NCsoft had achieved massive success and brand recognition after it had launched its initial games like Lineage 1, Lineage 2 and Guild Wars. But since then the tastes of its customers had been gaining diversity, therefore, the company needed to look out for ways to fulfill the demand for its products. The company later also developed other products within its simple product portfolio to increase its customer base and also to expand its company to acquire chunks of market share. Play NC was also one of the products it had launched which gained little success, almost negligible. Since then, the company has been focusing on its key issues which were also considered by its CEO. The first issue related to maintain the top position of the company in the leading game market.
For this, the company needs to expand, especially by acquiring new subsidiaries in other parts of the world where it had not previously marketed its products. The company’s second most important issue is to counterattack the global competition coming from the gaming industry and also other related industries, which might threaten NCsoft indirectly. The company needs to create customer oriented products that feature their personal lives, so that they are attached to the product and to the company itself. The company needs to formulate a globalization strategy. They need to increase its customer base. They also need to diversify to increase the range of its offerings and by including elements that emotionally attach the customers to its products, NCsoft could fulfill its long term dream of becoming a leading player.
NCSOFT, founded in March 1997, launched its first game with the name of Lineage in September 1998. Lineage, was Korea’s first role playing game. Although, NCsoft, began as a systems integration business, but soon it was transformed into a full game company. After the release of the first game, it gained a lot of success and was soon listed on the Korean Stock Exchange. Just after its creating in 1997, NCsoft was earning about KRW5.5 billion. It was only in 2007 that its revenues increased by 170 times and its people increase from just 17 to 16,000.
This case presents us with a contribution of NCsoft in the Korean Gaming market. NCsoft had faced many challenges and was yet to face. Since the year 2000, the PC game market has declined by over 30%. Also the mobile game market began to experience declining growth rates. Apart from this the video game market experienced negative growth in the year 2004, due to economic stagnation. Nevertheless, the Korean game market started to show high annual growth rate of around 50%. By 2006, NCsoft had earned its 43% of its revenue from its overseas market. The company had an advantage of a first mover in the initial years of its operations in the gaming industry. However, this was no longer its first mover advantage. With the advent of new technologies, development of various profit models, diversification of accounting methods and building an online platform for online games, the company is now forced to reinvent new ways to reach the market.
NCSOFT has a great growth potential both inside and outside of Korea. The president of the company is facing a number of issues. As the founder of the company, he wants to maintain a strong position in the Korean market. He wants to find out how to diversify into the global market in the area of, for example, casual games. He wants to deal with the negative perceptions that have been developed in the minds of many people regarding the side
effects of playing online games. Also the company wants to formulate strategies to counter attack the competition that is coming from competitors developing digital-content online games.
1. MAINTAING ITS TOP POSITION
NCsoft has achieved success in the gaming industry and maintained its number 1 position in the Korean market for a long period. It has released a variety of gaming services such as, Lineage 1 and 2, massively multiplayer online role-playing games, blade and sword and also other casual games. The company has developed globally and has grown in diversity within its customer base. The company had so far maintained its top position in the Korean gaming industry. However, it was still needed to raise the quality of its gaming services to meet the changing expectations of its people and also mitigate the competition coming from the global market.
– value drivers?
One of the ways for the company to maintain its top position was to occupy the niches in the game industry. For this, the organization needs to focus on its core capabilities and capitalize on them. So far the company had achieved success in the area of digital content company. The company needed to grow its business through the integration of wired and wireless networks to become a global online development and publishing company. Since its inception, NCsoft was differentiated in the perception of its games. They focused on, to make the lives of the customers more joyful and make them a part of their entertainment culture. The company needs to introduce new games into the market to further increase its market share. It is known that online games were going to create a nearly infinite potential because they were internet based.
The company needs to further expand in this area by targeting niche markets. NCsoft also had the dream of becoming the worlds’ best digital content company and had three major mottos, “Fun, Creativity and Quality.” The company needs to expand but it also needs to formulate such strategies and positioning plans that prevent cannibalization of the company’s other successful products. It has been seen that a new market within the gaming industry has been emerging. This was the development of game portals for the people of 30 or above and also some other casual games which were very popular with the people from all the ages, including the elders and the children. NCsoft can also target this area to maintain its brand image and top position not only in Korea but in the global market too.
