Halfbrick Studios Market Entry Strategy: UK Gaming Industry Analysis

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MGT611 Assessment 1
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Background
This report is prepared in order to make the analysis on the emerging market for the chosen
organization Halfbrick Studios. The report will help in understanding the international business
strategies which will include the external environment analysis, strategy development, problem
diagnosis as well as different micro as well macro-level factors which can have influenced the
strategic decision of the making entry into an emerging market. The economic theories related to
the international market and business environment. The Halfbrick Studios Pty Ltd is a video
game developer company in Australia. This company has worked primarily in the licensed
games until the year 2008. Outside their Brisbane headquarters, there are opened five offices in
Adelaide, Bulgaria, Los Angeles, Sydney as well as in Los Angeles. There are approximately
100 employees working there in this company. This company has the potential to expand its
business in the international market. There is high competition for such a company in the
Australian market. The list of the competitors for such company includes Car Throttle, Aframe,
Vimeo as well as Piksel. The country that will be selected for the purpose of expansion of such
business is the UK as there will be good market conditions for such business to expand.
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Key descriptive information
Company and its microenvironment
In order to analyze the situation and microenvironment of the company, there are several
numbers of methods that can be used in order to make the internal analysis of the company.
Competitor’s analysis, as well as SWOT analysis, is effective tools which can be used to make
the internal analysis of the business.
The company Halfbrick studios is an organization working in the game development industry of
Australia. This company was found in the year 2001. The video game industry is worth $2.96
billion annually in Australia in the year 2016. There are several numbers of gaming developer
companies in Australia which create a huge competition in the market of Australia.
In Australia, the retail sales within this gaming industry were approximately $2.46 billion in the
year 2014 which indicated the 20 percent increment from the year 2013. The digital sales value
is growing in a significant manner which indicated 39 percent significant increase in digital sales
from the year 2013. Although the video game market in Australia is continuously growing, the
size of the domestic industry of video game development in Australia has decreased to a great
extent.
The competitive position of the company
The gaming industry in Australia is continuously grooming and there are already so many
competitors exist for such a company in the market. The main competitors of such company in
the Australian market are:
 Goodgame Studios
 Ubisoft
 Rovio
 Electronic Arts
 Promineo etc.
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All these companies are doing well in the Australian game development industry. Together they
have also raised 2.0B between the estimated employees 38.6k. The revenue of the Halfbrick is
also ranked at number 9 among all its 10 competitors. There are approximately 150 employees in
this company.
SMEs in Australia
The small and medium enterprises are the businesses that follow the certain limits of the rules.
The SME businesses make up approximately 98% of the Australian Businesses and these also
produce one-third of the total GDP of such country. In Australia, SME is considered as a firm
having 200 or fewer employees. The micro businesses have 1-4 employees, small businesses
have 5-19 employees and the medium size enterprises have approximately 20-199 employees.
The SMEs also represent approximately ninety percent of the exporters of the goods and over
60% of the total service exporters.
SMEs are quite different from the large firms as the large firms employ more than 200
employees in their businesses. There is also found differences in their revenues as well as the
capital amount of the business.
There are several numbers of the barriers for the SMEs in order to enter into the international
market for further expansion of their business. There might be problems as compared to the large
business organization that the quality of the products may be lower of such SME. There is non-
competitive pricing of such company’s lack of market knowledge as knowledge regarding the
export and import procedures.
In the SMEs, there are found more full-time employees in order to manage the data as well as the
IT infrastructure. The titles given to such people are the network administrator, IT manager or
the system administrator. On the other hand in the large enterprises, due to the
comprehensiveness of the business model, the company has the full time IT staff having the
expertise of managing different applications used within the businesses. It is quite difficult for an
SME to make entry into the international market rather than the large organization (Kuss, et. al.,
2017).
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The macro environment in the United Kingdom
The country that has been chosen for such SME to expand their business in the international
market in the United Kingdom as the market of such country will be the most suitable for the
expansion of the gaming development company. This is the most appropriate country for the
firm to enter. Following is provided the PEST analysis of the gaming development industry in
the UK:
Political
The copied video games, as well as the software, are prohibited in different countries which also
include the UAE. The authorities in UAE are collaborating with each other, foreign government
as well as with the companies such as the Microsoft in order to capture counterfeit products
including the software as well as the video games (Buchanan & Elliott, 2017). According to IPR
rights, the department at Dubai customs, there were identified 3 seizures of the counterfeit CDs.
