GameStop Strategic Analysis and Recommendations

Keep calm and carry on gaming!
To the Board of GameStop
From Aalto Consulting
Aalto University School of Business
Executive summary
Executive summary
What is GameStop’s place in new digital-first economy?
Crumbling physical
retail
Downsize by closing stores, create a new Platform and mobile app, create e-
commerce segment and boost brand name and increase customer engagement.
Shift in industry
structure
Ruthless competition
Challenges:
Agenda
Retail industry
US retail forecasted to rise 3.8% YOY to top $3.8 trillion USD in 2019
A shift to online retail (14.3% of total retail sales)
A general decline in mall-oriented foot traffic
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Figures remain strong with a shift to e-commerce
Gaming Industry
Annual growth 9.6% YOY
Multi-billion-dollar industry
Shift away from physical game disks to downloaded programs and
online streaming services
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Growing and transforming industry
The last decade of GameStop
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Aggressive decrease within the last years
Revenue
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: The biggest revenue comes from new video game
software
Total
revenue:
$8,285.3
Main outcome
: The biggest revenue comes from new video game
software
SWOT
Strengths: 
recognized brand, active on all legacy social media
channels, sales per sqft competitive, product advantage in the
collectibles market
Challenges: 
net income negative, sales & margin & store traffic down
Opportunities:
 The rise of online gaming communities and esports,
rising interest towards gaming
Threats:
 large and fiercely contested market,  industry outlook shift
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Well-recognized brand with a threat of industry
outlook shift
Competitors: traditional (1/2)
Executive summary
Analysis
Alternatives
Implementation
Conclusion
GameStop
$8 bn
Online
competitors
$5 bn
BestBuy
$25 bn
Kmart
$25 bn
Target
$75 bn
Walmart
$75 bn
Annual revenue
Size
Competitors: online (2/2)
Origin and GameFly by Electronic Arts with over 50 mn registered
users
Steam: world’s largest digital distribution platform
Uplay
Amazon
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Competitors in both traditional and online retails
Future trends in the gaming industry
Driven by the connectivity of the internet and community-building
phenomenon it empowers
Interest in e-sports tournaments
Online streaming site earning more popularity
Retails prohibited from selling digital download codes
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Main outcome
: Competitors in both traditional and online retails
Agenda
Criteria for evaluation
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What is GameStop’s place in new digital-first economy?
Global trends fit
Customer engagement
Market position
Product side:
Company side:
Strategy fit
Ease of implementation
Cost of implementation
Alternatives
Executive summary
Analysis
Alternatives
Implementation
Conclusion
1
2
3
Sell
to Netflix
Merge
with Steam
Digitalize
Sell
to Netflix
Merge
with Steam
Digitalize
Alternatives
Executive summary
Analysis
Alternatives
Implementation
Conclusion
1
2
3
Access to resources
Synergies on
customer base side
New business for
Netflix
Dominate gaming
online and offline
markets
Synergies on customer
base side
Move to e-
commerce
Create own gaming
platform
Alternatives
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Alternatives
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Agenda
Recommendation
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Downsize by closing stores, create a new Platform and
mobile app, create e-commerce segment and boost
brand name and increase customer engagement.
Implementation 1/4
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What?
Why?
Implementation
Downsize to 10% of current physical presence
To decrease operating costs and to ensure capital for new investments
Close 4500 stores: 900 stores in 2020, 700 in 2021, 600 in 2022, 1200 in 2023 and 1800 in 2024
Sell fixed assets
Hire Change management consultant team (1+3)
Implementation 2/4
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What?
Why?
Implementation
Go digital: create Platform and mobile app
To acquire online presence and offer new digital products (Enter a new market)
Hire product manager and 10 developers to create the platform and another 5 developers to
create the app (1.5 year and 8 months respectively)
Create the platform and the app
Negotiate and create partnerships with gaming companies
Hire a data analytics manager and 2 DA specialists
Implementation 3/4
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What?
Why?
Implementation
Create e-commerce segment (both new and second-hand products)
To deal with the retail decline and acquire market share in commerce (retain customers and gain
new ones)
Hire e-commerce manager and 3 specialists
Hire distribution manager to operate the e-commerce distribution channel
Develop the e-commerce channel
Implementation 4/4
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What?
Why?
Implementation
Marketing campaign and branding initiatives
To make known that the company goes digital. Gain online visibility and ensure customer
engagement
Deploy Big Data Analytics for tailoring customer engagement with customized and personalized
offering
Create gaming areas and host competitions by leveraging the brand name and attract customers
Marketing and branding campaign spreading the message that GameStop has a strong digital
presence and will continue offering high value up-to-date customized products
Implementation plan
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Risks and Mitigation
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Financial Analysis
Renew only 10% of the expiring lease agreements
Average store size is 2100 sqft
Overhead costs are going to decrease by operational efficiency
improvements
Operating margin is going to grow to 50%
No more need for Goodwill impairments
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Financial Assumptions
Financial Analysis
Total cost savings from the
lease agreements in the
five years : 126 m$
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Lease agreement analysis
Financial Analysis
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Costs of Implementation plan
Financial Analysis
Revenue is going to
decrease but the
operational efficiency is
streamlined to the point
where operational
margins are going to
increase
Executive summary
Analysis
Alternatives
Implementation
Conclusion
Revenue analysis
Agenda
Conclusion
Executive summary
Analysis
Alternatives
Implementation
Conclusion
What is GameStop’s place in new digital-first economy?
Crumbling physical
retail
Downsize by closing stores, create a new Platform and mobile app, create e-
commerce segment and boost brand name and increase customer engagement.
Shift in industry
structure
Ruthless competition
Challenges:
Slide Note
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Aalto Consulting from Aalto University School of Business presents a strategic analysis for GameStop in the new digital-first economy. The report highlights challenges facing the company, including retail shifts and competition, and suggests actions like store closures, platform development, and enhancing customer engagement to address these issues.

