Competition in video game consoles Essay

Competition in boob tube stake Consoles The State of the Battle for Supremacy in 2008 1. What be the strategy-shaping commerce and economic characteristics of the storage locker segment of the boob tube naughty pains? What is the intentness give cargon? 1-1 Segmentation The industriousness was segmented into cabinet hardw atomic number 18, solace bundle program ( twain changes and rentals), handheld hardwargon, handheld computer parcel (both sales and rentals), PC softwargon (both sales and rentals), broadband, interactive TV, and brisk send fors. 1-2 Market SizeTable 1 Size of the Global characterization Games Markets, by Sector, 2000, 2003, and 2005, with Projections for 2010 ($ in millions) 2000 2003 2005 2010 Console hardw ar $ 4,791 $6,047 $3,894 $5,771 Console Softw be (both sales and rentals) 9,451 16,449 13,055 17,164 Handheld hardware 1,945 1,501 3,855 1,715 Handheld computer bundle(both sales and rentals) 2,872 2,238 4,829 3,113 PC software (both sales and rentals) 5,077 3,806 4,313 2,955 Broadband 70 497 1,944 6,352 Interactive TV 81 249 786 3,037 Mobile ph one and only(a)s 65 587 2,572 11,186 24,352 31,370 35,248 51,292.Source Informa Telecoms & Media, Games Market to Score capacious in 2007, press release, October 24, 2005, and Games Industry Boom Continues, press release July 24, 2003, both at www. informamedia. com (accessed September 8, 2006). As we shtup see the table above, the market size has grown from $24. 352 billion in 2000 to $51. 292 billion in 2010. In overbold(prenominal) words, the photograph crippled market be watch overs bigger and bigger. 1-3 Market harvest-festival rate Table 2 Compounded Annual Growth distance For the Video Game Industry 2000 2005 and 2005 2010 (projected) CAGR (2000-2005) CAGR (2005-2010) Console Hardware -4. 1% 8. 2%.Console Software (both sales & rentals) 6. 7% 5. 6% Handheld hardware 14. 7% -14. 96% Handheld software (both sales & rentals) 10. 95% -8. 4% PC software (both sales & rentals) -3. 2% -7. 3% Broadband 94. 4% 26. 7% Interactive TV 57. 5% 31. 04% Mobile Phone 108. 7% 34. 2% Total 7. 7% 7. 8% CAGR is compound annual growth rate. The formula is(VtnVt0)1tn-t0-1. V (t0) start value, V (tn) finish value, tn ? t0 number of years. The poem above are calculated from table 1. 1-4 Entry/Exit barriers The tercet existing companies are one of the origination barriers of different possible companies that would same(p) to enter this market.Video zippy industry wishs wide hood to invest on research and education department. Also, the entrants pick up to recruit unspoilt engineers and other talent staff to develop the proceedss and make efficient trade strategies. Combinations of all the entry elements, the entry barriers level is high for the perspective entrants.However, the software learning is easier to enter this market than the hardware part. Potential entrants scarcely need to focus on the software for the existing companies h ardware products. This will conduct less greet than develop entire hardware and software. 1-5 Scope of rivalry.Sony, Nintendo, and Microsoft are the trinity main companies in the television receiver biz industry. Before 2001, on that point was one to a greater extent than competitor, Sega, in the market. It tried to compete with Nintendo and Sony but it fin accessory was step forward of the industry in 2001.After 2001, depiction farinaceous industry has entered juvenile war. Sony, Nintendo, and Microsoft compete with each other by gaining sales and stir magnitude installed metrical foot. Play Station 2 from Sony has signifi brush asidet unit sold in $299 each however, its newest propagation, Play Station 3 has non successful break throughgrowth in the market. Play Station 3 was beaten by Xbox and Wii which are from Microsoft and Nintendo respectively.As the result, Nintendo and Microsoft were substitute Sony to compete the leadership position in recent year. In addition, the retails which those three main companies sold their products in are in the price ambition. Furthermore, console technology, online gaming, and mobile gaming has gradually transportd the belligerent situation. The dramatic technologies become important for the competitory companies to develop new generation console. Also, game software enter new world which the internet is common, so the online game is on the bowel movement that is expected to continue to increase in market. accord to the mobile phone using tribe increasing, the games are installed in the mobile phone are in the increasing trend also. In short, the picture show game industry rivalry has become fierce. 1-6 Scale economies fit in to offer the entire console hardware, a company cannot manufacture all components by itself. Therefore, Sony, Microsoft, and Nintendo would like to produce large amount of console hardware to constrict the greets. They choose to ally with IBM, maker of GPUs or Intel to get components to assemble their console.Beca practice those ally companies need to offer not only one buyer, they can produce large volume for the buyers. Thus, the price would be reduced by huge amount of production. Sony, Microsoft, and Nintendo can through this way to reduce the production approach and occur the economy scale. 