Bachelor dissertation: Xi’an Jiaotong – Liverpool University
Bachelor of International Marketing
MAN303 (17/18) Final Year Project
Written by :
Stian Sanni Iversen Hand-in date: 29.04.18
This paper is done as a part of the undergraduate program at BI Norwegian Business School.
This does not entail that BI Norwegian Business School has cleared the methods applied, the results presented, or the conclusions drawn
.
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TABLE OF CONTENT
1. Abstract ... 3
1.2 Acknowledgements ... 3
2. Introduction and background ... 3
2.1 PlayPulse ... 4
2.2 Their goals ... 5
2.3 Personal Motivation ... 5
2.4 Product market in China ... 6
3. Literature review. ... 6
3.1 Fitness industry ... 6
3.2 E-sports industry... 9
3.3 Exergaming ... 10
3.4 E-marketing ... 11
4. Research questions and investigative questions... 13
4.1 Research question ... 13
4.2 Investigative questions ... 13
5. Methodology ... 14
5.1 Methodology ... 14
5.1.1 Design ... 14
5.1.2 Qualitative methods: ... 15
5.1.3 Quantitative methods and primary research ... 15
5.1.4 Secondary data ... 16
5.1.5 Models ... 17
5.1.6 Preparedness for internationalization ... 19
6. Evaluation of results and findings ... 21
6.1 SWOT ... 21
6.2 PORTERS FIVE FORCES ... 24
6.2.1 Buyer power ... 25
6.2.2 Threat of substitutes ... 26
6.2.3 Threat of new entrants ... 27
6.2.4 Competitive power ... 29
6.2 Preparedness for internationalization ... 30
6.2.1 The Uppsala theory evaluation ... 30
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6.2.2 innovation model evaluation ... 32
6.2.3 CHROME framework ... 32
7 Conclusion ... 34
7.1 Investigative question 1 ... 34
7.2 Investigative question 2 ... 35
7.3 Investigative question 3 ... 36
7.4 Research question ... 36
References ... 38
Attachments ... 43
Interview question-sheet ... 43
Notes from interview with interviewee #1 ... 47
Notes form interview with interviewee #2 ... 50
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1. Abstract
(Chinese abstract)
本文分析了PlayPulse在中国的机遇。论文分析了中国健身产业，博彩业和电子竞技产业。它
分析了PlayPulse对国际化的整体准备，内部和外部优势以及上述中国行业的行业吸引力。论 文解释了所用的方法，它依赖二手数据，并通过深度访谈获得主要数据。最后，本文对 PlayPulse的情况进行评估，并通过发现的主要和次要数据为研究结果提供相关建议。
(English abstract)
This dissertation analyses PlayPulse’s opportunities in China. The dissertation analyses the fitness industry, the gaming industry and the e-sport industry in China. It analyses
PlayPulse’s overall preparedness for internationalization, internal and external strengths and the industry attractiveness of the Chinese industries mentioned above. The dissertation explains the methodology used and it relies on secondary data, and primary data through depth-interviews. Finally, the paper evaluates PlayPulse’s situation and give
recommendations in correlation with the study findings through primary and secondary data uncovered.
1.2 Acknowledgements
I would like to express my gratitude to those who have helped me through the process of this study. First, I would like to give my thanks to Dr. Ellen Touchstone, for her clear guidance and help she has provided me throughout the whole process. Secondly, I would like to thank Mr. Erling Magnus Solheim, for all the contact and help you have provided during the
process. Thirdly, I would like to thank all working with PlayPulse, I genuinely enjoyed working with the product, furthermore I believe you have created something unique, and I am
looking forward to seeing where it goes from here. I wish you all the best in your journey. I would like to express my thanks to the people at nHack, who helped establish contact and for all the good discussions.
2. Introduction and background
This paper is a final year dissertation written by Stian Iversen, hereafter referred to as “the researcher”, during his final year of his undergraduate study at the BI Business School in
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Figure 1: PlayPulse Gaming Device
Oslo, Norway. This third year was spent as an exchange student at Xi’ An Jiaotong – Liverpool University. In collaboration with International Business School Suzhou (IBSS), the researcher received a supervisor, tasked with guiding the researcher through the process of writing this dissertation. The first step in the process was to find a suitable company to work with. After a few weeks of considering different companies, the researcher identified with nHack, a Shanghai based company that specializes in connecting Nordic companies with Chinese businesses in terms of either production or market entry. nHack had several interesting start-ups that the researcher considered, but finally decided on a newly founded start-up named PlayPulse. After making contact with PlayPulse, the researcher was referred to Mr.
Erling Magnus Solheim, the VP of Business Development and C-F of PlayPulse. After a virtual meeting, the researcher and Solheim determined that it was a good match and that
collaborating could be beneficial for both parties.
2.1 PlayPulse
PlayPulse Ltd (henceforth referred to as PlayPulse or the client company) is a newly founded start-up based in Trondheim, Norway. The idea of PlayPulse originates from a master thesis by Kristoffer Hagen, where he brought together research from EXCAR (Exercise,
Cardiometabolic Health and Reproduction) and NTNU’s research program on video games at the University of Science and Technology In Trondheim, Norway (NTNU , 2017). The idea is an innovative gaming software for a stationary-spinning bicycle. The concept is to create a game that exercises your body, whilst having fun and playing a videogame. When asked about their mission, Solheim stated, “Our mission is to turn high intensity interval training into a fully-fledged computer gaming experience, boosting exercise motivation and battling sedentary lifestyles across the globe.”
PlayPulse ran many tests in order to confirm that their product had a positive effect on people. The tests had excellent results. These results then attracted several external investors, most notably the Norwegian Research Council who provided 2 million NOK investment and Shanghai based nHack.
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PlayPulse offers a full exercise and play package, with customers being able to buy the whole set-up- as shown in the Figure 1 above. They have focused on the B2B market in their local area. Currently, they are collaborating with a local gym chain called 3T. In addition, they have sold four exercise and play stations to a local elementary school, and are exploring other attractive B2B possibilities in the local business environment in Norway.
2.2 Their goals
Currently, PlayPulse is still trying to attain more business in Norway, the short-term goal is to achieve success in their home country of Norway, and then expand into the other
Scandinavian countries such as Denmark and Sweden. As stated earlier, nHack is one of the investors in PlayPulse, and together with them PlayPulse wants to explore the possibility of either starting production in China, or entering the Chinese market. This is more of a middle- or long-term goal, with the researcher and Solheim agreeing that this is something that would be explored for later. This dissertation will focus on the possibility of entering China as a market, not as a production site. The dissertation will explore possible outcomes and analyse the Chinese market, the current trends and in what direction the market anticipates evolving. Ultimately, the dissertation will draw a conclusion of the research question and suggest recommendations based on the findings and evaluations performed.
