Zynga Inc. is a leading provider of social game services. Their business is to develop market and operate social games as live services played on mobile platforms such as iOS and Android and social networking sites such as Facebook. Generally, all of Zynga’s games are free to play, and the company generates revenue through the in-game sale of virtual goods and advertising services.
From being a dominant social game developer with its partnership with Facebook to falling in game rankings far behind and facing lawsuits, Zynga had a lot going-on for a company operating for a significantly short period of time. The company was too dependent on Facebook and was slow to catch up with numerous developers on mobile operating systems. Being slow at innovative champion products, Zynga tried to generate profits by all means and with only data-driven approach. The company experienced lack of business focus and innovation. The users were also not happy with Zynga’s service – lag time, spam-like messages, pressure to buy resources for games and privacy issues. Without launching new games and being a follower of other game developers, not only did the company face lawsuits from angry rivals, but the user base started to shrink dramatically. Decline of market share and capitalization made it harder for the company to return its growth and early success. Zynga has to focus on innovative approach to enhance games, on users) needs and on improvement of corporate culture and governance.
II. Statement of the Problem
For a long time, Zynga is known for having a highly competitive and stressful culture, with long working hours. The CEO even encouraged employees to copy competitors’ software. As a result, Zynga faced many lawsuits and some senior employees were quite dissatisfied with the way that the CEO runs the business. Besides, the employees were also upset on the decision-making process within the company. The CEO is dictatorial, as he turned down innovative ideas from the designers just because he thought that a new idea did not fit the “tried-and-true” mold of other successes. The founder created the wrong corporate culture, the whole company was acting in a wrong way, and the endless lawsuits definitely damaged the firm’s reputation. Zynga’s bad reputation has prevented it from acquiring some top talent.
Using Porter’s Five Forces Analysis, the following details were taken into consideration:
1. Industry Competition
? Fast evolving technologies, mobile platforms, rapid industry growth. Intense competition on user base, brand recognition, channels of distribution, quality of games and retaining users
? The competition increases with growth of mobile operating system platforms and apps. Zynga was slow to shift to mobile users
? Very high impact
2. Bargaining Power of Customers
? Many entertainment options and games
? Number of users dropped. Most games are free, customers have high bargaining power
? High impact
3. Bargaining Power of Suppliers
? Dependence on social network platforms and mobile platforms
? Facebook, Apple and Google can affect Zynga’s business
? High impact
4. Threats of New Entrants
? Low barriers to entry gaming industry, but new entrants need network efforts and distribution channels
? Potential to high returns, attractiveness to growth and profits
? Very high impact
5. Threats of Substitutes
? Growth of mobile games and entertainment apps affect how much time and money users spend on games
? Variety of entertainment options, growing mobile gaming industry
? High impact
IV. Decisions – Formulation
From the foregoing analysis, we can draw a conclusion that Zynga is weak in executing strategic control. Poor management choices and an unforgiving company culture; and a steadily declining user base have all been major factors in the downfall of Zynga. The company has strongly failed to live up to their lofty expectations and big spending sprees, causing massive job cuts and tough losses in both talent and revenue. Unrest within the company has caused employees to feel uneasy, as many will wonder when their job will be next on the list to get cut. Luckily, Zynga has finally decided to make changes to help bring them back to relevance. A new CEO is introduced and is a proven leader and successful gaming businessman. Reduced spending, long term planning, and an influx of new ideas have all contributed to Zynga inching closer and closer to their break-even point. Zynga will improve their standing even more by developing in-house games, expanding to the markets of Asia, and fostering a company culture that encourages innovation. With a push in the right direction from their new CEO partnered with a renewed focus on mobile gaming, Zynga may once again be a giant in the gaming industry within a few years.
V. Actions – Implementation
First, in the short term, Zynga may need to focus on the innovation. On one hand, new technology in the game can help Zynga occupy the market. On the other hand, it can help the company avoid spending money on the endless lawsuits. The company can hire some talented people from outside and start a team that will concentrate on the product innovation. The firm can also consider introducing Project champions which can come from the executive team to help remove barriers and advocate for research team needs that would have had a longer lead time for help and resources had a Project champion not have been involved. And Zynga also needs to consider minimizing the game development time. As the technology develops so fast, it is much easier to seize the market in the first round.
In the long term, Zynga should consider collaborating with other firms. In recent years, Zynga indeed made remarkable success, but it is hard to sustain the development and keep growing. As Zynga is relatively a small firm, it is hard for it to compete on the resources with other big companies. Hence, it is advisable that Zynga should acquire other small firms or independent developers, to keep up with the latest technology. Also Zynga can consider merging with other firms to gain much more resources than before. Besides targeting the high-tech companies, Zynga may also need to think about the firms that can offer platforms for the game players, like Facebook or some mobile platforms, as many younger generations are heavily relying on the phone to play games.