1-7 Consumer characteristic.There are 300 million population dissembleed icon games which include console system, handheld devices, and mobile phone all over the world in 2008. Most of them are preteens, teenagers, and unripened adult who are between 20 and 40 year-old. In 2005, the second-rate age of players is 33 in US and there are 25% of gamers who were over 50.In addition, there are 31% of all gamers are under 18 and there are 44% of players were 1 to 49 year-old in 2005. Moreover, there is 62% of players are males. 2. What is contestation like in the icon game system industry? Which of the five competitive military strengths is robuste st? Which is weakest? What competitive bosoms seem to stick out the greatest effect on industry attractor and the potential pro jeer cogency of new entrants?2-1 * The business dealing power and leverage of buyersa __weak_______ competitive force First of all, retailers almost do not postulate bargain power beca put on they only can buy the products in those three companies.A retailer cannot buy the product from other companies and they whitethorn need to sell more than one brand to attract different customers taste. Therefore, they only hit low bargain power. * The bargaining power and leverage of suppliersa ____moderate_____ competitive force Although it is easy for video game companies, such(prenominal) as Sony, Microsoft, and Nintendo, to switch the suppliers, the large suppler tranquil contain bargain power. The bargain powers come from special technology, unique parts, and risk of prime(a) control. The small suppliers cannot guarantee the quality of products.Moreover, if those video game companies require unique components, then the suppliers may cave in bigger power to bargain. In short, the hardware component suppliers accept bargain power but the video game companies cod ability to transport suppliers also although it is not very easy.In addition, video game software suppliers are in the different situation which compares with hardware suppliers. Software suppliers may withdraw bargain power if they make a very marvelous game or they can bargain for the sales of hardware volume. If the sales of hardware console are not good, the software companies may not be willing to produce the software games.However, those video game companies have abilities to produce the software. They can publish their own game software. Therefore, software suppliers may not have bargain power as strong as hardware suppliers. In short, integrate hardware and software suppliers competitive forces. Suppliers have moderate bargaining power. * Competition from subst itutesa __weak to moderate______ competitive force Video game is for mess to spend their leisure time. Except video games, people can do outdoor activities, board games, watching TV, seeing movies etc. for their free time.Those activities may not instead of the feeling of playing video games but this depends on how video game players like to play video game. According to the data, video game enthusiasts can spend 6 hours per calendar week to play video games. Therefore, those people usually do not do other activities in their free time. In short, there is no activities entirely the said(prenominal) with video game but there are still other things that players can do to instead video game. Thus, the substitute force is low to moderate. * Threat of entrya __weak_______ competitive force.Due to the entry barriers, it is not easy to enter this industry. The requirements of entry are high. In fellowship to enter video game industry, entrants need to invest large groovy and possess enough technologic skills to compete with the existing companies. Furthermore, the existing companies have high ability to stay in the industry and have strong competitive products to threaten new entrants. Consequently, the threat of new entry has weak competitive force. * Rivalry among competing video game console manufacturersa __Strong_______ competitive force There is strong rivalry within the industry.As we can see, Sega was coerce to withdraw from the industry in 2001. The existing three companies have started competing with each other keenly. They continue to develop their products, to compete sales volumes and price. As huge as one of them does not pay help to each other action, they may lose a lot. Therefore, the competing within video game console producers is strong. 2-2 The strongest competitive force is rivalry among competing video game console producers. The weakest competitive force is threat of entry. The competition from substitute is the greatest effect on i ndustry.Because there are no substitutes which can provide totally the same experience for consumers, this is the greatest attractiveness and the potential profitability of new entrants. 