2.3 Personal Motivation
I, the researcher was born 29. August. 1996, the same year China had a GDP of 863,7 billion USD. (The World Bank, 1996). The researcher started studying at BI Business School in 2015, when China had a GDP of 11,06 trillion USD (The World Bank, 2015). Therefore, in the time period of nineteen years, China has increased their GDP (2015) 12.7 times to what it was in 1996. This is one of many indicators that China has grown to become one of the world’s leading economies, currently only behind the USA. Furthermore, all signs shows that China will surpass the USA in terms of GDP and technological development in the near future. The researcher has been amazed by the impressive growth of China, and as many other, saw the immense opportunities that this growth offered. Therefore, the researcher sought to gain special expertise in the Chinese market, through studying in China for the final year of his undergraduate degree.
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When it comes to the selection of a company to work with, the researcher was impressed by the vision and goals of PlayPulse. Not only were they highly ambitious, but they also had a realistic views as to what was possible and clear ideas of how to reach their goals within a realistic timeframe. The researcher also thought that working with a small company would be an interesting challenge, compared to working with a large sized company, where this type of student-conducted research might not even be read or considered in terms of strategy formation. For the reasons above, PlayPulse was an ideal match, due to its interesting product, in addition to the opportunity for the researcher to help them gain insight in the Chinese market.
2.4 Product market in China
China is experiencing a rapid growth in the fitness industry, and with increasing revenues every year (IBISworld , 2017). However, PlayPulse is both an exercise tool, as well as a source of entertainment. This enables the researcher to consider different customer segments including the fitness industry with a B2B approach and the gaming industry with a B2C approach and gaming enthusiasts with a B2C approach. In addition, the phenomenon of exergaming applies well with PlayPulse. PlayPulse has also expressed their interest in the growing industry of E-sport. Which is a perfect combination of gaming and competition.
China is big on e-sport and gaming; therefore, with the right strategy, this could be a potential market in which PlayPulse can be successful.
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3. Literature review.
3.1 Fitness industry
The fitness industry has experienced fast growth in Europe. It has become a billion euro industry, with revenues estimated to be at 26.7 billion euro in 2017. (Deloitte, 2016).
Deloitte’s report from 2016, mentions the fitness industry in Norway as being the most
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mature fitness market in Europe, with 4,823 inhabitants per gym. (Deloitte, 2016) China’s fitness industry has seen rapid growth in recent years. The industry has had a revenue growth of 12% annually from 2012 - 2017. (IBISworld , 2017). Despite this rapid growth, there is still an opportunity for improvement and for new competitors such as PlayPulse to enter the market. According to Chinese multinational bank ICBC, only 0.7% of China’s GDP in 2015 came from sports (JWT Intelligence, 2016). Which means that it is attractive to explore the Chinese fitness industry. In a 2014 report authored by the Boston Consulting Group, identified that China’s health and wellness market expected to reach 70 billion USD by the year 2020 (Wu, et al., 2014). The Chinese fitness market is showing positive trends
(IBISworld , 2017). Therefore, this could be a perfect opportunity for PlayPulse to establish market presence in this booming industry.
Fitness centres is growing in popularity at a fast pace. Numbers from Asian Academy fort Sports & Fitness Professionals (2016) show that the growth rate of Chinese fitness clubs was at -0.3 percent in 2011, then increasing to 8.5 percent in 2014 and in 2015, it rapidly
increased to 20.8 percent. Graph 1 illustrates the increase in fitness centres in China from 2001 to 2015 (Daxue Consulting, 2016). The graph does not illustrate the total amount of fitness centres in China.
Graph 1: Daxue Consulting: increase in fitness centres in China, 2016
Much like the European model, the booming fitness trend has seen the emergence of gym- chains, with successful brands such as Will’s Fitness, Tera Wellness Club and Bally Total Fitness Club being the biggest players (Daxue Consulting, 2016). The latter of the three is a joint venture of China Sport Industry Ltd and Bally Total Fitness Club, an American brand.
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For physical exercise, Chinese consumers prefer team sports and competitive sports.
Basketball have grown in popularity both as exercise in addition to watching it for
entertainment. The National Basketball Association (NBA) is the favourite viewer sport, and get strong viewership ratings in China. The NBA Finals in 2017 were watched by more than 190 million Chinese viewers through online stream (Minter, 2017). Researchers has in time tried to analyse Chinese consumer behaviour when it comes to sports and the purchasing of sports equipment. Back in 1996, researchers from Brigham Young University preformed a study using quantitative methodology. The goal of the study was to identify key
characteristics of Chinese consumer behaviour in terms of sports and purchasing of sports equipment. The study selected 10 major cities in China and performed random samplings in all the 10 cities. The study handed out 4.000 questioners, and had a response rate of 53.9%
and 2.155 fulfilled responses (Geng, et al., 1996). The study had positive findings,
furthermore the study concluded with giving useful tips on what strategies would most likely succeed, according to the study’s findings (Geng, et al., 1996). This study is widely
recognized as the first real study with focus on Chinese consumer behaviour in relations to sports and sports consumption. Considering this, the study is more than twenty-years old at the time of writing (2018); hence, some aspects of it may be outdated. In example, the income level has increased and the general spending on sports equipment has in all likeliness increased substantially. When looking on recent studies, we find that China has increased its position and become one of the most attractive markets for sports equipment brands to enter (Liu, et al., 2017). Nike and Adidas is by far the biggest players in the Chinese market, with a combined market share of 38.8 percent with Nike having 22.1 percent and Adidas having 16.7 percent (Euromonitor, 2016). Chinese brands such as Lining and 361 degrees has significant market share, however they have failed to match the competition from the foreign brands. According to Mr. Liu Peng, the Minister of General Administration of Sports in China, the gross value of sport industry in China for the year 2014, was at 404 billion RMB, accounting for 0.64 percent of national economy (General Administration of Sport in China, 2015).
To conclude, the trend in China is that a healthy lifestyle is widely considered more important now, than in the past. There are clear indications that the fitness and sports
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industry is growing. The gym and fitness clubs are experiencing a positive growth-rate, and in the last couple of years there has been 37.000 new gym clubs emerging and 2.8 million people participated 328 marathons, with the latter number being 14 times bigger than the level it was at five years ago. (Chinese Athletic Association, 2016-2017) The motivation for living a healthier lifestyle is the clear benefits of living more healthy, such as more energy and being able to focus for a longer time. (Wilson, 2016) In addition to this, it is also a sign of status, and the focus on having a good body is growing in China. (Mintel, 2017). Fitness and exercise is viewed as fashion in China, therefore it motivates many young Chinese to exercise on a regular basis (Yuanyuan & Qianqian, 2017). In typical western marketing, gyms often want to communicate, “You work out for you”. This is working in the west, however in China the best way to market a gym membership is to focus on the pragmatic, saying “you work out because you want to look better” and ultimately become a nan shen/nu shen (A dream boy or girl) (Reuter Communications, 2017).
