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Rovio’s internationalization to Japan

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The case

Who – the protagonist

Antti Sonninen, Japan Country Director for Angry Birds.

What?

Angry Birds is the smash hit mobile game that has gone on to become one of the most popular entertainment brands in the world. Toys, soft drinks, clothing, books, and even a film, are part of the Angry Birds portfolio.

Why?

Finnish company Rovio Entertainment, who developed Angry Birds, wanted to crack the notoriously difficult Japanese market, where many Western companies had failed.

With China, South Korea and Japan owning 21% of the mobile gaming market in 2013, and Japan overtaking the US as the biggest market for Google Play, which was by far the most popular operating system, it’s easy to see why Rovio wanted to head to Japan.

Antti played a key role in turning Rovio’s attentions to Japan, as he had been studying in the country and quickly understood the importance of Japan as a target market for Rovio. Antti approached Rovio’s management and they were quickly impressed by his drive and knowledge. He joined the company soon afterwards.

When?

Antti spent much of 2011 and 2012 conducting market research on Japan, and visiting the country many times, to meet potential partners and get a feel for what it would take to do business over there.

Convincing top management to proceed with the project in early 2013, and after several more trips to the Far East, Antti found a suitable office space in Tokyo, and Rovio officially started trading in Japan in May 2013.

Where?

The capital of Japan, Tokyo, boasts a population of over 9 million, and mixes the ultramodern and traditional.

Rovio’s office is located between Ebisu and Shibuya, two of the trendiest areas in Tokyo, which are home to many of Rovio’s competitors.

Key quote

“In Japan we want to be more Japanese than Japan.” – Peter Vesterbacka, Rovio’s Chief Marketing Officer at the time.

What next?

The phenomenal success of the Angry Birds brand has led to a large amount of scrutiny from the media, investors, business experts and consumers.

In 2013 profits dropped 51% to $37 million, while in 2014 130 people were made redundant at Rovio’s Headquarters in Finland.

As their product portfolio expanded tremendously from games and entertainment to cover various kinds of products, Rovio has scaled down their offering and has been focusing more on games and movies. This strategy seems to be paying off, and in 2016 its profits soared to €17.5million while in 2015 its loss was over €20million.

Feeling the heat of a saturated market in global gaming, Rovio had to work out how to proceed with its strategy and internationalisation not just in Japan, but overall.

 
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Lead Your Feathery Team into Battle Now! Rovio’s Internationalization to Japan
Ref 315-118-1
Teaching note
Ref 315-118-8

The authors

author

Miikka J. Lehtonen, Fernando Pinto Santos and Irina Mihailova

Miikka, Fernando and Irina discuss this fascinating and unique case.

Contradiction makes cases

Miikka said: “Perhaps the most fascinating aspect to this case is why does a company that heavily relies on distributing its content (i.e. mobile games) through digital channels establish subsidiaries in foreign locations?

angry birds

“In a way, this seemed to contradict traditional internationalisation theories as Rovio did not establish its Japan office to expand its operations there, as they already had customers in Japan. So we asked ourselves, would there be something novel here that we could teach to students not only in our home universities but also globally. Turns out, this case study revealed a lot about Rovio’s plans about Japan, and we were happy to gain such good and transparent access to the company.

“In addition, and more importantly, we were drawn to this case because it felt counter-intuitive for a company relying on digital distribution to establish a physical presence in one of its target markets. Thus, we felt there was a compelling story here we could tell in a format that best captures all the details and nuances: case study.”

Firsthand experience

Fernando continued: “When we started working on the case, access to Antti provided a unique opportunity to understand the activities of Rovio in Japan.

“Although during the time of writing the case Rovio was enjoying strong and rapid growth, they were nonetheless really open towards us, and especially Antti was keen to share his insights and vision when it comes to gaining a foothold in Japan. Because we were collecting data for pedagogical purposes, perhaps that was also one of the reasons for Antti to be so committed to this project: he was directly feeding input to our teaching that, in turn, would provide our students with cutting edge knowledge about a quickly changing industry.”

Playing with the big boysangry birds

Irina added: “We believe the fact that Rovio has created an entertainment brand in reverse is what makes Rovio such a unique case.

“As the case shows, the implementation of their entertainment brand strategy has its own challenges, but it provides important lessons on how a small organisation can play by their own rules in an attempt to become a major player in the entertainment industry. The level of ambition and the relentless pursuing of global success by Rovio managers is particularly inspirational.

“Rovio’s case shows students how creativity, strategic vision, a certain degree of ingenuity and the confidence to challenge traditional business models, are key ingredients for companies that aim to grow quickly and create a lasting impact in their fields.” 

Keeping an open mind

Miikka concluded: “We’ve experienced that graduate students are generally open minded to the idea that physical presence is important in internationalisation, even in businesses centred in digital products.

“The case of Rovio is probably especially well suited to shed light on this issue, since the company relies on both digital and physical products, and the latter has been central in the growth of the business activities and the creation of a global brand.” 

About the authors

Mikka J. Lehtonen is Visiting Assistant Professor at Aalto University.
e miikka.j.lehtonen@aalto.fi
tw @MiikkaLehtonen

Fernando Pinto Santos is PhD Candidate at Aalto University.
e fernando.santos@aalto.fi

Irina Mihailova is Lecturer/Researcher and Head of International Business Master’s programme at Aalto University.
e irina.mihailova@aalto.fi

 

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