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Sony Ps4 Strategic Management Essay

4173 words - 17 pages

The Challenge Of Maintaining Greatness in the Gaming Industry

Strategic Management Professor : Yuri Mishina 12-12-2013

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Table of Contents
Executive Summary....................................................................................................................................... 3 Industry Analysis ........................................................................................................................................... 3 Threat of New Entrants ............................................................................................................................. 4 Power of Suppliers ...view middle of the document...

................................................................................................................. 11 References .................................................................................................................................................. 12 Appendix ..................................................................................................................................................... 15

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Executive Summary
Video games are a fast growing arm of the entertainment industry. Console gaming has been around for over 40 years and has continuously evolved in complexity and scope. Currently in its 8th generation of consoles, the main market players are Sony Playstation, Microsoft Xbox and Nintendo Wii. The focus of our analysis, Sony Playstation, is part of a Japanese multinational firm headquartered in Japan and is one of the leading manufacturers in the world for consumer and professional electronic products. The aim of this report is to provide a strategic analysis of the Console Gaming Industry, and more specifically the strategies utilised by Sony for the Playstation 4. This report is divided into five parts. First, the industry analysis provides an overview of the Console Gaming Industry. The firm analysis for Sony provides an overview of their performance as a whole and Playstation’s role in it, while the strategic analysis looks at Playstation 4’s strategy and that of their competitors. We then critique Playstation’s competitive advantages. The report concludes by providing recommendations and discussing the future of the industry.

Industry Analysis
The video game console industry is an oligopoly market with three main market players: Sony, Microsoft and Nintendo, which manufacture the Playstation, Xbox and Wii, respectively. Sony and Microsoft target serious gamers while Nintendo is geared towards a wider market of casual gamers. The gaming industry generated about US$67 billion in revenue in 2012 (John Gaudiosi, 2012). The Playstation 3 (PS3) captured a 50.8% stake of the total consoles sold in 2013 while the Xbox 360 earned a 36.4% share and Wii gained only 12.8% (William D'Angelo, 2013). The industry depends on multifunctional game consoles, the availability of high end audio visual devices, like HDTVs and last but not least, exciting game titles to attract customers. (Yahoo Finance, 2013). Figure 1 Figure 2

(Parker, 2013)

(D’Angelo, 2013) 3

Threat of New Entrants
The three dominant players have taken the early mover advantage to grow their businesses. High level of adoption and efficient production are essential in this industry because consoles are traditionally sold at a loss and revenues are made up by licensing games to developers. This makes it very a difficult industry for new entrants. New technology incurs high cost of capital in research and development (R&D) and low product differentiation requires advertising and marketing. Their brand establishment, together...

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