Company Overview of Garena

Executive Summary

Garena is the largest leading gaming platform in Southeast Asia and Taiwan, and it expanded its presence from Singapore to each of the countries within 4 years. This report seeks to understand the secrets of Garena in maintaining its unparalleled leadership in the gaming industry. With regards to the value chain of the gaming industry, Garena functions as an integrated developer, publisher as well as a retailer.
Garena moved from a focused differentiation strategy towards a broader scope while maintaining their differentiation approach. Customers were the key consideration in dictating their business level strategy, which resulted in both core competencies and value creation being customer-centric.
Recommendations have been made to strengthen Garena market leadership and tapping new opportunities by analysing both micro and macro environmental factors and using SWOT analysis to identify internal strengths and weakness or its external opportunities and threats.

Company Overview

Garena is founded under the name of Forrest Li and his 9 friends in Singapore and it started off as an E-sports community in 2007. It basically focused on providing all sorts of services by hosting online games for the rapidly growing gaming community. Due to their passion to bring the online gaming experience to another whole new level, they are being motivated to build a great gaming company together. Therefore, Garena was established on 2009.
During 2010, Garena launched its best online gaming social platform called Garena+. It’s for online gamers play games online with each other and they could use it to meet, chat, share tips and strategies etc. Within one year, it’d reach to over 1 million monthly active users after its first launch and expanded its presence to various countries such as Taiwan, Malaysia, Vietnam, Philippines, Thailand, Indonesia and the CIS (Commonwealth of Independent States).
Other than to provide E-sports playground for popular classics such as DotA and Age of Empire, latest premium online games such as Blackshot, Heros of Newerth and the award-winning League of Legends is also introduced in Garena+. (Garena Singapore)

External Environment Analysis

Macro-environment
Political segment:
Singapore had been ruled by the PAP (People Action Party) for the past 52 years since it won the first electoral victory in 1959. (Ming, 2011) Therefore, there are not many changes that would occur in the government side. While there is no government body controlling PC game content, the industry practices self-regulation; Organisations such as the Entertainment Software Rating Board give age and content ratings for the games.

Economic segment:
Age structure of Singapore

Ethnic Group / Sex Total
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
35 - 39

Total

3,844.8
183.3
205.7
226.2
255.1
266.9
255.6
296.9
305.5

Males

1,891.5
93.5
104.6
116.0
130.0
134.0
124.0
141.3
147.4

Females

1,953.2
89.8
101.1
110.2
125.1
132.9
131.6
155.6
158.1

Chinese

2,853.8
127.4
134.5
152.4
179.4
190.5
184.5
215.1
223.6

Males

1,395.2
65.6
68.9
78.5
91.8
95.8
89.9
102.4
105.9

Females

1,458.6
61.8
65.6
74.0
87.6
94.7
94.5
112.7
117.7

Malays

512.8
30.6
33.4
39.9
45.8
48.7
40.8
34.4
29.8

Males

255.2
15.7
17.1
20.8
23.6
24.9
20.6
17.0
14.3

Females

257.7
14.9
16.3
19.1
22.2
23.8
20.2
17.4
15.5

Indians

351.7
18.3
27.4
24.6
22.6
22.3
23.9
34.3
35.7

Males

180.9
9.0
13.6
12.3
11.2
11.0
11.1
16.6
19.7

Females

170.8
9.3
13.8
12.3
11.4
11.3
12.8
17.7
16.0

Others

126.5
7.0
10.4
9.3
7.2
5.5
6.5
13.1
16.4

Males

60.3
3.3
5.0
4.4
3.4
2.4
2.4
5.3
7.5

Females

66.2
3.7
5.4
4.9
3.9
3.1
4.1
7.8
8.9

Source: (Monthly Digest of Statistics Singapore) Gaming is a hobby that mainly targeted on the large base of young and middle aged Singaporeans which provide a large enough market for Garena to target on.

A young boy watched the proceedings of a live gaming tournament

“Gaming might still be considered by many as a frivolous activity, and it will take time to turn perceptions around. But trailblazers like Hammy and Hoong are setting the path for future aspirants to take up the mantle and, together with the support of companies like Garena and Sony, help Singaporean gamers and game developers “level-up”.”
TGX 2011 (Games Xpo 2011) attracted more than 100,000 video game fanatic to participate in the event. World Cyber Games (WCG) was also held in conjunction with TGX 2011 to let gamers compete for the opportunity to represent Singapore to take part in the finals at Korea. This shows that gaming is becoming a serious business in the near future. (Lau, 2011)

Sociocultural segment:
Electronic sports (E-Sports) have now become more recognised, with professional gamers being an acceptable profession. Major corporations sponsor teams and events held in Singapore, which serve as an effective marketing tool to draw larger audiences directly to the games larger audiences directly to the product, even after the initial product launch period.

