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3 Do3

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  • 1. Individual Assignment MBAM 619: Envisioning Strategy Prof. Sunil Mehrotra Don’t look back, somethin’ might be gaining on you. –Satchell Paige
  • 2. 200 Cardinal Way, Redwood City, CA 94063 United States 650-385-3000
  • 3. Electronic Arts - Owned 20% of 3DO Matsushita - Owned 15% of 3DO Time Warner - Owned 15% of 3DO Kleiner Perkins - Owned 10% of 3DO AT&T - Owned 5% of 3DO 3DO Partners (May 1993 IPO @ $15)‏
  • 4. 1990 – Hawkins started 3DO as Medio as an EA spinoff 1991 – Hawkins changed the company’s name to SMSG 1991 – He stepped aside from EA and started 3DO in Redwood City His mission – shift home video games from cartridge to CDs 1993 – The company went public 1995 – Matsushita paid $100 million for licensing 3DO’s 64-bit graphic technology 1995 – Studio 3DO was established to develop software titles 1996 – 3DO acquired Archetype Interactive & New World Computing 1997 – 3DO sold its hardware assets to Samsung for $20 million 1998 – 3DO’s first year as a game maker (success with Army Men)‏ 1999 – 3DO raised $46.4 million through secondary stock offering 2000 – 3DO sets up an office in Europe 2002 – The company undertook a reverse stock split to avoid delisting from NASDAQ 2003 – Trip Hawkins who owned 40% of the company, resigned from the Board after company filed for bankruptcy protection under Chapter 11, which was followed by liquidation under Chapter 7.
  • 5. new product/service new process new business model Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 6. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 7.  
  • 8. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 9. Industry’s transition from 8-bit to 16-bit can be viewed as a disruptive technology from Nintendo’s perspective. HHI for 16-bit Gaming Industry = 50^2 + 50^2 = 5000 Highly Concentrated Industry: The 16 bit worldwide market share was evenly divided between Sega and Nintendo. Besides creating barriers to entry for 3DO, due to their size, Sega and Nintendo had a great incumbent advantage
  • 10. 3DO’s Primary NAICS Code - 511210 (Software Publishers)‏ 3DO’s Primary SIC code - 7372 (Prepackaged software)‏ 51 - INFORMATION 511 – PUBLISHING INDUSTRIES 5112 – SOFTWARE PUBLISHERS 511210 – SOFTWARE PUBLISHERS
  • 11. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 12. Content Developers CD-ROM development H/W manufacturers and licensees Software Developers (paid $3 royalty)‏ Matsushita’s retail outlets Other sales channels (assumption)‏ H/W Suppliers Consumer
  • 13. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 14. High Barriers to Entry due to high development costs for CD-ROM technology and therefore less threat of New Entrants to 3DO Robust competitors lured consumers with well designed substitutes (Sega Genesis Super 32, Super NES, Game Boy)‏ Although industry standards were different, in case of 3DO the suppliers had considerable leverage in bargaining as most of them were stakeholders in the company A burgeoning industry with high concentration implied lower bargaining power with the consumer. However, poor pricing strategies didn’t go unpunished High Exit barriers led to repeated capitalization through expensive internal equity. Non-strategic (redundant) alliances and partnerships, poor pricing strategies based on incompetent business model (were some of the reasons for3DO’s demise. Although they had value creating activities, they were unable to build barriers. In other words, they could not create unique / distinctive activities which would block existing and future competition.
  • 15. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 16. The presence of such colossal incumbents in the industry definitely contributed to the demise of 3DO. Although on one hand 3DO was a relatively slim and nimble organization with a highly entrepreneurial CEO, on the flip side, it was unable to create any barriers based on technology or process engineering (patents, copyrights, unique activities). The competition with favorable economies of scale imitated 3DO’s advantage position and thus capitalized on 3DO’s first mover advantage.
  • 17. Industry Analysis PEST Analysis Value Chain Porter’s 5 Forces Incumbency Competitive analysis Opportunity Value Proposition Target Customers Revenue Model Unique Capabilities Distinctive Activities Value Creating Activities
  • 18. Product Positioning – Nintendo’s SNES has the RPGs, Sega had the action games, 3DO was unable to develop a niche genre and therefore couldn’t analyze its position on the game genre lifecycle Sales & Sales Channel – 3DO tried to position itself as a high end audio-visual entertainment system instead associating itself with game/toy. Also, they mainly targeted retail sales through strategic partners. Pricing Strategy – 3DO was a price leader in the market and despite repeated efforts to lower costs could not beat competitors at bang for the buck Economies of Scale – The competition had an obvious incumbent advantage and the benefit of learning from 3DO’s mistakes. In conclusion, 3DO’s plans were not backed by the right strategy and therefore the implementation was not favorable. Brand – Since the industry was a tight oligopoly before 3DO’s inception, Competition’s existing brand presence was a major force in Shaping 3DO’s future.
  • 19. Despite all the product innovation at 3DO, the company failed to envision harnessing network economies. Unlike its competitors, it did not capitalize on the biggest invention of the decade; the internet. Another way of looking at the role of network effects is that although 3DO was getting its liquidity injections, the company’s solvency was not healthy enough for it wait for the internet to play a major part in its growth; the way it did for 3DO’s competitors. Essentially, 3DO’s competitors have leveraged off the social networking aspect and grown their brands stronger through the online/multiplayer aspects of gaming which bring a whole new dimension to the human interaction – emotions. 3DO however, could not use this to its advantage the way it should/would have wanted to. At the time 3DO sought bankruptcy protection, its top competitors besides Sega and Nintendo were EA and Activision Blizzard, both companies with evolving revenue models like online gaming which were essentially changing the rules of engagement in an old industry and therefore redefining the future. my takeaway – Innovation in and of itself is not the key to success. The ability to allocate resources and create unique/uncompromising value for the consumer should be a company’s goal.
  • 20. Source : Multiple gaming forums and blogs
  • 21.
    • HBS Case (9-795-104)‏
    • Google Web and Image search
    • http://delicious.com/smehro/DSIR
    • http://smehro.wordpress.com/assignments/
    • http://smehro.wordpress.com/12-strategy-gameboard/
    • http://smehro.wordpress.com/8network-effects/
    • http://www.census.gov
    • Mintel
    • Hoovers
    • Wikipedia