- Introduction to Relevant Literature
This chapter reviews the literature sources which provide relevant information and data for analyzing the chosen topic of applying the marketing mix in three chosen countries on the examples of three companies: Blizzard Entertainment (US), Rockstar North (UK) and Tencent (China). The main area for the collection of academic sources was marketing, as it is directly connected with the topic. Due to the reason that marketing in computer games is not extensively researched, I reviewed the literature on marketing, game industry and some sources about the three chosen companies, and did my own interpretation of the process of applying the concepts of marketing mix in the three companies based on the data about their products, popularity and revenues.
Comprehensive books as Dacko (2008), Hundekar, Appannaiah & Reddy (2010), Kermally (2003), Sherlekar, Prasad & Victor (2010) are used as general sources of marketing, which introduce the general theories and principles of marketing, and Wesley & Barczak (2010) presents the concepts of applying marketing strategies in the video game industry. Therefore, it was relatively easy to find relevant sources on the general theories of marketing, while it was difficult to get some exact references on applying the marketing mix in the three chosen companies.
2.2. Marketing Mix
This chapter presents the importance and the potential benefits of applying marketing mix while completing business plan and implementing marketing strategies and the possible limitations of applying the marketing mix in different countries.
2.2.1 The Importance and Benefits of the Marketing Mix
According to McDonald, Payne & Frow ( 2011, p.8), the main aim of marketing is to achieve the objectives of the organization and client’s objectives by matching the capabilities of the first with the needs of the second. The same source states that “since very few companies can be equally competent at providing a service for all types of customers, an essential part of this matching process is to identify those groups of customers whose needs are most compatible with the organization’s strengths and future ambitions”. Mentioning ambitions, the history of the development of Blizzard Entertainment is hard not to remember, as it was initially ran on sole ambitions and enthusiasm of its three founders. In the world of business, especially in the yet-to-be-developed segment, it is hard to rely completely on the pre-calculations of the business plan and on the marketing strategies mapped out in advance. When game industry just started developing, it naturally took the founders of the companies which later would become globally famous, a great deal of courage to enter the segment. However, since marketing mix had not only developed by then in its traditional form, but was already expended with the additional concepts, such as People, Professionalism, Point in time, etc (Dacko, 2007, p.335), it is evident that marketing mix could be already applied to completion of business plan and building short and long-term business strategies even in late 1980s. Sherlekar & Gordon (2010, p.5) mention the words by Paul Mazur, who defines marketing as “the creation and delivery of a standard of living to society”. In the context of game industry, with the progressive development of technology and the world having entered a digital informational era, the companies within the game industries and providing Internet services (in case of Tencent Holding) indeed carry a mission of introducing the society to newly developed technologies and services. By providing common users with software, chatting platforms, applications and PC games, the game industry helps the people get the benefits from the modern era of digital information and contribute to its development by raising the standards for the software and game developing organizations.
The same source says that modern marketing begins with the customer. Rowley (2006, p.2) says that “marketing has moved from its emphasis on products to focus on the delivery of customer value, and benefits that the customer appreciates”. Thus, based on this tendency, four main concepts of the marketing mix have been developed, as their combination is virtually oriented towards human aspects and reflect the reality of marketing being a social process. In order for the organization to create a marketing mix which will satisfy customers, it has to analyze what, where, when and how people buy (Danyi, 2008, p.19). While marketing mix might have Product in its main four concepts, it is most likely not to be for the reason of the organizations being solely product-oriented, but because product is what the consumer expects to get from the developer. People is most likely to take the first place among the concepts of marketing mix, since the business of goods and services is now human-oriented. The same source states that personal, psychological and social factors are the three main ones which affect a consumer’s purchase decision (p.22). For example, if the price for a product is affordable, the consumer takes into consideration his personal factor: “Yes, I can afford it”, psychological “The satisfaction of the product I buy will be worth the money I spend for it” and social “This product is affordable to the social class I belong to”/”This product is popular among others”. Opposite to the above-mentioned example, if the price is not affordable for the client, he may take it as personal offense “A brand, which I trusted, has changed his price policies and sets a price too high for me”, as psychological instability and uncomforting “I was going to buy this product, but as I cannot afford it, I am forced to buy the one I like less, but for cheaper” and as a social threat “I may not be in the right place in the social structure, because I cannot afford this product anymore”. Also, marketing introduces a concept named “attitude branding”, which “represents a larger feeling, which is not necessarily connected with the product or consumption of the product” (Geetanjali, 2010, p.238). For example, playing Warcraft rather than some less famous real-time strategy creates the feeling of belonging to the echelon of the people valuing the same product and being united with them.
