Question

Identify which strategy the firm pursues under porter's generic (competitive) strategies (cost leadership, differentiation, cost focus, or differentiation focus) Explain with sufficient support, why you believe that strategy is being employed.

FIRM: Zynga, Inc.

Answer 1

Zynga is a pioneer of social games that makes the games free to play. The revenue is generated through the in-built virtual goods, mobile game download fees and advertising services for others.

Using Porter’s fiver force analysis, the competitive rivalry within the industry is intensive as the gaming developers focus their target market to people who spend lot of time in gaming and are discretionary spenders. Zynga competes with mobile gaming developers, PC gaming developers and other forms of gaming or entertainment that keeps attracting the people.

These competitive forces can be handled by using the differentiation strategy such as:

• Free-games- Zynga well understands the psychology of people by attracting them with the power of free games. People are always hesitant to buy any service due to the risk of potential loss of the value for the money. However, this risk has been minimized by Zynga by removing the price to play the games. Once people start trying the games, they are involved so much that they purchase items in-game that enhances the performance of the game.
• Cross-promotional strategies- Zynga have a huge customer base in millions. This humungous customer base is best utilized by cross-promoting its games. When Zynga is about to launch a new game, it runs the title or the banner ads in the previous games while the player is playing. This differentiation strategy creates an interest or curiosity in the players to try the new game.
• Time vs Money- Another aspect of human psychology that Zynga utilizes for its business is time vs money. In the game Farmville, the player can skip the time that would be spent earning the item and finally paying for the item which is used instantaneously.
• Zynga community- Zynga creates message boards that allow the players to discuss, share tutorials, and converse on the different aspects of the game. This creates a strong community for Zynga players which creates a sense of belonging to the firm and hence they do not switch over to other brands.
• ‘Friend Tax’ – In order to progress further in the game, Zynga requires the player to send invitations to their friends to play their games. This strategy of referral would definitely increase the customer base and combat the competition in the industry.