In the coming years, such laws are going to be more effective due to the continuous advancement
in the technologies.
Economical
The GDP growth was approximately 2.7 percent in the year 2009 as compared to 2.6 percent in
the year 2010. The UAE is also planning to increase the diversification as well as making
improvements in education. There is the negative impact of the economic crisis was on the
income of people which is considered to be the main element while buying the game console,
since the prices of such games can be high (King, et. al., 2018).
Socio-cultural
The statistics from the Entertainment Software Association has reflected that 25 % of the game
players are of less than 18 years age. Approximately 49% of the gamers were the age of 18-49
and 26% gamers are of the age of 50 years old. The main reason for such participation in the
games is fun as well as the socializing activities of the families. The video games have become
the most important elements to the families and the adults to burn out the stress and they target
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the whole family as well as children as these are very user-friendly (Banks & Cunningham,
2016).
Technological
There is continuous development of advanced technologies such as augmented reality which is
very popular nowadays. The UK has one of the most advanced telecommunication
infrastructures in the world. The government of the UK is also taking initiatives in order to boost
competitiveness in the gaming development industry. IT and research and development are
important elements in the growth of the economy of the country.
After conducting the PEST analysis, it has been identified that the macro environment of the UK
is suitable for the expansion of the business of Halfbrick Studios. All the factors are showing that
the company will have good growth in such market (Buchanan, et. al., 2017).
Following is discussed the OLI framework which is an economic theory. This theory is the
further development of the internalization theory. Following are the elements of the OLI
framework:
Ownership advantages: These advantages are referred to the competitive advantages of the
companies which are looking further to engage in the FDI. If the competitive advantage of the
firm will be high, the more likely they are going to be engaged in foreign production.
Location advantages: Such locational attractions are referred to the alternative countries in
order to undertake the value adding the activities of different MNEs. The more the natural and
immobile resources, which firms require to use collectively with their own competitive
advantage, the more firms will choose to augment their specific advantages by engaging in the
FDI (de Wildt & Butt, 2018).
Internalization advantages: The Company may organize the exploitation as well as the creation
of the core competencies. If there will be great net benefits of internalizing the foreign
intermediate product markets, there will be more engagement of the firm in the foreign
production by itself.
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Conclusion
It has been concluded from this report that in order to make entry into the international market,
the SMEs may face several numbers of the barriers. The large organizations have the
competencies to enter into the new market as compared to the small and medium enterprise. This
report has included the macro environment analysis of the gaming industry of the UK and further
the competitive analysis for the company Halfbrick Studios was also made.
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References
 Banks, J., & Cunningham, S. (2016). Creative destruction in the Australian videogames
industry. Media International Australia, 160(1), 127-139.
 Buchanan, J. S. C., & Elliott, G. (2017). Reconciling Conflicting Demands in the EGM
Industry: Government, Industry, Media and the Community. Journal of Gambling Issues,
(35).
 Buchanan, J. S. C., Jones, M. L., & Tann, K. (2017). An Analysis of Media
Representation of the Australian Electronic Gaming Machine Industry. Journal of
Gambling Issues, (36).
 de Wildt, L., & Butt, M. A. (2018). Beer & Pixels: Embodiment, drinking, and gaming in
Australia. In Digital Games Research Association conference, Date: 2018/07/25-
2018/07/28, Location: Turin, Italy.
 King, D., Melzer, A., & Gaming Industry Response Consortium. (2018). Comment on the
global gaming industry’s statement on ICD-11 gaming disorder: A corporate strategy to
disregard harm and deflect social responsibility?. Addiction.
 Kuss, D. J., Griffiths, M. D., & Pontes, H. M. (2017). Chaos and confusion in DSM-5
diagnosis of Internet Gaming Disorder: Issues, concerns, and recommendations for clarity
in the field. Journal of Behavioral Addictions, 6(2), 103-109.
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