Will a game shop in the UK be successful?

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Year 11        GCSE Business Coursework        Adam DingYa

Will a game shop in the UK be successful?

Business Plan:

Aims and Objectives:

  • The survival of the business in the harsh competitive world.
  • To make enough profit to keep the business going and to expand worldwide.
  • The satisfaction of the customers.

Organisation:

  • My self as the owner.
  • 2 staff looking after the shop.

Research:

Customer needs:

  • A small store to buy home entertainment goods.
  • Games for different platforms such as PS2, GameCube, Gameboy Advance, Xbox and PC.
  • Different types of games such as RPG, Action, Adventure, Sport and Strategy.

Competition:

  • Weak competition in Oxford Street.
  • Main competitor is another game shop called GAME

Cost:

  • Labour = £1,000± /month/person
  • Power = £600± /month
  • Rent = £20,000± /month
  • Raw material = £3,000± /month
  • Equipments = £3,000± /month
  • Transport = £200±/month
  • Interest = £200±/month
  • Security = £500±/month
  • Loan repayment = £1,200±/month
  • Others = £100±/month

Cash flow forecast:

It is a bank’s decision whether to lend out loans or not. This often is based on the borrower’s cash flow plan, so if I had a very thorough cash flow plan on how I will spend the money, it would increase my chances of getting a loan.

The advantage of a cash flow forecast is it can tell a company how well it will perform in the future therefore if there will be problem in cash flow, the company will know in advance and discuss any possible solutions.

However, some costs cannot be predicted accurately in a cash flow forecast as they are due to external influences such as change in government, social behaviour.

Breakeven:

The breakeven point is where the revenue line and the total costs line intersect. Below that point, there is a loss. Above that point, there is a profit. So I will be expecting some losses during the Introduction stage of the product lifecycle of my shop.

Breakeven point =            Fixed Cost         

                

                           Selling price – Variable cost

Fixed Cost = Labour + Power + Rent + Interest + Security + Loan repayment

            = £1,000 + £600 + £20,000 + £200 + £500 + £1,200 per month

                  = £23,500

Selling price = £30

Variable Cost = £5

                   

Breakeven point = 940 games  

This meant that I have to at least sell 940 games each month in order to breakeven.

Introduction:

The current world has many potential customers concentrated in the entertainment market therefore I have decided to set up a game shop in the UK for the following reasons:

  1. People living in a well-developed country have money to spare on leisure and entertainment goods.
  2. The gaming industry is huge in a developed country such as the UK.
  3. Huge population distributed in a relatively small area, which makes it easier to advertise.

The aims for my business are the following:

  1. The survival of the business in the harsh competitive world.
  2. To make enough profit to keep the business going and to expand worldwide.
  3. The satisfaction of the customers.

Market research:

We do market research to understand what the customers need. I will use both primary and secondary for my research, because both of these types of research have advantages and disadvantages. The only way is to combine and compare them together to get the perfect results of what customers really want. Market research is important because it can help us to reduce risks from losing money and gaining market share quickly and rapidly against our competitors. Our target market in this case is the interactive gaming market.

Primary Research:

Primary research involves listening to and observing your customers, potential customers and competitors’ customers. This kind of research provides information that is specific to you, and is concerned with the impact of your business on the market, as well as that of your direct competitors. The reason why I use primary research is because it is more reliable and up to date. Although it is very expensive to carry out and time consuming, but I believe the results will be more than satisfactory. First of all, I shall carry out some questionnaires in a sample group in order to obtain some quantitative data and some qualitative data, so I can have a basic idea of what the customer need.

Printed Questionnaire:

Questionnaire of a computer game shop

1. How often do you buy computer games?

Once a week               Once a month               Once 6 months                Once a year        

2. Where do you buy games?

Game shop        Supermarkets                Internet                Software store

3. Which shops do you buy games from?

4. What kind of game do you like best?

Action              RPG               Adventure               Sport         Strategy                 Others        

5. What kind of multiplayer do you prefer?

Don’t prefer Multiplayer           Internet        LAN            Parallel cable

6. What price would you  pay for a game?

Under 10 pounds          Under 20 pounds          Under 30 pounds          Depend on game                

7. Who do you buy it for?

Yourself          Friends         Brothers or sisters          

8. Where do you find out information about new releases of games?

Magazines        Internet                From others        Other

9. What magazines do you read?

10. Would you like to try out a brand new game?

Yes          No          Depends on game type

11. To you, which is the most important aspect of a game?

                    

Game play        Graphics        Sound                Value                All important

12. When do you buy computer games?

Spring                Summer                Autumn                Winter                Any time I wanted

13. Which consol do you have?

PC        Xbox        GameCube        Playstation 2        Game Boy Advance        

14. Which is your favourite consol?

PC        Xbox        GameCube        Playstation 2        Game Boy Advance

15. What would make you to come and visit the shop again?

Analysis:

Results:

This table showed that many people bought their games every 6 months so I would expect most games to have a life of 6 months.

