...Five Forces Analysis of the Video Game Industry The five forces that drive industry competition, a model established by Michael Porter, are; threat of substitution, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and intensity of rivalry. The video game industry must deal with all five of these forces. The analysis of the strength of these five forces within the video game industry will help to draw a conclusion as to whether or not it is an attractive industry for Sony to be in. The threat of substitutes in the video game industry is relatively low. Most customers are looking for a console that they can play games on and there really isn’t much else to choose from. One could say that computer gaming, although still technically video games, is a potential substitute. Almost every household in America at least has one computer, so it is much easier for customers to just purchase games for their computer rather than buy a new console altogether. Computer gaming is not much of a threat to the video game industry because customers seek the different type of gaming experience that the consoles offer that a computer cannot, such as motion control for the Wii, and special controllers for the Xbox and the PlayStation 2. Clearly the threat of substitutes is not very large in the video game industry. The threat of new entrants in the video game industry is moderate. The three key players in the video game industry are Microsoft, Sony, and Nintendo....
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...Five Forces Analysis of the Video Game Industry The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It includes video game consoles, game software, handheld devices, mobile games and online games. The video gaming industry has been growing exponentially in recent years with Sony, Microsoft and Nintendo competing for the higher profits in the market. This essay will analyze each of the five forces acting on the industry: threat of new entrants, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among existing firms. Then it will be determined if the video game industry is still an attractive industry for Sony. The video game industry has high entry barriers because of its high research and development costs, and capital investment needed to start a business in the console industry. The cost required to develop and manufacture a product that could be a decent competitor in this market is too great for a non-established company in this industry. The technology that is needed to be successful is too advanced for new competitors to achieve. For this reason, the threat to Sony, Microsoft and Nintendo of new entrants, was not very high in 2008. Additionally, Sony’s PlayStation, Microsoft’s Xbox, and Nintendo’s gaming systems were very well established names in the industry. The prestige of these products was so strong that it...
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...The video game industry is the economic sector involved with the development, marketing and sale of video games. It encompasses numbers of job disciplines and employs a lot of people worldwide. It includes video game consoles, game software, handheld devices, mobile games and online games. Console is the largest segment in the industry. In recent years, the video gaming industry has been growing rapidly and it may grow in the future. The three main competitor companies in this industry are Microsoft, Sony and Nintendo. Microsoft is a multinational computer technology corporation that specialize in software such as Microsoft Windows operating system and the Microsoft Office suite. But what is more important they are best known for their consumer products Xbox. Sony is one of the biggest manufacturers of electronics, video, communications, video game consoles, and information technology products for the consumer. The latest generation of its console game products is the Playstation 3 which replaced Playsation 2.Finally Nintendo is one of the largest Japanese technology companies well known for its console games. Its latest and the most successful console Wii was able to outshine Microsoft’s’s Xbox and Sony’s PS3. Analysis of the competitive industry Organizations view competition in an industry as a crucial issue that needs to be analyzed. In terms of economic theory (cited by Johnsons et al.) industry may be defined as “a group of firms producing the same principal products”...
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...Business (Hons) 1. What are the defining business and economic characteristics of the video game console industry? What is the industry like? The video games industry in essence has brought arcade video games to the home of the user. Firms involved in the games console industry design, manufacture and bring to the market a host of video games consoles and games software. The introduction of the video game console in the early eighties allowed users to play video games at home by connecting the console to the users TV as opposed to traditional coin operated video games machines found in arcade centers. This innovation allowed the video game console industry to grow as the size of the potential market increased. The industry has seen periods of growth and decline over these past few decades with record sales of $23.1 billion in 2008. External factors are those factors relating to and impacting on business growth over which a firm has no direct influence or control. Such factors affecting growth within the video games console industry include advances in technological factors. These relate to not only how the games console looks and performs (graphics and speed) but also in the processes and operations involved in bringing the console to market (R&D and value chain). Increasing internet availability and trends towards online gaming will also impact heavily on the console market. Societal factors have also had a huge impact on...
