Company: Activision Blizzard, INC. (ATVI)
PESTLE

1. Political
Pg. 10 – Our products are sold internationally on a direct-to-retail basis, through third-party distribution and licensing arrangements, and through our wholly-owned European distribution subsidiaries. We conduct our international publishing activities through offices in the United Kingdom ("U.K."), Germany, France, Italy, Spain, Norway, the Netherlands, Sweden, Australia and Ireland.

• Activision Blizzard Inc. is an internationally traded company and most of its revenue is generated from foreign trade. Therefore it is subject to various foreign and domestic laws. Fluctuations in these laws such as increased tariffs, duties, transportation costs and instabilities in the currency exchange rates can adversely impact company’s operations in the foreign market.

2. Economic
Pg. 13 – Our products involve discretionary spending on the part of consumers. Consumers are generally more willing to make discretionary purchases, including purchases of products like ours, during periods in which favorable economic conditions prevail.

• Consumers purchasing trends have a direct relationship with economic condition. Therefore, current economic condition and global recession is likely to reduce consumer spending on the products which can have a negative impact on company’s operations and financial position.

3. Socio-cultural
Pg. 10 –We often seek to maximize our worldwide revenues and profits by releasing high-quality foreign language releases concurrently with English language releases and by continuing to expand the number of direct selling relationships we maintain with key retailers in major territories.

• The company is globally recognized and it maintains the brand name by putting its customers first. For foreign countries, ATVI modifies its products and services according to consumer preferences which is one of the key factors of the company’s success.

4. Technological
Pg. 5 – As such, in November 2011, Activision launched Call of Duty Elite, a digital service that provides both free and paid subscription-based content and features for the Call of Duty franchise. It combines social networking features and online programming, offering the most accessible way to connect and play Call of Duty games with other people.

• The interactive entertainment industry is highly competitive and is exposed to innovation and technology changes. Therefore in order to maintain its leader position in the industry ATVI anticipates & adapts its products to advancing technologies. Failure to adapt to emerging technologies would not only effect company’s profitability and revenue but will also harm its competitive position.

5. Legal
Pg. 6 – Like other entertainment companies, our business is significantly dependent on the creation, acquisition, exploitation and protection of intellectual property. Some of this intellectual property is in the form of software code, patented technology, and other technology and trade secrets that we use to develop our games and to make them run properly.

• Since the development of products is based on intellectual property, it is important to know that intellectual property such as patents, trademarks, trade secrets and copyrights are obtained through licenses and service agreements. Patents, copyrights and trade secrets prevent other companies from stealing, imitating and claiming ownership of the product. Whereas licenses and service agreements are limited in terms of time and scope, restricting the use of licensed rights for a certain time period. Therefore, in order for the company to continue its operations, it has to acquire new licenses and maintain the old ones.

6. Environmental
Ref. (1) – Activision Blizzard uses Amaray's Eco Lite DVD cases for Xbox 360, Wii, DS and PS2 games. Activision Blizzard also uses "soy-based inks" for printing, and all publisher peripherals are tested for toxic substances and materials to make sure they comply with laws.

• The company is mindful of environmental issues and is promoting environmental awareness by using the products that are environmentally friendly such as eco lite cases and soy based inks.

Porter’s Five Forces
7. Current Competitors/Intensity of Rivalry
Pg. 6 – We compete primarily with other publishers of PC, online and video game console interactive entertainment software. In addition to third-party software competitors, integrated video game console hardware and software companies, such as Sony, Nintendo and Microsoft, compete directly with us in the development of software titles for their respective platforms.

• ATVI operates in a highly competitive industry. Apart from Sony, Nintendo and Microsoft, its other big rivals include companies like Electronic Arts, Take Two Interactive Software, Konami and THQ.

