock option of 77 holders from December, 2013 3rd Party New joint platform is planned by 15 large game developers 8
  9. 9. Case Issue Background Issue Option Short-term Recomm endation Execution Plan Mid-term 1 Management Corporate Organization Financial ・ High dependence on game business Not mentioned No Mid-term Issues mentioned Not mentioned International Game Business ・ Unclear ability for localization 2 Domestic Game Business ・ Unhealthy business model (Kompu gacha) 3 ・ Competition with global platform player(Google, Apple) 1 Platform Business 9
  10. 10. Issue Background Issue Option Short-term Recomm endation Execution Plan Mid-term 1 Management ・ High dependence on game business ・Lack of clear mid-term vision and strategy Organization ・ Retrenchment of employees while preventing the loss of competent developers ・ Lower sales per employee ・ Secure adequate human resources for new businesses Financial ・ High expenses on TV CM (22 billion JPY) ・ Excess investments on acquisition ・ Efficient advertisement spending ・ Selection and concentration for investments International Game Business 2 ・ Unclear ability for localization ・ Global platform basis development ・ No guarantee to develop hit game ・ Unstable business Domestic Game Business ・ Unhealthy business model (Kompu gacha) ・ Loss from feature phone games ・ Establish healthy business model ・ Development of profitable smart phone based games Corporate Platform Business 3 ・ Competition with global platform player(Google, Apple) 1 10
  11. 11. Background Vision Issue Option Recomm endation Execution Plan 【Mission】 Making the world a better place through the power of the Internet. Top 10 500-1000 mil users Aim to be Top 10 Internet service company by CEO Tanaka in 2012 (Mil JPY) Net Sales 180,000 160,000 140,000 120,000 123mil users 100,000 Game (94%) 80,000 60,000 40,000 20,000 0 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 2017 11
  12. 12. Strategy Option Background Short-term Strategy [Emergency plan] Improve financial performance 1. Focus on game business to increase revenue 2. Reduce personal & advertisement expenses Issue Option Recomm endation Execution Plan Mid-term Strategy 1. Focus on Game business to be No.1 Game developer 2. Grow advertisement business as second business domain 3. Shift to the platform business to be a big data aggregator and solution provider 12
  13. 13. Short-term Background Issue Option Recomm endation Execution Plan Business Selection and Concentration Business Market >90% >90% Game Business Domestic Market Platform Business Licensing International Market Venture capital 13
  14. 14. Short-term Background Issue Option Recomm endation Execution Plan Actions for Komp gacha issue The countermeasure for “Komp gacha” issue has been already taken since July 2013, and will be continuously monitored by the compliance committee Prevent over usage especially by young users  Set the maximum amount of the charge for young people  Clearly state the warning Prevent over usage GREE’s Policy  Send notices of charge amount to users  Enlighten users to prevent over usage Check the contents  Make sure the warning is properly indicated in the games  Ask game developers to follow GREE’s policy 14
  15. 15. Short-term Background Issue Option Recomm endation Execution Plan Focus on releasing selected games in domestic market New games will surely hit once released even after “Komp gacha” crisis 2013 Coin consumption trend Web Game Native Game 15
  16. 16. Short-term Background Issue Recomm endation Option Execution Plan Speedy cost reduction is a mandatory option Fixed Cost Reduction • Optimize TV CM expenses • Reduce personnel expense (Mil JPY) 120,000 21,553 11,284 15,000 Others Bad Debt Loss Allowance for Bad Debt Leasing Expense Outsourcing Expense Agent Service Fee Commission Expense Personnel Expense Advertisement Expense FY2012 FY2013 Save 7 Bil JPY!!! 100,000 80,000 60,000 40,000 11,884 20,000 0 FY2011 16
  17. 17. Strategy Option Background Short-term Strategy [Emergency plan] Improve financial performance 1. Focus on game business to increase revenue 2. Reduce personal & advertisement expenses Issue Option Recomm endation Execution Plan Mid-term Strategy 1. Focus on Game business to be No.1 Game developer 2. Grow advertisement business as second business domain 3. Shift to the platform business to be a big data aggregator and solution provider 17
  18. 18. Opt Analysis Background Issue Option Recomm endation Execution Plan Qualitative analysis Value Organization Unique, attractive, and user-friendly application Rarity Imitability Rareness of a resource Difficult to imitate for competitors Supportive organization to achieve strategy Option 1 Game Strong Strong Moderate Moderate Option 2 Ad. Weak Weak Weak Weak Option 3 Big data Strong Strong Strong Moderate Development of the platform business and being big data solution provider have high competitive advantages based on VRIO analysis 18
