Ea_Sports_Financial_Success

Company Background Electronic Art (EA) has become the world’s independent leader in developing, publishing, and marketing of video games that are supported by a variety of platforms including, Personal Computers (PC), In-home video game consoles such as: Nintendo Wii, Sony Play station, Microsoft’s X-box, Mobil video games devices, cellular phones and online gamming communities. It is hard to believe that 26 years ago in1982, a man by the name of Trip Hawkins wanted to establish his own business dedicated to publishing games that could be played on PC’s. Originally working for Apple Computers at that time Hawkins, established the his company just outside of San Francisco in Redwood City, CA and called it Electronic Arts (EA). When Electronic Arts was initially established, its main focus was primary publishing games for personal computers. However, in the late 1980’s through the early 90’s EA began to developing games in-house that could be supported by the latest gaming consoles and are now known for developing the world most popular games, which are supported by consoles a variety of the worlds best selling consoles and leading EA to become an industry leader. Electronic Art was rapidly becoming a successful company and began to expand into new markets. They began acquiring more talented resources through the acquisition of smaller, but successful companies that also developed games. In early 2000, EA became one of the world’s largest third-party game publishers, but that was only the beginning for EA, which is currently ranked 8th on the list of the worlds largest software companies for 2007. EA currently operates under four operating labels EA, EA Sports, EA Sport Network, and EA Sports The first label known as EA, covers a verity of game titles such as; Need for Speed, The Sims, Lord of the Rings, Burnout an other popular games. The second is EA SPORTS label, which EA began using in 1993 to distribute games based on sports. The concept for this label came up when EA was attempting to develop games that would portray real-life sports networks. This label is dedicated to developing and publishing games with real life sports stimulation such as; Madden NFL, FIFA, PGA Tour, NASCAR, NHL Live and NCAAA March Madness . The third label is EA Sports BIG; this brand is mainly focused on publishing extreme sports games such as skiing and snowboarding. However, this brand also has Traditional sports games that have been modified such as; SSX on Tour and FIFA Street 2, NBA Street, NFL Stet and Def Jam Fight for NY. The Fourth is Pogo; this brand is used for EA’s online and downloadable games. These games are mostly casual games such as card games, puzzle games, and word games. However, Pogo is broken up into three different categories such as Pogo, Club Pogo, and Pogo-to-go, these games are typically played by causal gummers. EA’s curently most successful selling brand is EA Sport, which is known for selling up to 2million copies of games during it’s first week. In1991, Trip Hawkins left Electronic Art to start another company and Larry Probst was appointed as CEO for the EA. Once he becoming CEO, Probst planed to not include the development of games that involved crimes, sex or violent. This became one of EA’s organizational models. However, in 2007, Larry Probst left the company and John Ricitiello became the acting CEO for Electronic Art. Ricitiello was a former employee of EA in 1997 to 2004 and was the acting COO. He is currently back and ready to take the company in a new direction, which will hopefully lead it to become even more successful. Industry and Attractiveness Electronic Art operates in the Multimedia and Graphic Software industry, which is viewed as the entertainment market. The American population demand for video games has indicated that there is a huge need for computer and video games. This audience of people is as diverse as our nation’s population. Today's gamers include millions of Americans of all ages and backgrounds. In fact, almost two-thirds of all American households play video games. This industry has grown so big that it has become a multi-billion dollar industry. In 2007, the sales of computer and video game software grew six percent to $9.5 billion, three times bigger than industry sales in 1996. One reason for the industry rapid growth is due to the change of the American population. Today, approximately Sixty-five percent of American households play computer or video games. The average American game player is about 35 years old and has usually been playing games since the age of 13. Parents and grand parents are even becoming attracted to the industry; the average age of the most frequent game purchasers is 40 years of age. Many believe that males make up the majority of this audience; however 40 percent of all game players are women. . In fact, women over the age of 18 represent a significantly greater portion of the game-playing population, which is about 33 percent. There is only 18 percent of boys age 17 or under playing video games. More recently in 2008, 26 percent of Americans over the age of fifty started to play video games. This is an increase of 9 percent