8. Threat of new entrants
Pg. 6 – Further, a number of software publishers have developed and commercialized, or are currently developing, online games for use by consumers over the Internet, and we expect new competitors to continue to emerge in the subscription-based MMORPG category.
• The online gaming industry is rapidly pacing due to the increased demand for technology, free games and other leisure products. Therefore these new trends have lowered the entry barriers and created opportunities for new comers.
9. Power of Suppliers Pg. 6- Our products that play on game consoles and handheld platforms include technology that is owned by the console or wireless device manufacturer, and licensed non-exclusively to us for use. We also license technology from providers other than console manufacturers. While we may have renewal rights for some licenses, our business and the justification for the development of many of our products is dependent on our ability to continue to obtain the intellectual property rights from the owners of these rights on reasonable terms and at reasonable rates.
• Activision Blizzard Inc. relies on third party hardware manufactures and intellectual properties for creation of their products. Therefore the increased reliance, gives third party hardware manufacturers and suppliers the power and opportunity to set fixed fees or royalty for providing their products and services. 10. Power of Buyers
Pg. 25 – In the U.S. and Canada, Activision has primarily sold its boxed products on a direct basis to mass-market retailers, consumer electronics stores, discount warehouses, and game specialty stores. Activision boxed products are sold internationally on a direct-to-retail basis, through third-party distribution and licensing arrangements and through our wholly-owned European distribution subsidiaries. Activision's sales are made primarily on a purchase order basis without long-term agreements or other forms of commitments.
• Not forming long term contracts and agreements with the retailers reduces the company’s strength while giving more bargaining power to the buyers. Since buyers are not bound by long term contracts they can tend to discontinue business with the company and switch to other publishers if their requirements are not met or if they get better deals.

11. Threat of substitutes
Pg. 5– We compete for the leisure time and discretionary spending of consumers with other video game companies, as well as with other providers of different forms of entertainment, such as motion pictures, television, social networking, online casual entertainment and music.

• Video game industry has a great threat from various forms entertainment and leisure activities. The rapid growth in the use on internet can draw customer’s interest from playing paid-for video games to free music, videos and social networking. Also threat from substitutes is affected by seasonality, where individual tend to spend more time outdoors in warmer weather rather than playing video games indoor.

SWOT
12. Strengths
Pg. 3 – Activision Blizzard is a worldwide publisher of online, personal computer ("PC"), console, handheld, and mobile interactive entertainment products. Through Activision Publishing, Inc. ("Activision"), we are a leading international publisher of interactive software products and content, with a focus on developing and publishing video games on various consoles, handheld platforms and the PC platform through internally developed franchises and license agreements.
• Being a worldwide publisher ATVI has a strong leading position in the industry. The company has built strong competitive advantage through its franchises, multiple platforms and extremely successful intellectual property.

13. Weaknesses
Pg. 14 – A significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises and these products are responsible for a disproportionately high percentage of our profits.
• Since the company is dependent on small number of franchises for generating profits and revenue this can negatively affect the company in a long run when the consumer preferences change or competitors launch better products. Therefore company should develop more titles and franchises in order to avoid risk and uncertainties.

14. Opportunities
Pg. 5 – We continue to shift towards digital delivery of content and to establish and develop direct and long-term relationships with our gamers. We will also continue to support, maintain and enhance the World of Warcraft and Call of Duty online communities.
• With the changing trends of the gaming industry, ATVI tends to avail the opportunity and continue to adapt its products and services with respect to consumer demand and innovation. ATVI not only tends to advance towards digital delivery content but also evolve its products in fast pace online market.

15. Threats
Pg. 7 – We are actively engaged in enforcement and other activities to protect against unauthorized copying and piracy, including monitoring online channels for distribution of pirated copies, and participating in various enforcement initiatives, education programs and legislative activity around the world.
• ATVI faces huge threat in means of increased piracy. Piracy effects the company’s growth rate and revenue. If consumers start buying pirated copies the company will not generate enough revenue to cover its cost associated with production.