What motivates consumers are an important point for PlayPulse, in the Norwegian market the number one reason for not going exercising is the lack of motivation (Virke, 2015). One of the key success factors for PlayPulse will be to identify what motivates people, and how to develop their products accordingly. Mintel conducted a survey asking Chinese consumers what motivated them to exercise, 64% had improving overall health as the main motivation.
In second place was “better looks” with 44% (Mintel, 2017).
3.2 E-sports industry
The researcher alongside with the client company has come to an agreement that the
gaming industry is one of the main markets that is interesting for PlayPulse. The industry at a global level is huge, in the US estimates, it is identified that 2/3 households play videogames regularly (Entertainment software association, 2015). According to Chinese State
Administration of Press, Publication, Radio, Film, and Television, the number of Chinese people playing online multiplayer games have surpassed 500 million (Xueying, 2017).
The definition of E-sports is the following “A multiplayer video game played competitively for spectators, typically by professional gamers.” (Oxford Dictionaries, 2017). This form of entertainment has become popular in China. In the first half of 2017, e-sports revenue in China reached 36 billion Yuan (Xueying, 2017).
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3.3 Exergaming
The term exergaming separates in two words (Collins Dictionary, 2017). The word exercise,
“Activity requiring physical effort, carried out to sustain of improve health and fitness” and gaming, that means to play a game online (Oxford Dictionaries, 2017). The term exergaming is a mixture of exercise and gaming, and was first introduced in early 1980s with the Atari 2600-foot pad controller (Simmers & Klein, 2016).
Several studies of exergaming focuses on the problem of obesity of children, and the
inactivity of adolescent (Victoria A. Fogel, 2010). The research done by Christina S. Simmers, an assistant professor at Missouri State University, and her graduate student Matthew J.
Klein, hypothesize that exergaming and the Wii Fit, which is an exergaming console, viewed more as entertainment and not as exercise. It also hypothesize that those who are more sedentary are more willing to exercise if they were playing a game (Simmers & Klein, 2016).
The study concludes that exergaming, with the Wii Fit in focus, has a positive effect on sedentary adolescents. This shows that exergaming is a good tool to motivate and encourage adolescents. There has been several other studies to confirm Simmers and Klein’s
conclusion, such as “The effects of exergaming on physical activity among inactive children in a physical education room”, that concludes a positive effect on children. (Victoria A. Fogel, 2010). The same research team did a follow up study two years later; hypothesizing that exergaming not only had effect on inactive children, but also active ones without the problem of obesity. The result came up positive, stating that exergaming had positive effects, but that the equipment was poorly developed, hence making it difficult to implement in public schools (Shayne, et al., 2012).
These studies have focused on children and child obesity; however, there are also studies that target elderly. The study “Physical and Psychosocial Effects of Wii Video Game Use among Older Women”, states that it is beneficial to incorporate exergaming in a health setting (Wollersheim, et al., 2010). In addition to benefitting the women in a healthy way, it also helped them connect with family members, especially grandchildren, which was
especially positive for them (Wollersheim, et al., 2010). All of these studies were conducted in the US, which is a very different market from China. Considering this the researcher finds
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their results to support the claim that exergaming has positive effects on people, and that the data collected from the studies shows that exergaming is a potential for other parts of the world, including China.
One of the biggest disadvantages exergaming games have, compared to traditional games is that you often have little possible progression. I.e. a traditional online multiplayer game like World of Warcraft can make players play on average 21-22 hours a week, and it never stops.
The exergaming games, such as Wii Fit games are very short and considered repetitive (Medgadget, 2009). This is where it is important for PlayPulse to differentiate themselves. If they can succeed in creating games that are more progressive, they can gain competitive advantage over exergaming competitors.
3.4 E-marketing
E-marketing’s role is to take the business outside national borders using the internet. This new aspect of marketing has reshaped how the entire world looks on marketing, changing the way the world perceives global expansion (Strauss & Frost, 2014). The introduction of Information and Communication Technology (ICT) has enabled companies to have access to compelling technology to simply the communication between business and consumer.
Collecting data from the market and afterwards customizing products according to the market need is one of the key-opportunities e-marketing gives companies (Rust, et al., 2010). Using internet as a sales channel can be an opportunity for PlayPulse, since it has a worldwide reach, needs relatively low maintenance and is highly cost-efficient. This will also help speed up the internationalization process (Arenius, et al., 2005). Practicing E-marketing will help businesses change the consumer’s knowledge, attitude and their behaviour, and the ultimate end-goal is to reach a sale, and keep the consumers wanting more (Bolos, et al., 2016).
Using E-marketing will be crucial for PlayPulse, as it enables them to enter a foreign market, such as the Chinese one. The problems however, is that the normal platforms used in PlayPulse’s origin country Norway, are Facebook, Instagram and SnapChat. All of the mentioned are banned in China. Therefore it is important that PlayPulse figure out how to
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use social media and internet to market themselves in China, as China has own versions of social media, with the biggest one being WeChat. When working with E-marketing, it is important to remember that E-marketing is most effective towards the younger segments, this applies both to the European market, in addition to the Chinese market. The number of global users of mobile phones surpassed the number of desktop users in 2014 (Marrs, 2017).
Using this information, it will be a critical success factor for PlayPulse to engage in e- marketing through mobile phone apps.
E-marketing through using social media is an attractive opportunity for modern-day companies that enables them to communicate with their target-audience at a relatively cheap price. It is also a way of communicating directly with a low-context communication.
The power of social media is increasing every year, and the number of social media users were at 2.46 billion, and is estimated to be at over 3 billion in 2021 (Statista, 2017). When looking at the age distribution on social media, it is apparent that the younger half of the population (16-34) are using several forms of social media, often actively updating three or more platforms of social network on a day-to-day basis. The elder half of the population (35- 64) are also increasing in the use of social media, but they are mainly using one or two platforms (Statista, 2018). These figures are interesting for when applying E-marketing, as they are clear indications that you can reach out to a vast amount of people, with little age or location restrictions. These figures illustrates the potential of using e-marketing in a clever way, as you could reach out to whomever you need.