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...Nintendo has focused on video game consoles and with the introduction of the Nintendo Wii console the company gained a strong hold as a leader in this industry. In 2008, Nintendo experienced various production and legal issues. However, their most significant challenge during this time was identifying and investing in innovative products that would allow the firm to continue to expand in the video game industry; while defending itself from rivals (Sony and Microsoft). Our analysis is based on various analytical tools, including SWOT (Appendix A), segment analysis (Appendix B), competitive strength assessment (Appendix C) and financial ratios (Appendix D). Overall, Nintendo has several opportunities and strengths of which they can take advantage to stay competitive in the market. However, their competitive threats and weakness pose significant financial challenges for the firm. Based on our analysis, we considered the following alternatives: 1. Continue to focus on the existing marketing strategy by differentiating itself from the competition; 2. Expand the video game product line to include games with improved graphics and functions for the current Wii in an effort to expand their customer base; 3. Invest aggressively in research and development to create a new video game console that takes into account the requirements for both the non-gamer and traditional gamers; and 4. Continue to differentiate itself from the market by expanding into gaming through social media...
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...……………………………………….……3 Industry analysis ……………………………..………………….……...…......4 Competitors strategy ……………………….……………………………………. Microsoft – A differentiator………………………….…......7 Sony – A differentiator ……………………….…………………9 Analysis of competition………………………………………………………11 Nintendo’s strategy …………………………………..……………………….14 SWOT ………………………….…………………………………………………….17 Recommendations …………….………………………………………………18 References ……………………………..………………………………………….20 Introduction The first video game was created in the 1960's. Half a century later, the industry of video games represents a 42 billion Pound industry. The recent significant increase in this industry is due to the growth of broadband, the adoption of more robust wireless networks and phones, and the consolidation of game developers and publishers. This global turnover is divided in two parts: the software component is worth (32 billion pound) and the hardware component is worth (10 billion pound). Some recent analysis shows that there is about 300 millions of players in the world. It is quite difficult to find the exact number because a game or a console can be used by more than one player. The Video Game Hardware market is dominated by three main competitors: Nintendo (49%), Microsoft (30%) and Sony (21%). While the video game software market is dominated by four companies: Nintendo (19%), Activision (12%), Electronics Arts (11%) and Konami (5%). These figures indicate that Nintendo is the leader on the video games market, on hardware...
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... February 17, 2015 Critical Issues After an analysis of the current situation, Blue Orb Inc. needs to address the following: • Transition Path from a research-orientated organization into retail oriented business • Strategic business decision regarding marketing plan for SwitchBlade Pro o Inability to convert free subscribers to paid subscribers o Whether to accept The FightWare Proposal as a part of marketing campaign o Whether to do in-house promotional SwitchBlade Pro gaming competition as a part of marketing campaign Situation analysis Blue Orb Inc. must develop a comprehensive marketing strategy in order to create awareness for their SwitchBlade Pro software to generate revenue. They are in this situation due to a low volume of paid subscribers. They need to convert free downloads to subscriptions. They have an excellent software program and Blue Orb believes when gamers use SwitchBlade they will like it. The inability to get the word out has hindered Blue Orb’s market share as well as sales. Blue Orb’s weakness is its lack of promotional efforts as the awareness of SwitchBlade is relevantly low with a deadline of mid-September, and its strength is that they offer a differentiated product and offer 15 years of active business. Their opportunities involve creating a partnership with hardware and software companies however this requires obtaining 10,000 paying consumers (see Exhibit 1: SWOT Analysis). In addition, a low barrier to entry enables competitors...
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...Five Forces Analysis of Video Game Console Industry Threat of Substitutes: The main substitute for a video game console would be a personal computer. They can both be used for playing different types of video games and be used for entertainment. The threat of this substitute edging out video game consoles is very low, because they are not completely similar. If anything, video game consoles are edging out personal computers in the gaming industry. The threat of substitutes in the video game is not very high. In 2008, this was not a very strong force in the video game industry. Threat of New Entrants: In 2008, the threat of new entrants was not very high. Sony’s Playstation, Microsoft’s Xbox, and Nintendo’s gaming systems were very well established names in the industry. The brand identities of these products were so strong that it would be very difficult for a new player to enter the game at this point in time. Many years prior to 2008 this was not the case. Many new companies tried to enter the market, some, like Microsoft, succeeded, others, like Sega, did not fare as well. In 2008, the Threat of new entrants, is not a strong force in this industry. The cost required to develop and manufacture a product that could be a decent a competitor in this market is too great for a non-established company in this industry to be able to compete. The technology that is needed to be successful at this point is too advanced for new competitors to achieve. Although at times the threat...