Competitive Strategy
Pg. 5 – Our objective is to continue to be a worldwide leader in the development, publishing, and distribution of quality interactive entertainment software, online content and services that deliver a highly satisfying entertainment experience. […] We continue to shift towards digital delivery of content and to establish and develop direct and long-term relationships with our gamers. We will also continue to support, maintain and enhance the World of Warcraft and Call of Duty online communities. We believe that focusing our efforts on online product innovations, such as additional online content, services and social connectivity provides lasting value enhancement to our global communities of players.

Pg.7– Create, Acquire and Maintain Strong Franchises. Activision focuses on development and publishing activities, principally for products and content that are, or have the potential to become, franchises with sustainable mass consumer appeal and recognition.
• ATVI focuses on implementing differentiation strategy. Its product improvement and expansion in technology gives company the competitive advantage in the industry. ATVI thrives to maintain its leader position in the industry by focusing on delivering digital content to meet its consumer preference and provide them with satisfying experience.
• ATVI currently has three key franchises Call of Duty, World of Warcraft and Skylanders. These three franchises generate approximately 73% of the company’s net revenues. In order to prosper as a worldwide leader ATVI’s goal is to develop and maintain new franchises.

Contrast Company View of Itself with a Recent Business Article
Diablo® III Sets PC-Game Launch Record “I want to reaffirm our commitment to make sure the millions of Diablo III players out there have a great experience with the game moving forward, and I also want to thank them for their ongoing support” said Mike Morhaime, CEO and cofounder of Blizzard Entertainment

Digital availability via http://www.diablo3.com for the Russian version of the game will also begin June 7. In addition to the English version, Diablo III is fully localized into Latin American Spanish, Brazilian Portuguese, French, German, European Spanish, Italian, Polish, Russian, Korean, and traditional Chinese.

Analysis / Insights –
On May 23 2012, Blizzard entertainment Inc. released Diablo III, another major hit setting an all-time record in the industry. During first week of the release more than 6.3 million copies of the game had been sold. This figure does not take account of 1.2 million customers who received a free copy of Diablo III upon signing up for ATVI’s game named World of Warcraft.
These initial sale records not only indicate the consumer loyalty and confidence in the brand but also proves that ATVI is committed to provide its customers with great entertainment experience and has always lived up it costumer’s expectation. In existing tough economy such an extraordinary sale records depict that ATVI is focused on implementing its strategy of providing value to its customers. Distribution of free copies to existing customers also prove the extra measures, the company takes to strengthen its terms with the customers. Therefore by providing value, the company has formed long lasting relation with its customers and this relation will flourish even more when the economy recovers.
With the recent launch of a new franchise, ATVI continues to maintain its strategy of acquiring new franchises and sustaining its leader position in the industry by providing the world’s largest PC and online gaming service. The article also indicates the company’s dedication towards its foreign customers. In order to compete in international market the company is intended to launch the customized version of the new game in near future. Since ATVI is focused on product differentiation and customer satisfaction, therefore keeping it consumer preferences in concentration the company tailors its game in different foreign languages depending on the geographies in which the company conducts its business.
Activision Blizzard Inc.’s statements and strategies discussed in10-k fall in alliance with that of the article. The company’s motive is to provide its customers with extraordinary entertainment experience by creating and maintaining new franchises. The article, “Diablo III Sets PC Game Launch Record”, itself is a clear indication of how the company is focused on sustaining its leader position by implementing its strategies.

References
Reference (1): http://www.eurogamer.net/articles/how-green-is-the-games-industry
Article Link:
http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-201205230900BIZWIRE_USPRX____BW55311¶ms=timestamp||05/23/2012%209:00%20AM%20ET||headline||Diablo%C2%AE%20III%20Sets%20PCGame%20Launch%20Record||docSource||Business%20Wire||provider||ACQUIREMEDIA||realtedsyms||%7CUS%3BATVI&ticker=ATVI:US