...industry: the starting period of video game industry, the development of the home cartridge, the entry of independent game developer-publishers, and the development of massively multiplayer online role playing games, known as MMORPG. According to the authors, those changes in the industry had an impact on its competition and culture (Zackariasson & Wilson, 2010). Kline, Dyer-Witheford and Peuter (2003) also mentioned about the starting period of the video game industry and agreed that it marked a great beginning of the industry. Along with the fast growth, the authors also brought up how the fast growing industry came to an end in 1984. However, not long after the meltdown of the industry, Nintendo stepped in and rescued the industry with its skillful marketing concepts and management. Nintendo, as stated by the authors, has expanded the video game industry and was an important part of its development (Kline, Dyer-Witheford & Peuter, 2003). Accordingly, I have chosen two periods, that I believe, have shown great changes in the video game industry and its firms: the period in which Atari made video game to billion-dollar industry...
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...result in a sustainable competitive advantage for a competing firm, protecting it from imitation by rivals (Rumelt (1984)). For Nintendo, a large hardware customer base increases the incentive of Nintendo’s licensees to develop games for Nintendo’s platform, which will in turn create a positive feedback loop whereby even more consumers will flock to Nintendo’s game console as it is associated with more game titles than that of Nintendo’s competitors. There is a Nash equilibrium: licensees want to develop games for Nintendo’s hardware platform because it has a large installed user base, and consumers want to purchase Nintendo’s hardware because it has many available games. It is therefore no surprise that Nintendo priced its Famicom at or below cost when it was launched in 1983: by capturing more hardware users early, the firm incentivizes game developers to contract with Nintendo over other hardware developers. This also explains Nintendo’s capacity commitment with its suppler of chips for 3 million units, and its development of the Nintendo Power magazine, which served to increase the positive network effects among its installed base of customers. There is a sense in which, as Nintendo can lock-in its consumers to purchase only Nintendo games (e.g. the cost of buying competing hardware having already purchased Nintendo’s, the fan community that Nintendo created, the wide availability of games), its stronghold over developers in turn increases. Nintendo’s key actions regarding...
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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...
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...Nintendo's Fall from Grace As one of the biggest gaming giants to exist to this day, Nintendo certainly has a lot of experience in what they do best: creating incredible games for everyone to enjoy. How is it then that Nintendo, with their latest system the Wii U, is failing to capture the market they once had? There hardly seems to be any interest in it, and sales for their console are at an all time low. The gaming industry is an ever-changing economy, and in order to survive, Nintendo is going to have to change their ways. Nintendo's been in business since their early days in the late 1800's as a cardgame company, eventually solidifying it's place within gaming in the 1980's. They make both videogame consoles as well as their own games, and even saved the industry from a major economic crash. Nearly all of their systems, ranging from the NES to the Wii, have been commercially successful. Then there's the Wii U, which has not only failed to gather consumer attention, but is at this point causing them to bleed through their profits at an alarming rate. Satoru Iwata, the current CEO of Nintendo, has been recently coming under fire for his business decisions and leading Nintendo into the current state that they're in, and why the Nintendo Wii U isn't selling nearly as much as they projected. Some people say that they simply failed to adapt to the dynamic market despite their efforts, while others argue that they are stuck in the 90's and refuse to change the way they do business...
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...2. Apple and Nintendo’s strategy with respect to their developers are similar in the sense that both Apple and Nintendo try to limit some of the value that their developers create. Even though developers create a complementary product (games and apps for video games and iPhones/iPads/etc.) that creates value, neither Apple nor Nintendo lets the developers capture all potential value. Nintendo restricted developer value creation by limiting the number of licenses to be distributed and the number of NES titles that could be developed a year. Apple takes a similar approach, as developers have to go through a rigorous approval process before their app is accepted into the Apple app store. However, Apple does not limit the number of apps a developer can release a year, unlike Nintendo. Even with its rigorous approval process, Apple does not have a hard number quota of apps for each developer. In addition, Apple does not force its developers into exclusivity agreements like Nintendo does. iOS developers are free to work on other app platforms like Google Play. Thus Apple does not as heavily limit the total value created by its developers when compared to Nintendo. Another similarity is that both Apple and Nintendo charge fees to its developers in order to increase their own value captured. Nintendo does so with licensing fees, while Apple’s Software Development Toolkit charges developers a fee for its user-friendly platform to create applications for the Apple app store. Apple...