China, as previously mentioned, has banned most western social media (I.e. Facebook, Instagram twitter and many more). As an alternative, they have launched their own
substitutes for it. WeChat is the Chinese equivalent of Facebook Messenger, and is the most popular form of social media in China, reaching over 1 billion active monthly users
(Hollander, 2018). WeChat have had a tremendous growth over the last five years, with having 100 million active monthly users in Q1 of 2012, to reaching the 1 billion active monthly users in Q3 2017 (Statista, 2017). In a global scale, WeChat is currently (as of Q3 2017) the fifth biggest social network (Statista, 2017).
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4. Research questions and investigative questions
4.1 Research
question
During discussions with the client company, the researcher has established that their main problem is how to enter the Chinese market, the overall preparedness for
internationalization, and which market they should focus on. The two markets that were under discussion was firstly the fitness industry; doing B2B with fitness centres and gym chains. The second market under discussion was the gaming market, with B2C, with E-Sport being a particularly interesting market for PlayPulse.
The main objective is to establish PlayPulse in the Chinese market. The researcher has composed the following research question:
RQ1: Will entering the Chinese market be profitable for PlayPulse?
This question leads to many investigative questions.
4.2
Investigative
questionsIQ1: What is the current preparedness for internationalization?
In order to establish PlayPulse in the Chinese market, it is important to evaluate the client company’s preparedness for foreign ventures.
IQ2: Which market should PlayPulse mainly focus on?
PlayPulse is a product that appeals different markets. However, it is essential to have a clear strategy as to which market PlayPulse should devote most of their resource, in addition it is important to evaluate whether or not the company will be distributing through B2B or directly to the costumer (B2C)
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IQ3: Does the product need modifications in order to please Chinese customer needs?
When entering a new market, it is important to analyse if the new market differ in needs and norms.
The research will debate, analyse, conclude and come with recommendations for all the investigative questions. This will lead to a general recommendation and conclusion for the research question. The research will use various models and tools in order to enable an analysis of high standards. These are explained under the “Methodology” section below.
(Segment 4. Methodology)
5. Methodology
5.1 Methodology
Methodology is a generally guideline for solving a problem, with specific components.
Methodology benefits research by providing information to plan and review. (Ishak & Alias, 2005).
5.1.1 Design
To provide the study with solid primary data, the researcher will mainly use the design
“exploratory”; furthermore, the study will also use “descriptive” research to some degree.
(SMstudy, 2016).
The exploratory research will guide the researcher to explore consumer needs and to research problems that has not been clearly identified yet. The advantages of using
exploratory research includes, but not limited to flexibility, effectively laying the groundwork, time and resource efficient (Thornhill, et al., 2015).
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5.1.2 Qualitative methods:
One of the goals of performing depth-interviews is to create a better understanding of the target audience (Gripsrud, et al., 2016). Depth interviews will be the main source of primary research for this study, the study will also rely on secondary data gathered by the
researcher. The participants answered a series of questions, all relevant to the study. The ultimate goal was to identify key differences from Chinese consumers vs. western
consumers, furthermore, the goal was to acquire more knowledge of customer behaviour and identify possible threats/disadvantages and/or possible advantages and strengths of the client company’s product within the selected market. The recruitment of participants was through the researcher’s social network. The participants met the participant demand, meaning they was to of sufficient age and have relevant consumer experience within the two markets that is relevant for the study. The research relied on voluntary participants, and there was no monetary resources put into these interviews.
The objective for these interviews will be to collect informative data from the correct audience, hence making it easier to configure the product after market demands (Gripsrud, et al., 2016). The client company has already performed these kind of interviews in the Nordic market, but the expectation is that there will be some minor differences, if not major differences with the Chinese consumers.
5.1.3 Quantitative methods and primary research
Primary data is data collected specifically for the relevant study. Examples of primary data could be, but not limited to; surveys, in-depth interviews, experiments and focus groups.
These are a mixture of qualitative and quantitative methodologies.
Quantitative methodology emphasize measurement through statistical, mathematical or numerical analysis of data. The collection of data is through polls, questionnaires and surveys. Quantitative methodology creates solid data for a market; however, they require a big amount of samples in order to be viable (Triola, 2011). In example, a survey usually has
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to have at least a hundred samples to be representative of the market, and larger markets require larger sample-sizes (Triola, 2011).
In order to make and perform a survey, you need to be able to reach a broad audience, and this could be difficult for this research. Ideally, a third party should conduct surveys, in order to confirm its validity. A third party, would be able to perform these types of quantitative methodology in a professional manner, and can guarantee a random and adequate sample size. If the researcher were to perform a survey, it would be a convenience sampling, getting the easiest samples from friends and colleagues. This is deemed the least viable kind of sampling, and would in many cases be regarded as unprofessional (Triola, 2011). Researcher and academics recommended using a professional third party company to process and conduct surveys. This is to gain unbiased samplings, through random sampling and adequate sampling sizes (Patton, 2015). Using a third party is resource heavy, but provide solid reliable data, for those reasons it is important to evaluate the value of primary data and what it can provide a company in short-term and long-term.
5.1.4 Secondary data
Secondary data is all data not developed by the researcher. Examples of this is, but not limited to: academic papers, journals, news articles or magazine articles (David, 2003).
Secondary data is advantageous in many ways. Researchers can use each other’s findings to help draw conclusions. This is time efficient since researchers do not have to make all data for their research themselves (David, 2003). The use of secondary data is highly
recommended when writing study papers such as this. This is due to the efficiency of not having to perform primary research of something someone already have. In today’s internet era, secondary data is easily available for the researcher, and the paper will rely heavily on secondary data. It is crucial to review secondary data with critical thinking, noting the strong points of literature in addition to the weak points. Taking this into consideration, researcher have mainly used academic peer-viewed sources such as journals and other research papers found through various databases such as ABI/Inform, Factiva and Google Scholar, in
addition, the researcher has used popular media articles to some degree due to its
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availability and simplicity. However, it is not recommended to use too much of popular media articles and websites, due to its lack in academic credibility (Patton, 2015).
5.1.5 Models
In the research, there will be several academic models and theories, in order to analyse markets and other factors. The models applied to this study is a SWOT model. The SWOT model will be analysed in the perspective of PlayPulse. A SWOT analysis contributes to finding a certain organization or companies: strengths, weaknesses, opportunities and threats (Humphrey, 2005). Additionally the study will include an analysis of Porters Five Forces. This is an analytical tool comprised of supplier’s power, buyer’s power, competitive power, threats of substitution and threats of new entries. Porters Five Forces will help evaluating the overall industry attractiveness (Porter, 1998). In addition to using the mentioned frameworks, the evaluation will analyse PlayPulse’s overall preparedness for internationalization.
