Strong market position and widespread business operations

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The SWOT analysis of Ubisoft game company! words must more than 400

Strong market position and widespread business operations.

Ubisoft has established a strong market position in the gaming industry over the years. According to the group, it is the third independent video game publisher in the UK video game market. In the third quarter of FY2015, Ubisoft was the third independent publisher in the US and Europe with 10.1% and 14.3% market share respectively. In addition, the group has strengthened its presence in on social media and within gaming communities and established a customer baser of million fans on Facebook, and 74 million players through Uplay, its online distribution and services’ platform.

The group has operations in 30 countries in North America, EMEA and Asia Pacific. Ubisoft has established an extensive distribution network by virtue of its strong international operations.

The group's international operations are managed by local subsidiaries that develop and market products according to the local preferences. The group also offers direct distribution via its Uplay, a digital distribution, digital rights management, multiplayer and communications service. Due to its global reach, the group has also become a major worldwide distributor and marketer of video games

Growth through acquisitions

Ubisoft has established leadership position in the gaming industry through inorganic growth strategy.

In 2013, the group acquired THQ Montreal and two companies specializing in free-to-play games, including Digital Chocolate and Future Games of London. These acquisitions enabled the group to develop and distribute casual games for mobiles and social networking. Its acquisitions in 2011 include Owlient, specializing in free-to-play games, and RedLynx, specializing in downloadable games.These acquisitions aligned with the group’s strategy of establishing its position as the creator and developer of online gaming.The group’s previous acquisitions also align with the same strategy. These include Nadeo studio and Tom Clancy name for video games and ancillary products, and of the Massive Entertainment studio. Previously, the group acquired Red Storm Entertainment and Blue Byte Software.These acquisitions established Ubisoft as one of leading independent publishers.

Weaknesses :-

Dependence on console manufacturers

A significant part of the group's business comes from selling video games for consoles. Ubisoft purchases cartridges and gaming media from console manufacturers such as Sony, Nintendo and Microsoft.The supply is subject to prior approval of the manufacturers, the production of these media in sufficient quantities and the establishment of royalty rates. Any change in terms of sale by manufacturers could have a material impact on the group's results. The console manufacturers are large players and market leaders in the gaming market and are therefore enjoy higher bargaining power compared to Ubisoft, thereby, increasing the vulnerability of the group's revenues and operating margins to the supplier's business policies.

Lack of scale

The group lacks scale when compared to its peers operating in the same industry.The group recorded revenues of E1,007.1 million ($1,349.7 million) in FY2014. Comparatively, Activision Blizzard recorded revenues of $4,408 million in FY2014 (year ended December 2014).The group also reported negative operating and net margins in FY2014. Ubisoft had a negative operating margin of 9.7% and a negative net profit margin of 6.5% during FY2014. Comparatively, the group’s competitor, Activision Blizzard recorded an operating margin of 26.8% and a net profit margin of 18.9% during FY2014.

Opportunities:-

Strong growth in mobile gaming market

The mobile gaming industry is expected to record strong growth in the coming years. According to industry estimates, the mobile games market is predicted to grow at a rate of 27.3% annually to reach $24 billion by 2016. The growth is expected to be driven by increasing number of players, payers, as well as a higher average spend per paying mobile gamer. The tablet games market is expected to grow four fold until 2016, to reach $10 billion. Moreover, Western Europe, North America and Asia Pacific are expected to remain the most appealing markets for mobile game publishers.

Robust growth in games software market

The global games software market experienced strong growth during 2013 and the market is forecasted to continue growing strongly over the forecast period to 2017. According to MarketLine (a unit of Informa), the global games software market is expected to grow at a compound annual growth rate (CAGR) of 4% during 2013-17 and reach $34.6 million in 2017.

Growing presence in emerging markets

Ubisoft opened a new Russian subsidiary based in Moscow, in October 2014. Through this, the group intends to provide community development and support to Russian customers, and work closely with partners to increase marketing and sales growth in the emerging Russian videogame market. The Russian market is continuing to expand across almost all formats and platforms. According to industry estimates, online gaming market is booming and is expected to grow by 20% until 2016.

Threats:-

Intense competition

Ubisoft operates in a highly competitive interactive software industry. Competition in the entertainment software industry is based on innovation, features, playability, and product quality; brand name recognition; compatibility with popular platforms; access to distribution channels; price; marketing; and customer service. The group competes with existing and evolving entertainment software titles, hardware for adequate levels of shelf space and promotional support.

Technological changes and transition in console platforms

The rapid technological change in the gaming industry coupled with the transitions in console platforms may impact the group's performance. The group's market is characterized by rapid technological changes, evolving industry standards, frequent new product introductions and short product life cycles. New products introduced by Ubisoft may not achieve significant market acceptance or achieve sufficient sales to recover development, manufacturing and marketing costs.

Growing software piracy

Ongoing piracy problems continue to impact the growth for players in the entertainment industry. Unauthorized copying of the Ubisoft's titles and reverse engineering of the products would enable duplicating of the programming techniques proprietary to the group and creation of similar competitive products.

Reference no: EM131469269

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