Video Rival Presentation.docx[1]

8/3/2019 Video Rival Presentation.docx[1]

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First and Second Generation

Console 1972 1985

Atari (2600) Controlled and dominated their market.

Started with Pong and then integrated to a console thatused interchangeable games (4bit system).


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Third Generation Console

1986 1991

Nintendo (NES) 8bit system, created legendary games,and protected their systems to control the supply ofgames for their system.


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Fourth Generation Console

1992 1995

Sega (Genesis) 16bit system, a more powerful systemsand games selection propelled this system as marketleader.


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Fifth Generation Console

1995 1998

Sony (PlayStation) 32bit system, Used CD-ROMswhich lowered fixed cost in game manufacturing.


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Sixth Generation Console -

1999- 2005

Sony (PlayStation2) DVD, Games, Graphics, Internetcapabilities and power are the drivers for success.


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Seventh Generation Console

2005 Present

Value and interactive entertainment, innovations are

the drivers of success.

Sales as of 2009

Nintendo Wii 50.4 Million

PS3 26.7 MillionXbox 360 30.2 Million


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Video Game Industry

Porters Five Forces


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Threat of new entrants into

the industry0The video game industry is unlikely to see many new

entrants - Video game and console development,

production, and marketing costs are very high.0 Current industry strongholds (Nintendo, Sony and

Microsoft) have refined their business processes andgained economies of scale.

0 Large Companies the industry will retaliate viamarketing or pricing.


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Bargaining power of suppliers0 Suppliers in the industry are moderately powerful

because the industry provides a unique, patented and

technological product.0 Firms depend on effective parts for gaming consoles,

such as computer chips and video cards.

0The industry faces threats that suppliers of hardwarecomponents could forward integrate and startproducing their own gaming consoles.


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Bargaining power of buyers

Buyers have a fair amount of power in the video gameindustry, especially for Nintendo whereas Sony and

Microsoft have other sources of revenue.

Buyers have options; if they are dissatisfied withNintendos game console or game offerings, they canbuy from Sony or Microsoft


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Threat of substitutes

0 Customers have a wide range of available substitutes,spanning over all sorts of possible forms of

entertainment: television, movies, PC games, boardgames, literature, sports, etc.


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Rivalry

0 Intense in the video game industry. Nintendo, Sony,and Microsoft continually compete to differentiate

themselves from each other.

0 When one company introduces an innovativetechnology, the others must create even moreadvanced products.


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Value Chain of the IndustryComponent Manufacturers

0 Console manufacturers formulate their consoledesigns by sourcing best of breed components. The

Nintendo Wii is produced by the followingcomponents:

Korean company Samsung supplies the DRAM

memory chip. US companies supply the CPU andaccelerator. The controller is provided by an Italian-French joint venture. And the wireless LAN and ACadapters come from Japanese companies.[1]


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Console Manufacturers

0 Console manufacturers provide platforms that aredesigned primarily to play games, which are oninterchangeable discs.

0The manufacturers provide software development

interface to publishers and game developers and certifythe distribution of games.

0They license games are used with their platform oncommercial terms and heavily market and promote

these games.0 Of this $67 billion industry, console manufacturers

capture $25 billion value.


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Developer

0 Responsible for creating games the consumer willeventually play. Some developers are independent whileothers are very large. Large publishers consolidatedevelopment teams of their own and enter contractualagreements with outside developers.

0Their primary role is to enter a cycle of trying andfailing until they can produce a solidified product.

0The process is three-phased. Phase one includesconducting research and designing an initial prototype.

Phase two is implementation and testing. The finalphase is mastering and forming the product[3].


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Publisher

0 Publishers capture a $33 billion value the most outof any individual component in the industrys supplychain.

0 Key to linking developers and distributors they payfor the development of games and through marketresearch identify which titles they will pursue andultimately pass on to distributors.


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Distr

ibutor

0The focus of the distributor is to compound and createagreements to connect publishers and retailers.

Distributors can be in-house (larger publishers typicallyhave in-house publishers) or they can be licensed.


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0Retailer

0 Console manufacturers and software publishers both

distribute their products to different kinds ofretailers.

0 Retailers operate both as brick and mortar (Wal-Mart,Target, Radioshack), and virtually (Amazon)

0 Under brick and mortar retailers, specialty storesexist which are organized purely to carry the videogame industrys products.

