...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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...FOR THE VIDEO GAME INDUSTRY For some time we have believed the game industry is ready for disruption. Not just from Nintendo, but from all game developers. It is what we all need to expand our audience. It is what we all need to expand our imaginations. - Satoru Iwata, president of Nintendo Co. Ltd1 In the 2008 BusinessWeek–Boston Consulting Group ranking of the world’s most innovative companies, Nintendo Co. Ltd (“Nintendo”) was ranked seventh, up from 39th the previous year. 2 This recognised Nintendo’s significant transformation into an innovative design powerhouse that had challenged the prevailing business model of the video game industry. In 2000, when Sony, Microsoft and Nintendo (the “big three” of the video game console manufacturers) released their latest products, Sony's PlayStation 2 (“PS2”) emerged as the clear winner, outselling Microsoft’s Xbox and Nintendo’s GameCube. In 2006, a new generation of video game consoles was introduced by these players, precipitating a new competitive battle in the industry. Microsoft and Sony continued with their previous strategies of increasing the computing power of their newest products and adding more impressive graphical interfaces. However, Satoru Iwata, president of Nintendo, believed that the video game industry had been focusing far too much on existing gamers and completely neglecting non-gamers. Armed with this insight, the company repositioned itself by developing a radically different console, the Wii...
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...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 completely took over the industry and continued to dominate...
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...business in Kyoto, Japan and, decades later, expanded to video game production. Nintendo released its first game console, the Nintendo Entertainment System (NES), in 1985 (Nintendo, 2013). The NES became an instant hit and set Nintendo to be a pioneer in the game console industry throughout the 1990s. Gradual Decline Nintendo enjoyed tremendous success as it continuously released new consoles: Nintendo 64, Game Boy, Game Boy Advance, GameCube, and more. However, the company faced increasing competition in the early 2000s from Microsoft’s Xbox and Sony’s PlayStation consoles and its market share started to decline. In 2003, Nintendo’s share price fell sharply when Sony announced its PlayStation Portable (PSP), threatening the monopoly that Nintendo held on the portable console market (Kendall, 2009). Change in Strategy In an industry that competes based on delivering the latest technology, Nintendo’s newly promoted president, Satoru Iwata, took the company in a new strategic direction to restore the company’s former glory. Challenging the long-time video game market of boys, young men, and “serious gamers,” Nintendo decided to change their strategy and target those outside their traditional demographic: women, seniors, and families (MaRS, 2010). Rather than focus on the latest graphics processors, hardware design, or engine speed, Nintendo took a new “fun and social” approach to gaming and released the Wii console. This new gaming system was based on body motions...
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...To fully understand the importance of video games you need to take a look at all angles. Video games have been around for years and have impacted us more than you can imagine. From the very first prototype, to the futuristic simulations we have today, video games have changed the world as we know it. The video game industry is at an all time high. Video games are no longer a form of entertainment for few, but a world-wide phenomenon for people of all ages joining in on the fun. Consoles have a very long history; from the very start passionate people have been hard at work to make the industry what it is today. There are also guidelines that all video game companies must abide by as well, so it’s not all fun and games. A video game is defined as a game that involves direct input from a user to generate visual feedback on a device. The systems used to play video games are commonly known as platforms. These devices range from home consoles such as the PlayStation 3, Xbox 360, Wii to the personal computer, and all the way to the arcade system, where the video game was born. Video games were first made as a form of entertainment but have since evolved into a worldwide cult following. They are now used for entertainment, learning tools, and even training. The video game industry was first introduced as a commercial entertainment medium in 1971. This is where it all started. After the collapse of video games in 1983, there was a rebirth 2 years later which set in motion the events...
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...Segments Demographics Through the technological advancements and the progression of the video game console industry, the demographics of the target segment for this industry has changed in many different factors. First, a frequent misconception of the customer base of this industry is the age group of the video gamers. Many believe that youth dominate the video game console industry but studies have proven otherwise. Researchers surveying the demographics in the 2012 USA market, the average ‘gamer’ is 30 years old down from 37 years old in 2011. As a matter of fact, the results presented only 32% of gamers to be under the age of 18, a declining trend initiating from 2005. This trend further opposes the conception of the core of video gamers are youth. As of January 2012, 56% of all households in the US own a console and 17% owning 2 video game consoles. This implies that the customers in the industry are increasing loyalty on the brand rather than seeking to turnover to another console. These statistics and research illustrate that the age of consumers in this industry varies than the common perception. Changes in these trends must be analyzed carefully and acted upon to increase market share. Women, families, grandparents, have all shown increases in the participation of video games. Another common misconception is the gender base of consumers using video game consoles being dominated by males. 2012 data conveys that the gamer gender demographics are broken down...
