Strategy Capstone: A Comprehensive Analysis of Activision Blizzard

This case study provides a comprehensive analysis of Activision Blizzard Inc., a leading American gaming developer, focusing on its strategic and financial performance. It covers the company's background, including its merger history, vision, mission, and key recent events, such as its financial earnings and workforce reductions. The analysis delves into Activision Blizzard's ethical standards, social responsibility initiatives, and involvement in current events, such as gambling law breaches. An organizational analysis examines the company's divisional structure, leadership, and corporate culture. Furthermore, the study includes a marketing analysis detailing market segmentation and the marketing 4Ps (Product, Place, Price, Promotion). The management information system analysis highlights the use of Oracle Database for reliability and customer satisfaction. A detailed financial analysis, incorporating liquidity, activity, and debt ratios, benchmarks Activision Blizzard against competitors like Sony, Valve, and Nvidia. The study concludes with a critical reflection on Porter’s Generic Strategy and the company's corporate strategy.

Running head: STRATEGY CAPSTONE
Strategy Capstone
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Chapter 3: Analysing the Firm...................................................................................................2
Introduction:...............................................................................................................................2
Company Background:...............................................................................................................2
Ethics, Social Responsibility and Current Events:.....................................................................3
Organizational Analysis:............................................................................................................3
Marketing Analysis:...................................................................................................................6
Management Information System Analysis:..............................................................................7
Financial Analysis:.....................................................................................................................8
Financial Ratios......................................................................................................................8
Critical Reflection:...............................................................................................................16
Porter’s Generic Strategy:........................................................................................................16
Corporate Strategy:..................................................................................................................17
Summary:.................................................................................................................................18
References:...............................................................................................................................19

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Chapter 3: Analysing the Firm
Introduction:
Activision Blizzard Inc is regarded as an American gaming developer and
manufacturing company of games. The company was established during the year 2008 in the
form of a merger of Activision which is an entertainment software publisher that has its roots
with the actual Atari game console and Vivendi Games being the parent company of the
Blizzard Entertainment. Upon the completion of the merger where Activision was the senior
partner, Vivendi bought 52 percent of the stock in the newly created Activision Blizzard.
Both the companies namely the Activision and the Blizzard maintained distinct corporate
identities with the independent development and publishing streams. The corporate
headquarters of the company is located in Santa Monica, California.
Company Background:
Activision Blizzard
History:
Activision Blizzard is the American video gaming company that is based in
California. The company was established in 2008 July following the merger of Activision and
Vivendi Games.
Vision and Mission:
The vision and mission of the company is to be the leader in the work of
entertainment by developing and distributing gaming consoles. The company mission is to be
the quality service provider for its customers and have faith in the teamwork spirit.
Highlights and key recent events:

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During the year 2018 the financial earnings call to shareholder has witnessed a record
in revenue. The company would be laying off around 8% of its workforce for not meeting the
expectation and reducing some non-development expectations. This resulted in the company
reporting US $164 million for its 2018 financial year fillings. As of march 2018, Activision
Blizzard is regarded as the largest gaming company in US and Europe in terms of the market
capitalization and revenues generated. The company’s titles have broken several release
records where games such as Warcraft and call of duty have received an overwhelming
response.
Ethics, Social Responsibility and Current Events:
Activision Blizzard
Ethics: Activision Blizzard believes in integrity and honesty. The company follows the
ethical code of conduct that includes the general guidelines regarding the operation of
business with highest ethical standards (Werhane et al., 2017).
Social responsibility: The Company is committed towards the maintenance of environmental
regulations by abiding with ecological laws (Chell et al., 2016). It strives to act with dignity
and protect the human rights. Social responsibilities such as developing games which enables
kids to learn regarding fraud, bullying is achieved by Activision Blizzard.
Current events: During 2018 in May the company was charged for breaching the law of
gambling in Belgium. The Belgian Gaming Commission imposed a penalty of €800,000 for
not complying with the laws (Walsham, 2015).
Organizational Analysis:
Activision Blizzard:
Structure:

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The structure of the company is divisional in nature as it is divided in three key
business segments namely Activision publishing, Blizzard Entertainment and King. There are
two non-reporting segments inside the Activision Blizzard that looks after the production of
film and entertainment on the company properties (Movahedi et al., 2016). These segments
are handed with the responsibility of managing, developing, producing and distributing its
video games to the subsidiaries.
Leadership:
Activision Blizzard merged with the Vivendi games to retain the autonomy and
corporate leadership in the merger (Wheelen et al., 2017). The company follows the
transformational leadership that works to implement change in the organizational culture by
applying new ideas.

