Case Synopsis Zynga
Zynga, located in San Francisco, California, had become a dominant player in the online gaming field, almost entirely through the use of social media platforms. The company name was established by the founder and original CEO, Mark Pincus, to pay tribute to his late beloved pet bulldog, named Zinga. Although this seems whimsical, Zynga had quickly become a powerful company. To exemplify Zynga’s prominence, Facebook was reported to have earned roughly 12 percent of its 2011 revenue from the operations of Zynga’s virtual merchandise sales. Based on this success, Zynga had gone public in December of 2011.
Zynga had been a dominant force but had lost market share in recent years due to the absence of a new and innovative product pipeline. Lack of new product-driven growth had led to uneven revenues, with significant losses – over $108 million in 2016. Even though Zynga had released some new mobile games, which accounted for 73 percent of the company’s revenue in 2015, this was not enough to reverse declines from the existing product lineup.
Zynga’s long-term viability may be at risk because of questionable decision making. Many of Zynga’s competitors, and even some partners, had been displeased with the company’s actions and had shown it in the form of litigation. Agincourt, a plaintiff of a lawsuit brought against Zynga, was quoted as saying, “Zynga’s remarkable growth has not been driven by its own ingenuity. Rather it has been widely reported that Zynga’s business model is to copy creative ideas and game designs from other game developers and then use its market power to bulldoze the games’ originators.” Zynga had been accused of copyright infringement, breach of written contract, and, internally, had a reputation for a risk-averse company culture that failed to reward innovation and creativity. Regarding its users, complaint resolution consisted of email-only support, and there was concern that customer information was not being properly protected against unauthorized access.
To make matters worse, Zynga had had four CEO changes since 2013, with the most recent one, Frank Gibeau from Electronic Arts, installed in March of 2016, now expected to turn the company around. Although Zynga had once been a dominant force on Facebook, by 2016 it had failed to surface in the top 5 virtual-gaming rankings, with users increasingly choosing to play King Company’s Candy Crush Saga and others.
As Zynga looks to the future, where will its next big hit come from? With all the criticism aimed at Zynga’s past behavior, will the company continue on the path it has become notorious for and
reap further accusations of imitating its competitors’ games and putting customers potentially at risk? Or will Zynga change its approach, gain a reputation for intellectual integrity and begin creating true one-of-a-kind games—showing its capabilities as a leader in the industry rather than a follower?
1. What internal resources and assets does Zynga have that may give it a competitive advantage?
2. What issues did Zynga face in formulating its initial strategy decision?
3. What challenges did Zynga face as it implemented strategy decison?
4. What decision does leadership have to make now in order to attain and sustain a competitive advantage?
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