0 Retailers combine to capture $9 billion value from thesupply chain.


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Value Chain


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Market Share


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In what sense and for what

reasons is this a Winner-Take-

All Industry?


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Market in which the best performersare able to capture a very large share of

the rewards, and the remainingcompetitors are left with very little.


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Video Game Industry divided into two main

segments:

1. Hardware (Video Game Consoles)

2. Software (Video Games)


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Video Game Console Industry

Oligopoly Few firms in the industry which between themshare a large portion of the industry.

(Sony PlayStation, Microsoft Xbox, Nintendo Wii)

Two key features of an oligopoly:

1. Interdependence of the firms

2. Barriers to entry


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Video Game Console Industry

Oligopolistic Market - Sony playstation, Microsoft Xbox,Nintendo Wii

Video Game Software IndustryMonopolistic Electronic Arts (19.8%), Konami (9.8%),Take-Two interactive (9.9%), Activision (8.8%), Others(52.7%


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Key Success Factors of the

Video Game HardwareIndustry

0 Product Innovation

0

Identification of Niche Market0 Identification of Customer Needs

0 Financial Power

0 Marketing Power

0 Branding

0 Low Pricing0 Network Capabilities

0 Distribution Systems


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What does the success ofNintendos Wii tell us about

the changing basis forcompetitive advantage in thisindustry?


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Innovation

Less processing power and graphics

Interactive Game Play

New Target Market -Family and casual players

Nintendo


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Low Cost0Nintendo strategy focused on gaming quality

rather than graphics and processing power.

0Gaming console manufactured at aconsiderable lower cost than competitorsSony and Microsoft


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First Mover Advantage0Differentiate products from competitors while

satisfying demandFirst Interactive Motion Game Play

Imitation by Competitors

Xbox (Kinect)

Play station (Move) imitate.


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0 Primary focus on family oriented gaming experienceand secondary focus on hard core gamers

0 Changing the game experience to be moreparticipative and to be used for physical therapy

0 Expand target market to social networking andmobile devices


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In relation to the next generation of videogame consoles, make strategy

recommendations for:SonyMicrosoft and

Nintendo.


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Video game consoles and video gaming are important

source of leisure entertainment, education and socialinteraction for all generation.

Gaming consoles are a crucial feature for any

entertainment centre. Consoles like Microsoft Xbox 360,Sony PS3, and Nintendo Wii have revolutionized thegaming system but they continue to lose money


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Rivalry in Video Games0 Video game consoles and video gaming are an

important source of leisure and entertainment,

education and social interaction for all generation.Gaming consoles are a crucial feature for anyentertainment centre. Consoles like Microsoft Xbox360, Sony PS3, and Nintendo Wii have revolutionizedthe gaming system


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MICROSOFT

- XboxProblems

High cost associated with advanced technologyspecifications

Fewer games

Lacks versatility and design.

Sluggish onscreen movements

Consumers require space to play

Separate payment for multiplayer gaming to access onlinefeatures.

The Kinect had difficulty recognizing voices in a noisyroom.


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Recommendation Microsoft must know its market

Engage third party developers to ensure steady

stream of quality video games Have close relationship with third party developers to

ensure that there is no difficulty in developing gamesfor the console.

Develop New titles for console faster than 18 36months.


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Sony- PS3Problems Challenges of designing a console that would be a favourite

among game players

Establishing consoles as the general home entertainment device. The consoles were difficult and expensive to manufacture.

Delay in the HD Blu-ray DVD drive which is a central element for

Sony.

Console were complex and had increased power

Cost of games were produced at a higher cost due to complexity.

Did not have enough products to sell.


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Recommendation Always have enough products to offer during

launching.

Keep tight control with third party developers withregards to licensing fees and buying power

Produced games at a lower cost for the console.

Must have excellent advertising budget

Have knowledgeable team for the launch of theproduct


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Nintendo - WiiProblems

0 technologically lacks the advanced features of the

Xbox 360 and the PS3 and graphics


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Recommendation Vigorously continue scanning the demographic environment Manufacture consoles to attract the non-gamers as this is a very

large market.

Improve on its technological capabilities over those of the Xbox360 and PS3 Include multimedia features such as video and music player, web

browser, hard drives, graphics and other functions so as tomaintain their competitive edge.

Nintendo should also continue to use its R & D, marketingdepartment and its resources to increase its innovation

technology Efficient manufacturing of consoles at a lower cost than its

competitors. Maintain their differentiation strategy.

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