Technological segment:
For gaming purposes, it had always been focusing on processing speed and graphical capabilities over other features. Technology that is popular now in Singapore is cloud computing which helped the gaming industry in Singapore. It enables subscriber to play high-end game on a Pentium-4 computer.

Gaming devices are connected through wired or wireless access that gamer do not play alone anymore as social networking is the upcoming trend now which is beneficial for Garena as it’s a social platform for gamers to interact. By introducing this technology, the main purpose is to develop Singapore as the leading regional centre to develop and distribute connected games content across different platform and it aims to make use of the emerging interactive platform provided by virtual words to test out new business models, products and services. (Jayaraman Archana, 2011)

Legal segment:
Given that Garena operates in both a knowledge-rich and tech-heavy industry, a strong legal framework includes various patents, trademark, and copyright laws are needed to protect corporations in that competitive business environment. This enables game developers to build up their brand name without worrying about others stealing their credit.

Micro-Environment

Threats of new entrants:
Barriers to entry as a game developer are generally low since the infrastructure required to develop simpler games are widely available. Cost and infrastructure requirements increase with game complexity, from an average of $1~5m for blockbuster titles in 2000 to over $20m in 2010. Incubation times for these quality games are also generally much longer, which potentially increases the barrier for those entering the higher quality game segment.

Threat of substitute products:
In terms of interactive entertainment, the main substitutes for Garena products used to be console games, such as the Nintendo DS, Sony PlayStation and Microsoft Xbox. Recent technological advances also mean that smart-phone apps and browser-based games are substitutes. These may eventually evolve into directly competing products as the development skills required are largely transferable between platforms, hence products of similar gaming experience may start appearing on these other platforms.

Bargaining power of suppliers:
Garena outsources part of their game development to small studios. It is highly competitive between the small studios as big firms like Garena provide a stable source of funding. In terms of labour, Garena mainly employs skilled labour such as game programmers and designers. The lack of organised labour unions in the industry also signals weak labour bargaining power. The market for hardware required for development is almost perfectly competitive, thus the bargaining power of suppliers for hardware is very low.

Intensity of rivalry among competitors:
Strong rivalry occurs between publishers and developers of these core titles and their associated franchises. Competition is strongest within each game genre for developers, with developers focusing on expanding the game franchise when they have established a successful foothold in the market.

Direct:
There are two competing companies in the E-sports gaming industry, AsiaSoft and Steam. Both are of comparable size, have integrated development and publishing arms, and have published multiple games in the PC gaming market which have been commercially successful.

Indirect Competitors:
The largest and most well-known of these is Electronic Arts (EA), which has its hands in every pot – it broadly targets every genre. EA also sells games developed by its subsidiaries such as Bioware. EA is not a direct competitor as it targets the generic market, but that could change depending on Garena strategic direction.

Bargaining power of customers:
In Garena+, a virtual currency called SHELLS; where users are given the option to purchase in game items for a small payment. These items usually provide only cosmetic changes or minor ease-of-play improvements, and are peripheral to the core product. In the case of an integrated developer-publisher, they have low bargaining power since they usually do not have sufficient purchasing capacity to influence the prices of products. Competing pressures and high threat of substitute products are instead the main limiting factors.
Internal Environment Analysis

1) Garena network of servers is valuable because it is necessary in order to connect gamers worldwide, which is part of the core experience offered. Garena+ is served as an online platform for gamers to interact with each other in games, while Garena stadium is officially launched in November 2012 to provide best gaming experience in Asia.
“Garena Stadium is a brand new venture for us – we have chosen to launch our very first one in Singapore to be the platform for professional e-Sports players to showcase their skills and compete with some of the best in the world,” said Forrest Li, Chief Executive Officer of Garena. “As one of the leading online game service providers in Southeast Asia and Taiwan, we see Garena Stadium along with the numerous tournaments we organize spurring further development of the vibrant and fast-growing e-Sports scene.” (Chad, 2012)

2) Garena is heavily dependent on the skills of its Human Capital, which are arguably their most valuable assets. The success of games largely depends on the creative force of the people behind it (thus rendering it non-substitutable), the firm’s strong brand equity that helps it to recruit and nurture top talent will be very costly to imitate.

3) Garena is one of the Leading online game service providers in Singapore, and ranked No 15 on the Deloitte Technology Fast 500™ Asia Pacific 2012. Over the past 3 years, the company’s revenue growth hit 2,019% that leads to the top on the list of Singapore companies on the Deloitte Technology Fast 500 Asia Pacific 2012. (SMEMagazine, 2012)

4) This concentration of high tech firms spurs competition, helping push tech-based products and their supporting technologies forward. Unfortunately, this also means that product life cycle for products such as PC games are becoming shorter, as user expectations increase.

5) The award-winning game, League of Legends is also introduced in Garena+ which also officially became the most-played PC Game in the world (Gaudiosi, 2013) and it won many awards over the years such as Best Free-To-Play Game (Liebl, 2011)and etc.