There are fan clubs of all popular computer games, where the players share their hints, game stories, discuss the tactics, share cheating codes, sharing collections of items related to the game, etc. Another important thing about the marketing mix is concentrating on two business terms of segmentation: “niche marketing” and “target marketing” (Paley, 2006, p.20). Niche marketing is entering the market with the products and service to cover a segment which will deprive the competitors of interfering with your efforts (same as Tencent took a niche of providing the population with social networks, while such global social network as Facebook is banned from China). However, as a little correction to the previous statement, a Facebook user from another country may use other social platforms, such as Tencent, in order to cover certain gaps in Facebook’s social media maps (Gordon, 2013, p.127). Target marketing is aiming the product at a certain group of population. McDonald & Wilson (2011, p.227) expand the 4Ps of marketing mix and specifically explain how each of them can be addressed. For example, for Product, the product line could be extended (in case with the game industry, more physical copies of PC game can be released or double-released in case the first release has sold out, or a sequel of the highly popular and profitable game can be released, as with Grand Theft Auto, for example), change quality of features (for example, Rockstar North implementing 3D view in his GTA game). Another example is Tencent significantly expanding its chain of services by adding dating, e-mail, alumni clubs, portals, auction, online gambles, search to his QQ chat program (So & Westland, 2010, p.116-117), as well as providing its users with Mobile QQ Games and Mobile QQ Cinema (Greif, 2011,p.128). QQ is also an actively used Internet portal for expressing public opinion (Geall, 2013, p.90). Most certainly, it is for these reasons that Tencent’s users spend 780 minutes online per user per month (Winseck and Dal, 2011, p.40) and that Tencent already “enjoys a global presence” (Jin, 2010, p.56). For Price, price can be changed (in case of Tencent, it provides free services for its users). For Promotion, advertising or selling can be changed (for example, turning to in-game marketing, which is described by Cielen&Meysman, 2013, p.266). According to Fill & McKee ( 2012, p.20) advertising is “the focal point of the marketing communications mix”. For Place, distribution, service or channels can be changed. For example, Tencent, apart from providing online chat services, also provides web storage cloud portal.
Tencent also became a leader in brand advertising within the Chinese market in 2007 (Harden and Heyman, 2009, p.63). Apart from Place being one of the aspects of the marketing mix, place (geographical location of the consumers) can also influence the application of the marketing mix by the same company. As Rao (2006, p.179) suggests: “a problem facing international marketers is whether or not to use the same marketing mix for the same product in Eastern and Western markets where social and economic systems differ”. Of course, since Internet and PC games are developed for global purchase, it touches the aspect of multiple diversified nations becoming the consumers of the same product, and, therefore, applying marketing mix to the product line which is supposed to be spread internationally should be treated with great caution. For example, the source states that Western consumers are more responsive to discounts, while Eastern are more preoccupied with brands (p.180). While discounts depend on the present socioeconomic conditions or seasonal sales, brand carries more, as it is “a bundle of values, which is has to deliver” (Chunawalla, 2009, p.14). As mentioned by Cherunilam (2010, p.34) with referencing to Cateora and Keaveney: “the key to successful international business is adaptation to the differences in the environment that usually exist from one market to another”. Same as Tencent adjusted ICQ service to the Chinese language. Geographic location (ethnography) is also included into studies of consumer behavior (Nair, 2009, p.11).Also, Chinese political situation is more complex and uncertain than that of Western countries (Breznitz & Murphree, 2011, p.39) Domestic Chinese organizations engaged in the game industry have to analyze the current situation and calculate the possible future outcomes in order to set their priorities correctly and properly set up their business long-term objectives when making business plan and applying marketing mix to their business. As it has been previously mentioned, Chinese is more focused on the domestic market. However, having figured out that almost the same marketing mix can be applied to close Asian countries’ markets, Tencent, along with Naspers from South Africa, became a part owner of Indian ibibo ( an ecommerce and online transactions company) (Gupta, Pande & Wang, 2014, p.79).Therefore, it also influences applying marketing mix in these three different companies.
