TO: Professor Lasaga
FROM: Group 12
DATE: 01/18/13
SUBJECT: Week 5 Group Memorandum

GameStop (NYSE: GME), is the world’s largest multichannel retailer of video games. GameStop's retail network and family of brands include 6,650 company-operated stores in 15 countries worldwide and online at www.GameStop.com. (GameStop, 2011) The key to GameStop’s success lies in its ability to differentiate its products and services from its competitors. GameStop has been so successful at differentiating its products and services that it has become a trend-setter in the video game retail industry, resulting in other industry giants emulating its business strategies.
One of the key components of differentiation that garners the company a competitive advantage in the marketplace is GameStop’s buy, sell, and trade program. Through the program, the company sells used games that are purchased from customers at a discount in exchange for store credit or currency. The program creates value for customers by offering them a low-cost alternative to purchasing new games while GameStop receives a substantial profit from reselling used copies of games at a higher price than they were purchased from customers, thereby cutting purchase and transportation costs involved in acquiring inventory from publishers and developers. This service differentiation gives GameStop a competitive advantage in the video game retail industry by allowing it to receive higher profits than its competitors who traditionally purchase inventory at higher costs directly from publishers. Additionally, the program increases sales to customers because GameStop is the only retailer that allows customers to trade-in their video games for discounts on new games. GameStop is the pioneer of this program and its success hasn’t gone unnoticed as Best Buy has initiated a similar program in its stores as of 2012.
Another strategy that differentiates GameStop’s service from its competitors is the in-game bonuses provided when pre-ordering games. GameStop has increased its pre-order volume by negotiating with game publishers to include exclusive in-game bonuses which are available only if the customer pre-orders the game from Game Stop. Bonuses typically include Down Loadable Content (DLC) codes that unlock extras such as exclusive characters, weapons and maps. For example, GameStop included an additional avatar costume for “Call of Duty: Black Ops” when it was released in 2010, and an additional multi-player map when “Call of Duty: Black Ops 2” was released. The success of the program has caused Best Buy to adopt it as well. However, neither company has the same in-game bonus provided when a customer pre-orders a game. Therefore, GameStop still maintains its product differentiation which gives it a competitive advantage over other companies.
The third key differentiation of GameStop’s service is its knowledgeable employees. GameStop's check out policy allows employees to check out one item of store merchandise for personal use for up to four days. The purpose of the program is to allow the employee to evaluate the game and learn about its content so that employees can properly assist customers in making their selections. This check out policy applies to both new and used games. The program creates a knowledgeable employee base which differentiates GameStop from competitors such as Best Buy, whose employees do not have the same ability in assisting customers in choosing the proper product. In sum, GameStop’s product differentiating strategies are what give it a competitive advantage, secures its position as a dominant market leader in the video game retail industry, and rank it 273 on the Fortune 500.

References: “About Us.” GameStop Texas Ltd., 2011. Web. Retrieved 16 January 2013. from www.gamestop.com.