Most of the people showed that they prefer to buy games from game shops so this means that there is a market for game shops.

Nearly all of the people I asked bought their games from a shop called ‘GAME’ so this tells me that this shop will be my main competitor in the market. In order to be competitive, I would need to carry out further research and analysis on this shop to find out how and why it attracts so many customers.

The data showed on this chart was quite evenly distributed, so this meant that there are a fair number of people like each type of games. In order to maximise profits, I must stock a variety of product in the shop.

More than three quarters of the people I asked prefer to play multiplayer games on the Internet, which told me that I should sell more Internet playable games than others in order to sell more and gain more profits.

The above pie chart showed that over half of the people I asked would pay whatever is necessary depending on the game. So in order to sell more products, I must find out which game is more popular to the public. Also most of the games have their own RRP (recommended retail price) decided by their producer, so most of the game shops would sell their games at the same price thus lowering the intensity of competition. But I will introduce reduction on the prices of games a stage earlier than other competitors in order to compete.

As you can see most of the customers bought games for themselves, therefore it would make sense to say that most buyers were also consumers. So probably it would be a good idea to aim the games mainly for the buyers.

My research showed that more people would choose magazines to find out new releases of games. This result told me that the customers are expected to find out about new games in magazines therefore it would be better to advertise new games in magazines and on the Internet because more reader could read it, one after another.

Here are just some of the most popular game magazines I obtained from my research:

                

The above result showed that I should probably advertise on these magazines in order to get the maximum coverage.

This result is related directly to the results obtained from question 4. Since the results in question 4 told me that the different types of games were distributed evenly in customers, so I would suppose that the launching of any new game would sell successfully.

This table showed that many gamers thought a good game would contain all 4 aspects thus giving me an idea that the overall quality of the product must be up to a certain standard in order to attract more customers.

My research showed that most people I asked would’ve only bought games when they wanted it. This has created some problems for me because I will not be able to predict when the customer will visit my shop. So my best bet is to import product evenly through the year, so whenever a customer visit my shop, there will always be products available.

As you can see here, most people have either PC or Playstation 2. So it would make sense that I should place all the PC and Playstation 2 games near the entrance of the shop in order to attract more customers.

The results obtained here told me that PS2 and PC were the most popular consol and therefore I should increase stock priority for PS2 and PC games over others.

The above 4 points will be the main element for success in my new shop because they were the most important aspects in the customers’ mind. From my results, I need to primarily assure excellent services which meant I will need to make sure that I have enough staff on duty and that they are well trained. I could offer incentives for the best sales person each month in order to make sure of high motivation, thus good services to the customers. I will also have to do the same for other factors such as lowering the price of games earlier in the sales season, increase stock of different games and home delivery.

Price comparison:

I have gathered the price for the same game in different shops in and around London. Surprisingly they were either the same or have very little differences perhaps because the pricing techniques for games were different than any other products. Game producers usually define the prices for games and they recommend the price to the retailers. The retailers normally will not sell the games at a higher price because then nobody will go to their shop, so the retailers would only sell its games at the recommended prices. But on some occasions, the retailers will decide themselves of how much they will sell the product to their own benefits, this can be seen in remote areas where there were fewer shops. As for my shop, since it will be set in Oxford Street in London, I will use penetration pricing for the products to attract customers during the introduction stage of my shop, although this would mean a decrease in profit perhaps even an overall lose of money in the business, but I believe through long term quality and good services, my reputation would build up rapidly and will attract more customers, then I can raise the price in order to earn profits.

Join now!

Flow of people in the area:

Interview of a shop owner:

Name of the shop:  GAME

Owner’s name: John Wells

Type of shop: Computer games shop

Type of ownership: Franchise

  1. Who are your main customers through out the year?

Mostly teenagers or young adults under 20, sometimes parents come with their child to buy games.

  1. How many customers do you have each week?

This really depends on many factors such as the weather for example. ...

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