  • GameStop
  • Strategic Analysis
  • Retail Industry
  • Digital Transformation
  • Aalto Consulting

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  1. Keep calm and carry on gaming! To the Board of GameStop From Aalto Consulting Aalto University School of Business

  2. Executive summary What is GameStop s place in new digital-first economy? Challenges: Crumbling physical retail Shift in industry structure Ruthless competition Downsize by closing stores, create a new Platform and mobile app, create e- commerce segment and boost brand name and increase customer engagement. Executive summary

  3. Agenda Analysis Alternatives Implementation Conclusion

  4. Retail industry US retail forecasted to rise 3.8% YOY to top $3.8 trillion USD in 2019 A shift to online retail (14.3% of total retail sales) A general decline in mall-oriented foot traffic Main outcome: Figures remain strong with a shift to e-commerce Analysis Executive summary Alternatives Implementation Conclusion

  5. Gaming Industry Annual growth 9.6% YOY Multi-billion-dollar industry Shift away from physical game disks to downloaded programs and online streaming services Main outcome: Growing and transforming industry Analysis Executive summary Alternatives Implementation Conclusion

  6. The last decade of GameStop Stock price, $ 63 54 5 2008 2014 2020 Main outcome: Aggressive decrease within the last years Analysis Executive summary Alternatives Implementation Conclusion

  7. Revenue 9%4% 2% 30% Total revenue: $8,285.3 12% 22% 21% Main outcome: The biggest revenue comes from new video game software Analysis Executive summary Alternatives Implementation Conclusion

  8. SWOT Strengths: recognized brand, active on all legacy social media channels, sales per sqft competitive, product advantage in the collectibles market Challenges: net income negative, sales & margin & store traffic down Opportunities: The rise of online gaming communities and esports, rising interest towards gaming Threats: large and fiercely contested market, industry outlook shift Main outcome: The biggest revenue comes from new video game software outlook shift Main outcome: Well-recognized brand with a threat of industry Analysis Executive summary Alternatives Implementation Conclusion

  9. Competitors: traditional (1/2) Walmart $75 bn Size GameStop $8 bn Target $75 bn BestBuy $25 bn Kmart $25 bn Online competitors $5 bn Annual revenue Analysis Executive summary Alternatives Implementation Conclusion

  10. Competitors: online (2/2) Origin and GameFly by Electronic Arts with over 50 mn registered users Steam: world s largest digital distribution platform Uplay Amazon Main outcome: Competitors in both traditional and online retails Analysis Executive summary Alternatives Implementation Conclusion

  11. Future trends in the gaming industry Driven by the connectivity of the internet and community-building phenomenon it empowers Interest in e-sports tournaments Online streaming site earning more popularity Retails prohibited from selling digital download codes Main outcome: Competitors in both traditional and online retails Analysis Executive summary Alternatives Implementation Conclusion

  12. Agenda Analysis Alternatives Implementation Conclusion

  13. Criteria for evaluation What is GameStop s place in new digital-first economy? Company side: Product side: Strategy fit Global trends fit Ease of implementation Customer engagement Cost of implementation Market position Alternatives Executive summary Analysis Implementation Conclusion

  14. Alternatives 1 2 3 Sell Merge with Steam Digitalize to Netflix Alternatives Executive summary Analysis Implementation Conclusion

  15. Alternatives 1 2 3 Digitalize Sell Merge with Steam to Netflix Access to resources Synergies on customer base side New business for Netflix Dominate gaming online and offline markets Synergies on customer base side Move to e- commerce Create own gaming platform Alternatives Executive summary Analysis Implementation Conclusion