2.3 The Game Industry
Although spending time playing PC or video games used to be considered the domain of untroubled youth, there has been a considerable shift in the tendencies and more and more layers of the population get involved into this activity. Therefore, gaming has transformed from being an activity for young people to being a mainstream entertainment medium (Wesley&Barczak, 2010, p. 172). As Kline, Dyer-Witheford & De Peuter (2005, p.82) mention, “the game business is now central to the commercial colonization of cyberspace. The whole interactive game complex now operates within a globalized context characterized by both international expansion of markets and deep exclusionary digital divides”. The game industry and its products have become subjects for multidisciplinary research (Hjorth, 2011,p.2) More and more studies are turning to researching marketing, psychology, management, development and economy of the games. As Dovey says (2006, p.23): “Te computer game becomes a significant site of investigation since it is produced by the interplay between an increasingly lucid culture and a world that is increasingly technologically mediated”. With the millions of revenues and thousands of employees working for one corporation in different cities (in case with Tencent), the game industry has definitely come out of being a domain of solely young unoccupied males and now involves people of different gender, age and occupations. As Juul (2010,p.8) says, there are now more video game players than non-video game players in the United States and many Asian and Western countries”. The same source states that the average age of a video game player in the U.S. is currently 35 years. This must have definitely influenced the marketing mix, as it now should be oriented to much diversified public. Another peculiarity of the game industry is that its market is very concentrated, as there are only a few large gaming developing organizations, while minor or sole developers often simply cannot overcome what is needed to obtain a publishing contract (Laramee, 2002, p.173).
So, there might be an assumption that for most large companies, successful application is not needed for getting their product on the market and raising brand awareness, as their name already constantly appears on the shelves of gaming stores. What they are likely to be more concerned about is standing the competition and satisfy their loyal consumers’ expectations. In this context, applying marketing mix has a whole new meaning. Also, from the standpoint of the approach of the game industry changing from it being considered an unserious activity to anticipating its benefits and advantages, gaming industry can be also viewed as a psychological stimulator. Sicart (2009, p.111) states that the strategy game is “designed to encourage conflict”, while Cuddy & Nordlinge (2009, p.4) argues that “in-game events can be just as real, important and meaningful as real life events”, it is evident that solving conflicts, being exposed to virtual danger, being challenged and striving for higher results within a game may also develop the real-life skills in a gamer. As all nations have their own mentalities and define danger, fear, life-threatening situations, etc., differently, the game developers need to take it into consideration when developing a game. Also, Calleja (2011, p.58) states that such in-game abilities as reflexes and hand-eye coordination in multiple players games can do little in battling for victory, while “the measure of one’s ability is determined by the abilities of other players”. Transferring it onto the real life situation, we can see the following. An applicant is not hired for a position simply because he presented a well-written CV, but his skills and abilities are evaluated in comparison with other applicants. Since many players are attracted to a specific games (such as Grand Theft Auto), the storyline as a part of defining the Product marketing mix is an important step. As stated by Brown (2008, p.4), “the growth of the industry depends on the theoretical reconciliation of game and story and support of skilled writers”. Since it has been stated above that the game industry has shifted to be a more “sophisticated” and work and thought-involving activity, this industry “demands the attention of game designers”. Logically following from the previous statement, it is obvious that although multi-player games are popular, it is important for them to have a captivating storyline, because the sole interaction between the gamers will not suffice. As Soria & Maldonado (2010, p.8) mention, “the load og a game depends not only on the number of active concurrent players, but also on the number and type of their interactions”. For such products, the marketing mix should imply professional storyline developers and professional programmers.