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...Executive Summary: In the report, we addressed the Nintendo's external and internal analysis. We analyzed the years from 2010 to 2014. First, we briefly introduced the company and the most notable events. In the external analysis, we applied some of the most-known applications to evaluate the external environment of any given company. That includes PESTEL, Michael Porter's five forces model and SWOT analysis. We also evaluated the internal factors of Nintendo taking into account its financial statements through the past four years. In addition to some financial ratios such as net profit margin, current ratio, debt ratio, inventory turnover and assets turnover. Finally, recommendations have been placed based on the internal/external analysis from our perspective as a Chief Operating Officer of Nintendo. Introduction: Nintendo is a multinational consumer electronics company located in Kyoto, Japan. It is considered as the world's largest video game company by the value of its revenue. Fusajiro Yamauchi founded it on1889; where it originally produced handmade playing cards. In 1963, the company was trying several small niche businesses, including cab services and love hotels. The company relinquished the previous ventures in favor of toys in the 1960s, Nintendo. In the 1970s, it developed into a video game company, substantially becoming one of the most effective in the industry and Japan's third most-valuable listed company with high market value. Nintendo of America is also...
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...Esmir Hadzic 661035592 Intro to Management 2/4/14 Five Forces Analysis of the Video Game Industry As in every industry, there are five competitive forces that determine the intensity of competition between the different players. These competitive forces are; the threat of entry of a new company in the industry, the threat of substitution by another product, the bargaining power of the buyers, the bargaining power of the suppliers, and rivalry among currently existing competitors. These competitive forces are easily seen in the video game industry, as there is already immense competition in the industry due to the similarities between the few major companies at play. Sony, Nintendo, and Microsoft are the three large players in the present day video game industry. Sony Computer Entertainment Inc. has been a dominant company in the industry for over a decade with the PlayStation 1 and PlayStation 2 platforms; however, it is struggling to stay at the helm of the industry due to the presence of these competitive forces. The threat of entry of a new company in the video game industry is a relatively weak competitive force for Sony. The video game industry is already dominated by three major players (Sony, Nintendo, and Microsoft), thus the possibility of a new entrant in the industry is very low. Nintendo was established well before Sony as a major player, and Microsoft came into the industry in 2001 with the original Xbox. When Sony came in with the PlayStation 1, they...
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...Nintendo Wii Marketing plan Table of Content 1. Situation analysis 1.1 Macro analysis 1.2 Micro analysis 1.3 SWOT analysis 1.4 Bowman’s strategy clock 1.5 The Product Life Cycle 2. Target Market 2.1 Positioning 2.2 Segmentation 3. Marketing Mix 3.1 Product 3.2 Price 3.3 Promotion 3.4 Place 3.5 People 3.6 Physical 3.7 Process 1. Situation analysis 1.1. Macro environment The PESTEL analysis describes a framework of macro-environmental factors. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. 1.2.1. Political The video game industry is influenced by factors such as taxation policies, foreign trade regulations and social welfare policies (some games have sexual/violent content). Video games tend to play with the emotions of people. Governments have the authority to control the content of the video game frames. 1.2.2. Economic The income of the consumers in the video game industry have an effect on their buying behaviour. If people fall under a low-income range, they might not be able to buy a video game because they are relatively expensive. 1.2.3. Social Factors that can influence the video game industry are: income distribution, lifestyle changes, level of education, population demographics, attributes to work, consumerism, etc. Nintendo’s action to open World of...