since 1999. Most of the older adults such as, head of households play games on wireless devices. These adults account for about 36 percent, which is up about 20 percent since 2002. They mainly play games on their cell phones or PDA’s. There are different types of ratings when it comes to video games, just like as there is for Hollywood movies. In 2007, Eighty-five percent of all games sold were under three different ratings; rating “E”, “T”, and “E+10”. Rated “E” games are for games that stand for every one, which indicate that the game is for players of all ages. A rating of “T” means that the games are recommended for teens and those older. A rating of “E+10” means that the game is suitable for players ten years or older. Ninety-four percent of game players under 18 years old said that their parents are present when they purchase or rent their games. The majority of parents feel that games are good for children. Sixty-three percent of parents believe games are a positive part of their children’s life. Competitors In this industry there are a lot of competitions and EA has to be the best at what they do in order to be successful. EA's main competitors include, Activision Blizzard, Incorporate, Konami Corporation, Take-Two Interactive Software Incorporate, THQ Incorporate, and Midway Game Incorporate. Activision Blizzard, Inc. is a worldwide pure-play online and console game publisher with “leading market positions across all categories,” of the rapidly growing interactive entertainment software industry. There main headquarters is in Santa Monica, CA. However, they have operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, Norway, Denmark, the Netherlands, Romania, Australia, Chile, India, Japan, China, the region of Taiwan and South Korea. Some of their best-selling video games are Guitar Hero, Call of Duty, and Tony Hawk Pro Skater. There number one online game subscription is based on massively multi-player online role-playing game, such as, World of Warcraft. Konami Corporation is another leading developer and publisher in the entertainment industry. The company was founded in 1969 as a jukebox rental and repair business in Osaka, Japan, by Kagemasa Kōzuki. Some of Konami best selling games are the Metal Gear series and Silent Hill series. Like other game developers Konami also operates world wide and have many locations. However, there home country and headquarter is located in Japan. Take-Two Interactive Software Incorporate is an American publisher, developer, and distributor of video games. The also deal with video game peripherals. The company's headquarters are in New York City, but also have international headquarters in Geneva, Switzerland. However, there main game developing studio is located in San Diego, Vancouver, Toronto and Austin, Texas. There most popular games include, the Grand Theft Auto series, the Serious Sam shooter series, Manhunt and Manhunt 2 and most recently BioShock. Take-two is one of the strongest competitors for EA because they develop and publish games that include crime, sex, and Violent. EA feels most threaten by them because they are the most different from EA. In February 2008, EA attempted to buy out Take-two, however they were unsuccessful and the bid ended August 18, 2008, THQ (Toy Headquarter) Incorporate is a United States based international developer and publisher of video games. The company develops products for video game consoles, handheld game systems, as well as for personal computers and wireless devices. THQ is not really threat to EA, however they have started to develop games that are leaking into EA’s brand of “EA Sport BIG”. They have game title such as MX vs. ATV and Company of Heroes. This is a problem for EA because they will lose market share if THQ can capture and attract players to their extreme sport game instead of EA’s Sport BIG. Midway Game Incorporate was formerly Midway Manufacturing. Midway Game is an American video game publisher. Some of Midway’s most famous game was Mortal Kombat, Ms. Pac-Man, Spy Hunter, Tron and NBA Jam. They were listed as the #19 video game publisher in September 2005. Midway is not a strong competitor in the industry and dose not opposed much of threat to EA. Competitive Forces One of the resources that EA uses to compete is its location. Although, there main headquarters are located in the U.S., EA also has operating locations in other countries including, Canada, Europe, Asia Pacific, and Africa. They use these locations to capture resources that are close to there headquarters. For example, if they need images of a football stadium in San Francisco, they would not have to travel far because their main headquarters located is in Redwood City just outside of San Francisco. They do they same for all their locations in other countries. EA also has to compete by using their strong licensing and partnership with game console makers. EA has strong competitive advantage in this because they do not develop games to one game console. This gives a stronger position when they are negotiating their licensing rights. Lastly EA compete with very strong programming staff. They have acquired the very best programmers and game developer