PART 3: PERFORMANCE ANALYSIS (Entertainment and Gaming Software)


Four companies that we will look into are Ubisoft, Activision/Blizzard, EA, and Square Enix, which are in the top ten highest grossing gaming developers that focus mainly on game development. The top markets for developing video games is China, Japan, and the U.S. The competitive landscape is movies, shows, music, internet, and non-electronic leisure activities. The purpose of the performance analysis is to assess the extent to which the industry is profitable and the distribution of profitability among competitors. You have to specifically answer to these questions: • How profitable is my industry? Is it highly profitable or not?

• Which are the most profitable and least profitable companies? • Which companies are profitable, socially responsible and environmentally conscientious? To assess if the industry is profitable:

• Identify generic performance indicators (profits, sales, ROE, ROA, stock prices, etc…). • Analyze the evolution over time of performance indicators (is performance growing or decreasing?) • Benchmark the performance indicators of your industry with the performance indicators of similar industries (for instance compare the profitability of the US airline industry with the profitability in the European Airline Industry; compare the profitability of the beer industry with the profitability of the wine or liqueur industry). To assess how profitability is distributed among the main competitors: • Identify generic performance indicators (profits, sales, ROE, ROA, stock prices, etc…). • Compare the performance indicators of main competitors to identify which companies are best. N.B. = profitability ratios are the best performance indicators but if your competitors are diversified companies which operate in multiple businesses you may not be capable of getting profitability ratios. For instance, if you focus on the Videogame Console industry you will not be capable of getting the profit of X-Box but only the profit of Microsoft and you will not get the profit of the PlayStation but only the profit of Sony. In these cases, use multiple performance indicators to derive an appreciation of performance. Even if you will not get profits you can get sales. You can use reflective indicators of performance, such as innovation, growth in size, growth in operations, growth in investments, stock fluctuations after major product innovations, etc… You can use industry reports, company reports, newspaper articles which provide performance assessments even if the companies do not formally disclose profitability information. Remember to provide your evaluation of the profitability of the industry. Do not simply describe numbers but explicitly judge if the industry is highly profitable, moderately profitable, or not profitable. I want to see your capacity to judge and not just to describe.

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