Zynga
Creating the Next Big Hit -- Or Cashing Out ASAP
Describe the business situation, including the macro-environmental and micro-environmental conditions facing the organization.
Zynga has had a tremendous rate of growth that has been as marked by a considerable amount of instability in regards to its perceptions among its current and potential investors. For example, as soon as the company went public, Zynga's stock fell 5% below its $10 initial public offering price to close on the same day; despite the fact that many predicted that it was going to be the hottest IPO in the market (Baker & Barr, 2011). The stock further went through a near catastrophe when the stock fell nearly forty percent after posting the financial statements about its losses in 2012, many also pointing to its reliance on Facebook for its performance which had announced that it was beginning to distance itself from the online games platform (Gustin, 2012).
On the micro level, the company has struggled to innovate and create new sources of revenue streams. Games like Farmville, and other similar Facebook hits, have largely lost their appeal after their initial debut. In the macro environment, many tech companies have also had problems which has put the whole industry at risk in the eyes of investors. There is a lot of turbulence in the tech industry since so much of it is built on constant innovations. This is especially applicable to companies in the software industry in general, but the gaming industry more specifically. There are many sources of competition that can spring out of nowhere, including startups that can possibly compete with larger companies such as Zynga.
2. Develop the problem statement: the opportunity or threat facing the organization.
The company would have more privacy and more flexibility if it went private, which many have stated that the company should do (or have done already). However, if the company could create an innovative new game that could drive revenues like Farmville did for them before, then it would make sense for them to remain a public company.
3. What alternative strategies and programs would you consider to deal with the opportunity or threat to the organization? Present each alternative in sufficient detail to give the reader an idea of why it may be beneficial.
Strengths
Strong Brand Recognition
Leadership
Real Estate Holdings
Weaknesses
Industry Volatility
Weakened Partnerships (Facebook)
Lack of Innovation
Opportunities
Pursue New Channels (Mobile, PC)
Create a New Hit Game
Reinvent Social Platforms
Threats
Shrinking Consumer Base
Competition
Based on the SWOT analysis, Zynga has to use the resources that it still controls to find sources of innovation that can be translated into real streams of revenue. If the company remains public, it needs to expedite an aggressive approach towards innovation. This would represent the high risk-high reward strategy. If the company sells out to a private investor, the need to perform in the short-term would be significantly reduced and the company could have more time to focus on its strategy (to some extent). Many analysts have called the social gaming trend something of a fad that will likely fade away over time.
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