around the world. They need these staff because they have to develop games for all three game consoles. They put very strong patents on their programming codes to keep their competitors from acquiring it. Drivers of Change In the age of the internet revolution, companies have continued to change to in order to stay in business. There is constantly new Internet capability and applications being develop everyday that continue to reshape and drive this industry. The industry also has to adapt to constant change of customers. Customers taste change constantly because their customers range from kids as early as 5 years old to adults in there 50’s. This makes the market very big and makes it very difficult to market their product. They have to find out buyer’s preferences and what is popular trend. They also need to determine which age niches to target for maximum profit. Product innovation also plays big role in shaping this industry to change. There are always new advance in technology that help developer produce better games and also lower cost of production. Successful companies in this industry understand that they have to move with the changes or they will not survive. Organizational Structure Electronic Arts has a functional hierarchy with horizontal differentiation structure. The organization basis involves a CEO with presidents for each of the main product developments and a president that resides over the general operation of the whole company. EA utilizes a decentralized command system, where each product line is given a direction and the president of that sector is permitted to run it as they see fit as long as it operates within the boundaries of the organization’s code of conduct. EA’s structure for local field offices on various continents allows it to be flexible and react faster to perform corrective actions when needed. It is necessary to understand that a global organization that is organized with horizontal differential based on product lines must be flexible in order to tailor products to different geographic regions based on taste and regulations and to allow for changes in regulations within different regions. Company Culture EA’s financial success is owed to its dedicated hardworking employees, which without EA would be unable to continue to survive. EA’s employees are expected live by EA’s values or “EA Actions” as they like to call them. These values include “being bold,” which allow employees to take risk, think big and become leaders. “Think Consumers First,” leads employees to always think of there consumers when developing games and go beyond there expectations. “Creative Quality and Innovation,” this vision allows employees to develop quality products that go beyond what consumers expect and focus on continuous improvement. “Act with Integrity,” allows EA’s employees to trust one another, never keep anything from each other and always try to do the right thing for the company. “Be Accountable,” this value allows employees to keep there words and deliver when they say they will. The most important value for the company is “Learn and Grow” this allows employees to develop themselves and the company, it allows them to help one another become better and continually grow. Employees at EA have work hard, but also play hard and love there jobs. It has been noted on several employee forums that EA employees are usually happy and upbeat about working for EA. They enjoy weekly motivational speakers, daily lunch ins on the company campus, frequent BBQ’s on company time, game rooms, gyms, happy hour on Friday’s, which include free Beer and drinks. Employees at EA have been noted for playing sports on the company lawn and being extremely happy to work there. Despite law suits the company faced for overworking employees and not paying them for overtimes EA has become a lot better with its employee relations and is now focusing on improving communication between employees and management. Marketing Electronic Arts has many different game lines and each is advertised in a different manner. The major marketing strategy for the EA game line has been magazine, television, and internet advertisements. “The average price for a TV advertising campaign… cost about $2million” (Thompson, C-223) EA uses a different strategy for each of its different sectors; the sports games sector enjoys the most attention at EA with its Madden NFL flagship using a large percentage of the budget on endorsements of athletes. Other sports titles also utilize endorsements with athletes such as Tiger Woods for their PGA game along with a partnership with Gillette to “create a variety of co-promotional marketing opportunities focused on similar male consumers. This will include joint online marketing efforts in more than 20 markets in North America, Latin America, Western Europe and Asia that will leverage the Xbox 360(R) LIVE and EA SPORTS in-game environments.” (“Proctor & Gamble” 19) Another line is EA, which covers a wide array of non-sport games such as Need for Speed and The Sims. This line of game mostly promotes through gaming magazines and television advertisements but does not enjoy the use of endorsements. The marketing of this line focuses