Another remark about the gaming activity during the early stages of its development was that it is a passive time-passing, and is, therefore, undesirable for teenagers. As Rutter (2006, p.137) states, “any act of media consumption is an active process”. As has been numerously mentioned above, computer gaming has indeed become a medium of media consumption. Moreover, the same source states that “the interactive playing of a digital game is not necessarily a more active practice than the interpretive engagement with non-interactive media consumption”. Therefore, game developers also need to realize the responsibility and properly utilize the possibility of conveying certain messages in their product (Product aspect of marketing mix). Game industry, being a medium of information and containing various aspects of globalization, contributes to the society not only by offering some type of activity for spare time, but also by developing an individual, motivating him and encourage him for competitiveness. According to Jackson, “computer games demonstrate successful pedagogical techniques that can be used in learning across academic disciplines” (2004,p.22). Also, visual literacy and multimodal texts (which mix words and images) are also present in the game, so it makes the product of the game industry a method of learning and developing literacy (Gee, 2003, pp.13-14). Unlike conventional books or other literature sources, adventure games are non-linear and present a high level of interactivity (Choi&Loo, 2002, p.100).
Another source (Corneliussen & Rettberg, 2008, p.6) talks about the usage of players’ knowledge when he is dealing with fantasy-based game. As an example it mentions World of Warcraft, which is a product of Blizzard Entertainment, which is one of the chosen companies for this research. Therefore, it partially answers the question of how the marketing mix aspects Product and Promotion are applicable to this specific game. Not only the users find this role-playing game in a fantastic world highly attractive, but their parents, having found out about how the game process may benefit the individual development of their child, can be more tolerant towards and more approval of their child’s gaming activity. Another proof to the statement of gaming beneficial for developing certain skills may be the fact that simulation games “have long been used in the army as a tool for equipping soldiers with exposure to situations which cannot be enacted in our life without enormous experience” (Choi & Loo, 2002, p.100). Even as controversial concept as cheating has been considered to be useful in gaming and viewed from a whole different point: “The advantage falls to the cheater because the cheated person misperceives what is assumed to be the real world” (Davidson, 2005, p.96). The abovementioned statements prove that the game industry is studied and research across the disciplines and its marketing cannot be prescribed to the discipline of Marketing solely, as even applying the basic marketing mix to the different countries’ business varies and requires various disciplines to be taken into consideration. The abovementioned statements prove that such disciplines as Political Science, Geography, Geopolitics, Economy, History, Psychology, Education, and Ethnography need to be in consideration when trying to figure out the ideal combination of applying marketing mix in a certain country.
2. 4 Blizzard Entertainment
Blizzard Entertainment entered the game industry at its very beginning, when transition in the PC space was only starting, and many opportunities were open for those seeking to take this niche of business. Even then, the founders of the company demonstrated good sense of being in the right place at the right time – a very important factor in business. The history of this game industry giant began in February, 1991, when, having just graduated from UCLA, Allen Adham, Frank Pearce, and Mike Morhaime founded the company Silicon & Synapse in Costa Mesa, California (Clayman, 2014). They were already good friends in the university, so their further cooperation was strengthened by their common goals and perspectives on running the business and developing games. Adham became president for the newly established company, Morhaime became his vice president and Pearce became their programmer (Werner, 2011). The company started off with releasing RPM Racing for the newly released Super Nintendo just a year after the company had been launched, and became the first in the United States to release a game for this particular system (Werner, 2011). Then this small company released Rock&Roll Racing and The Lost Vikings for the Super Nintendo Entertainment System, with both games combining a humorous approach to the gaming technique and good music background. Even being a little company with a handful of employees, Blizzard Entertainment, then known as Silicon and Synapse, demonstrated a qualified approach towards proper addressing the product’s “benefits” (or “satisfactions”) – taking into consideration not why the costumers buy their products for the sake of the products, but for the sake of what this products give them (Ruskin-Brown, 2006, p.104). Of course, the company runners were then more likely ruled by the enthusiasm than by some mapped-out marketing strategy, however, it was a good start. The company was awarded with “Best Software Developer” from Videogames Magazine in 1993 (Werner, 2011). The same year, the company changed their name to Chaos Studios. Despite their quick success, the company suffered from the lack of funds and could not develop further. The enthusiasm and love for what they were doing were certainly taking the 15 employees far, but only in perspective, as they desperately needed some financial back-up for their developments, equipment and innovations. In 1994, already under the name of Blizzard Entertainment, the company released the first version of Warcraft. Multiplayer games were relatively new at that time, so Blizzard Entertainment demonstrated a proper application of the Product concept of the marketing mix by properly addressing consumers’ benefits. However, it only benefited to the “dedicated fantasy game enthusiasts”, because common consumers did not have enough money and know-how to play the game. Nevertheless, Warcraft was the first real-time strategy game (Werner, 2011), so it put Blizzard Entertainment to the role of the pioneers and opened a wide horizon of possibilities for them. Blizzard Entertainment was soon acquired by Davidson&Associates for $6,75 million – not a bad number for a company only existent on the market for five years by then (Bailey, 2014).
