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Valve

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The video game industry can be considered as one of the cultural industries. By this, it is meant that a creative product is made once and then mass-distributed to the market. The creative elements perform the underlying function of giving entertainment, providing social display, and building identity. The mass distribution refers to using economies of scale for giving products to end consumers. It decreases the cost of distribution since the cost of producing one new game is far greater than simple copying into another disk (which is almost negligible). The cultural industries, in definition, include books, magazines, games, music etc. There are five factors which are characterized to cultural industries and, specifically, the video game industry. These are: first, the products are experience-based and the consumer wants innovation and novelty. Secondly, there are economies of scale involved. Thirdly, there is a huge variance in sales. Fourthly, there is no predictability in the extreme. This follows from the “Nobody knows principle” (Rights, 2012). It means that no one knows how your product is going to do unless you launch it into the market. Lastly, there is always an abundance of creative labor, and independence of economic cycles (Bernstein, 2015). 

Following questions are answered in this case study solution:

  1. What degree of environmental uncertainty is there in the videogame industry? Justify. 

  2. Applying contingency theory to the following questions:

    a. Discuss about the structural dimensions of the organization (Except personnel ratios). You need to mention if the company in the article has a high, medium or low degree for each structural dimension (except personnel ratios) of the organization and support your answer as to why you think so. 

    b. What type of strategy is Valve pursuing according to Milles and Snow’s framework? 

    c. What type of major structural design does Valve have? 

    d. Are all these characteristics in questions 2a,2b, and 2c adapted to the environment in Question 1? Provide evidence of this adaptation .

  3. In dealing with its ecosystem, can we say Valve is pursuing a Resource Dependence or a Collaborative Network Approach? Why? 

  4. If Valve decides to go into hardware, how will the organization need to be changed? 

  5. In article 2, Spicer (2018) describes some developments at Valve between 2013 and 2018.

    a. Analyze this evolution in terms of networks and power 

    b. How might this hurt the company culture and ethics in the long run?

Case Study Questions Answers

The videogame industry can be characterized as based on projects, a high degree of environmental uncertainty, and whether the product that is being made would be a success, and there are “winner gets all” tendencies in the industry. In the supply chain of the game industry, there are five processes: these are developing the game, publishing it, and manufacturing, distributing, and finally retailing it. In order to play the final game, it is important that one has the hardware of it which is the gaming console. The structure of the supply chain of the gaming industry is multi-faceted and highly complex. The market is basically two-sided and due to that one platform’s attractiveness is dependent on the number of suppliers available and vice versa. 

There is extreme ambiguity in the gaming industry and there is a high degree of environmental uncertainty involved. The performance of a video game is dependent on several factors which makes an environment of mutual dependency. The gaming studios like Valve develop the game, the publishers perform the vital tasks of marketing and the platform manufacturers provide the user with the device on which to play the game. This whole process of mutual dependency along with the product uncertainty yields critical business questions. One of these questions is to determine what makes a game successful. There are several factors which come into play like what is the studio, who is marketing it, and what are the antecedents that surround the game. Moreover, another question is whether there is any single antecedent which makes a game successful or there is a combination of those antecedents which comes into play. There is also the option of whether to choose a production based-strategy and make the game in-house OR a selection-based strategy and focus on working with game studios (Spicer, 2018). 

2. Applying contingency theory to the following questions:

a. Discuss about the structural dimensions of the organization (Except personnel ratios). You need to mention if the company in the article has a high, medium or low degree for each structural dimension (except personnel ratios) of the organization and support your answer as to why you think so. 

Not all organizations are similar. Problems have occurred in the past when they all were considered alike. The contingency theory means that things are dependent on each other. It means that the structural formation of an organization should be such that it meets the outside environment (Daft, 2008). There must be a goodness of fit between the two. For the structural dimensions; we have five of them to discuss (Daft, 2008). On the formalization structure, the organization has a low degree of formalization as from the article it is evident that Valve works in Cabals and does not have set job descriptions for its employees. The level of specialization in Valve is low, as that it means the degree to which an organization’s tasks are divided into sub-jobs. A low degree means that the employees perform a wide range of tasks in their jobs. It is sometimes referred to as the division of labor. For the third structural dimension, we look at the hierarchy of authority. This term describes the factor of who reports to which person and the level and span of control that each manager has. When the span of control is wide, the hierarchy of authority will be shorter (Bernstein, 2015). This is the case in Valve as the employees as the leadership and top management is not pre-defined rather, they are self-imposed and temporary. As the article suggests, there are de facto leads in the organization but they carry no certain formal authority. Valve believes that it is better if the de facto leads existed only for some time. The next factor is centralization. Valve has a very almost low to none degree of centralization and it can be said to be a decentralized organization because the decisions are not made by the top management but employees at every level are given the authority and free will to make decisions. According to the video (Video), the person that is being hired at Valve should be quite skillful in their tasks. They should be T-shaped – should know to do a lot of tasks and have specialization in a skill as well. So, the degree of professionalism and formal education is not a necessary to get hired at Valve but to be skillful in your tasks and have excellent self-management skills is what really matters. 

b. What type of strategy is Valve pursuing according to Milles and Snow’s framework? 

According to the Milles and Snow’s framework, there are fundamentally four strategies that an organization could be following. These are prospector, defender, analyzer, and reactor. Without going into much detail about what each strategy is; from a detailed and thorough look at the case study of Valve, it can be concluded that it is following the analyzer strategy. The analyzer strategy is a mix of both prospector and defender strategies (Daft, 2008). In this, an organization is constantly trying to innovate and create the next big thing while also defending their already made innovations and stay in the lead in that line of product. The same is the case with Valve. For example, it made steam in 2004 and stayed the market leader in that but it kept on innovating the steam platform and kept on making it available for use to other range of consumers as well. Also, it keeps on innovating and introduces new games while also updating and defending its already launched successful products. 

c. What type of major structural design does Valve have?

The two common approaches to the structural design are the functional grouping and the division grouping. After the analysis of Valve’s organization and work structure, it can be comfortably concluded that it follows the division group (Daft, 2008). Why is that? The answer is quite simple and straightforward. In Valve, the Cabals are used to perform work on specific projects. These Cabals are made of teams that the initiator of the project deems fit. This Cabal then moves on to complete the work together; hence, as per the division grouping definition - which is: the organizations of divisions on the basis of individual’s services, products, profit centres, projects, and programs, etc., – the Structural design of Valve falls into that category. This kind of structure is also called product or strategic business units. The divisional group is agile and flexible and can be changed according to the stimuli that its internal and external environment throws at the group. 

d. Are all these characteristics in questions 2a,2b, and 2c adapted to the environment in Question 1? Provide evidence of this adaptation 

Yes. All of the characteristics provided in the a, b, and c section of the question 2 are adapted and quite well-aligned to the environment of the cultural and gaming industry that is provided in the answer of question 01. The question specifically talks about how cultural industries, and especially the gaming industry, have a lot of uncertainty involved in the success of the products that are being sent to the market. The gaming industry comprises of factors that cannot be predicted as such. Following from that, the claims and the observations made in the above three parts actually convinces one that they are in fact as per the environment that has been discussed in the question one. 

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