on niche markets and concentrates on the type of user instead of the EA Sports line where it promotes to the general market by using endorsement to attract the target audience. This line focuses more on game play and the type of play usually simulates a life style which can not be achieved otherwise in the player’s day to day life. In Need for Speed, the advertisements usually promote the idea of the gamer to take the role of the main character in the game and drive vehicles at unsafe speeds to outrun police and to beat other street racers to win money and fame. EA also makes deals with movie production companies to partner up and produce games based on movies that are popular at the box office to allow gamers to relive the movie with a more hands-on involvement with the character development. EA also is planning on wider surface to enter new untapped markets such China, India, and Eastern Europe. EA planned to do its marketing in these countries and others by using a “field sales organization” (Thompson C-228) along with direct telephone marketers to entice the local retailers to carry their line of games. Each line is also carefully selected to target gamers in certain geographic regions to enhance the efficiency of the marketing. NFL and NHL targeted at North America, FIFA with Europe and South America, and Rugby in Europe and South-east Asia. According to exhibit 6 of the EA case in Thompson’s text, EA had spent $466 million in 2007 on marketing which up to that point is the highest it has ever done so. This can be attributed to the promotion of the EA Sports brand and the amount of endorsements costs involved; EA chose to concentrate on this due to the large segment that this line represented – males age 16-40. On top of all the sole sponsorship of its games, EA often teams up with other organizations to do in-game advertisement to raise revenue. The partnership involves companies such as Axe or any other company that feel that a particular game would also attract the same target audience as their own products to place static advertisements written into the software and to be displayed in an in-game billboard or graffiti on a wall. An example would be while playing Need for Speed, a car would drive by a billboard that displayed a replica of an Axe billboard ad. Research and Development EA utilizes its many around the world studios to aide in developing sports games to create realism that otherwise could not be realized without a large cost to production. The use of these studios is to mitigate the cost of sending expensive equipment and personnel back and forth to different regions to recreate realistic replicas of stadiums. Each of those locations also allowed the designers to be immersed in the culture that it is catering for and to enhance the gamer experience with the taste that they are acquired to. However, EA’s operating cost has risen sharply in the last few years due to the popularity of its EA Sports line and movie related games. The cost involved was concentrated around the licensing content from “sports leagues, player associations, performing artists, movie studios, music studios, and book authors.” (Thompson C-224) This has led to the new goal and approach of developing more of the game content in-house using original ideas so mitigate the licensing costs. The ultimate goal is to create and wholly own 40-50% of all game content in future titles. The emerging technology of faster internet has also led to the increase in demand of Mass Multiplayer Online Game (MMOG) which is another arena which EA is planning to dominate in the near future. To do this, EA must creating games more interesting than its competitors and to do it faster than the competitors. As of 2007, EA.com has yet to take advantage of the growing market with only revenues totaling $79 million which is less than a single best-selling game title. The advancement of technology along with plans to utilize more of EA’s own talent to reduce the cost of game production and increase sales places a large pressure on R&D. This reflected in the operating cost of the department to be more than twice that of marketing and sales at a whopping $1,041 million in 2007. Production and Operation Electronic Arts major advantage over some its rivals in production is the use of partnerships with game console makers. EA has partnerships Sony’ PSP and PS3, Nintendo’s Wii, Microsoft’s Xbox 2. Each of these partnerships gives the permission to game console makers to make and package the games themselves for their particular console. EA also contracts third-party vendors to produce and package their games to be sold in retail stores. These production partnerships allows for lower inventory in the EA facilities and reduces overhead costs for making vast quantities of games and having to ship them to locations that are not cost efficient. With the cost of production using a third party costing less than $2 per unit, it allows for a larger profit margin and also a faster turnaround time for shortages at particular stores or regions. EA also partners with retailers and specialty stores to bundle their products with other related products and in doing so creates more