Suffolk University Yogo Game Strategy in the United States Case Study Case study “Yogo Game: Strategy in the US” is attached, just follow other attached file it has the questions and instruction MAX 3 pages W17311
YOGO GAME: STRATEGY IN THE UNITED STATES
Xiaohua Yang, William X. Wei, Ken K. Chou, Stavros Christoforou, Natasia de Silva, and Henry Patterson wrote this case solely to
provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial
situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Version: 2017-05-31
It was the spring of 2016. Hiro Keigo, president and chief executive officer of Yogo Game America, sighed
and shook his head as he ended his video chat with Yogo Game, Inc.’s executives back at the company’s
headquarters in Nagoya, Japan. “We have a lot of important decisions to make here in Menlo Park,” Keigo
muttered aloud to an empty conference room. During the video chat, he and the other executives had
discussed the need for Yogo Game to expand its U.S. operations. The expansion included hiring many new
employees. Management in Nagoya made it very clear that Keigo was to implement the expansion without
compromising cost efficiency and profitability. However, Keigo was conflicted. He knew that as a Japanese
company doing business in the United States, Yogo Game faced distinct challenges in terms of personnel
and company culture. Should Keigo hire locally, or bring in employees from Japan? Thoughts about the
costs and benefits of pursuing each option swirled in his head as he got out of his chair and left the
conference room. When Keigo got back to his office, he scheduled a meeting with Yogo Game America’s
management team. Keigo knew that the hiring decisions the team was going to make would greatly impact
the company’s success.
COMPANY BACKGROUND
Yogo Game, Inc.
In 2002, Kenzo Makoto and two associates launched a self-developed advertisement product called
“Yogoclick.” They could not have imagined then that this creation would make the company, Yogo Game,
Inc., a household name in the Japanese Internet industry. Headquartered in Nagoya, this young company
experienced initial success when it was awarded Venture of the Year in 2003.
Yogo Game carried this momentum into early 2004, entering the Tokyo Stock Exchange. Unfortunately,
the remainder of 2004 was a difficult time for the entire industry as a result of the dotcom crash. Yet under
Mokoto’s careful guidance, the company displayed toughness and resiliency, diversifying and expanding
over the next four years. Yogo Game went on to establish its presence in various Internet fields with new
subsidiaries, such as Mobile Cal, Novo EC, and Search Cal.
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By 2008, Yogo Game had fully recovered from any fallout effects of the dotcom crash, recording profits
for the first time since its listing on the stock exchange. In the same year, Yogo Game launched Zemba, a
blog service with enough potential and profitability to become the company’s core business just one year
later. As Zemba gained popularity, Yogo Game’s other divisions also experienced substantial growth. Yogo
Game had achieved a great deal in just 14 years. The firm’s overall operating profit had grown more than
48 per cent, and by then, the company employed over 2,000 people across subsidiaries in major cities within
the United States, China, and Vietnam. With a mission of “becoming a . . . hallmark of the 21st century,”
the future looked bright for Yogo Game. Management set out to increase the company’s influence even
further by exploring untapped areas of the Internet industry.
Yogo Game America
Yogo Game America was established in Menlo Park, California in 2012, and was a wholly owned
subsidiary of Yogo Game. The main purpose of this subsidiary, led by Keigo, was to introduce and deliver
the same successful online service and entertainment experience from Japan to a new American audience.
Unlike Yogo Game, which was heavily involved in four primary business sectors, Yogo Game America
focused on only one particular aspect of the Internet industry: social game development and online
entertainment communities. As a part of the corporation’s plan to seek innovation, Yogo Game America was
positioned to explore and compete in online gaming and entertainment for the emerging smartphone and tablet
market. Yogo Game America was quickly becoming a leading application developer for a few Silicon Valley
social media companies.
Whether Yogo Game America could take its success to the next level would depend on the quality of the
company’s leadership and its ability to adjust management practices to the U.S. market—a foreign market
for Yogo Game. The company wanted to balance Japanese and American cultures to maintain Japanese
group productivity and American individual creativity (see Exhibit 1). The volatile nature of the online
gaming and entertainment industry and its placement within a highly competitive environment compounded
Yogo Game America’s challenge.
PRODUCTS AND SERVICES
When Makoto started Yogo Game, he envisioned centring his business on the ever-growing Internet
industry. Staying true to his vision, Makoto built a company that influenced its consumers by being an
active participant in all Internet-related activities. There were four primary sections that made up the Yogo
Game business domain: blogging and virtual communities, Internet media, Internet advertising, and venture
capital investment development.
Zemba: Blogging and Virtual Communities
Zemba was Yogo Game’s core business outlet. It started in 2008, primarily as a communication and social
networking platform. As the service gained increasing popularity over the years, it evolved to offer two
main services: blogging and a virtual community. In 2010, Zemba was awarded first place in the blog
service category of Web of the Year.1 By 2012, Zemba had become Japan’s overall leader in blog services.
Just eight years after its implementation, Zemba had over 20 million registered users worldwide, and was
1
Web of the Year awarded the best websites in several categories, selecting from nominated websites that serviced Japan.