  19. 19. Domestic Market Background Issue Recomm endation Option Execution Plan Quantitative analysis: Market Online Game 100M JPY 100M JPY 6,000 Internet Advertisement 10,000 9,000 2,500 7,000 3,000 6,000 5,150 2,000 3,000 7.1% 8,000 33.1% 3,870 63.2% 2,000 5,000 4,000 100M JPY 3,500 5,000 4,000 Big Data 8,680 9,300 3,000 3,100 1,500 1,000 1,900 2,000 1,000 500 1,000 0 2012 2015  High growth market Reference: Yano (Jan,2013) 0 0 2012 2015  huge market size  Low growth rate Reference: Dentsu(Feb,2013) 2012 2015  Highest growth rate Reference: Yano(Apr,2012) 19
  20. 20. Opt Analysis Background Issue Option Recomm endation Execution Plan Quantitative analysis: Sales & Profit Plan (Mil JPY) 350,000 Sales Plan (Mil JPY) Profit Plan 100,000 90,000 300,000 80,000 250,000 200,000 70,000 60,000 50,000 150,000 100,000 40,000 30,000 20,000 50,000 10,000 0 0 20
  21. 21. Opt Analysis Background Issue Option Recomm endation Execution Plan Quantitative analysis: Financial forecast (Mil JPY) Game Business 10,000 8,000 6,000 4,000 2,882 1,0772,261 2,000 (577) 0 (2,000) (Mil JPY) (4,000) (6,000) (4,000) (8,000) (10,000) (12,000) Cash In Cash Out IRR = 10.3% Initial Investment 4 Bil. JPY (Enhancement of IT system) Sales Growth 7.4% (Market Growth Rate) Advertise Business (Mil JPY) (Mil JPY) Big data Business 10,000 8,364 7,063 8,000 8,000 6,000 6,000 4,669 4,000 4,000 1,012 1,492 2,000 2,000 199 601 874 0 0 (2,000) (2,000) (4,000) (4,000) (2,000) (6,000) (6,000) (8,000) (8,000) (10,000) (10,000) (12,000) (12,000) (12,000) 10,000 Cash In Cash Out Cash In Cash Out IRR = 10.5% IRR = 22.1% Initial Investment 2 Bil. JPY (Enhancement of IT system) Sales Growth 1.7% (Market Growth Rate) Initial Investment 12 Bil. JPY (additional investment for IT system) Sales Growth 13.0% (Market Growth Rate) 21
  22. 22. Strategy Option Background Short-term Strategy [Emergency plan] Improve financial performance 1. Focus on game business to increase revenue 2. Reduce personal & advertisement expenses Issue Option Recomm endation Execution Plan Mid-term Strategy 1. Focus on Game business to be No.1 Game developer 2. Shift to the advertisement business 3. Shift to the platform business to be a big data aggregator and solution provider 22
  23. 23. GREE Background Issue Option Recomm endation Execution Plan Where can we go with GREE platform? ?1 way Option Much support for Developers GREE Platform Inc. Steam GREE Game developer ? DeNA Blue Ocean Option 2 way Zynga Less support for Developers Platformer Operating System Providers facebook 23
  24. 24. Recommendation Background Issue Option Recomm endation Execution Plan 1st step: make our platform more diverse and attractive 2nd step: integrate big data from platform for new business Game platformer 1st step Application platformer 2nd step Big data science company Game developer 24
  25. 25. Background Recommendation Issue Option Recomm endation Execution Plan What big data can achieve Money flow Supply data to developers etc. Big data GREE platform as an Eco-system Developers & Manufacturers etc. Log on the platform Purchase Customers R&D and marketing 25
  26. 26. Recommendation Background Issue Option Recomm endation Execution Plan Key differentiation 1: strong relationship between GREE and developers to reinforce the attractiveness to any users Startups capital Entrepreneur mentoring Free platform for developers Develop the best environment for developers 26
  27. 27. Recommendation Background Issue Recomm endation Option Execution Plan Key differentiation 2: GREE platform is the only way to monitor customer experience Point data on “Purchase” or “Search” ? Behavior data on platform Good Purchase Share They do not know how customers use and are satisfied… Use USER EXPERIENCE data Satisfied Interested 27
  28. 28. Execution plan Background Short-term Strategy 2013 – 2014Q2 Strategy Actions Focus on improving Financial situation Speedy cost reduction Focus on releasing games Issue Option Recomm endation Execution Plan Mid-term Strategy 2014Q3 - 2016 Provide Free platform Start big data science company The investment for The investment for analysis IT system engine & data analysts Gather developers and continue focusing on application development Look for clients and supply big data services Solutions for short-term and mid-term issue Create mid-term Differentiate from vision competitors’ platform 28
  29. 29. We can become a big data science company to reach TOP10 Internet service provider. Thank you. Team K 29
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