5.1.5.1 SWOT
SWOT is an acronym for Strengths, weaknesses, opportunities and threats (Humphrey, 2005). A SWOT analysis is not a process, but more of a tool to analyse the organizations external and internal favourable and unfavourable aspects. The obvious upside to the SWOT model is that it has little-to no cost, and is easy to perform if you have basic knowledge of the company’s organizational structure, internal affairs and the external trends for the organizations market. This means that a company would not need to employ a business consultant, thus making it cost efficient. There are some critique of the SWOT analysis as a tool, due to its systematic approach and almost working as a checklist. Some researchers argue that its inability to measure sustainability of advantages and the inability to measure persistence of disadvantages makes it a tool that analytically has clear flaws (Valentin, 2001).
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However, there are clear advantages of a SWOT analysis. Therefore, the researcher will conduct a SWOT analysis, in order to clearly identify PlayPulse’s internal strengths and weaknesses, as well as analysing the external opportunities and threats.
5.1.5.2 Porter’s five forces
Porter’s five forces is a strategically framework used to analyse suppliers power, buyer power, competitive power, threat of substitutes and lastly threat of new entry’s. These five categories creates Porters five forces (Porter, 1998). These five forces will help researchers and companies study the external affairs within their industry, hence measuring the overall industry attractiveness. Porter’s Five Forces is a commonly used framework that has been around since the 80’s. The framework have managed to keep its relevance over several decades, however there are some pitfalls that researcher Andrew Beattie pointed out in his article in investopedia.com (Beattie, 2018). The article claims that Porter’s five forces is not able to keep up with the rapid growth in technology and the globalization (Beattie, 2018).
Despite this claim, it is still a highly relevant tool and considered useful in many situations.
The most common mistake made when performing a porter’s five forces analysis is to analyse the company, and not the industry, as is intended. If one can avoid this mistake, the five forces model is useful in analysing the overall industry, and several important factors that should be analysed before making company strategy decisions. By doing this it will enlighten the company in what industry trends there are, and ultimately how they can gain competitive advantage through differentiating themselves from their competitors.
In the evaluation part of this dissertation, the researcher will include a Porters Five Forces analysis that is inspired by MarketLine’s unique method of using this framework. It includes a score from 1-5 in all of the forces, as well as evaluating every force in more detail, giving out scores from 1-5 in smaller categories within each individual force. This usage of scoring will help visualize the different weighting of each force.
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5.1.6 Preparedness for internationalization
Firm internationalization is a process of initiating, developing and maintaining international business (Sandberg, 2013). In order to understand what possibilities PlayPulse have in the international market, as well as their perceived position in the international market, it is vital to study the internationalization patterns in the target market as well as internal and
external forces within the market (Sandberg, 2013).
Before measuring and analysing which entry node is the optimal match, it is vital to start with an evaluation of a firm’s preparedness for internationalization. Evaluating the capabilities of the firm readying itself for export is highly recommended, not only by
researchers, but also by most practitioners and international business consultant (Cavusgil &
Tamerand, 1990). PlayPulse goes under the category of a SME (Small to medium sized enterprise) and there are several prominent researchers that has written research papers and studies on how to adequately analyse preparedness for internationalization for SME’s, and what frameworks and questioners companies should use, in order to make an
analytically good decision.
Internationalization have two main theories. Firstly, the Uppsala model (Johanson & Vahlne, 1977). Secondly, the innovation related model (Bilkey & Tesar, 1977). The Uppsala model describes internationalization as a process of gradual learning through experiences in foreign markets (Bose, 2016). The Uppsala theory have four main components in order to measure a company’s preparedness: 1) exposure of the firm’s management to export related stimuli, 2) commitment of the firm’s management, 3) firm resources (tangible and intangible) and 4) lateral rigidity (perception of challenges and risks associated to export) (David & Cariou, 2014). Before considering doing anything further in regards to internationalization, it can be helpful for companies to apply the Uppsala theory to their company and if they are happy with the results, the company should invest more in researching their overall preparedness (David & Cariou, 2014). The innovation related model views internationalization as a process where the steps are identical to new product introduction and development (Dhanaraj &
Beamish, 2003). Innovation models is usually categorizes in three main stages: 1) pre-export stage, 2) export trail stage and 3) advanced export stage (Coviello & Munro, 1997). The degree of innovation is normally higher in later stages of the process, compared to earlier.
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The innovation models are highly relevant to the client company, as it is introducing a new product to the market.
These two theories have been used for around since the 70’s, and it may be a problem to apply them to the more modern way of marketing, with e-marketing and the internet enabling alternative ways of internationalization and expansion. The researchers behind the Uppsala theory wrote an updated article in 2009, which had many changes in order to keep it relevant to the more modern world. The revisited Uppsala theory focuses on the same aspects, but with more focus on networks in the internationalization in firms, in addition it is updated in order to keep its relevant to the modern market (Johanson & Vahlne, 2009).
Table 2 below is a description an analytical framework” (David & Cariou, 2014). This
framework is named CHROME, which is an acronym of the first letters of the six dimensions displayed in the framework. This framework is helpful to analyse PlayPule’s preparedness, and in collaboration with the two theories previously mentioned, the analysis of PlayPulse’s preparedness will be sufficient to make adequate recommendations.
Figure 3: CHROME framework by David & Cariou, 2014
The “CHROME” framework use a point system, where you evaluate a score from 0-5 of each of the frameworks 40 criteria’s, with the maximum score being 200. (The table only shows three or four criteria examples; there are 40) The interesting figures that we can take from
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this framework is the overall score, which evaluates preparedness for internationalization.
Furthermore, it is interesting to observe the average score for each CHROME dimension, to detect where a company might be handicapped and where the company has strengths.
(David & Cariou, 2014) The French researchers behind the study, categories three different levels of preparedness, 1) “passe-partout” (scores between 161-200), 2) “mid-level pass”
(scores between 121-160), 3) “entry-level pass” (scores between 81-120) and lastly 4)
“impasse” (scores below 81). The lower score a company achieve, the lower preparedness for internationalization the company has according to the framework developed by David &
Cariou.
6. Evaluation of results and findings
In this segment of the paper, the researcher will analyse all of the primary data collected through the qualitative methods used, and the secondary data, in order to evaluate and analyse, and finally giving adequate answers to the investigative question, in addition to the main research question.
6.1 SWOT
Using the SWOT model, the researcher will discuss PlayPulses internal Strengths (S) and weaknesses (W) identified through primary data gathered through in-depth interviews, and the external opportunities (O) and threats (T) from secondary data discussed in the
Literature review.
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Figure 4: SWOT analysis model
The first and most substantial strength PlayPulse have is its innovative product. They offer a new option to exercise and entertainment, and they have gained strong competitive
advantage through differentiating themselves from their competitors. PlayPulse is in its start-up period, and have just recently started selling their products within the B2B market in Norway, mainly selling to local gyms in Trondheim. However, they are always looking to expand and are constantly pitching their products to various companies and institutions.