6) Lastly, Garena has a large dedicated Fan Base which is valuable as it guarantees a minimum demand for their releases. However, there are many popular franchises with large fan bases. Moreover, games are not mutually exclusive and players usually play 2 or more games. (Marie Loh)

SWOT ANALYSIS FOR GARENA

Recommendation:

Maintain successful business level strategy
We recommend that Garena move towards a broader and more differentiated business level strategy through the support and development of game modifications (mods). (Peel, 2012)
Garena should announce official support for modding of its games, in the form of sponsoring modding competitions and hosting online forums to support player communities for these mods. By doing so, Garena will be able to earn licensing fees should these mods become popular and used in E-Sports competitions. Garena could also monetize mods by developing them in-house and charging users a small fee to purchase and use (akin to downloadable content available for many games), thus mitigating the issue of irregular cash flows.

Garena could also draw upon this community of modders from which to hire game developers, given that they already have a passion for developing games. This would serve to strengthen Garena’s core competency of human capital. Hiring employees from their target market could also serve as a form of crowd-sourcing, which might allow it to gain a core competency in game design, as it will not be possible to substitute player input/feedback when publishing a game.

Conclusion:

Given the competencies, effective current strategies, and favourable environment, I have great confidence that Garena will succeed in its next lap of game development. With the proposed recommendation, Garena will be able to enhance its competitive edge, break new grounds and better harness the revenue potential of its products.

References:

Chad. (5 November, 2012). Retrieved 5 December , 2013, from http://reimarufiles.com/: http://reimarufiles.com/2012/11/05/garena-stadium-debuts-singapore/
Garena Singapore. (n.d.). Retrieved 8 December , 2013, from Garena Founding Team: http://about.garena.com/index.php
Gaudiosi, J. (7 November, 2013). Forbes. Retrieved 10 December, 2013, from Riot Games ' League of Legend Officially Becomes Most Played PC Game In The World: http://www.forbes.com/sites/johngaudiosi/2012/07/11/riot-games-league-of-legends-officially-becomes-most-played-pc-game-in-the-world/
Jayaraman Archana, N. D. (23 November, 2011). Gaming in Singapore. Retrieved 05 December, 2013, from National University In Singapore: http://wiki.nus.edu.sg/pages/viewpage.action?pageId=86529849
Kim, W. W. (November, 2013). Monthly Digest of Statistics Singapore. Retrieved 5 Decemeber, 2013, from http://www.singstat.gov.sg/publications/publications_and_papers/reference/monthly_digest/mdsnov13.pdf
Lau, R. (21 September, 2011). YahooNews. Retrieved 10 December , 2013, from In Singapore, gaming is becoming serious business: http://sg.news.yahoo.com/in-singapore--gaming-is-becoming-serious-business.html
Liebl, M. (21 October, 2011). GameZone. Retrieved 10 Decemeber, 2013, from League of Legends Wins 2011 Golden Joystick Award for Best Free-to-Play Game: http://www.gamezone.com/news/2011/10/21/league-of-legends-wins-2011-golden-joystick-award-for-best-free-to-play-game
Marie Loh, S. M. (n.d.). Garena. Retrieved 10 December, 2013, from Garena Attains One Million Concurrent Users: http://about.garena.com/details.php?press_id=7
Ming, M. S. (31 May, 2011). singaporerebel.blogspot.sg. Retrieved 12 December, 2013, from Straits Times celebrates 50 years of PAP rule: http://singaporerebel.blogspot.sg/2009/05/straits-times-celebrates-50-years-of.html
Peel, J. (23 August , 2012). Modding. Retrieved 10 December, 2013, from PCGames: http://www.pcgamesn.com/modding-demonstrates-pc-about-creating-things-whereas-other-gaming-platforms-are-solely-about-consuming-says-bohemia-head
SMEMagazine. (07 December, 2012). SME & Entrepreneurship Magazine. Retrieved 5 December, 2013, from http://www.smemagazine.asia/index.php/top-news/singapore/1402-sme-magazine

References: Chad. (5 November, 2012). Retrieved 5 December , 2013, from http://reimarufiles.com/: http://reimarufiles.com/2012/11/05/garena-stadium-debuts-singapore/ Garena Singapore Kim, W. W. (November, 2013). Monthly Digest of Statistics Singapore. Retrieved 5 Decemeber, 2013, from http://www.singstat.gov.sg/publications/publications_and_papers/reference/monthly_digest/mdsnov13.pdf Lau, R Ming, M. S. (31 May, 2011). singaporerebel.blogspot.sg. Retrieved 12 December, 2013, from Straits Times celebrates 50 years of PAP rule: http://singaporerebel.blogspot.sg/2009/05/straits-times-celebrates-50-years-of.html Peel, J SMEMagazine. (07 December, 2012). SME & Entrepreneurship Magazine. Retrieved 5 December, 2013, from http://www.smemagazine.asia/index.php/top-news/singapore/1402-sme-magazine