2. MITIGATING THE WORLD COMPETITION
NCsoft was now giving considerable attention to the emerging competition that was going to increase in the distant future. It was known that the future competition in the gaming industry, especially in the online games area would not be just dependent upon the games of other competitors. The competition was about providing the entertainment. People are beginning to search for games on the internet. Therefore, NCsoft needs to prepare itself for competition with other online companies, such as portals, communities and shopping malls. The online service of the company will not help the company survive in the future environment of the competition. The company needs to introduce more and more games to survive in the online environment, where users have a limited time to use the internet.
The online games on the internet can be described in various forms. These will include all such content which provides entertainment to the customers. Most important along with this is that the company needs to launch such new games that will provide its customers the true perceived value. It could launch other products just like Lineage 1, Lineage 2 and the Guild Wars because of online games the customer was not just a customer but it is now considered as an asset. Therefore, the company needs to apply the Porter’s Five forces model to look at the emerging competition and analyze its position. The company should conduct this analysis when entering new markets. The company needs to examine the micro-environment as well as its macro-environment, before entering new markets.
When the company has analyzed the new markets, especially the niche markets where it is planning to penetrate, they should expand on their core competencies and expertise and the areas where the company has achieved proficiency to create a competitive advantage and sustain it for the long term. NCsoft has always ruled the online game market in Korea, but since the Internet had appeared, most of the companies were transformed, to online gaming companies and first movers appeared in different fields. Everyone was looking for fully realizing the new market potential coming out of the online games. NCsoft was also one of them. From all of this, NCsoft came to enjoy brand recognition in the year 2007.
3. DIVERSIFICATION OF ITS GAME OFFERINGS
The company began in 1997 and since then the company has focused on adding new elements and updated when it first launched Lineage in 1998. The company has focused emphasis on the games as a work of art which was completed over several sessions of trimming and molding done through many hands. The main motive of NCsoft was not just to invest its capital in the business and generate a required rate of return on that investment, but the company always wanted to and had examined it’s all new games to identify what areas were falling short of the highest standard of quality. Since the beginning, the company has always been criticized for its dependence on the success of Lineage alone. Looking at its simple product portfolio, the goal of the company of becoming a global company in the game industry it does not match.
Therefore, later NCsoft had diversified and had increased, a new product to its simple product portfolio. The name of this product was play NC. This product provided a number of games, but its performance was not good. But still NCsoft has been focusing on developing new products through most of its subsidiaries. Garret brothers have given NCsoft the title of becoming the next-generation online game. NCsoft needs to focus on diversifying its portfolio further. It needs to identify niche markets and penetrate its products in those markets. This would not only increase the market share of the company, but it would also give the company opportunity to become the most leading players in the game industry.
The CEO of the company, T. J. Kim himself enjoyed playing games and he had also spent sleepless nights playing these games just like his own customers. This was all due to the hard work of developers of NCsoft. They always tried to put their complete efforts and souls into the development of the games which always was a NCsoft’s advantage. The company needs to use these elements and the element of aiming for perfection to leave its competitors behind and diversify into new overseas markets.
NCsoft needs to now look further than just generating revenues. It should search for new avenues to diversify its games in order to cut the completion and better monetize its products throughout the world. NCsoft needs to formulate a monetization strategy to create a new strategic advantage. It needs to create games that are more addictive. People should feel that the games have been developed keeping in mind their personal lives. The unpredictability of the gaming industry is the only reason why diversification should be on high on the game developer’s side.
The company on the other hand needs to also search areas where its business has grown to the maximum potential. These are the areas from where the company can think of further diversification into different areas. Diversifying into new areas does not simply mean increasing the revenue for the whole business. It also means reducing costs by achieving economies of scale in the business. NCsoft can acquire new subsidiaries in different parts of the world where it wants to promote its most successful games. This could be done for all online games or internet based games.
The company has a very good opportunity to diversify into the area of casual games. Casual games are basically a type of video games which could be played by a huge audience at the same time. The rules required to play these games are simple and are different from one another which distinguish these games from one another. These are simple games and not so much tough like the other hardcore games. These types of games normally play on the personal computers that have internet on them. But now these types of games are becoming popular on mobile phones and game consoles as well.
