The Valve Corporation: High-Quality Products

Introduction

The Valve Corporation is a video game developer and a digital distributor. A number of computer games created by this enterprise, such as Half-Life, Counter-Strike, and Portal, are some of the most popular video games in the world (Kelion n.pag.; “Case Study” 1). The Valve L.L.C. was created in 1996 in Kirkland, WA, by two former Microsoft employees, Mike Harrington and Gabe Newell. In 2003, it moved to Bellevue, WA, and was incorporated; the name of the organisation was changed to Valve Corporation. Since its inception, the company managed to become one of the most well-known video game developers and earn tremendous revenues while retaining relatively small size; it is a medium business, consisting of only a few hundreds of employees (Valve n.pag.).

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How was Valve able to achieve such success? An attempt to answer this question is made below.

The Challenge

The company, as was stressed, was started in 1996. Its first major game was released in 1998, which provided the enterprise with the recognition of the gaming public, as well as with large quantity of sales. However, it is stated that the organisation was still just one of the companies that produce video games, and it was needed to find a business model which would allow it to be different from its rivals and gain a sustainable competitive advantage. In addition, it was necessary for the company to address the problem of digital piracy, which posed a considerable threat to the profitability of the business (“Case Study” 1).

There was also another issue. For any company, the organisation of the working process is of paramount importance if it is to be efficacious. While it is considered an obvious truth that an enterprise needs to have a hierarchical structure of leaders and subordinates in order to operate effectively, the creators of Valve decided to utilise a different way to organise the working process of its employees (Kelion n.pag.).

The Journey

In order to become one of the leaders of the video games market, Valve took a risky step which would potentially differentiate it from most other computer games developers. Namely, the company decided to create a new digital distribution platform; this platform was named Steam. It was intended that Steam plays the role of a game update interface which would be user-friendly; but another aim of the project was to permit for considerably limiting the online piracy that Valve was suffering from (“Case Study” 2). A significant problem related to this was that customers might have dislikes having to use the online platform in order to play the games; in addition, the whole model was new, and the clients were not accustomed to it (“Case Study” 2).

As for the organisation of the working process, the members of the Valve enterprise disliked the idea of the traditional hierarchy in the company. Thus, it was decided to build a company in which there would be no traditional hierarchy (Warr n.pag.). This turned out to be a highly effective solution for Valve.

The Solution

The Steam platform was initially met with suspicion, for gamers do not usually like the necessity to register online in order to play a game. However, although this step was quite risky, it was hypothesised that the convenience of the platform would win the customers over and that ultimately it would allow the company to win its battle with the online pirates while not losing a significant amount of clients.

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As for the organisational structure of Valve, the company adopted a horizontal, hierarchy-free structure of its workforce from its very inception (Valve n.pag.). Every worker of the enterprise is free to start their own project if they are able to find colleagues who would also become interested in that project. There are no managers or bosses in the company; the pay for a particular employee is decided by the whole collection and is based upon one’s performance (Warr n.pag.). In fact, there is virtually no structure; the company is anarchic.

The Implementation

Therefore, Steam was made the basic platform for the games created by Valve. In spite of the fact that the clients had to register, it became widely liked by the clientele because of its convenience; it allowed for easy access to digital content, permitting the clients to download it without any problems, as well as providing the features of cloud storage, customer profiles, tracking of gamers’ achievements, and so on (“Case Study” 2).

It is also important to stress that Valve provided its clients with high-quality customer support. The enterprise participated in the creation of game mods and made efforts aimed at the incorporation of the mods created by fans into its games. This also considerably improved the favourable attitude of consumers towards the organisation.

The hierarchy-free structure that was implemented in Valve allowed for ensuring that workers only do what they want to do and what they consider interesting. The workers in Valve do not have to follow the directives of managers who, due to the fact that they do not possess expertise in software development, often may not understand the nuances of the work. The projects which find not support do not waste the time of the employees, whereas interesting projects with great potential get much attention and interest, ensuring that the results of the collective’s efforts are of high quality (Kelion n.pag.).

The Results

Therefore, it is possible to state that the steps taken by the company allowed it to become one of the most widely known game developers in the world. The profits of the company are also estimated to be very high. Unfortunately, Valve has always made a considerable effort in order to hide its revenues, so it is difficult to precisely assess its profitability. However, there exist numerous estimates of the company’s financial situation.

For instance, it is stated that in 2014, Valve made a revenue of approximately $730 million. Out of these, the revenue made from Steam were neat $330 million, and the gross sales from Steam were equal to $1.5 billion (Murray par. 2-4). Simultaneously, it is claimed that in 2015, the gross earnings from Steam in 2015 were $3.5 billion (Haddi par. 2). Here, it should be noted that the number of company’s employees is equal to only a few hundred.

The anarchic structure of the organisation also proved to be extremely efficacious for Valve. In fact, it allowed for the creation of a friendly and enthusiastic atmosphere where each employee is empowered to do what they are interested in, yielding high workforce output and permitting for creation of high-quality products only (Kelion n.pag.).

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SWOT Analysis

The SWOT analysis for the current situation for Valve is provided below.

Strengths

The Steam platform still remains a major strength of the Valve Corporation, allowing for profound and effective customer support, as well as safeguarding the company form the attacks of digital pirates. Clients are able to purchase games from their home, which provides them with additional ease. The company pays much attention to its clientele, taking into account the desires of their games’ fans.

Weaknesses

The products created by Valve require their users to have access to the Internet in order to enjoy the full experience from gaming. In addition, this means that the clients cannot enjoy the games when the company’s servers are down.

Also, the company has only developed a relatively small number of original games.

Opportunities

The enterprise has a variety of opportunities. In fact, numerous fans of their products are eagerly awaiting the creation of sequels to their favourite games. However, Valve makes no haste to create sequels or new games, probably due to the fact that the revenues of the enterprise are rather high even without them (Murray par. 5). In addition, because the Internet and computers become more and more widespread, Valve has all the chances to gain even more new customers in the future.

Threats

It is possible to hypothesize that most important threats for Valve come from other online gaming platforms, such as Battle.net, Windows Live, and EA Origin. However, the organisation has all the chances to deal with these threats, for, as it was stated, there are numerous fans awaiting the release of new games and sequels from Valve.

Conclusion

Thus, since its creation in 1996, Valve was able to become one of the leading game developers in the world. Its online gaming platform, Steam, was met with approval by its customers, simultaneously allowing for safety from piracy. At the same time, the horizontal, anarchic structure of the company permitted its employees to take great joy in their work and ensured that only interesting and promising projects were developed, leading to a high-quality product. In spite of the fact that the company is a medium-size business, its revenues are very high, and appear to be growing further from year to year.

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Works Cited

Case Study: The Dynamic History of Valve: From Game Developer to Console Manufacturer. n.d. Web.

Haddi, Abdul. Steam Sales 2015: Valve Has Generated a Total of $3.5 Billion from Paid Games. 2016. Web.

Kelion, Leo. Valve: How Going Boss-Free Empowered the Games-Maker. 2013. Web.

Murray, Steve. Report: Valve Made $730 Million in Revenue in 2014. 2015. Web.

Valve. Our people. n.d. Web.

Warr, Philippa. Valve’s Flat Management Structure ‘Like High School.‘ 2013. Web.

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