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generating a considerable portion of the company’s profits. Most recently, Zemba launched a microblogging platform—Zemba Now—which was positioned to rival Twitter.
In February 2012, Zemba launched Zemba Pegg, an avatar-based community service that offered members
the opportunity to actively partake in a virtual world. Users were encouraged to first create characters
known as “peggs” with multiple attribute selections such as facial features, clothing, and accessories.
Participants could then choose to purchase furniture to decorate their own rooms, buy clothes and
accessories to expand their wardrobe, and chat with other peggs in various virtual locations and time
periods. Mini-games available within the online community further promoted user interaction. As of spring
2012, Zemba Pegg was the leading virtual-world service provider in Japan, and was so popular that the
company launched an American version, known as Zemba Peco.
Internet Media
This business sector mainly consisted of social games and applications for personal computing and
smartphone platforms. Yogo Game became Japan’s number one social applications provider, with over 30
social applications developed by Yogo Game for both Japanese and American markets. These applications
offered a variety of functions, such as information services, product price comparisons, and purchase-point
reward systems. Social games advanced the company’s profile further. A key function of Yogo Game
America was to develop social gaming for U.S. iPhone and iPad users.
Internet Advertising
Considered by many to be a pioneer in the Internet industry, Yogo Game pushed its Internet services to
develop a portfolio of online advertising technologies. The company’s advertising billings were the highest
in Japan, and its services earned the highest rating (four stars) in an agency ranking system. Some marketing
and advertising firms focused on just one or two specific areas of online advertising, but Yogo Game
provided a variety of solutions, including campaign planners, advertisement development and publishing,
operations, and real-time analytics. Yogo Game also employed traditional Internet marketing methods, such
as banner ads, social media, and search engine optimization, for both online and mobile companies. A team
of professional technical staff supported those using paid search advertisement.
Venture Capital Investment
With the goal of enhancing the general development of Internet business and financing, Yogo Game’s
ventures division focused on developing firms within the Internet industry, especially start-up companies.
Yogo Game provided support and the funding needed for start-up companies to develop and prosper; this
strengthened the services provided within the overall network and improved the entire online ecosystem.
Ranked as the top corporate venture capital firm in Japan, Yogo Game managed about US$90 million2 in
assets with over 79 portfolios spread across Japan, China, and Vietnam.
2
All currency amounts are in US$ unless otherwise specified.
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INDUSTRY AND COMPETITION
Social gaming and online communities developed as a viable industry with the proliferation and widespread
use of social media and the entry of smartphones into the mainstream mobile device market. While the
category of social games was broad and encompassed a variety of products, the key features of these games
were that they were web based and often involved, or had the capacity to involve, people in a user’s online
social network.
The business models varied among social gaming companies, but many games were offered for free or at a
nominal price. Companies tended to generate revenue through a variety of other mechanisms, including
sales of virtual goods within the games, paid advertisements, or subscriptions to premium versions of the
games.3 The market was expected to bring in over $5.5 billion in revenue in 2015, more than double its
revenue in 2011 (see Exhibit 2).4
There had been a push in the industry to determine who social gamers were so key players in the industry
would better understand “how to best reach, engage, and influence” this audience.5 According to a 2011
study conducted by Kabam Social Gaming, 41 per cent of U.S. Internet users played social games.6 This
amounted to approximately 100 million individual users—a figure that was expected to rapidly increase
over the next few years (see Exhibit 3).7 The average user was 40.9 years old, with female social gamers
outnumbering their male counterparts.8 Social gamers could be categorized into four groups: affluent
players, who purchased in-game currency to advance; competitive players, who played to win and boast
about their achievements; beginner players, who were less technically proficient and preferred free content;
and devotees, who comfortably used advanced functions but also preferred free play.9
Statistics from 2016 indicated that the social gaming industry in the United States consisted of 7,644
companies, employing 13,839 individuals.10 Even though there were clearly many firms in the business of
social gaming, there was still incentive to enter the industry, with its low barriers to entry and high potential
for profit.11 As in other industries, the landscape of social gaming was shaped by the major players who had
a majority of the market share, including Zynga Inc., Electronic Arts Inc., and the Walt Disney Company.
The industry leaders bolstered their companies by acquiring smaller competitors. Zynga notably acquired
Newtoy, Inc., the developer of the popular Words with Friends game.12 Similarly, in order to bolster their
3
Sande Chen, “The Social Network Game Boom,” Gamasutra, April 29, 2009, accessed March 24, 2017,
www.gamasutra.com/view/feature/132400/the_social_network_game_boom.php.
4
Pascal-Emmanuel Gobry, “The Social Gaming Market Will Explode to $5+ Billion By 2015,” Business Insider, February 21, 2012,
accessed March 24, 2017, www.businessinsider.com/the-social-gaming-market-will-explode-to-5-billion-by-2015-2012-2.
5
RockYou, “RockYou® Reveals Findings from Social Gamer Thought Leadership Research: Top 5 Insights about Social Gamers,” press
release, September 26, 2011, accessed March 23, 2017, www.businesswire.com/news/home/20110928005240/en/RockYou%C2%AEReveals-Findings-Social-Gamer-Thought-Leadership.