sales. This can be often found in exclusive deals at certain retailers that will sell a game console and two or three games bundled with the package at a reduced cost. The use of third-party vendors means a smaller inventory which would also translate to increased demand for a game. As a game is sold out faster at a particular store or region, it creates a demand by adding value to the customer who wants to purchase that game 1) it increases the image of demand thus popularity of the game appears to be higher 2) the increased popularity gives the gamers a feeling of prestige as they become the first ones to own a “very popular” title and hence the game’s demand would naturally follow. This coupled with the quicker turnaround time involved in using third party vendors, with an average two to three weeks to fill an order and the trend of most games being sold within 60-90 days of release creates a relatively good marketing strategy as well. Financial Conducting business in a competitive industry represented by $18.85 billion in sales in 2007 and where creativity and attention to detail mean everything may not be a simple task, however Electronic Arts (EA) has managed to become an industry leader in development, publishing, and marketing of video games. Fiscal 2007 sales of $3.1 billion have increased 4.7percent since 2006, partially due to EA’s ability to develop popular game franchises such as; Madden, FIFA, NHL Live, PGA Tour, NCAA Football, and NASCAR, which are all known to have sold more over 1 million copies upon there realize dates. EA’s chameleon like abilities are also responsible for is financial success, being able to enter new markets that are currently “cool” or “hip” have allowed EA to develop games for personal computers (PC), game consoles, phones, online use, and handheld devices of which industry game sales represent $9.5 billion, with 21percent coming from handhelds, 9.6percent coming from PC’s, and 69.4percent from Consoles. Along with EA’s ability reap profits from being able develop, publish and market games for different devises come high operating costs, which have caused EA’s earning to fall. In 2005 EA reported earnings of $504 million, in 2006 earning fell to $236 million and in EA reported 2007 a mere $76 million in earning due to high operating costs such as research and development. Profitability Ratio |Profitability Ratio |** |** |** | |  |2007 |2006 |2005 | |Gross Profit Margin |60.7 |59.9 |61.7 | |Operating Profit Margin |1.2% |11% |21% | |Net Profit Margin |2.30% |8.20% |1.60% | |Return on Stockholders equity |1.79% |7.10% |14.41% | |Earning per Share |0.23 |0.79 |1.62 | EA’s profitably ratios have been slowly declining for the past three years , which leads one to suggest that the higher cost of operations have lead EA to become less profitable. For fiscal year 2005 EA’s gross profit margin was equivalent to 61.7%, in 2006 59.9% and in 2007 60.7%. This ratio illustrates the profit a company makes after paying off its cost of goods sold (cost of inventory) and shows us how efficient the management of the company is in using its labor and raw materials in the process of production. The typical trend should be an increasing yearly ratio with a higher ratio being better for the company. Even though EA’s profitably ratio has been slowly declining we should not be alarmed because it has maintained itself relatively stable over the past three years. Operating profit margin ratio illustrates how efficiently the managers of a firm have been using business operations to generate profit and the success rate of these managers. EA’s operating profit margin for 2005 through 2007 have been, 21% in 2005, 11% in 2006, and 1.2% in 2007, the declining trend leads us to believe that EA should analyze and retrain its operations management because there tactics may be becoming obsolete. The trend for operating profit margins should be for it to increase through out the years, but EA has seen a drastic decline over the past three years. EA’s net profit margin which indicates the companies after tax profits per dollar or sales and exactly how the managers and operations of a business are performing by comparing the net income of with total sales achieved, it refers to that which is left for the owners from a dollar of sales after all expenses and taxes have been paid. EA’s net profit margin increased from 2005 to 2006 from 1.6% to 8.2%, but decreased to 2.3% in 2007. In other words EA’s management ability to carry a dollar of sales down to the bottom line for the stockholders has been declining Return on stockholders equity is the measurements of stockholders earning from their investments in a firm. Typically investors consider a return between 12- 15% as average and the trend of their return should be for it to increase positively year by year. From 2005 to 2006 stockholder have been earning less on their investment in EA with 2005 return on stockholders equity being average at 14.4%, but a decrease of 50% in 2006 to 7.1% and in 2007 a mere 1.7%. Earning per share is the measurement of the dollar amount that each share of common stock outstanding is earning. In 2005 earning per share of common stock in EA were $1.62, in 