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 ...view middle of the document...
S. as well as globally.
The majority of analyses is made by Porter. His Five Forces Model in the strategic management viewpoint is used to identify how attractive is an industry in terms of competitive forces.(Johnsons et al. 2008). It includes five forces within an organisation.
The threat of new entrants
The power of suppliers
The power of buyers
The threat of substitutes
Threat of new entrants
Bargaining power of buyers
Bargaining power of suppliers
Rivalry amongst existing firms in the industry
Threat of subsitutes
According to Campbell et al. during the analysis of Porter’s forces the key forces have to be found. Therefore in order to have effective strategic analysis it is needed to focus on those forces which are identified as the key forces of the industry at any time.
The degree of competition is clearly influenced by the entry of an industry. The new entrants have to overcome different barriers of entry.
Clearly Nintendo was the first video game on the market. Therefore Nintendo was able to reach economies of scale before Sony in 1990s entered the market with its PS and later Microsoft with its Xbox console. In this case the newcomers should be prepared to achieve comparable economies of scale. Sony and Microsoft were able to reach a strong position in the video game industry through new technologically developed consoles. Xbox made the equivalent contribution to that made by Nintendo’s Game Cube and PS2 become the market leader.
The power of buyers and suppliers
In every industry the power of buyers and suppliers should be controlled by companies because when these powers are high it causes cost increase for suppliers and price decrease for the customers.
The key buyers for in the video games industry may be people in different ages. Nintendo with quite different strategies focused all its products more on children and dominantly female. On the other hand Sony and Microsoft designed their products for older mostly male customers. The companies try to consider the relationship with its customers in order to retain their loyalty.
The three companies try to retain good relationship with its suppliers that are mostly common in the industry. These are for example Dell, Hewlett Packard, Twentieth Century Fox, Disney Corporation, or Toshiba etc. Closer relationship with suppliers may lead to cost reductions.
Substitutes are products or services that offer a similar benefit to an industry’s products or services but by a different process. Obviously these the products of Nintendo may be regarded as substitutes for Sony or Microsoft. This existence helps to identify the elasticity of demand of the products. It is price sensitive. For instance people who are not allowed to buy Xbox decide to buy the cheaper Wii. Thus PS3 is more expensive than the other products its technological capabilities give it an advantage on the other side. So the reason that Nintendo lost sales may be that...