3. How is the video game system industry changing? What are the underlying drivers of change and how might those driving forces individually or collectively change competition in the industry? Driving forces will include * Product mental home The development of software and hardware of console is an important driver to advertize the industry to change. New technologies can attract individual buyers to purchase.The enthusiastic consumers may hope to obtain newest games, so they may be easy to change their favorites. Also, new development can force other producers to mitigate their products. A new asylum product can be success in the industry. therefore, it may give haul to other competitors to improve their products. Therefore, product innovation is a driver of change. * Emergence of new video game devices The new video game devices are a driver to let the producers to change their products because new devices may improve the products and may be a sparkle of consumers willing to buy.When a new device comes out, a producer does not catch up the trend and then it may be kicked out the market. Moreover, a new device may become a trend in the industry and may trigger a new competition war. * Emergence of internet- sternd video games Internet-based video games allow multiplayers at the same time. Also, the players may change their get pattern. Internet is convenience for the consumers to purchase new games and has accompanies to play games device so it will enhance the products become more splendid and convenience to possess. Therefore, internet-bas video games become a trend in the industry.The study players of industry have started to develop their products to allow users to player through wireless networking. Therefore, the producers are making change to fit the consu mers new using and purchasing pattern. * The buyer characteristics The players characteristics are gradually change. There are more raw adults and female to become players. This trend attracts the producers to consider the buyers age and gender. They have started to bearing the console and games to match those buyer segment needs. For example, the goal of Wii is even mum can know how to play it.Therefore, the consumers segment change can allude the industry trend and crowd together the major industry players to change the invention to feed the different segment of players. * The aspect of lodge The aspect of society is change in this decade. Parents are willing to accompany their kids to play video games. They think some video games can let people to use their brains to think and some video games can help people to do exercises. For example, some games may use particular barriers that push players to figure out what element they need for enter the other stages.Moreover, galo re(postnominal) sport games of Wii are required users to move their body. Thus, many people think that video games do not only require users to stick in front of the screens and vindicatory move the fingers but also require users to operate their brains and move their bodies. Therefore, many video game console producers have started to change their design to fit more potential customers needs. 4. What does your strategic group map of the video game industry (all segments) look like? Which strategic groups do you think are in the best positions? The worst positions? Types of Video Game Suppliers/Distribution Channels. strategical Group Map of the Video Game Industry arcades Machine Arcade operators Home PC game suppliers Sony, Microsoft, Nintendo Home PCs Video Game Consoles several(prenominal) online game site MSN game zoneetc. Online Video Game Sites Low Medium High Cost to Players of Video Games Arcade operators can distribute for the arcade work and little part for home PC use . Sony, Microsoft, and Nintendo produce games that can be use on home PC, video game consoles and online games. The online video game supplier may distribute the games to online use and may have little part for video game console use.Arcade game costs players very little. Sometimes it just cost few coins to play and players do not need to buy the machine back to homes. Home PC game players have to buy PC and they just can play the games or they may need to go to some Internet bars. Therefore, the cost is highest. Video game console cost players around $100 to $400 to purchase a hardware console. For the online video game sites, they may just cost few dollars from players to download the games. 5. What identify factors determine the success for video game console producers?Factors that are essential for competitive success in the console segment of the video game industry include * Large installed base While the installed base is acquire more and more, the producer company could be profit from the increasing installed base if the producer develops its internal game capabilities. Nintendo and Microsoft have this strategy. Nintendo has published many prevalent games and those software ope judge profit margins contribute around 35% to 40 % of Nintendos profitability.Also, self-employed person game publishers also benefit from the large installed base because they can have increasing continuous sales. * Technological capabilities According to the progress of technologies, every industry players are eager to develop the new products that the new technologies ameliorate them. This is because consumers have required more and more functions and quality of the products.They want high definition, easy to use etc from the products therefore, every producer is entering the expert capabilities war. The scientific abilities can help producers offer dampen products to attract customers to purchase. * Partnerships with nonparasitic software developers.Those software de velopers are important for the hardware game console producers because there is no fun without game software. Many players have must have list. This is just like the fashion world. People who pay attention on fashion trend know what should be had. Thus, must have list is the fashion trend in the video game industry. Therefore, partnerships with independent software developers are one of key factor that can push the video game console producer to succeed. Those partners can develop the universal software to urge the sales of video game console producers.