A year later, WarCraft II: The Tides of Darkness had made the company a leading PC developer. When Blizzard acquired Condor Inc., a Californian gaming company, later named Blizzard North, it became responsible for Diablo, Blizzard’s next hit. With the release of Diablo, the company demonstrated the application of two aspects of the extended marketing mix: Promotion and Point at Time. First of all, a free online service was launched for the players to play simultaneously; therefore, more and more people became familiarized with and engaged into the game (Referenceforbusiness, 2014). Also, the game was released after the Christmas buying season, so it was a good time to stand away from the competitiveness from other game developers and introduce a new game after all the shopping season mess. The same source states that the third version of Warcraft (Reign of Chaos) was released in 2002 and became the “fastest selling PC game ever”. This record was then broken by their next version, World of Warcraft, in 2004. With as many as 1,5 million purchases in North America, the game expanded to Europe and China, where, despite the Chinese preference to their domestic game industry products, it soon outnumbered North America in the number of players. Therefore, the game was the best in its category. Such high popularity was achieved by the combination of many factors: the game was well-designed and had fantastic graphics and music, great storylines, common availability and affordability. Thus, Blizzard Entertainment filled their niche in the game industry and applied the marketing mix to their products. For example, distribution of game in Asian countries was deemed to be potentially unsuccessful to the competitors, however, Blizzard Entertainment went ahead and created a good game which was internationally focused and provoked interest in diversified audience. Their games went from being a product of the company founders’ enthusiasm and creativeness to the mainstream games popular all over the world.
2.5 Rockstar North
In 1988, David Jones, Russel Kay, Steve Hammond and Mike Dailly launched a company called DMA design. Scotland-based company released Lemmings, a 2D platform two years after the company was set up (Giantbomb, 2014). With the game selling over 20 million copies, it is evident that the company made their step forward to gain the audience attention and confirmed itself as a promising developer addressing the consumers’ needs (the game was released on three different platforms, thus, making it more available and included Christmas special editions, thus, ensuring its selling during the shopping season). The company then had a great chance to enter Asian market, alike Blizzard Entertainment, when Nintendo asked it to design a game called Body Harvest, however, DMA dropped this idea after numerously adjusting the game to the Japanese market to no avail. While Blizzard Entertainment simply chose to design a game which would be interesting and “global”, with no specific geographic specialization, thus making its worldwide distribution more probable, DMA failed when making multiple changes to the Asian-oriented game. Nonetheless, the experience with development of Body Harvest was put in use during the design of Grand Theft Auto for the PC. With including display of violence and provoking negative feedback in the British press, the company ensured game’s success (Giantbomb, 2014). By the end of the 1990s, 3D view had started being implemented in PC games, so DMA granted consumers’ satisfaction with the 3D spaces and jump from a top-down view in Grand Theft Auto II (Nitsche, 2009, p.2) and navigable 3D world with extended parameters of the game in GTA III (Bogost, 2007, p.43).
