Analysis of the Gaming Business Environment
The gaming industry has become a lucrative business given the dynamic technological environment that has seen many new gaming devices being developed for gaming experiences. The introduction of the Wii games have changed the way games are being played as they provide the user with a more virtual and realistic experience when playing.
The use of body movements and sensory technology has made gaming experiences to be more enjoyable as more children, young people and adults look for games that will provide them with a more virtual and realistic experience (Lainema 2004). The gaming business environment around the world is one that is characterised as being very competitive especially with the ever changing technological environment that has seen more virtual video games being produced by many gaming companies (Eastin et al 2009).
Some of the main players or companies involved in the gaming business environment around the world include Zynga which has designed games like FarmVille, Mafia Wars and Cafe World, CrowdStar which is known for producing games such as Happy Island and Aquarium, Sony Computer Entertainment which has designed Play Station 1, 2 and 3 video games ,Capcom which is the main designer of Resident Evil video games and Nintendo gaming company which is responsible for the development and design of Nintendo games (Dalal 2010).
All these companies have focused their business strategies and objectives on the development of games that are based on the player’s needs, usage patterns and player behaviours. These companies have developed strategies that have ensured that they remain competitive in the changing competitive environment that continues to create newer and better gaming technologies that are meant to provide the user with a more realistic experience (Schulz 2001).
The gaming environment is therefore very competitive around the world but with particular focus on the UK, the industry has faced a somewhat downward spiral in the recent past.
According to a report released by the trading body in the United Kingdom, TIGA, the UK gaming sector has experienced a decline of 9% from 2008 with the tax revenues generated from the industry declining by over £55 million in a period of two years. This might present a challenge to any company wishing to join the industry because of the poor sales that are being experienced by some companies in the sector some of which include Bizarre and Wavertree (Houghton 2011).
The gaming lounge business industry is one that is relatively new as many people still prefer to play their games either online or in the comfort of their homes. The gaming lounges that are currently in existence today are mostly online where players are able to play games while at the same time socialising with their colleagues or purchasing online products in the game lounge (Chaney et al 2004).
Social networking sites such as Facebook have incorporated virtual games in their websites that enable users to play online games while they connect with their friends. An example of an online gaming lounge is GSN (Game Sow Network) which offers its users an opportunity to play various games such as word puzzles, card and board games either online or through TV pay channels such as DirecTV (Hruschak 2010).
Another online gaming lounge is Apocalypse which also offers online games in the form of virtual gaming experiences and board games (Hopper 2002).
Challenges in Implementing Business Plan
The gaming lounge industry is one that is relatively new and it faces a myriad of challenges where many gaming companies prefer to sell their products to video arcades and toy stores that offer gaming services to their clients. These companies such as Sony Entertainment also prefer to sell their products in online stores where customers can be able to purchase and play PS3 in the comfort of their homes without having to visit any gaming store (Maw et al 2005).
This presents a challenge to any business person that is interested in investing in a physical gaming lounge given that the business world and the gaming world in particular has become more technologically oriented. More people are turning to the Internet for their business or personal activities which means that many businesses operating in the real world are facing obsoletion because of emerging technological innovations (Kim et al 2002).
With regards to the gaming lounge, the idea is only viable if there is an emerging market of consumers that prefer to play games in a physical atmosphere rather than online. But in the technological world, the business venture might prove to non-viable as more and more companies are changing their business operations to be more Internet-based (Fattah and Paul 2002).
The Internet and the technological environment therefore presents a major challenge to the viability of the business venture as many people prefer to play video games such as PS3 and Wii games in the comfort of their homes. The gaming lounge will therefore face some stiff competition from online gaming lounges as well as from video arcades and toy stores (Peters 2004).
Another challenge that will affect the gaming lounge is the target market which according to Appendix 1 will mostly target young adults such as teenagers and children in Norwich who are mostly in school during the weekdays. This might affect the profit and income generating activities of the venture especially if the business is going to primarily concern itself with offering gaming services.
This will mean that the gaming lounge will be dependent on weekend sales and school holidays for its income and revenues as most kids are home during that time (Wetherly 2010). The idea then becomes non-viable especially of the business partners are focused on making a profit within the first five years of operation.
While the business idea itself is strong, the plan becomes weak especially when the operations of the business are focused only on providing gaming experiences to young people. The challenge therefore becomes to look for another target market that will focused on to provide weekday sales and revenues for the business (Ferrazzi et al 2003).
Evaluation of the Financial Plan
Appendix 3 displays the financial plan for the business where the visitor numbers projected for the business have been displayed in the financial forecast. The financial plan has projected that the business will be able to have visitor numbers amounting to 13,000 within the first year of operation. These visitor numbers are mostly composed of young people who as discussed earlier are more than likely to be in school during the weekdays.
While the 640 visitor number projected for January in the financial forecast might seem to be viable, the number might vary during the first day operations of the business depending on what marketing technique the business has used. Social networking sites such as Facebook and Twitter might prove to be an important tool in increasing the numbers of visitors to the gaming lounge (Westwood 2004).
