...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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...[pic] MKT 4100 Strategic Marketing Management Module Handbook Academic Year 2012/2013 Dubai Coordinator: Dr. Doug Young School of Business |Student Name: | | | OR |Student Number: | | | |Seminar Class Details: | |Name of Seminar Tutor: | |Day: | |Time: | |Room: | Lectures: Tuesday from 6:30 - 9:30 PM in KV Block 17, Room 009 ...
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...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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...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 completely took over the industry and continued...
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...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 in future...
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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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...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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...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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...Nintendo Company Ltd. is a strong contender in the home entertainment industry and has faced the challenge of developing and maintaining a competitive advantage over the years. Its mission is to offer the highest quality products and services while treating their customers with attention and respect. Since 1983, 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...
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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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...MACRO AND MICRO ENVIRONMENT ANALYSIS FOR NINTENDO Macro Environment Macro environment is said to be the most general layer of the environment. This consists of broad environmental factors that have an impact on the organisation. The PESTEL framework helps us to identify the future trends which might impinge on Nintendo and therefore identify the key drivers of change. On the other hand the five forces framework helps to understand how the competitive dynamics within and around the video game industry are changing. The two frameworks are discussed below: PESTEL Framework: This categorises environmental influences into six main types, namely: political, economic, social, technological, environmental and legal. A PESTEL analysis on the video game industry is carried out below: Political: Factors such as taxation policies, foreign trade regulations and social welfare policies influence the video game industry. Video games have a tendency to play with the emotions of people which inturn can threaten peace and law, a country being multicultural. Therefore Government has the authority to control the contents of the video game frames. Economic: Places such as U.S and Japan are largely dominated by the video game business. Therefore contributing towards the GDP of their countries. Interest rates have not much impact on the video game business as they manufacture their own units. The disposable income of the consumers in the video game industry has an effect on their buying...
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...com INDUSTRY: Video game industry BACKGROUND/HISTORY/TIMELINE: “Nintendo Company Ltd .was founded in 1889 as a producer of Japanese playing cards, but by the 1980’s the corporation had turned its attention towards the production of video game hardware and software”. “Since then, Nintendo has gone on to become the third most valuable company in Japan selling more than 470 million home game consoles and handhelds as of 2009”. Nintendo was founded by Fusejiro Yamauchi the great grandfather of the current president of Nintendo.” Nintendo's products arose in the mid-1980s from the relative obscurity of the amusement arcade to change the concept of home entertainment in both Japan and the United States”. SWOT ANALYSIS: Strengths: Nintendo “strongly established brands”, “robust revenue growth”, “strong cash flow from operations, and “Nintendo derived most of its revenue from the video game business, Nintendo was in the lead in video console” (pg.C269). Weakness: Nintendo weakness is “Inventory shortages”.”Nintendo was unable to meet demand during 2007 and also struggled throughout 2008”.”In an interview on the website Game Theory, Perrin Kaplin, Nintendo vice president of marketing and corporate affairs, suggested that shortages were expected some time”. “We are at absolute maximum production and doing everything we can…but demand continues to be really high” (pg.C273). Also Opportunities: “Rising demand for company’s products and related software”, “growing US games software...
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...External Analysis 3 1.1 Macro-Environment Analysis 3 1.2 Industry Analysis 4 Porter’s Five Forces of Competition Analysis of Netflix 4 1.2 Opportunities and threats (Partial SWOT) 5 Part 2: Internal Analysis 6 2.1 Value Chain Model 6 2.2 Competencies Framework 7 2.3 VRIO Framework 8 2.4 Strengths and Weaknesses (partial SWOT) 9 Part 3: Netflix Issues and Challenges……………………………………………………………………………………………..10 Part 4: The selection of strategic options 11 4.1 Strategy Clock model and the Porter’s Generic Strategy Model 11 4.2 Strategic Options 12 Part 5 – Conclusions 14 References 15 Appendix 17 Introduction Netflix, set up in 2000, is a television show and movie rental Company. It slowly became a leader in this field by offering DVD-by-mail and online video streaming services. It provides a subscription based model. According to this model the customers utilize the products and services of Netflix through a monthly fee rather than a pay as you use rate. Netflix has been expanding its reach of providing services to other geographies with its two service lines to places like the UK, Ireland, Canada, Latin America and the Caribbean. Among the Porter’s generic strategies, Netflix has adapted the Differentiation/Cost Leadership strategy as their target customer base is broad and they also provided to renters a low cost alternative to the otherwise traditional video rental stores. The major stakeholders of Netflix are the content owners who provide video content...
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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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...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 ID...
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