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...*CASE STUDY 11* Competition in Video Game Consoles: The State of the Battle for Supremacy AUTHORS: Christian Kostadinov 29114042 Ivaylo Baldev 29114047 Sofia 2010 Competition in Video Game Consoles: The State of the Battle for Supremacy Objectives in front of the case study The main objective that stands in front of our project is to clarify the present situation on the market of video console games. To present the strategies of the three main rival firms-Sony, Nintendo and Microsoft, to see their advantages and disadvantages, to see what their mission statement is, to see who are their customers and in which market segments the companies are trying to penetrate or have already penetrated. At the end we are going to try to predict the future development of the battle. We are also going to compare them in the above mentioned spheres, with the help of a competitor analysis. Conclusions are going to be derived after every paragraph. In order to do that we are going to use different methods including- SWOT analyses, PEST analyses etc. There were two different variants how to structure the text- first to include the PEST and SWOT analysis in the text for every firm or second variant to add it after the analysis. The second way was chosen because we decided that using this method it will be easier to compare the firms. Additionally we are going to present the information in the most understandable way by a PowerPoint Presentation. Content: 1. Introduction...
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...Video Game Consoles Video Game Consoles Video Game Consoles Name | Varun Punjabi | Class | PGDM - Communications | Subject | Marketing Management | Roll No | 39 | Scope: The Indian video games sector in 2011 was driven by the urban middle class/upper-middle class population, who adopted both static and handheld games. Rising income levels, increased availability of international brands such as Sony PlayStation 3, Nintendo Wii and Microsoft Xbox 360 as well as growth in retail chains were primary factors driving the demand for video games in India. An industry worth 25 billion dollars globally, the 9th generation of video game consoles will see tremendous advances especially with the inclusion of virtual reality compatible hardware technology. ------------------------------------------------- ------------------------------------------------- Video Game Consoles: Interesting Trivia ------------------------------------------------- ------------------------------------------------- - 2 out of 5 gamers are women ------------------------------------------------- - 65% of US households have atleast 1 video game console ------------------------------------------------- - The average age for gamers is 32 ------------------------------------------------- - An average gamer spends 18 hours playing video games. ------------------------------------------------- - Sony Playstation 2 sold 138 million units worldwide making it the best-selling console...
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...Nintendo’s Strategy for the Wii— Good Enough to Beat Xbox 360 and PlayStation 3? 12 C A S E ASSIGNMENT QUESTIONS 1. What are the defi ning business and economic characteristics of the video game console industry? What is the industry like? 2. What is competition like in the video game console industry? Do a fi ve-forces analysis to support your answer. Which of the fi ve competitive forces is strongest? Which is weakest? Would you characterize the overall strength of competition in video game consoles as fi erce, strong, moderate to normal or weak? Why? 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 profi table in future years? 4. What 3-5 key factors determine the success of video game console developers like Nintendo? 5. What is Nintendo’s strategy? Which of the fi ve generic strategies discussed in Chapter 5 is Nintendo using? What are some of the recent offensive and/or defensive strategies that Nintendo has employed? Have these tactics been successful? 6. Is it fair to characterize Nintendo’s introduction of the Wii as a blue ocean strategy? Why or why not? 7. How well is Nintendo’s strategy working in terms of the fi nancial performance it is delivering? Should shareholders be pleased? Why or why not? What 2-3 weaknesses do you see in Nintendo’s fi nancial performance? 8. What...
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...for Video Game Supremacy John Sterman, Khan Jekarl, Cate Reavis As Sir Howard Stringer, CEO of Sony Corporation, settled in for his flight back to Japan from New York, a number of pressing issues occupied his mind about Sony’s future. At the forefront, Sony’s next generation video game console, the PlayStation 3 (PS3), was set to launch worldwide on November 17, 2006, a mere week away. Despite PlayStation 2’s (PS2) dominance in the last generation of gaming consoles, Stringer understood that past successes were no guarantee of future success in the intensely competitive game industry. Microsoft had launched the first volley in the last console war by releasing the Xbox 360 in the fall of 2005. Within one year, almost 4 million Xbox 360s had been sold worldwide, giving Microsoft a significant head-start in the race for market dominance. Meanwhile, Nintendo, a competitor thought to be dead due to the lackluster sales of its previous console, the Nintendo Gamecube, had generated significant “buzz” around its new entry, the Nintendo Wii (pronounced “we”). Targeting more of a mainstream audience than Sony and Microsoft, the Wii, scheduled to launch just two days after the PS3, posed a serious threat to Sony’s market share, particularly due to its $249.99 retail price, half the price of the PS3. Stringer also knew that there was much more at stake than winning the console war. The next generation of the DVD market was at stake as well. In addition to being a gaming console, the...
