GameStop's Strategy for Future Sustainability in the Changing Video Game Industry
GameStop is facing declining results in revenue and operating income due to changes in the video game industry, such as the shift towards digital content and online retail. To ensure future sustainability, GameStop needs to strategize on adapting to these industry shifts by focusing on online distribution channels and revamping outdated physical stores.
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GameStop: GameStop: The paradigm of a shifting industry The paradigm of a shifting industry PBS Consulting Team PBS Consulting Team Bernardo Pequito Gustavo Moutinho Laura Fernandes Marta Andre Porto Business School Porto Business School
Executive Summary Executive Summary Challenge Challenge Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan To Sum Up To Sum Up 2
GameStop is facing declining results GameStop is facing declining results Revenue (in Billion $) Operating Income (in Million $) 9.6 700 9.4 600 9.2 500 9 400 8.8 300 8.6 200 8.4 100 8.2 8 0 2012 2014 2016 2018 2012 2014 2016 2018 3
GameStop is facing declining results GameStop is facing declining results Revenue (in Billion $) Operating Income (in Million $) 9.6 700 9.4 600 9.2 500 9 400 8.8 300 8.6 200 8.4 100 8.2 8 0 2012 2014 2016 2018 2012 2014 2016 2018 GameStop needs to act fast to tackle the weakening outcomes! GameStop needs to act fast to tackle the weakening outcomes! 4
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? 5
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Decline on hard copies Preference for streaming options 6
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores 7
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores Unsteady management 8
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores Unsteady management Triple AAA Strategy Triple AAA Strategy 9
Challenge Challenge What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores Unsteady management Triple AAA Strategy Triple AAA Strategy ADAPT Business Model ADAPT Business Model AMAZE Customers AMAZE Customers ALIGN Vision ALIGN Vision 10
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer 12 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer GameStop | EB Game | Micromania 5 830 Stores Website 13 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer Video Game Software Video Game Software Pre-owned video Game software Digital currency for online Games Paraphernalia GameStop | EB Game | Micromania 5 830 Stores Website 14 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer Video Game Software Video Game Software Pre-owned video Game software Digital currency for online Games Paraphernalia GameStop | EB Game | Micromania 5 830 Stores Website PowerUp Rewards Program Game Informer Magazine 15 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer Video Game Software Video Game Software Pre-owned video Game software Digital currency for online Games Paraphernalia GameStop | EB Game | Micromania 5 830 Stores Website PowerUp Rewards Program Game Informer Magazine 16 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What is GameStop What is GameStop? ? Traditional structure multi Traditional structure multi- -channel retailer channel retailer Video Game Software Video Game Software Pre-owned video Game software Digital currency for online Games Paraphernalia GameStop | EB Game | Micromania 5 830 Stores Website PowerUp Rewards Program Game Informer Magazine GameStop s presence in the market is no longer aligned with the preferences of GameStop s presence in the market is no longer aligned with the preferences of consumers and that is leading to the declining results consumers and that is leading to the declining results 17 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
GameStop has had a difficult path GameStop has had a difficult path 1996 1996 1999 1999 2000 2000 Today Today Bankruptcy Bankruptcy 18 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
GameStop has had a difficult path GameStop has had a difficult path 1996 1996 1999 1999 2000 2000 Today Today Bankruptcy Bankruptcy Restructuring Restructuring 19 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
GameStop has had a difficult path GameStop has had a difficult path 1996 1996 1999 1999 2000 2000 Today Today Leveraging from gaming Leveraging from gaming console popularity console popularity Bankruptcy Bankruptcy Restructuring Restructuring 20 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
GameStop has had a difficult path GameStop has had a difficult path 1996 1996 1999 1999 2000 2000 Today Today Currently facing decreasing profits Currently facing decreasing profits with: with: Down sales Non-existing profits Store traffic down Store sales down Stock price decline Leveraging from gaming Leveraging from gaming console popularity console popularity Bankruptcy Bankruptcy Restructuring Restructuring 21 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