Their fresh motivation as a start-up cannot be viewed on as anything else then a strengths.
They are a small dedicated team, which allows them to have a flat organizational structure, hence making decisions easier and faster. This allows them to be more effective in the decision process as well as the developing process. Having a small team enables them to be more in line with the direction of the company, and the collective goals and vision of the company.
On the other side, being a small team could also be a weakness. Having a small team could slow things down, as the workload could be overwhelming. In addition to this, a small team where everyone has a say could ultimately create disagreements and tension at the
workplace. PlayPulse currently have a full Norwegian management team, with good experience with previous businesses (PlayPulse, 2017). This is a good strength for them, as experience and previous success is key factors for new success. Other clear weaknesses PlayPulse has are lack of resources. They are not yet a big company with unlimited resources
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and are not able to fund big marketing campaigns and heavy-cost strategies. This could be a problem when entering the Chinese market, as it is often costly to export to the other side of the world. Despite PlayPulse not having the strongest financial position, they have the
strength to attract investors from the Norwegian business environment, in addition to this, nHack a Scandinavian company focusing on attracting Nordic companies to the Chinese market. nHack is a good partner for PlayPulse if they decide to enter the Chinese market. In addition to multiple private investors, PlayPulse also have received substantial support from the Norwegian Research Council (Weldeghebriel, 2017).
Being a start-up means that they does not have a strong brand name, which is a weakness.
However, they can improve their brand quite easily over time if they manage to grow according to their expectations.
When looking on the opportunities PlayPulse have, many are easily identified. First of all, for any start-up there are numerous opportunities, in fact this very research is exploring the opportunity of entering the Chinese market. As previously described in the literature review, the market of exergaming is an opportunity due to its immaturity and it being relativity new to the market. During the depth-interviews, one of the interviewees stated the following “if they can make the game interesting, and make it competitive, I believe this could be a big success. But it all depends on how challenging and interesting they can make it.” (#1, 2018).
This is a very fundamental point to how PlayPulse can achieve success. Their competitors in Wii Sports and games like Dance Dance Revolution (DDR), are considered too repetitive, and does not offer the ability to progress over a longer period, nor do they have online
competitive ranking system. All of the above have been mentioned as a necessity by the Chinese gamers that was interviewed for this study (Interviewee #1, Interviewee #2).
While doing analysis of possible external threats for PlayPulse, the first one that usually comes to mind is the cultural divide between western culture and Chinese culture. This cultural divide has denied many promising companies to expand into China. The Chinese concept of guanxi is highly important for PlayPulse to understand, these Chinese concepts that has its origin from Confucianism are the biggest difference from the western business culture (Wang & Chee, 2011). This is a threat that PlayPulse must seek to avoid, they have already done a great leap in avoiding this when they started collaborating with nHack. nHack specializes in the Chinese market and their primary goal is to help Nordic companies expand
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into China, either with entering the Chinese market or helping them set up for production in China. Therefore, this partnership could prove to be a key success factor if PlayPulse wish to expand in to the Chinese market or to start production in China.
In China the amount of gyms are increasing by the minute, and the growth of gym chains could be a huge opportunity for PlayPulse, or a huge threat. If they manage to create good relationships with big chains such as Will’s fitness or CSI (China Sport Industry) – Bally Total fitness (Daxue Consulting, 2016), they have a unique opportunity to distribute their products doing B2B with these chains. If they fail at making good relationship with them, they would become a competitor.
6.2 PORTERS FIVE FORCES
The industry PlayPulse will try to penetrate in China is somewhat undefined. They can either move into the fitness industry, mainly focusing on establishing B2B sales with gym-chains or selling their products as an engaging fitness device. On the other side, they could go in to the gaming industry, selling their products B2B to internet-café’s or B2C, selling their products as an exergaming device, with the focus being the game. This analysis will use Porters
framework from PlayPulse’s point of view.
Figure 5: Porters Five Forces
Inspired by MarketLine’s method of analysing Porters Five Forces, the researcher will analyse both the fitness industry and the gaming industry.
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Figure 6: Evaluation: Porters Five Forces
6.2.1 Buyer power
How empowered is the customers to bring the price down? In the fitness industry, the willingness to spend money is quite high. The buyer power is somewhat low, due to the high motivation for actively using fitness services and products. The price sensitivity is considered low, and the researcher decides to give it a score of two (Reuter Communications, 2017).
The number of customers in the Chinese fitness industry is growing and the trend is increasing for every month there is. For these reasons, it is considered to be the buyer’s strongest point, hence it is awarded with five points in the score.
The difference between competitors is something we can clearly see. The industry offers a various types of gyms that offer a variety of services and themes. Considering the fitness industry as a whole, would imply that sport clubs and gyms are identified as competitors, despite the fact that they have significant in-similarities. In example, the gym chains try to differ themselves with either offering special classes, courses or special premium services.
They differentiate themselves in order to gain competitive advantage over their competitors.
(Barney & Hesterly, 2015) The industry offers various types of substitutes, such as gyms being a substitute of doing sports, and vice versa. PlayPulse could be considered a substitute to gyms or sports, and the way they differentiate themselves from the rest of the industry is key to their success. Due to high concentration of substitutes and many options within the industry, the score for substitutes is valued at four.
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Due to the modern access to internet and information being available for everyone, the consumers in the fitness industry have decent knowledge about the industry and the overall standards. Therefore it is crucial for companies within the industry to use e-marketing and social media in an optimal way, and hence increasing their chances of reaching competitive advantage and success in the market. This is also one of PlayPulse’s key factors of success.
Figure 7: Evaluation: Power of buyer
6.2.2 Threat of substitutes
PlayPulse has successfully differentiated themselves from their competitors, however they are a substitute for many others. The grade of PlayPulse’s differentiation means that any mainstream product from the respective industries they penetrate could be considered a substitute. In example, playing tennis would be another option for playing on the PlayPulse, making tennis rackets a substitution. Considering this, PlayPulse have a significant amount of substitutes. Moreover, many of them are more popular and more attractive to others, due to PlayPulse being an innovation newly presented to the market. Therefore the number of substitute products scores at five.
PlayPulse has the benefit of differentiating themselves from these substitutes that have been around for a long time. Therefore, the product differentiation is quite high (4), and this
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is a positive for PlayPulse as they can gain competitive advantage through differentiating themselves.