2006 $0.79 and in 2007 $0.23. This indicated that shareholders have been earning less on there investment over the past three years because the amount of shares outstanding has been relatively stable and the company has not declared any stock splits. Liquidity Ratios |Short-Term Liquidity Analysis |** |** |** | |** |2007 |2006 |2005 | |Current Ratio |3.5 |3.46 |4.47 | |Acid-Test Ratio (Quick Ratio) |3.44 |3.39 |4.4 | |Working Capital |2.5b |2.1b |2.8b | |Inventory Turnover |49.8 |48.3 |50.4 | |Days in Inventory |13.6 |13.2 |13.8 | |Average collection period | 31.3 |24.6  |34.4  | EA’s current ratio, which shows the EA’s ability to pay its short term debt using its liquid assets, the higher the ratio the better off the company is because it measures the extend of which current assets are available to meet current liabilities. EA’s current ratio for 2007 was $3.50, which indicates that EA has $3.50 of current assets for every $1.00 of current liabilities. EA’s current ratio decreased in 2006 to $3.46 from $4.47 in 2005. It should be noted that EA has also increase its cash and short term investments over the past three years. Quick ratio also referred to as acid test ratio gives a picture of a firm’s ability to repay current liabilities without relying on the sale of inventory or prepaid items, which are assets that cannot be converted to cash rapidly. EA ability to pay its current liabilities with out relying of inventory for 2005 was $4.40 for every $1.00 of current liabilities, $3.39 in 2006, and $3.44 in 2007. This indicates that EA’s financial strength has been diminishing since is financial liquidity has been declining over the past three years. The working capital ratio is an important measurement that represents a company’s available operating liquidity on a day by day basis. Even though a company may appear to have lots of assets and great profitability the company can still not be liquid if it can not convert it assets and profits into cash rapidly to pay off short term debt. EA’s ability to pay off its short term debt and still have enough money to finance its day to day business operations has been maintained relatively stable, in 2005 it was $2.8 billion, $2.1 in 2006 and $2.5 billion in 2007. This ratio indicates that EA’s current assets are greater than its current liabilities and EA is financially healthy and does not have to borrow additional funds finance its daily operations.. Activity ratios indicate how rapidly a firm can convert various accounts into cash or sales. The sooner management can convert assets into sales or cash, the more effectively the firm is being run. Days in inventory represent the number of day’s sales that are possible with inventory on hand. EA’s days to sell its inventory have been relatively stable for the past three years with 13.8 days in inventory for 2005, 13.2 days for 2006, and 13.6 days in inventory for 2007. If EA were to increase there inventory turnover ratios they would decline their days in inventory more rapidly. Inventory turnover ratio is the measurement of the number of times inventory has been sold or replaced during a given year. Gross profits are earned each time that inventory is sold and the measurement is a good indicator of how well inventory management has been performing. EA turned inventory around 50.4 times in 2005, 48.3 in 2006 and 49.8 in 2007. This indicates that EA has not been growing into new markets or leaving markets because they have been maintaining a constant amount of inventory for the past three years since expanding into Europe. Average collection period of a firm indicates the length of time a company must wait to receive payment owed from its customers after making a sale. In 2007 EA’s average collection period was 31.3 days up 6.7 days from 2006 when it was 24.6, and in 2005 it was 34.4 days. The collection periods have remained relatively stable over the past three years, which make it easier for EA to forecast receivables from sales. Industry The entertainment software industry is currently one of the most rapid rising industries in the U.S economy, creating thousands of jobs and producing global revenues. The industry has grown faster than the U.S population, growing 17 % over the past 4 years, while population growth has only increased by less than 4% during the same period. The entertainment software industry’s added to $3.8 billion U.S GDP in 2006. This amount represents the total dollar value of all goods and services produced during the year. The entertainment software industry has also contributed significantly to employment U.S employment. From 2002-2006, direct employment for the industry grew at a rate of 4.4 % annually. Together computer and video game companies are responsible for directly and indirectly employing over 80,000 employees in 31 states and it is estimated that by 2009 the industry will maintain over a quarter of a million U.S jobs.  