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...3 External Analysis …………….…………….…………………………………………………………………………………….. 3 PESTEL Analysis ……………….……………………………………………………………………………………………. 4 Political Factors ……………………………………………………………………………………………………. 4 Economic Factors …………………………………………………………………………………………………. 4 Socio-Cultural Factors ………………………………………………………………………………………….. 5 Technological Factors ………………………………………………………………………………………….. 6 Environmental Factors ………………………………………………………………………………………... 7 Legal Factors ……………………………………………………………………………………………………….. 7 Five – Forces Model ……………………………………….……………………………………………………………. 8 Supplier Power ……….………….…………....………………………………………………………………… 8 Buyer Power ………………………...……..………………………………………….…………….…………… 9 Degree of Rivalry ……………………….………..……………………………………………………………. 10 Threat of New Entrants ……….………....……….……………………………………………………….. 10 Threat of Substitutes …………….……….……………………………………….………………………… 11 Conclusion ....……. ………………..………………………………………………………………………………………….. 12 Problems and Solutions …………………………………………………………………………………………… 12 Works Cited ………………………………………...…………………………………………………………………………... 14 Introduction Gabe Newell, a Harvard drop out, began working for Microsoft in 1983. Newell spent thirteen years at Microsoft and emerged as a “Microsoft Millionaire.” Newell and his co-worker Mike Harrington left Microsoft in 1996 to begin their own company. The inspiration came from another former Microsoft employee named Michael Abrash. Abrash departed Microsoft to assist in creating the video game Quake at...
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...(5 points) Nintendo is a company that creates video games and game consoles. Nintendo is the creator of the Game Boy, Super Nintendo, Nintendo DS, Nintendo 64, Nintendo GameCube and of course the Wii. Nintendo is only one of the few companies that create gaming systems, and is in constant competition with Sony (PlayStation) and Microsoft (Xbox). Nintendo’s revenues in 2009 were $19,308.1 million, with a net income of $2,930.8 million. 1. What are the defining businesses and economic characteristics of the video game console industry? What is the industry like? (10 points) 2. What is competition like in the video game console industry? Do a five-forces analysis to support your answer. Complete the following as part of your answer. Make sure to explain the reasons for your answers. (10 points) a. The bargaining power and leverage of buyers is a ________ competitive force b. The bargaining power and leverage of suppliers is a _______ competitive force. c. Competition from substitutes is a _______ competitive force. d. Threat of entry is a ________ competitive force. e. Rivalry among competing video game console producers is a _______ competitive force. Overall assessment: 3. What forces are driving changes in the video game console industry? Are these driving forces acting to make the industry more or less competitively intense? Are the driving forces acting to make the industry more or less profitable...
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...The Video Game Industry An Industry Analysis, from a VC Perspective Nik Shah T’05 MBA Fellows Project March 11, 2005 Hanover, NH The Video Game Industry An Industry Analysis, from a VC Perspective Authors: Nik Shah Nik.Shah@Dartmouth.edu Tuck Class of 2005 Charles Haigh Charles.Haigh@Dartmouth.edu Tuck Class of 2005 • The video game industry is poised for significant growth, but many sectors have already matured. Video games are a large and growing market. However, within it, there are only selected portions that contain venture capital investment opportunities. Our analysis highlights these sectors, which are interesting for reasons including significant technological change, high growth rates, new product development and lack of a clear market leader. The opportunity lies in non-core products and services. We believe that the core hardware and game software markets are fairly mature and require intensive capital investment and strong technology knowledge for success. The best markets for investment are those that provide valuable new products and services to game developers, publishers and gamers themselves. These are the areas that will build out the industry as it undergoes significant growth. • A Quick Snapshot of Our Identified Areas of Interest • Online Games and Platforms. Few online games have historically been venture funded and most are subject to the same “hit or miss” market adoption as console games, but as this segment grows, an opportunity...
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...The Video Game Industry An Industry Analysis, from a VC Perspective Nik Shah T’05 MBA Fellows Project March 11, 2005 Hanover, NH The Video Game Industry An Industry Analysis, from a VC Perspective Authors: Nik Shah Nik.Shah@Dartmouth.edu Tuck Class of 2005 Charles Haigh Charles.Haigh@Dartmouth.edu Tuck Class of 2005 • The video game industry is poised for significant growth, but many sectors have already matured. Video games are a large and growing market. However, within it, there are only selected portions that contain venture capital investment opportunities. Our analysis highlights these sectors, which are interesting for reasons including significant technological change, high growth rates, new product development and lack of a clear market leader. The opportunity lies in non-core products and services. We believe that the core hardware and game software markets are fairly mature and require intensive capital investment and strong technology knowledge for success. The best markets for investment are those that provide valuable new products and services to game developers, publishers and gamers themselves. These are the areas that will build out the industry as it undergoes significant growth. • A Quick Snapshot of Our Identified Areas of Interest • Online Games and Platforms. Few online games have historically been venture funded and most are subject to the same “hit or miss” market adoption as console games, but as this segment grows, an opportunity...
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