A Strategic Alliance Approach for the on-line Game Industry between China and Taiwan

A Strategic Alliance Approach for the on-line Game Industry between China

and Taiwan

Chia-Nan Wang

_{, Jen-Han Tsai}

_{, K.-L. Yang}

_{Department of Industrial Engineering and Management}

National Kaohsiung University of Applied Sciences

cn.wang@cc.kuas.edu.tw

2

_{Kainan University, Tauyuan, 338, Taiwan}

_{National Defense University, Taipei, 106, Taiwan}

Abstract

As the gradually growing market of China, many Taiwanese companies are finding new opportunities in China for extending profits. The strategic alliances for on-line game industry between China and Taiwan have become an important topic in this industry. Based on data envelopment analysis (DEA) and heuristic technique, this study proposes a new approach to resolve the issues. The objective is to provide an effective search to find the right strategic partner when an on-line corporation implementing strategic alliance between two countries, as well as the analysis of efficiency and resources distribution after alliance. Realistic data of 10 companies are collected from published stock market of both China and Taiwan. The results show that China Netease is the best combinations for alliance with most of the Taiwan companies. This is sound for enterprises to find the future candidates of strategic alliances by many industry peoples.

Keywords: Data Envelopment Analysis, Efficiency,

Strategic Alliance, On-line Game

1. Introduction

The estimated market sales of Taiwan’s gaming industry are 39.1 billion NT dollars in 2008, showed by Topology Research Institute [1]. Its growth rate will rise 58% and 60.9% for Taiwan and China, respective. For the rapid growth of online game, many Taiwan’s gaming companies target China as their biggest market chance. Investment in China market has become the one of the major trends. The purpose of this paper is to develop an effective approach to find the best candidate to assist Taiwan on-line companies to find the best candidate of alliance in China. Therefore, Based on data envelopment analysis (DEA) and heuristic technique, this study proposes a new systematic approach to resolve the issues. The objective of this research is to provide an effective search to find the right strategic partner when an

on-line corporation implementing strategic alliance between two countries.

Section 2 surveys the related literatures. The proposed approach is introduced in Section 3. Case study and result analysis are discussed in Section 4. Finally, concluding remarks and future directions are depicted in Section 5.

2. Literature Reviews

Charnes, Cooper and Rhodes (CCR) were first proposed model of DEA [2]. Its original idea comes from the measurement model of production efficiency proposed by Farrell [3]. DEA itself is a non-parametric method for assessing the relative efficiency of decision making units (DMUs) based upon multi-inputs and multi-outputs. The primitive DEA model adopts the concept of production in microeconomics: efficiency = output / input. Banker, Charnes, and Cooper (BCC) developed a new model from the CCR model to understand the problems of pure technical efficiency (PTE) and scale efficiency (SE) [4].

Most of DEA applications are focused on performance evaluation [5], [6], [7]. However, DEA can not only be used in performance evaluation and can be extended more. Some researches extend DMU to study strategy and merger [8], [9], [10]. This study tries to build a model to find the best merger candidate. An approach to investigating Information Technology (IT) on technical efficiency in a firm’s production process is developed by Shao and Lin [10] to measure the efficiency scores of IT firms. Nevertheless, none of above researches applies in technology oriented business and focuses on candidate selection of strategic alliance.

3. Proposed Approach

However, we face an issue of how to combine all the data on variables. Performance change after alliance could be good synergetic effect, or deteriorated. To simplify the issue, following assumptions are made: (1) All enterprises are seeking to increase efficiency by

Chinesegamer+Shanda 1 4 -3 Soft-world+Shanda 3 4 -1 Soft-world+Sohu 3 4 -1 Softstar+Sohu 3 4 -1 Chinesegamer+Haihong 1 5 -4 Soft-world+Haihong 3 5 -2 Gamania +Netease 6 5 1 Wayi+Shjuyou 4 5 -1 Wayi+Sohu 4 5 -1 Softstar+Shanda 3 5 -2 Wayi+Shanda 4 6 -2 Gamania +Shjuyou 6 6 0 Gamania +Shanda 6 6 0 Softstar+Haihong 2 6 -4 Gamania +Sohu 2 6 -4 Wayi+Haihong 2 6 -4 Gamania +Haihong 2 6 -4

From table 5, the results are separate to 3 groups and discuss below.

Group 1: Chinesegamer+Netease

Taiwan Chineseamer is 1st _{ranking and the virtual}

alliance, Chinesegamer+Netease, is still 1st _ranking.

This alliance is good choice to keep the competition to be the leading edge.

Group 2: Soft-world + Netease, Softstar + Netease, Wayi + Netease, and Gamania + Netease

Obviously, these are increase 1 rank. Soft-world, Softstar, Wayi, and Gamania can get advantages from alliance with Netease.

Group 3: others

For others, they can not improve ranking, so there is no any advantage for alliance.

Concluding Remark

By our proposed approach, the results show that Taiwan Wayi, Taiwan Softstar, Taiwan Soft-world or Taiwan Gamania allied with China Netease would be the best combinations. The results are sound for enterprises to find the future candidates of strategic alliances by many industry peoples. This approach can be applied not only to estimate each industrial alliance but also to bring up ameliorative projects for businesses.

There are several contributions of this research: (1) few of DEA related researches in the past focuses simply on profit efficiency. The accomplishment of this study can lead to future research with some intangible factors in the field; (2) this research discusses the topic of alliance and provides a new possible evaluation tool when enterprises consider exploring alliance in the game industry; (3) normally, all DEA related papers implement performance analysisfocusing on “score.” However, we believe that

under different circumstances, discussions made solely based on “score” can be misleading. Our approach conceived in this paper can better compare all factors subjected to assessment.

Future direction will be considered involvement with intangible resources for input factors or output factors, and the trend of inputs and outputs could be discussed as well.

6. Reference

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[14] Taiwan Stock Exchange Market Observation Post System. 2006; Available: http://mops.tse.com.tw/.