GameStop has had a difficult path GameStop has had a difficult path 1996 1996 1999 1999 2000 2000 Today Today Currently facing decreasing profits Currently facing decreasing profits with: with: Down sales Non-existing profits Store traffic down Store sales down Stock price decline Leveraging from gaming Leveraging from gaming console popularity console popularity Bankruptcy Bankruptcy Restructuring Restructuring GameStop s had recovered from difficulties and they can leverage today from the GameStop s had recovered from difficulties and they can leverage today from the market evolvements to recover once again. market evolvements to recover once again. 22 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD 23 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD Increasing search for online Increasing search for online- -first Console sales remains the fastest growing market Console sales remains the fastest growing market CAGR of 13.4% first Downloaded and streamed Experiences Downloaded and streamed Experiences CAGR of 13.4% 24 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD Increasing search for online Increasing search for online- -first Console sales remains the fastest growing market Console sales remains the fastest growing market CAGR of 13.4% first Downloaded and streamed Experiences Downloaded and streamed Experiences CAGR of 13.4% How is the industry expected to evolve How is the industry expected to evolve? ? 25 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD Increasing search for online Increasing search for online- -first Console sales remains the fastest growing market Console sales remains the fastest growing market CAGR of 13.4% first Downloaded and streamed Experiences Downloaded and streamed Experiences CAGR of 13.4% How is the industry expected to evolve How is the industry expected to evolve? ? Shift to online retail General decline in mall-oriented foot traffic Online shopping accounting for 14.3% 26 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD Increasing search for online Increasing search for online- -first Console sales remains the fastest growing market Console sales remains the fastest growing market CAGR of 13.4% first Downloaded and streamed Experiences Downloaded and streamed Experiences CAGR of 13.4% How is the industry expected to evolve How is the industry expected to evolve? ? eSports competition through video games In-Person tournaments Online streaming Shift to online retail General decline in mall-oriented foot traffic Online shopping accounting for 14.3% 27 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
What does the industry look like What does the industry look like? ? Market size 18$ billion USD Market size 18$ billion USD Increasing search for online Increasing search for online- -first Console sales remains the fastest growing market Console sales remains the fastest growing market CAGR of 13.4% first Downloaded and streamed Experiences Downloaded and streamed Experiences CAGR of 13.4% How is the industry expected to evolve How is the industry expected to evolve? ? eSports competition through video games In-Person tournaments Online streaming Shift to online retail General decline in mall-oriented foot traffic Online shopping accounting for 14.3% The industry in growing with a shift in Business model. GameStop will need to The industry in growing with a shift in Business model. GameStop will need to accommodate these changes to ensure a stable growth for the future. accommodate these changes to ensure a stable growth for the future. 28 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests Engaged customer base | Gaming interests 29 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests What is the consumer looking for? What is the consumer looking for? 30 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests What is the consumer looking for? What is the consumer looking for? Shifting to online retail Decreasing use of mall traffic Increasing Online shopping -- 14.3% 14.3% 31 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests What is the consumer looking for? What is the consumer looking for? Value for Money Value for Money Convenience Convenience Experience Experience Shifting to online retail Decreasing use of mall traffic Increasing Online shopping -- 14.3% Differentiation | Valuable | Benefits | Frictionless | Unique Experience | Support | Sociability 14.3% 32 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests What is the consumer looking for? What is the consumer looking for? Value for Money Value for Money Convenience Convenience Experience Experience Shifting to online retail Decreasing use of mall traffic Increasing Online shopping -- 14.3% Differentiation | Valuable | Benefits | Frictionless | Unique Experience | Support | Sociability 14.3% eSports competition through video games In-Person tournaments Online streaming 33 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Who is the customer of GameStop Who is the customer of GameStop? ? Engaged customer base | Gaming interests What is the consumer looking for? What is the consumer looking for? Value for Money Value for Money Convenience Convenience Experience Experience Shifting to online retail Decreasing use of mall traffic Increasing Online shopping -- 14.3% Differentiation | Valuable | Benefits | Frictionless | Unique Experience | Support | Sociability 14.3% eSports competition through video games In-Person tournaments Online streaming The customer of today values the personal touch and is looking for different The customer of today values the personal touch and is looking for different products to meet their gaming needs. products to meet their gaming needs. 34 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Competition Competition Size Size Walmart Walmart Target Target BestBuy BestBuy Brick and Brick and Mortar Mortar Kmart Kmart Online Online 35 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Competition Competition Size Size Walmart Walmart Steamed Steamed GameStop GameStop Target Target Origin Origin BestBuy BestBuy Uplay Uplay Brick and Brick and Mortar Mortar Kmart Kmart Online Online 36 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Competition Competition Size Size Walmart Walmart Steamed Steamed GameStop GameStop Target Target Amazon Amazon Origin Origin GameFly GameFly BestBuy BestBuy Uplay Uplay Brick and Brick and Mortar Mortar Kmart Kmart Online Online 37 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Competition Competition Size Size Walmart Walmart Steamed Steamed GameStop GameStop Target Target Amazon Amazon Origin Origin GameFly GameFly BestBuy BestBuy Uplay Uplay Brick and Brick and Mortar Mortar Kmart Kmart Online Online Competition is fierce in both markets. Still, GameStop can differentiate attacking Competition is fierce in both markets. Still, GameStop can differentiate attacking the growing market segments. the growing market segments. 38 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