The cost of switching for the consumers depends of what substitute product they switch to, however the general cost is considered low. PlayPulse’s strategy is to sell products through B2B, cooperating with gym-chains or local clubs and organizations. This makes the cost difficult to analyse, as it will be different for every client. As a general score, the researcher believes that the cost of switching is low, and the cost of switching is one. When it comes to buyers’ propensity to choose substitutes, this is awarded a high score. Due to the substitutes being more popular and that the substitutes are more mature.
Figure 8: Evaluation: Substitutes power
6.2.3 Threat of new entrants
The client company PlayPulse have the strong advantage of being different from others. This makes it very difficult for other companies to do the exact same thing as them, as their product is currently hard to imitate. The researcher evaluated the possibility of new
exergaming devices that are similar to PlayPulse’s product is unlikely and the overall threat level of new entries is hence low. The special knowledge PlayPulse has gained through developing their product is high, and they therefore have a strong technological head start to their competitors that wish to imitate their product and become direct competitors.
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Figure 9: Evaluation: Threat of new entrants
Power of suppliers
The bargaining power of the suppliers are a different case with the Chinese ones. PlayPulse is currently developing their product in small scale in Norway. They are looking on the possibility to extract this into China, and therefore the researcher will use that as a basis for analysing the power of suppliers. Considering this, the Chinese suppliers are somewhat difficult to deal with, so it is important for PlayPulse to break the cultural barriers and fully understand how to deal with the suppliers. As previously mentioned, their collaboration with nHack will be crucial in order to succeed in this.
The researcher has evaluated the supplier’s power to be poor, as China is one of the world’s most attractive countries for production in the world. Due to its low labour cost and
beneficial taxation (Lee, et al., 2009). The number of suppliers are high, meaning that there are plenty of options for companies to choose. The size of suppliers are also quite high, and suppliers often manufacture for more than one client at the same time. The cost of changing to production in China is very low, this being the core benefit of anyone wanting to produce in China.
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Figure 10: Evaluation: Suppliers power
6.2.4 Competitive power
PlayPulse’s biggest strength is the uniqueness they offer. They have developed a product that is fresh and new to the market. This is enhancing their competitive power within the market. They have clear restrictions when it comes to resources this decreased their
competitive power. The biggest players in the fitness industry and the gaming industry could easily out match them in terms of resources and R&D, but the imitation of PlayPulse’s
product is rather difficult.
Figure 11: Evaluation: Competitive power
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6.2 Preparedness for internationalization
6.2.1 The Uppsala theory evaluation
According to the Uppsala model, there are four main components to internationalization. 1) exposure of the firm’s management to export related stimuli, 2) commitment of the firm’s management, 3) firms resources (tangible and intangible) and 4) lateral rigidity (perception of challenges and risks associated to export). If we look at the client company in these four components, we can see some clear indications on their preparedness. (Johanson & Vahlne, 1977)
1) exposure of the firm’s management to export related stimuli
As of now, the management of PlayPulse are not too eager to expand into different markets. They have clear goals of success before considering this. Despite this, they have clear visions and goals of export in a later stage of their history. They have a clear
collaboration with nHack, so they have great exposure and insight in the Chinese market, as nHack specializes in just this. The increasing use of social media and e-marketing, (Guyer, 2014) also makes the world a much smaller place and creates stimuli every day for PlayPulse and other companies. This increases the overall export related stimuli of PlayPulse, and evaluating the indicators mentioned above, there are clear signs that the management is affected by the thought of export and that the ambition of exporting in a later stage is relevant in their business environment.
2) Commitment of the firms management.
The management of PlayPulse are young and full of ambitions. They already have proved their ability to achieve success in the past, and the researcher evaluates them eligible to achieve success with PlayPulse. They have clear strengths as a team, and they have clear visions of exporting abroad. The expansion in to China is relevant for the management, however it is not viewed as realistic by the management at the time of writing. The management is fully focused on achieving success in their home base and local area in Norway, as it should be. The commitment of the management is therefore evaluated to be two-sided. On one side, the management is not committed due to being occupied with growing within the home country of Norway. On the other side, the management is
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committed, since they have clear ambitions of entering foreign markets in the future, with entering China being a particularly interesting area of entry.
3) Firms resources (both tangible and intangible)
As previously stated, the financial power of PlayPulse is poor compared to other that evaluate foreign ventures. They have multiple independent investors; however, they are not fully prepared for a venture to China in terms of resources. Optionally, they would have to seek further investments dedicated to entering the Chinese market, which is highly possible. They have also clearly stated that they intend to evaluate moving to the Chinese market at a later point, hence the financial situation may contrast the current state.
4) Lateral rigidity (perception of challenges and risks associated to export)
This post is evaluated to be high by the researcher. For a SME like PlayPulse it would be a high risk with great challenges to enter the Chinese market. They would have to mature their brand name, in addition to improving their own financial situation. Despite these limitations, the researcher profoundly believes the client company has potential to enter the market, due to the findings in the secondary data, and the depth-interviews. Both indicates that the market in China is ready for a product such as PlayPulse offers. The mix of exercise and entertainment experienced positive reception in the Chinese market, where the market has developed a significant growth in both the gaming industry and fitness industry.
Evaluating the four main components of the Uppsala theory, the researcher concludes that PlayPulse is not ready for internationalization. Their lack of financial funds, young brand and the high risk of entering the Chinese market are clear indications of unpreparedness. Despite this, the researcher evaluated PlayPulse to be prepared for internationalization within the near future. Factors such as the management experience, collaboration with nHack in addition to clear ambitions of exports are indicators that PlayPulse have opportunities in the future, if they manage to apply their current strategy with success.
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6.2.2 innovation model evaluation
The second main theory that are commonly used when analyzing preparedness for
internationalization is innovation related models. These models view internationalization as a process, where an evaluation is based by analyzing the current stage within the process.
The models usually categorize in three main stages.
1) Pre-export stage 2) Export trail stage 3) Advance export stage
When evaluating PlayPulse’s position within these stages, the researcher determined that the client company has most similarities with the pre-export stage. They are not exporting in any way as of now, and they will not export in the near future. However, they have a high level of innovation, which makes them attractive for export in a later stage. Following the innovation models, their innovation level will continue to grow when processing further. This is deemed likely, furthermore PlayPulse have the potential to develop with fast pace with their degree of innovation and uniqueness.
6.2.3 CHROME framework
Researchers of internationlizations broadly agrees that the Uppsala theory and innovation model theories are the most common ways of analyzing preparedness for
internationalization. However, the Uppsala model was first released in 1969 (DOBBELT SJEKK), which makes it of significant age. The innovation models are in some cases vague and hard to analyse. (Coviello & Munro, 1997) For these reasons, the researcher has decided to analyse a third framework that is updated to the modern standards of e-marketing and the increasing globalization. The framework is called “CHROME” and as stated in the
methodology section, it analyses the preparedness for internationalization using a score system where the researcher evaluated a total of 40 criteria’s. For the sake of simplicity and efficiency of the dissertation, the researcher will quickly summarize overall the six
dimension. Instead of applying scores to all the 40 criterias, for the sake of simplicity and
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efficiency, the researcher will instead rank the six dimensions from low (1), low-medium (2), medium (3), medium-high (4) and lastly high (5).