The average salary earned by direct employees was estimated at $92,300, and the total national compensation for the industry was estimated at $2.2 billion. The entertainment industry also serves as a primary provider for individual U.S state economies. Currently California, Washington, Texas, New York and Massachusetts have the highest concentration of video game industry jobs. It is estimated by the Entertainment Software Association that these states directly employ 16,604 workers and are responsible for approximately 70 percent of the industry's total indirect employment. According to Entertainment Software Association, California is the largest employer of the industry and is responsible for approximately 40% of total industry employment and provided $1.8 billion in direct and indirect compensation to Californians in 2006 and added $1.7 billion to California’s economy in 2006. The computer and video game industry grew 12.3 percent in 2005 three times greater than the states overall growth. [pic]   The entertainment software industry reportedly generated $18.85 billion in sales in 2007, of which $9.5 billion were spent on games alone and the remaining $9.35 billion on consoles. The majority of video game sells were for consoles, which accounted for a whopping 69.4 percent of total sells and $6.6 billion. PC games accounted for only 9.6 percent, and portable handheld device games accounted for 21 percent and $2 billion. It is estimated that approximately 276.8 million units were sold in 2007, which is an average of one video game sold for every second of every day during the year. The entertainment software industry has been rapidly growing and will continue to grow as technology changes, Electronic Software Association CEO states, “The video game industry set the pace over all others in 2007, with record-breaking sales, off-the-charts consumer demand, and innovation reaching from galactic exploration to guitar simulation,” As popular consoles continue to be released and consumers line up in front of stores over night to purchase the newest consoles and games, Electronic Arts will be hitting the drawing boards to develop the most creative, realistic, jaw dropping games out on the market and will continue to grow as a company along with the industry. SWOT Analysis Strengths • Games are capable of operating on a multiple platforms including computers, consoles, handheld gaming devises, and cellular phones. • EA’s ability to develop games for all age groups and niche markets. • Franchises that allow EA to release new versions of its sporting games yearly. such as; Madden, FIFA, PGA Tour, NASCAR, and NBA Live. • Exclusive deals with Hollywood, which allow movie based games to be released. • New product life cycles constantly. • Global Company sales. • Development of online gamming communities. Weakness • Royalty fees paid to consoles manufactures. • Sales are dependent on release of new platforms. • Declining Revenue. • High operating cost. • Long development time for games. • Platform manufactures are making it difficult for EA to develop the same game for multiple platforms by designing making each platform unique. Opportunities • Constant release of new platforms. • Online gamming is becoming more popular. • Technological change can lead to more realistic games. • Selling online subscriptions to games. • Cellular phones are becoming capable of playing detailed games. • Faster internet connections will allow EA’s internet community to grow. Threats • Increasing research and development fees. • Patents • Economy is at an all time low. Conclusion Electronic Arts is the number one publisher, marketing and developer and distributor of video games for personal computer and video games consoles. After a thorough analysis our group believes that Electronic Arts is a great company that will continue to grow as population rises and the economy begins to stabilize. EA is a strong competitive and creative company that will continue to publish, market and develop games that will be purchased by gamers globally. If it continues to improve and enter new markets it’s financial success will be great. Bibliography 1. Procter & Gamble; Gillette and EA Sports Announce Global Partnership Focused on Gaming,Anonymous. Entertainment Business Newsweekly. Atlanta: Sep 14, 2008. pg. 19 2. Thompson, Arthur, A Strickland, and John Gamble. Crafting & Executing Strategy: The Quest for Competitive Advantage. 16th ed. New York: McGraw-Hill, 2008. 3. http://investor.ea.com/index.cfm, accessed November 9, 2008 4. EA Announces New Company Structure http://www.gamasutra.com/php-bin/news_index.php'story=14374 June 18, 2007. 5. Accessed November 9, 2008. 6. Executive Offices http://aboutus.ea.com/executive-section8officers.html 7. Accessed November 9, 2008. 8. 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Entertainment Software Association, Industry facts. 2008 2 November 2008, http://www.theesa.com/facts/index.asp 20. Investopedia. Dictionary 2008. 3 November 2008, http://www.investopedia.com/'viewed=1 21. “Electronic Art” Jobs. 2008. 3 November 2008, < jobs.ea.com> TABLE OF CONTENTS Company Background 1 Industry and Attractiveness 3 Competitors 4 Competitive Forces 6 Drivers of Change 7 Organizational Structure 7 Company Culture 8 Marketing 9 Research and Development 11 Production and Operation 12 Financial Analysis 13 Profitability Ratios 14 Liquidity Ratios 15 Industry Analysis 17 SWOT Analysis 19 Conclusion 21 Bibliography 22