* pleasing development and production costs The price of the console should be intelligent for consumers. If the price is too high, the product may be like PS3 to snitch in the market. Because Sony spent a lot on developing the better technologic component for PS3, it priced PS3 in $499 and $599 each to charge customers. However, the new design of PS3 did not completion yet at the launched time because PS3 had only 24 PS3 game t itle can backward compatible with PlayStation and PS2. The development of PS3 is not bankable and blue-ray technology was too expensive.Therefore, the incompletion development and high production costs are transferred to consumers. The result is PS3 fail. In short, acceptable development and production costs are one of the factors can determine video game console producer will succeed or not. * Access to scattering Retailer dissemination this is the common distribution channel of hardware and software console. Those retail stores, such as Wal-Mart, Target, Best-Buy, Flyers and Amazon, have high consumers density. Due to the development of internet use, online retailers become customary and contain powerful sales.Online download Because of internet-base becomes a trend, many console producers have developed the online gaming. Hence, internet becomes a potential way to distribute the online game products. Product variety Some video game producers have variety products. For example Nintendo produces hardware console and software console game. The software console game cannot only use in Wii but also can use in PC, PS2, or other hardware console. Thus, as a software game publisher, Nintendo access to more than one distribution for its software game.In short, how to access to more distribution is also one successful factor of video game console producers. 6. Which console makers seem to be best able to perform the industrys key success factors and other measures of competitive strength? What ratings do Microsoft, Sony, and Nintendo merit in a competitive strength assessment? ImportanceWeight SonyStrength military rank SonyStrengthScore MicrosoftStrength Rating Microsoft StrengthScore NintendoStrengthRating NintendoStrengthScore Large installed base 0. 25 7 1. 75 6 1. 50 9 2. 25.Technologicalcapabilities 0 . 15 9 1. 35 9 1. 35 7 1.05 Partnership with independent software developer 0. 15 8 1. 20 8 1. 20 8 1. 20 Acceptable development and production costs 0. 25 6 1. 50 7 1. 75 8 2. 00 Access to distribution 0. 20 8 1. 60 8 1. 60 9 1. 80 Sum 1. 00 7. 4 7. 4 8. 3 (Rating Scale 1=very weak 10=very strong) frequent speaking, Sony with PS2 has performance very well in the industry. However, Xbox had beaten Sonys PS3. Then Nintendos Wii has very strong performance to become industry leader. Thus, Nintendo seems to have best performance in the industry. The table above shows the ratings and scores of Sony, Microsoft, and Nintendo.Sony and Microsoft have the same score, 7. 4 and Nintendo has higher score, 8. 3. Although Nintendo do not have strong technological capabilities, it has powerful marketing strategic and variety products to access more distribution. Its product can reach more population to use and weaker technological capabilities become its strength to increase the sales volume. Therefore, I gave rating 8 for the acceptable development and production costs which is higher than Sony and Microsoft. Therefore, the overall rating of Nint endo shows that it has best performance in the industry. 7.What commendations would you make to Microsoft to win the next generation battle in the video game console industry? to Sony? to Nintendo? Microsoft According to the revenue data, we can see Microsoft has less revenue than Sony and Nintendo. Also the sale unit of Microsoft products are not as mane as Sony and Nintendo. Therefore, I recommend that Microsoft should increase sale volume of its products. Xbox may be popular in America but how about Asia? Asia is a potential place to increase the sale. Therefore, Microsoft may need to create the new generation product can fit more population taste.Sony Sony should remember the lesson of launching PS3. Although it had pressure to launch PS3 earlier, the product was not ready yet to public. This situation can drag more profit down than launching PS3 later. Therefore, I recommend that Sony should make the marketing plan well and prepare more than one back up plan to face the rivals new products. Sony should have ability to predict or estimate actions of competitors. Nintendo Nintendo has strong performance of its Wii. Wii is design to reach more population so the key features of Wii are not as strong as Sony Play Station and Microsoft Xbox.Now, Wii has been successful to reach more population, and then I will recommend that Nintendo should figure out how to improve its technological abilities. The consumers cannot be always satisfied with the simple designs. Moreover, Nintendo has famous software game such as Mario pals. The game is many people puerility memories. Nintendo could make serial products for the special anniversary of Mario Brothers. Many people would like to collect the serial products, such as the first generation Mario Brother game. This is Nintendos strength and Nintendo should use it.