4. GLOBALIZATION OF NCSOFT’S PRODUCTS
If we look at the gaming industry in Korea, it is always seen that active marketing of the online games in overseas country has always contributed to the development of the online game industry. This was also proved by the fact that a forecast showed that the export market share of online games would exceed 82% among all other export games that are sold overseas. This online game industry was further expected to develop in the areas of various profit models and diversification and accounting methods. These online games were then beginning to be exported to Japan. These online games occupied 80% of Korean game exports.
So on with the use of its superior technology and wide range of offerings, NCsoft had grown into a global online game company. It had entered countries such as China, Japan, Taiwan, Thailand, Europe and the United States. The most important thing to note about NCsoft’s globalization strategy is its speed. The company should adopt a different payment policy with regard to country to country, despite its domestic payment policy based on monthly charging fee scheme.
NCsoft had promoted its first role playing game, Lineage, in the world market. It had signed a licensing contract with a Taiwanese based company names as Gamania. This game was then launched in Taiwan with the name of Tiantang. The company needs to also develop new product offerings and promote those products through other licensing contracts with other companies including Japan, China and America.
It has been seen that the major contributor in the success of NCsoft, so far in its profitability is through its game Lineage 1 and Lineage 2. The company has other games that are not much successful in these markets. Therefore the company has the opportunity to win its foreign users’ hearts by differentiating its other games and updating their previous versions in these markets to win margins and create brand recognition.
A large portion of the world market today is occupied by the arcade games industry, video games industry and also the console games industry. Although these industries, except the video games industry, are not a direct threat to the online games industry, but still they could become a very credible threat in the future when the console gets connected to the online games. Therefore, it is becoming more and more important for the online games industries to prepare strategies against the console game makers for the future and to also develop such content in their games so that they have a very strong hold of their future.
Apart from this, Microsoft has established a center known as an online game innovation center in Korea. It has also announced that soon it would be investing in it about 100 million dollars and will be going to put extra efforts in the online game related technologies. Therefore, the company needs to develop strategies for its future so that it could remedy its over-dependence on the heavy user based MMORPGs and also to pursue its globalization industry.
The task of the personnel involved in the manufacturing of console games is ended when a game has been purchased and installed. The transaction ends here. However, the task of the personnel involved in the online game industry starts right here and this stage provides an opportunity for online game companies, like NCsoft, to provide customer oriented services with respect to each individual country and market characteristics.
5. DEALING WITH NEGATIVE PERCEPTIONS & SIDE EFFECTS OF PLAYING ONLINE GAMES.
The negative perceptions regarding playing games online could be dealt by counseling the parents of young children. They should be motivated by telling them about the positive effects that online games could bring to children, such as problem solving skills, logic, hand-eye coordination, spatial and fine motor skills, resource management, planning, logistics, multitasking and managing multiple objectives. Given all of these benefits the parents could be motivated and their wrong perceptions regarding playing online games could be easily removed. Also, they should be guided that excessive use of anything would surely be harmful, therefore, children as well as the adults should divide their time between leisure and other activities.
This case study presents us with the success story of NCsoft as the leading game company in the online game industry. The case focuses on how it emerged from Korea, as a systems integration business and becoming a full gaming company. It diversified its simple product line into a number of successful products after the release of Lineage 1 & Lineage 2. The company now wants to diversify its products further in other overseas markets. It is looking for niche markets to target them with its those games that have not gained much popularity in other markets.
The company also will have to formulate a new globalization strategy to meet its long term goal of becoming the world’s leading game player and promote its brand. The company also needs to formulate strategies to overcome the competition coming from other online game players. It will also need to deal with competition coming from console game and video game developers. Ncsoft needs to develop strategies and perform detailed five forces analysis before entering the new world markets.
One of the areas where the company had the opportunity to develop and create its market is the area of digital media gaming. The company could occupy this segment of the market also. It could develop a variety of product offerings in this area and capture the sales of this segment to churn a bigger market share of the global gaming industry. The company also needs strategies and their immediate implementation to maintain its top position in the world market. The company can do so by making its games more thrilling, joyful and reality based. They should include such elements in their games that reflect the personal lives of the people. Finally, they should also give people complete guidance regarding the positivity created by playing these internet based games.