(C)ompentcies of management (Medium-high, 4)
The management has previous experience with international business, with Solheim having previous experience with a international bag company named Douchebags. (Solheim, 2017) The founder of the company have previous experience as a e-sport athlete and developed the product in Norwegian Technological University (NTNU), department of computer science. For these reasons, the researcher evaluates his qualifications as high. The management’s knowledge on the Chinese market is limited; however they have taken
promising steps to enhance their knowledge through collaborating with nHack, in addition to requesting this dissertation. Solheim has previous experience in international markets
through being a co-founder of the international bag company Douchebags.
To summarize the competence of the management, the researcher believes it to be of strong degree with minor errors.
(H)eritage (Low, 1)
Considering PlayPulse being a start-up, their heritage is scaled at poor- to nonexistent. They have no presence in foreign countries, neither do they have high recognition in the market at present moment. Therefore, the researcher evaluated their heritage to be of a poor state.
(R)elationships (Medium-high, 4)
The relationships PlayPulse have established with investors is a strong feature. They have also managed to create customer relationships with multiple Norwegian businesses. This ability will play a vital part when entering a new market. They have also a relative internet presence, with their website being international-friendly. The researcher evaluates their relationship abilities to be medium-high.
(O)fferings (High, 5)
The strength of the product is high; they have created an innovative idea with few similarities to their competitors. The adaptability of the product to the Chinese market is
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low; it would be easy for them to export it as it is. The implementation of different language would be the only clear feature that needs to be changed.
(M)eans (Low, 1)
As previously identified, the financial situation of PlayPulse is considered inadequate for foreign ventures. PlayPulse would have to seek new investments in order to successfully penetrate the Chinese market as it is now.
(E)ngagement (Medium, 3)
As of now, the management have little availability to dedicate time to international
activities, and their overall preparedness is evaluated to be low. Therefore it’s easy to argue that the engagement of the management is low, however they have shown their willingness to risk in order to achieve success. In addition, they have indicated clear motivation and long-term goals of becoming an international brand, selling their products outside of their home country of Norway. For the reasons mentioned, the researcher has evaluated their engagement to be of a medium state.
To finalize the CHROME framework, the researcher has calculated the six dimensions, and the average score of PlayPulse’s preparedness was 3.66, hence making it in-between medium to medium-high.
7 Conclusion
7.1 Investigative question 1
Investigative question 1: How is the current preparedness for internationalization?
The researcher have analysed and evaluated the client company’s preparedness for internationalization by using the Uppsala Theory, innovation models and “CHROME”
framework. (See “Preparedness for internationalization segment 5.) The researcher found that PlayPulse do not have the sufficient finance for internationalization in the near future, however with the correct strategy and clever usage of partnerships, the client company have potential to reach a better stage of preparedness within short time.
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Using the Uppsala theory, the researcher evaluated the client as unprepared for
internationalization, due to their young brand name, lack of funds and them being in the start of their career. During interview with interviewee #2, the interviewee stated, “China is very different and maybe difficult for small companies (to enter)”. This is a very interesting statement, as the interviewee is a normal Chinese consumer, but the interviewee had the perception that the Chinese market was difficult for foreign SME to enter. That statement is one more indication that penetrating the Chinese market would take a lot of resources and time, which PlayPulse does not currently have. The innovation models confirmed the same findings, with PlayPulse being in the pre-export stage. However, PlayPulse have a high degree of innovation, which will help them accelerating faster in the innovation process. The
“CHROME” framework identifies PlayPulse to be medium prepared for internationalization.
To conclude and answer IQ1, the researcher finalize that PlayPulse have a low degree of preparedness for internationalization. They have, however great potential to quickly gain a high degree of preparedness, due to their high level of innovation, determined management and their high ambition level.
7.2 Investigative question 2
Investigative question 2: Which market should PlayPulse mainly focus on?
The literature review points out that the two relevant industries, has clear indicators of healthy growth in China. The health and wellness market (hereunder fitness) expects to reach 70 billion USD by 2020 (Wu, et al., 2014)|. Fitness centres in China have had an increase in popularity, with 37.000 new centres emerging the last couple of years (Daxue Consulting, 2016). In addition, there are clear indicators of fitness and exercise becoming a social trend, where the focus on healthy lifestyles are increasing in importance (Reuter Communications, 2017). In interview with interviewee #1, the interviewee stated “I think there is a growing concern to be more healthy and stay fit. Many of my friends have now started exercising quite seriously.” (Interviewee #1). The industry has successfully managed to offer a variety of different services, tailored to different segments of the Chinese
consumer base. The industry is slowly maturing into a fundamental industry that is
incorporated in daily Chinese lives, much as it already is in the western markets of Europe and North America.
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Likewise, the gaming industry in china have experience a significant growth. As mentioned in the literature review, the total estimate of Chinese online multiplayer have surpassed 500 million users (Xueying, 2017). During interviews with young Chinese gamers, the researcher identified a strong unity towards the motivation for playing videogames. The interviewed believed the aspect of competition and the possibility to achieve a better rank was the most important factor of motivation. The esport industry in China have also experienced a growth in revenue, reaching 36 billion RMB the first half of 2017. (Xueying, 2017) Taking into
consideration the clear indicators of financial motivation, in addition to the gamers
interviewed statements. The researcher believes that the gaming industry is attractive for a product such as PlayPulse. During interviews, interviewee #1 stated that he believed that exergaming would be popular, due to its unique opportunity to offer a variety of both strategically thinking with combination of exercise.
Evaluating the points made above, the researcher believes that the client company should keep its focus on attracting young gamers. The way PlayPulse developed their product, they have managed to create a game that stimulates and can be fun over a longer period. They have created a game and device that are not made for exercising, but for entertainment through physical activity. As the interviewed gamers stated, it is important to make the game challenging and interesting. It is important to avoid repetition and present the possibility of long-term progression.
7.3 Investigative question 3
Investigative question 3: Does the product need modifications in order to please Chinese consumer standards?
In the depth-interviews, the researcher received indications that the product was well received, and that few modifications would have to be made. The clear modification would be language, due to lack of English skills. Other than this, the researcher believes that the game and hardware is good enough for the consumer standards in China.
7.4 Research question
Research question: Will entering the Chinese market be profitable for PlayPulse?