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...Microsoft Microsoft started from humble beginnings in 1975, and soon rose to become one of the biggest companies in modern history. Today, Microsoft is having record revenues, making a total of $18.06 billion dollars last quarter (Forbes). Microsoft affects almost everyone’s life in the US daily, whether it is kids on their Xbox, to desk workers using Windows Office each day to accomplish their work, people use Windows every day. From Microsoft’s early beginnings to its multibillion-dollar company today, Windows has had success from the start, and will continue to for the coming decades. Two men in 1975; Bill Gates and Paul Allen founded Microsoft. (History of Windows) They started out with MS-DOS, their first operating system. The companies’ first headquarters was in Albuquerque, New Mexico, but after signing some pivotal contracts with IBM, they moved to their headquarters in Bellevue, Washington in 1979.(History of Windows) Working side by side with IBM to develop OS/2, Microsoft released their new product, Microsoft Windows. It was a graphical extension of MS-DOS. On March 13th, 1986, Microsoft went public, which would result in 4 billionaires and an estimated 12,000 millionaires being created from the ensuing rise in stock. (Forbes) Along with its partnership with IBM came allegations that they were trying to monopolize the computer industry. The Federal Trade Commission set its sights on Microsoft and began almost a decade of legal battles between Microsoft and the...
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...Passani Economics 106T Professor Board December 2, 2010 Nintendo: Horizontal Differentiation in an Oligopoly “The game has changed, ... and the way the game is played has to be changed.” —Satoru Iwata, president of Nintendo Co. Ltd (Malstrom) Nintendo has been a major player in the technology and gaming industry ever since entering into electronics in 1970. While for years it dominated the market for virtual gaming, a rise in competition within the industry presented serious challenges for the company. After struggling for the first five years of the new millennia, Nintendo made an exceptional comeback with its innovative products, the Wii and the DS, that shook the market and brought in a whole new set of customers. Their new strategy was so successful it allowed the company to be ranked the second most valuable Japanese firm after Toyota in 2007 (Farhoomand 6 ). Despite its recent success, Nintendo must look ahead and act strategically as its competitors begin to adapt to the new market trends. Market Background The Birth of Gaming The electronic gaming industry began with a few very basic games in the 1970s. At first, they appeared in the form of coin-operated machines in public places, with games like Pac Man and Donkey Kong before moving to home entertainment with hits like Atari’s Pong (Vaughan 13). A major shift in the quality of in-home gaming came with Nintendo’s release of Famicon in Japan and the Nintendo Entertainment System (NES) in the United States in 1983...
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...2013 Introduction Nintendo Co. Ltd, founded by Fujisaro Yamauchi in 1889, began as a playing card 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...
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...Video Game Industry Copyright © 2004-05, RocSearch Ltd. Table of Contents 1. Market Size .................................................................................... 3 2. Market Statistics ............................................................................ 4 3. Competition ................................................................................... 6 4. Market Trends ............................................................................... 7 5. Driving Forces ............................................................................... 8 6. Infogrames/Atari .......................................................................... 9 6.1 Overview ....................................................................................9 6.2 Position & Prospects .....................................................................9 RocSearch Copyright © 2004-05 2 1. Market Size The worldwide market for video games, computer games and interactive entertainment hardware and software would grow from $20.7 billion in 2002 to $30 billion in 2007. Total U.S. retail sales of video game hardware, software and accessories grew 10 percent in 2002 over 2001. The video game industry generated $10.3 billion in record-breaking sales, surpassing the previous record high of $9.4 billion in 2001. The category of video game software, consisting of both console and portable software, experienced sales gains of 21 percent in dollar volume...