To Sum Up To Sum Up Decreasing Sales Decreasing Sales Not up Not up- -to to- -date with latest date with latest gaming trends gaming trends W W S S Engaged customer base Engaged customer base Cash Available Cash Available Rising market segments Rising market segments Consumers changing Consumers changing preferences preferences T T O O Fierce competition Fierce competition 39 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Which Alternatives does GameStop have for the Future? Which Alternatives does GameStop have for the Future? What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores Unsteady management Triple AAA Strategy Triple AAA Strategy ADAPT Business Model ADAPT Business Model AMAZE Customers AMAZE Customers ALIGN Vision ALIGN Vision 41 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Which Alternatives does GameStop have for the Future? Which Alternatives does GameStop have for the Future? ADVANTAGES INORGANIC DISADVANTAGES Not good time to sell now, declined price per share Quick impact No future risk SELL Quick impact Dispersion of risk Possibility to enter new segments Lost of control Strategic designment Cultural challenges MERGE Quick impact Dispersion of risk Possibility to enter new segments Compound of the problem Cultural challenges ACQUIRE 42 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Which Alternatives does GameStop have for the Future? Which Alternatives does GameStop have for the Future? ADVANTAGES ORGANIC DISADVANTAGES Increase efficiency Reduce fixed costs Focus on future opportunities Leasing expiration for stores Job Loss Possible inseminations Brand image DOWNSIZE Enter fast growing segments Be align with the trends of the future Assure future sustainability of the business PIVOT No previous experience 43 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Which Alternatives does GameStop have for the Future? Which Alternatives does GameStop have for the Future? Strategic Strategic Alignment Alignment 2 2 3 5 5 Financial Effort Financial Effort Cultural Fit Cultural Fit Time to Time to implement implement 2 1 1 4 4 RESULT RESULT Sell Merge Acquire Downsize Pivot 5 3 1 4 4 1 2 2 4 5 10 8 7 17 18 Minimum : 1 Maximum : 5 44 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Which Alternatives does GameStop have for the Future? Which Alternatives does GameStop have for the Future? Strategic Strategic Alignment Alignment 2 2 3 5 5 Financial Effort Financial Effort Cultural Fit Cultural Fit Time to Time to implement implement 2 1 1 4 4 RESULT RESULT Sell Merge Acquire Downsize Pivot 5 3 1 4 4 1 2 2 4 5 10 8 7 17 18 Minimum : 1 Maximum : 5 ADAPT Business Model ADAPT Business Model 45 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Triple A strategy to tackle the GameStop Challenges Triple A strategy to tackle the GameStop Challenges What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Preference for streaming options Shift from Offline to Online Retail Outdated physical stores Unsteady management Triple AAA Strategy Triple AAA Strategy ADAPT Business Model ADAPT Business Model AMAZE Customers AMAZE Customers ALIGN Vision ALIGN Vision 46 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Triple A Strategy Triple A Strategy How to Adapt Business Model? How to Adapt Business Model? What should be the strategy of GameStop to ensure future sustainability of the What should be the strategy of GameStop to ensure future sustainability of the business business? ? Changing Video Game Changing Video Game Industry Industry Distribution channels Distribution channels Organizational changes Organizational changes Decline on hard copies Decline on hard copies Preference for streaming Preference for streaming options options Shift from Offline to Online Retail Outdated physical stores Unsteady management Triple AAA Strategy Triple AAA Strategy ADAPT Business Model ADAPT Business Model AMAZE Customers AMAZE Customers ALIGN Vision ALIGN Vision 48 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Triple A Strategy Triple A Strategy How to Adapt Business Model? How to Adapt Business Model? PRESENT CORE CORE Hard Copies Hard Copies Hardware Hardware Used Games Used Games 75% 75% ACCESSORIES ACCESSORIES Video Game Video Game Accessories Accessories Digital Digital Others Others 25% 25% 49 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
Triple A Strategy Triple A Strategy How to Adapt Business Model? How to Adapt Business Model? PRESENT FUTURE CORE CORE Hard Copies Hard Copies Hardware Hardware Used Games Used Games 75% 75% ACCESSORIES ACCESSORIES Video Game Video Game Accessories Accessories Digital Digital Others Others INVEST IN FAST INVEST IN FAST GROWING GROWING SEGMENTS SEGMENTS 25% 25% 50 Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan