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...The console video game craze started off in November 1977, the year the Atari 2600 was released. It sold for 200 dollars and was an instant hit. The killer app for the system was the game Pong. This game consisted of a ball bouncing back and fourth on the screen, the player had to hit the ball with a paddle and the other player or computer would return the ball in the same manner. Atari offered many other games but none were as popular as Pong, until space invaders came along. Released in Japan in 1978 and 1979 in the US, Space Invaders became a world wide craze. According to an article found on http://retrogamer.merseyworld.com “kids stopped listing to music, playing sports or going to the movies, they played Space Invaders. Space Invaders Greatly increased the popularity of the Atari 2600, video games became the new hot thing. Everything was going great for Atari until 1984 when the Atari 5200 was released. The system was a flop and it seemed to kill the video game industry in the US. While the US video game craze seemed like it was over, a new craze was starting in Japan. In 1983 a little company named Nintendo released a console named, Famicom. The system sold for 100 dollars in Japan and was very popular; however it was not released in the US due to the video game crash of 1984. In late 1985 The Famicom was released in the US as the NES (Nintendo Entertainment System). By February 1986 the NES had already sold over 30 million. The original US set came with two controllers...
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...differentiation strategy with its seventh generation console the Wii, while simultaneously deciding to focus on serving buyers comprising of a narrow market niche. Rather than building a console with new graphic features and technological capability in to the console itself, the company concentrated on pioneering a daringly different video game controller. The bold new approach allowed Nintendo to tap into an entirely new demographic and to engage new players of video games. Combining these two strategic approaches propelled the company to become the market leader in sales of the third generation video game consoles, far surpassing Sony’s PlayStation 3 (PS3) and Microsoft’s Xbox 360. Nintendo is currently facing two significant problems: 1. The immediate concern is that the company is unable to meet the demand for the Wii console which continues to sell out in stores. 2. The long term issue that needs to be addressed is whether the company can identify and invest in innovations that would allow Nintendo to continue to expand in the market, while resisting a significant attack from its competition. In order to analyze the issues in detail a SWOT, PESTE, financial, and competitive analysis were performed. The findings indicated that the company differentiates itself from the competition with a high emphasis on product differentiation; it is quite susceptible to competition; and that the release of the Wii console has improved its financial status immensely from a revenue...
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...VIDEO GAMES CONSOLE The games console industry is divided into three periods. The first period is the growth of the industry to the advent of the 32 bit era. The next period is the developments and trends during the PlayStation era and the third is the likely development of the industry over the next few years BRIEF HISTORY OF THOSE PERIODS and THEIR REVENUES (The Evolution of the Game Console Industry) In 1994 , the first time that consumer electronics giant Sony had bravely attempted to enter the highly competitive games console market. Going under the catchy, self–explanatory name PlayStation, this 32–bit, CD–based system hit Japan in December and faced tough competition from 'The Big Two' in the form of Sega's fundamentally similar Saturn, and Nintendo's upcoming Ultra 64. By May 1995, barely six months after the release of PlayStation, over 1 million Japanese gamers had become converts. Games like Toshinden, CyberSled, Jumping Flash!, and a host of other, decidedly more obscure titles (our favourite is Chou Aniki – Kyuukyoku Muteki Ginga Saikyo Otoko – literally 'Super Older Brother – The Galaxy's Absolutely Invincible Strongest Man') helped to propel sales, impressing players with their advanced 3D visuals and diverse gameplay. By October, worldwide PlayStation shipments had reached 9 million, and with the arrival of huge sequels such as Tekken 2, Ridge Racer Revolution and Wipeout 2097. In a year that saw cosmologists announce that the expansion...
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...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 industry growth. In recent decades society has become more...
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...Abstract Nintendo has been a major contender in the video game industry for the past several decades, and has faced the challenge of developing and maintaining competitive advantage over the years. With the introduction of the Nintendo Wii console, the company gained a stronghold as a leader in the video gaming industry. However, competitors Sony and Microsoft are quickly gaining on Nintendo’s competitive advantage, forcing the company to monitor and reevaluate its strategies. To maintain a competitive advantage, Nintendo must look toward influencing the customers of Sony and Microsoft, continue developing innovative technologies, and also consider the impact of social networking and mobile devices on the gaming industry. 3 History of Nintendo Nintendo Co. Ltd began its long history at the turn of the twentieth century as a Japanese manufacturer of playing cards. The company went public in the 1960s, and by the 1970s Nintendo had begun directing its focus toward electronic toys and video games. Nintendo became a leader in the video game industry in the ‘80s and ‘90s with its home video game consoles and popular game titles. Competitors began to emerge in the ‘90s; the release of Sony’s PlayStation platform broadened the video game market, and the rising popularity and improvement of PC technology led to the use of PCs as gaming platforms. Capitalizing on the popularity of PC gaming, Microsoft developed its Xbox game console in the early 2000s. While the competition focused on...
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