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...I. Introduction a. Company History And Background Nintendo started as a small Japanese business by Fusajiro Yamauchi near the end of 1889 as Nintendo Koppai. Based in Kyoto, Japan, the business produced and marketed a playing card game called Hanafuda. In 1956, Hiroshi Yamauchi visited the US, and this is when he realized the limitations of the card business and hence moved on to different arenas of the gaming world. In 1963, Yamauchi renamed Nintendo Playing Card Company Limited to Nintendo Company, Limited. During 1963 and 1968, Nintendo set up a taxi company, a "love hotel" chain, a TV network, a food company and several other things. All these attempts at expanding and diversifying the business failed, except toy making, where they had relatively prior experience with from selling playing cards. In enormous debt, Nintendo was trying to withstand the Japanese toy industry; it was still small at this point. Due to the short product life cycle of toys, innovation and constantly new product development was vital. This was the beginning of a major new era for Nintendo. In 1970, Hiroshi Yamauchi discovered the hidden talents of Gunpei Yoki, a maintanace engineer at the factory, who built what was later called The Ultra Hand which soon turned into a huge success, selling approximately 1.2 million units. Yokoi was soon moved from maintenance to product development. Nintendo’s first step into the video games industry was in 1975. At the time, home video game consoles were...
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... AC = TC / Output Marginal Costs are the costs for producing one more unit of a good. It is calculated by looking at the difference between levels of Total Costs. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit. For example, if producing additional vehicles requires building a new factory, the marginal cost of the extra vehicles includes the cost of the new factory. 2. Oligopoly is a form of market structure different from perfect competition, where there is a significant number of small competitors, and from a pure monopoly, where there is only one giant company. The dominant form of oligopoly in developed countries when there is only few large producers of the good or service providers. Good example is the gaming market where there are 3 big gaming system producers: Sony, Microsoft and Nintendo sharing almost the whole market among each other. A characteristic feature of oligopoly is the lack of price competition between the participants in that market. The competition is held in other areas (quality,...
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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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...services supplied, business owners will be able to pen point the market price of his or her own products. Therefore, the understanding of supply and demand is important before deciding the equilibrium. With the quantity demanded and supplied as equal, the sales price is known as the equilibrium price (McConnell, 2009). When looking at equilibrium quantity there are two parts that have to be taken into consideration in a competitive market; quantity demanded and quantity supplied (McConnell, 2009). Combining the two will yield the market equilibrating process in a specific market and balance the supply and demand. For instance with release of Play Station 3, Sony was the monopoly and could sell their product at any price as wanted. That year, the XBOX 360 and Nintendo Wii released with the ability of virtual reality and exceptional graphics that forced Sony to develop another strategy. Play Stations were not selling and the market equilibrating process began to show its affects. Sony had more supply than demand and eventually had to drop their price to stay competitive. In addition, the price of a product and household income plays a major determinant that can affect the equilibrium price (McConnell, 2009). From personal experience, waiting until the price of Play Stations dropped tremendously was important before making a purchase because of income. In this case, competition was good for the consumer as it forced three major competitors to make...
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...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 page 2 1.2 Profile of the gamer page 2 2. Microsoft page 3 3. Nintendo page 4 4. Sony page 6 5. Competitors analysis page 8 6. PEST analyses page 9 7. SWOT analyses...
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...Journal of Economic Geography Advance Access published June 22, 2005 Journal of Economic Geography (2005) Page 1 of 30 doi:10.1093/jeg/lbi001 Video games production networks: value capture, power relations and embeddedness Jennifer Johns* Abstract This paper has two main aims. Firstly to conceptualize the production networks of the video games industry through an examination of its evolution into a multi-million dollar industry. Secondly, to use the video games industry to demonstrate the utility of Global Production Network approaches to understanding the geographically uneven impacts of globalization processes. In particular, three key notions of value, power and embeddedness are used to reveal the most powerful actors in the production network, how they maintain and exercise their power, and how the organization of production is manipulated as a result. It is argued that while hardware production is organized by console manufacturers using truly global sourcing strategies, the production of software is far more complex. In fact, software production networks are bounded within three major economic regions: Western Europe, North America and Asia Pacific. This paper seeks to explain how and why this has occurred. Keywords: video games, global production networks, value, power, embeddedness JEL classifications: L14, L23, L82 Date submitted: 4 October 2004 Date accepted: 12 April 2005 1. Introduction The video games industry1 was born during the early 1960s and has rapidly...
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