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Reveta Bowers – Director. She is important for managing the governance and
organizational functions.
Chris Walther – Chief Legal Officer. Responsible for managing the legal affairs
surrounding the operations of business.

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Robert Kotick – CEO – Responsible for looking after the company’s finance and
promoting efficient working environment in the organization.
Culture:
Activision Blizzard promotes the values and behaviours that helps in contributing
towards the unique social and psychological environment at the company. The company has
also adopted the employee wellbeing program that focuses on getting the job done.
Marketing Analysis:
Market Segmentation:
The market segmentation for each of the four companies involves the young men that
play the first person shooter games and other identical forms of games. These customers have
demands for the high precision and high end graphics along with the high frame rate at the
time of playing games (Armstrong et al., 2015). Companies such as Sony and Activision
Blizzard make the use of segmentation approach in the form of general strategy of reaching
their customers while Valve Corp targets an age group of around 18 to 34 years as their
segment of gamers. Nvidia usually has targeted males with the average boys spending 70
percent more on gaming than girls.
Marketing 4P’s:
The four p’s can be defined as the key factor that involves the market of the goods
and services. It is regarded as the set of market tools that is used by the firms to pursue the
market objectives.
Product:
Activision Blizzard sells product that are highly differentiated with numerous and
unique product features (Fan et al., 2015). The company sells products that are well-known

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for its traditional design that are practical for its customer use. This includes the series of call
of duty, crash bandicoot series and heroes of the storm.
Place:
Activision Blizzard sells its product with the help of two marketing channels. First it
sells its product through online mode and secondly it uses more than 500 retailers that are
present globally. The company has a substantial amount of online sales traffic on its website.
Price:
Activision Blizzard follows the value pricing strategy and charges higher price that
its competitors. This is because the company provides more features and higher price makes
up for its features.
Promotion:
Activision Blizzard makes the use of several media channels to promote products.
The company uses traditional media that comprises of advertisement on television and radio
(Datta et al., 2017).
Management Information System Analysis:
Activision Blizzard makes the use of Oracle Database for its advantage to promote
reliability. The oracle database enables the Activision Blizzard to deliver the excellent
performance when challenged with the demanding tasks. The company uses the ACID test as
important tool that is useful in assuring that the integrity of data stored easily passes the
Oracle Database (Schwalbe, 2015). The Oracle helps in benefitting the company in using it as
customer satisfaction. This enables the company to completely overhaul their database
system.

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Financial Analysis:
Financial analysis is regarded as an important element to determine the financial
stability and position of an organization. The financial analysis for the company is performed
to determine the financial position of the Activision Blizzard. The industry benchmark has
been used to compare ratios of the four firms.
Financial Ratios
Liquid Ratios: Liquidity ratios refer to those ratios that are used to determine how the
company is financially placed to meet its short term debt obligations.
Current Ratio:
Current ratio assesses the liquidity position of a company whether and the firm has
sufficient amount of money to meet its short term debt obligation.
Current Ratio 2014 2015 2016 2017
Activision Blizzard 2.41 1.30 1.82 1.78
Sony Corp 0.88 0.88 0.87 0.83
Valve Corp 4.47 5.80 4.02 3.44
Nvidia Corp 1.79 6.38 2.48 4.69
2014 2015 2016 2017
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2.41
1.30
1.82 1.78
0.88 0.88 0.87 0.83
4.47
5.80
4.02
3.44
1.79
6.38
2.48
4.69
Current Ratio
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 1: Current Ratio

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(Source: As Created by Author)
Activision Blizzard may struggle to meet its debt obligation due to greater level of
debt. This is because the company has a low level of debt and a higher proportion of current
assets, it is better capable of managing its short term obligations.
Quick Ratio:
The quick ratio is viewed as the ratio which is used to measure the liquidity position
in order to ascertain the short term obligations with the most liquid assets.
Quick Ratio 2017 2016 2015 2014
Activision Blizzard 0.70 0.57 1.25 2.36
Sony Corp 0.71 0.73 0.74 0.73
Valve Corp 1.58 1.85 2.35 1.98
Nvidia Corp 4.26 2.30 5.84 1.50
2 0 1 7 2 0 1 6 2 0 1 5 2 0 1 4
0.70
0.57
1.25
2.36
0.71
0.73
0.74
0.73
1.58
1.85
2.35
1.98
4.26
2.30
5.84
1.50
Quick Rati o
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 2: Quick Ratio
(Source: As Created by Author)
The quick ratio for Activision Blizzard is low over the four year span. This signifies
that the company has fewer current assets than the current liabilities.