Appendix 2 has identified the various costs that will be incurred from purchasing gaming equipment where the total amount for purchasing the Wii consoles and controllers, the PS3 consoles and games and the cables, Tvs and Tv projectors for the games is £3,050 of the total £ 7,400 that is needed to start up the business. These costs reflect the market prices of gaming consoles in the technological world as well as other technological requirements needed by the business.
To meet the costs of these expenses, the business plan proposes to charge £3.00 per hour and £5.00 for every 3-4 people in one hour. While these prices might offset the start-up costs, they are not enough to provide the business with a profit within the first three years of its operations.
Competitive pricing is only important in cases where many businesses in a particular area offer the same service which is not the case in this business venture. While the low prices might attract school children and teenagers, they are not enough to provide the business with a profit during its first few years of operation (Squire and Jenkins 2003).
The operational risks that will arise during the start up of the business will involve machine breakdowns where the Wii and PS3 game consoles might breakdown through improper use. Another risk will arise when the supplier’s of the business fail to deliver the food and drinks needed in the gaming lounge.
The strategic risks that will arise during the course of running the business will be potential competition from arcades and toy stores that have now started offering virtual and realistic games. The financial risks that will arise in the business will include increasing rent, water and electrical bills as well as increasing game console prices (David et al 2010).
The purpose of this essay has been to critically evaluate the business plan that has been developed for a gaming lounge known as LMNE which will be located in the Norwich area of the United Kingdom.
A business plan is an important aspect in the planning process as it is designed to persuade investors and other stakeholders to the idea to support the business venture (Timmons et al 2004). Business plans provide a framework that will be used by the owners of the venture to outline the specific business goals and objectives that need to be achieved for the business to be successful. (McKeever 2008: Stone and Desmond, 2007).
The evaluation of the business plan has shown that while the plan itself is strong, there are various weak points which need to be addressed in the competitive environment of the business venture. The evaluation has highlighted the fact that the Internet has played a major role in the gaming lounge business where many gaming companies are able to offer online services without having to physically provide game arcades and lounges to their clientele.
A recommendation for the business will therefore be to tap into the online market as it seeks to establish itself in the Norwich gaming market. The business partners should look into ways of designing and developing an online gaming lounge that will be able to appeal to the adult demographic thereby increasing the number of customers the business receives per year. This will ensure that it has expanded its market segment while at the same time diversifying its operations to include online gaming sites.
Chaney, I. M., Lin, K. H., and Chaney, J., (2004) The effect of billboards within the gaming environment. Journal of Interactive advertising, Vol.15, No.1
Dalal, S., (2010) Creativity and innovation in business. New Delhi, India: Creativity Innovation eBook
David, M., Lowell, W., and Jonathan, D., (2010) To start or not to start. Journal of Business Venturing, No. 2, pp 192-202.
Eastin, M. S., Griffiths, R., and Lerch, J., (2009) Beyond shooter games: how game environment, game type and competitor influence presence, arousal and aggression. Web.
Fattah, E., and Paul, P., (2002) Gaming gets serious. American Demographics, Vol. 24, No. 5, pp 38-44
Ferrazzi, K., Chen, J., and Li, Z., (2003) Playing games with customers. Harvard Business Review, Vol. 81, No.4, p 21
Hopper, J., (2002) The online games people play. Brandweek, Vol.43, No.1, p 16
Houghton, A., (2011) Liverpool MP Luciana Berger backs video games campaign. Web.
Hruschak, P. J., (2010) GSN game lounge free preview weekend on DirecTV. Web.
Kim, K., Park, J. Y., Kim, D. Y., and Chun, H. C., (2002) E-lifestyle and motives to use online games. Irish Marketing Review, Vol.15, No.2, pp 71-77
Lainema, T., (2004) Redesigning the traditional business gaming process: aiming to capture business process authenticity. Journal of Information Technology Education. Vol.3, pp 35-52.
Maw, D. F., Poh, K. W., and Andy, O., (2005) Do others think you have a viable business idea? Team diversity and judges’ evaluation of ideas in a business plan competition. Journal of Business Venturing, Vol.20, No.3, pp 385-402.
McKeever, M. P., (2008) How to write a business plan. New York: Nolo Publishers.
Peters, M., (2005) Supporting coursework in an online gaming environment. IEEE, No. 30, pp 287-288
Schulz, E., (2001) The marketing game: how the world’s best companies play to win. New Jersey: Adams Media
Stone, M. A., and Desmond, J., (2007) Fundamentals of markets: a critical evaluation. New York: Routledge.
Squire, K., and Jenkins, H., (2003) Harnessing the power of games in education. Vision, Vol. 3, pp 1- 33
Timmons, J. A., Zacharakis, A., and Spinelli, S., (2004) Business plans that work: a guide for small business. New York: McGraw Hill.
Westwood, J., (2004) The marketing plan: a step-by-step guide. London: Kogan Page.
Wetherly, P., (2010) The social and cultural environment. Web.