The same source explains the consumers’ satisfaction with playing GTA III with the game being interactive, wide possibilities for player manipulations, gameplay effects, and mental synthesis. 89% of games were reported to contain violent content in 2001 (Rutter, 2006, p.208). However, controversies only fueled people’s interest to the game. The 2004 GTA: San Andreas game by Rockstar North, also rated as “one of the PS2’s best-selling and highest rated games” (Wesley and Barczak, 2010, p.xiii) contained racism, violence, shootings and explicit sex, however, as the same source mentions, the link between video games and real world violence is not straightforward. Therefore, Rockstar North was successfully applying the Place aspect of the marketing mix: releasing a game which simulated the reality of American history and catered to young players’ “cybernetic loop” between the player and the game. GTA IV was released in 2008 on the Xbox 360 and PS3, thus, making it more affordable and available for the wide circle of customers. GTA V, released in 2013, broke six new world records (Lynch, 2014). It sold 11,21 million units within the first 24 hours and the overall revenue was estimated to be $815,7 million after just three days after the game was released. Evidently, proper applying the marketing mix and producing good-quality innovative and creative product helped Rockstar North reach such high levels. Their Product was designed with excellence, the Place was chosen wisely, as “video games were reported to have become the UK’s most popular form of entertainment” and “during the period 1996-2009, in the U.S. the number of video games sold for use on a console or PC increased from 73,3 million unites to 273,5 million” (Young, 2013, p.1). Promotion was done mainly based on the company’s already earned positive reputation and controversies concerning violent content, which fueled public’s interest. The set price was affordable, and as the majority (67%) of households had a gaming console or a personal computer (Young, 2013, p.1), the game’s accessibility could not be put in doubt.
Tencent Holding is headquarted in Shenzhen, China and was founded in 1998 (Westland & So, 2009, p.114). Being a dominant chat provider, Tencent has become the largest internet company in China (Breznitz & Murphree, 2011, p.39). Tencent is the operator of popular social networks and apps in China (with the revenue of $291 million in the first quarter of 2014), and reaches over 180 million daily users on its game distribution channels (Hong, 2014). Although Tencent does not fall under the category of PC games developers, it is still a large provider of mobile games and applications, and it is actively applying the marketing mix to its business planning and strategies, which is proved by its high revenue and a great popularity of its products. The key reason of Tencent Holding’s success and popularity among the users is a free Internet messaging service and powerful portal-based services (Chaze, 2010). Tencent also offers a 10 TB (10240 GB) free cloud storage (TechBlog, 2014). Since Facebook, the largest social network in the world, is banned in China, providing opportunities for online chatting to the consumers is a good option for addressing their needs. Therefore, the Product aspect of the marketing mix is successfully applied by Tencent, since the company provides the services which have a mass audience and do not have many competitors in the country. The Place aspect of the marketing mix is addressed by Tencent with “taking the best ideas from foreign technology service providers and Internet content companies and adapting their systems to the Chinese market (Breznitz & Murphree, 2011, p.161). For example, the same source states that in 1999, Tencent “wrote a Chinese-language imitation of then globally popular instant messaging software ICQ” (p.175). Now, QQ (the name of the Shenzhen version of this software) is the most valuable brand of Tencent. In 2004, the Internet portal QQ.com was launched, and soon became the most visited website in the country (p.176) Although at first such high popularity created problems for the company by requiring much money needed for supporting computer servers, it soon attracted many investments. Also, narrow local specialization of the company aimed mainly at developing and releasing services in China deprived the company of the possibility to attract many talented and skillful researched from abroad, it resolved the problem by dividing the company’s responsibilities between Beijing, Shanghai and Shenzhen. So, it is evident that from the start, the company mainly focused on adapting foreign services to the Chinese realities, but later it started developing its own software and became much more successful. Another positive aspect of applying Place to the company’s progress is China’s restriction on certain types of content, so domestic operating environment and the absence of foreign competitors’ offerings play its role in raising Tencent’s popularity (Chaze, 2010, p.103). There are over 420 million Internet users in China (Chen, Batson & Dang, 2010) – more than the total population of the United States. Therefore, the company is well provided with potential users. Another good factor of orienting the business domestically was because Tencent was barely affected by the world crises of 2008. As Tencent’s services and portals are mainly free of charge, it means that they are commonly affordable (the Price aspect is addressed). Also, due to high popularity of its content, Tencent can advertise its new products within the existent ones (applying Promotion aspect).
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