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Activity Ratios: This ratio can be defined as the category of financial ratios which
measures the organizations ability to convert the different accounts in the balance sheet
into cash or sales.
Total Asset Turnover Ratio: This ratio is useful in measuring the efficiency of the company
in generating sales.
Total Asset Turnover Ratio 2017 2016 2015 2014
Activision Blizzard 0.12 0.13 0.16 0.19
Sony Corp 0.38 0.43 0.45 0.44
Valve Corp 0.76 0.74 0.68 0.86
Nvidia Corp 0.8 0.7 0.6 0.6
2017 2016 2015 2014
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.12 0.13 0.16 0.19
0.38 0.43 0.45 0.44
0.76 0.74 0.68
0.86
0.8
0.7 0.6
0.6
Total Asset Turnover Rati o
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 3: Total Asset Turnover Ratio
(Source: As Created by Author)
Activision Blizzard has reported lower ratios. This signifies that the company is most
likely to be having management or production problems and are using their assets less
sufficiently.
Inventory Turnover Ratio:

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This ratio demonstrates how effectively the company manages its inventory in
comparison to its cost of goods sold.
Inventory Turnover Ratio 2017 2016 2015 2014
Activision Blizzard 15.43 8.37 6.95 6.80
Sony Corp 7.18 7.66 7.54 7.00
Valve Corp 1.77 1.59 1.45 1.80
Nvidia Corp 4.70 4.88 4.61 8.65
2017 2016 2015 2014
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
15.43
8.37
6.95 6.807.18 7.66 7.54 7.00
1.77 1.59 1.45 1.80
4.70 4.88 4.61
8.65
Inventory Turnover Ratio
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 4: Inventory Turnover Ratio
(Source: As Created by Author)
Activision Blizzard has reported an improved inventory turnover in the last four
years. The ratio signifies that the companies are overspending in inventory and it is producing
waste resources by storing inventories that are non-saleable.
Debt Ratios: Debt ratio measures the total liabilities of the company as the percentage of
total assets.

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Debt Ratio 2017 2016 2015 2014
Activision Blizzard 0.49 0.48 0.47 0.51
Sony Corp 0.82 0.81 0.81 0.82
Valve Corp 0.28 0.24 0.23 0.30
Nvidia Corp 0.41 0.39 0.39 0.39
2017 2016 2015 2014
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
0.49 0.48 0.47 0.51
0.82 0.81 0.81 0.82
0.28 0.24 0.23
0.30
0.41 0.39 0.39 0.39
Debt Ratio
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 5: Debt Ratio
(Source: As Created by Author)
Activision Blizzard has more favorable debt portion. This signifies a favorable portion
of total assets than its liabilities.
Equity Multiplier:
The ratio measures the sum of firm’s assets which is financed by the shareholders in
comparison to its total assets.
Equity Multiplier 2017 2016 2015 2014
Activision Blizzard 1.97 1.91 1.89 2.02
Sony Corp 5.63 5.34 5.41 5.51
Valve Corp 1.39 1.32 1.30 1.42
Nvidia Corp 1.71 1.65 1.63 1.63

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Activision Blizzard
Sony Corp
Valve Corp
Nvidia Corp
0.00 5.00 10.00 15.00 20.00 25.00
1.97
5.63
1.39
1.71
1.91
5.34
1.32
1.65
1.89
5.41
1.30
1.63
2.02
5.51
1.42
1.63
Equity Multiplier
2017 2016 2015 2014
Figure 6: Equity Multiplier
(Source: As Created by Author)
Activision has reported lower ratio which effectively means that a lower portion of
debt is used to finance its assets.
TIE:
The times interest earned ratio measures the portion of income that is used to cover
the interest expenditure in the future.
TIE 2017 2016 2015 2014
Activision Blizzard 8.97 6.60 6.66 5.86
Sony Corp 19.85 11.63 2.90 1.13
Valve Corp 5.78 6.67 34.46 29.32
Nvidia Corp 33.40 18.68 16.50 13.05