  16. Alternatives Sell Merge Digitalize ? + + - ? ? + + + - - - + + + + ? ? Global trends fit Customer engagement Market position Strategy fit Ease of implementation Cost of implementation Alternatives Executive summary Analysis Implementation Conclusion

  17. Alternatives Sell Merge Digitalize ? + + - ? ? + + + - - - + + + + ? ? Global trends fit Customer engagement Market position Strategy fit Ease of implementation Cost of implementation Alternatives Executive summary Analysis Implementation Conclusion

  18. Agenda Analysis Alternatives Implementation Conclusion

  19. Recommendation Downsize by closing stores, create a new Platform and mobile app, create e-commerce segment and boost brand name and increase customer engagement. Implementation Executive summary Analysis Alternatives Conclusion

  20. Implementation 1/4 What? Downsize to 10% of current physical presence Why? To decrease operating costs and to ensure capital for new investments Implementation Close 4500 stores: 900 stores in 2020, 700 in 2021, 600 in 2022, 1200 in 2023 and 1800 in 2024 Sell fixed assets Hire Change management consultant team (1+3) Implementation Executive summary Analysis Alternatives Conclusion

  21. Implementation 2/4 What? Go digital: create Platform and mobile app Why? To acquire online presence and offer new digital products (Enter a new market) Implementation Hire product manager and 10 developers to create the platform and another 5 developers to create the app (1.5 year and 8 months respectively) Create the platform and the app Negotiate and create partnerships with gaming companies Hire a data analytics manager and 2 DA specialists Implementation Executive summary Analysis Alternatives Conclusion

  22. Implementation 3/4 What? Create e-commerce segment (both new and second-hand products) Why? To deal with the retail decline and acquire market share in commerce (retain customers and gain new ones) Implementation Hire e-commerce manager and 3 specialists Hire distribution manager to operate the e-commerce distribution channel Develop the e-commerce channel Implementation Executive summary Analysis Alternatives Conclusion

  23. Implementation 4/4 What? Marketing campaign and branding initiatives Why? To make known that the company goes digital. Gain online visibility and ensure customer engagement Implementation Deploy Big Data Analytics for tailoring customer engagement with customized and personalized offering Create gaming areas and host competitions by leveraging the brand name and attract customers Marketing and branding campaign spreading the message that GameStop has a strong digital presence and will continue offering high value up-to-date customized products Implementation Executive summary Analysis Alternatives Conclusion

  24. Implementation plan Action 2020 2021 2022 2023 2024 Close store and sell assets Hire change management team Hire product manager and team Create Platform Create mobile app Partnerships with gaming companies Hire a data analytics manager and team Hire e-commerce manager and team Hire distribution manager and team Develop the e-commerce channel Marketing and branding campaign Create gaming areas Host competition events Implementation Executive summary Analysis Alternatives Conclusion

  25. Risks and Mitigation Risks Probability Impact Low Mitigation Delay of development Hire more developers Medium Retail decline faster than anticipated Increase pace of digitalization, renegotiate lease agreements and close stores faster Medium Medium New products appear Create a BI team to constantly monitor the trends Medium High Established competitors react by more offering and or lower prices Closely observe competitors actions and unusual shifts and follow rapidly Low Medium Customers react poorly to marketing / branding campaign Realign campaign and make use of the successful channels Low Low Implementation Executive summary Analysis Alternatives Conclusion

  26. Financial Analysis Financial Assumptions Renew only 10% of the expiring lease agreements Average store size is 2100 sqft Overhead costs are going to decrease by operational efficiency improvements Operating margin is going to grow to 50% No more need for Goodwill impairments Implementation Executive summary Analysis Alternatives Conclusion

  27. Financial Analysis Lease agreement analysis Total cost savings from the lease agreements in the five years : 126 m$ Implementation Executive summary Analysis Alternatives Conclusion

  28. Financial Analysis Costs of Implementation plan Total costs 4801 4505 42374200.54086.2 5 2020 2021 2022 2023 2024 Implementation Executive summary Analysis Alternatives Conclusion

  29. Financial Analysis Revenue analysis Revenue is going to decrease but the operational efficiency is streamlined to the point where operational margins are going to increase Implementation Executive summary Analysis Alternatives Conclusion

  30. Agenda Analysis Alternatives Implementation Conclusion

  31. Conclusion What is GameStop s place in new digital-first economy? Challenges: Crumbling physical retail Shift in industry structure Ruthless competition Downsize by closing stores, create a new Platform and mobile app, create e- commerce segment and boost brand name and increase customer engagement. Conclusion Executive summary Analysis Alternatives Implementation

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