6
Information Solutions Group, Social Gamer Research Study, Kabam Social Gaming Research, September 2011, accessed
March 24, 2017, www.infosolutionsgroup.com/pdfs/2011_Kabam_ISG_Social_Games_Research_Results.pdf.
7
Gobry, op.cit.
8
Information Solutions Group, op. cit.
9
RockYou, op. cit.
10
“Social Network Game Development: Market Research Report,” IBIS World, July 2016, www.ibisworld.com/industry/socialnetwork-game-development.html.
11
Chen, op.cit.
12
Zynga Inc., “Zynga Acquires ‘Words with Friends’ Developer NEWTOY,” press release, December 2, 2010, accessed March
24, 2017, http://investor.zynga.com/releasedetail.cfm?ReleaseID=625900.
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positions in the burgeoning social gaming industry, Electronic Arts purchased Playfish,13 and Disney
bought Playdom,14 in acquisitions worth hundreds of millions of dollars.
In addition to these industry giants, Yogo Game competed more directly with GREE, Inc. and DeNA Co.,
Ltd., both of which were based in Japan and had also recently opened U.S. subsidiaries. All of Yogo Game’s
competitors had headquarters in California’s San Francisco Bay Area, except Disney, which was based in
Southern California. Given that the major industry players were U.S.-based companies, they conformed to
U.S. standards for compensation, bonus structures, and work culture.
NORTH AMERICAN OPERATIONS
Strategy
As a relatively new industry, the social gaming market had grown at an exponential pace since the
introduction of the smartphone. In order to maintain its own steady rate of expansion, Yogo Game decided
to establish Yogo Game America as the forefront of the company’s global development strategy. Yogo
Game America’s launch was deliberate and well planned, motivated by several strategic considerations.
First, Menlo Park provided the perfect setting to establish operations for any gaming-related company.
Menlo Park was in the heart of Silicon Valley, famous for housing the corporate titans of the gaming
industry. While well-known companies such as Sony Corporation, Nintendo Co. Ltd., and Electronic Arts
were located in surrounding cities, Menlo Park itself was home to fresh heavy hitters such as Zynga and
GREE. From a geographic standpoint alone, Menlo Park had become the mecca of the electronic
entertainment industry for all gaming-related organizations on the West Coast.
Second, when comparing Japanese and U.S. social gaming markets, it was obvious that the United States
not only had more potential, but also more resources. There were nearly three times more people living in
the United States than in Japan, which directly translated into a larger market potential for Yogo Game. In
addition, while Japanese firms had always been considered the pioneers of the video and electronic gaming
industry, the United States had become a leader of that business worldwide over the previous few decades.
Such rapid growth and development required an abundance of resources, including funding, skilled
personnel, and technology.
Lastly, Yogo Game America was established for competitiveness. Despite all of Yogo Game’s successes,
the company wanted to avoid complacency and remain competitive; therefore, Yogo Game America was
launched to keep pace with Yogo Game’s aggressive industry rivals. Because top gaming companies such
as GREE and DeNA had already implemented their expansion plans into North America, and U.S.-based
Zynga, Electronic Arts, and Disney already exerted substantial influence over the U.S. market share, Yogo
Game had to act quickly, yet strategically, to compete.15
13
Eric Eldon, “EA Buys Playfish in Deal Worth Up To $400 Million,” AdWeek, November 9, 2009, accessed March 24, 2017,
www.insidesocialgames.com/2009/11/09/ea-buys-playfish-in-deal-worth-up-to-400-million.
14
Brooks Barnes and Claire Cain Miller, Disney Buys Playdom in $763 Million Deal, Becoming Hollywood Leader in Social Games,”
The New York Times, July 27, 2010, accessed March 24, 2017, www.nytimes.com/2010/07/28/technology/28disney.html.
15
Ishaan, “GREE and DeNA Open New Game Studios in North America,” Siliconera, February 12, 2012, accessed March 24,
2017, www.siliconera.com/2012/02/12/gree-and-dena-open-new-game-studios-in-north-america.
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Workplace Culture
Yogo Game America’s workforce was currently 35 per cent American, but Keigo would have liked more
American influence in the company; he thought this could be achieved by rapidly expanding the workforce,
and ideally, hiring locally. After much thought and discussion with management, Keigo’s target was to
have 70 per cent American employees by the end of 2017. Keigo intended to have 120 employees, which
was almost three times the number of employees currently working at Yogo Game America.
While tripling the workforce seemed extreme, part of the hiring necessity stemmed from the extent to which
American engineers specialized in their field. Because American engineers were so specialized in the type
of work they did, four American engineers had to be hired to do the job that one Japanese engineer could.
Yogo Game also wanted to have American management at Yogo Game America because Americans were
familiar with the U.S. business climate. Americans also had more insight to, and experience in running, a
successful social media company in the United States.
New employees to Yogo Game America took part in an offsite training program that introduced new
employees to the industry, headquarters, and current trends. The training lasted for one week, after which the
new employees joined their teams. There was no cultural component to the training.
Yogo Game America believed it operated in a way that reflected American culture and attitudes. For
example, in Japan, an employee would traditionally be p…
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