Electronic Arts and the Global Video Game Industry
Gaming has become an important part of growing up for people who were born in the last 25 years. Approximately 3.9 - 4.7% of total world population (250 to 300 million people) is ¡§very active¡¨ or a ¡§frequent¡¨ player of video games or at least owns the necessary equipment. This target group spends five or more hours a week playing video games. The United States is the largest video game market in the world with about 50% of the US population (145 Million people) spending 6.5 hours a week on computers and video games. The majority of video game players are preteens, teenagers, and young adults (between the age of 20 and 40). A full 70% of college students play video games at least
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This strategy will provide EA with talent to better integrate their games with popular action movies. Manufacturing Strategy: EA uses CD¡¦s and DVD¡¦s supplied by Sony and Nintendo as part of their manufacturing process. The company also engages three other entities to print the game instruction booklets, produce packaging materials and to press the CDs and DVDs. This outsourcing allows EA to lower their costs and to pass these lower costs onto customers. EA also reduces costs by maintaining low inventory levels. Distribution Strategy: EA established a field sales organization and a group of telephone sales representatives to market games directly to retailers. EA¡¦s games are distributed through 80,000 retail locations, like Wal-Mart, Toys-R-Us, Target, and Best Buy. EA currently uses rack jobbers and regional distributors in areas where direct sales are uneconomical. Sony and Wal-Mart are EA¡¦s largest customers with Sony distributing 60% of EA¡¦s PlayStation and PlayStation II games. Wal-Mart accounts for 12 percent of EA¡¦s total sales. These two suppliers have significant power of Electronic Arts. Procurement: Their strategy is to lower their own costs by using their high volume based leverage on other companies to press their CD¡¦s, print their booklets, and package their end game products for customers.