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2017 2016 2015 2014
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
8.97 6.60 6.66 5.86
19.85
11.63
2.90 1.13
5.78 6.67
34.46
29.32
33.40
18.68 16.50
13.05
TIE
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 7: Times Interest Earned
(Source: As Created by Author)
Activision Blizzard, has reported ratios better than the present industry standard.
Profitability Ratios: Profitability ratio is regarded as the class of financial metrics that is
used to evaluate the ability of business to produce earnings relative to the revenues,
operational costs and shareholders’ equity by using data from the specific point of time.
Net Profit Margin:
The net profit ratio assesses the percentage of dollars earned by a company that ends
up as the profit for the firm at end of accounting period.
Net Profit 2017 2016 2015 2014
Activision Blizzard 0.13 0.44 0.36 0.30
Sony Corp 0.02 0.03 -0.01 -0.01
Valve Corp 0.04 0.04 0.09 0.07
Nvidia Corp 0.24 0.12 0.13 0.11

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2017 2016 2015 2014
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.13
0.44
0.36
0.30
0.02 0.03
-0.01 -0.01
0.04 0.04
0.09 0.07
0.24
0.12 0.13 0.11
Net Profi t
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 8: Net Profit Ratio
(Source: As Created by Author)
The ratio has for Activision has been relatively below the benchmark standards as in
the last four years the company has significantly produced a lower net profit. This signifies
that these companies have been less profitable.
ROE:
The ROE measures the ability of a company to produce profits from the investment of
the shareholders (Walsham, 2015).
Return on Equity 2017 2016 2015 2014
Activision Blizzard 0.03 0.11 0.11 0.12
Sony Corp 0.04 0.07 -0.02 -0.02
Valve Corp 0.04 0.04 0.08 0.09
Nvidia Corp 0.29 0.14 0.14 0.10

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2017 2016 2015 2014
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.03
0.11 0.11 0.12
0.04
0.07
-0.02 -0.02
0.04 0.04
0.08 0.09
0.29
0.14 0.14
0.10
ROE
Activision Blizzard Sony Corp Valve Corp Nvidia Corp
Figure 9: ROE
(Source: As Created by Author)
In the last four-year span Acitivision has reported relatively strong ROE which
signifies that the company is using effectively the shareholders’ funds to produce profits.
Critical Reflection:
The liquidity position of Activision Blizzard over the four year span has declined
while the asset turnover ratio for the company has been constantly falling. The inventory
turnover ratio has represented an improvement over the four year span. The debt ratio for
Activision has improved in the last four years while the profitability ratio represents a
constant fall over the last four year span.
Porter’s Generic Strategy:
Activision Blizzard makes the differentiation strategy to obtain the competitive
advantage in the market. The purpose of adopting the differentiation strategy adopted by the
company is to provide different value proposition to its customers (Lotayif, 2016). Activision
Blizzard video game studio is different from its competitors such as EA that are determined

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to product more efficient gaming experience by centralizing the designs and programmers
(Linton & Kask, 2017).
Figure 10: Porter’s Generic Strategy
(Source: As Created by Author)
Overall, the industry faces intense competition and the intense rivalry is related to the
attainment of higher market share. There are more than 2500 companies that are currently
operating in the US gaming market (Belton, 2017). Therefore, this reflects a higher existence
of threat amid the competitors because of a high level of competition. There is a threat of new
entrant in the company and these companies are required to focus on the innovation for the
adoption of new technologies (Csimarket.com, 2019).
Corporate Strategy:
The business strategy of Activision Blizzard is to grow its business by 22 per cent.
The strategy of the company is to strengthen its engagement with the franchises and building
the franchises that are engaged with the social communities (Baumgartner & Rauter, 2017).
Cost Leadership Differentiation
Cost Focus Differentiation Focus
Porter Generic
Strategy

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The company has raised around $46 million through venture capital and $211 million in
crowd funding to march towards the launch of a squadron of 42 story based games. The
company strategizes in development of a new division that is focussed on creating company’s
franchises.
Summary:
Activision Blizzard digital business has attained a significant growth of 22 per cent
and regularly engages with the community to build a more enduring business environment.
The overall financial ratios explain that Activision Blizzard has able to maintain a sufficient
level of liquidity to meet its short term debt obligations. The company has reported a lower
debt position to finance its assets and over the years has sufficient produced income to cover
its interest expenses.

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introduction.
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