Analysis of the Home Vedio Industry

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Analysis of the Home Video Game Industry

PLCY 399

Nintendo’s first success
At the 1980s, home video game’s sales began to decline and people tend to believe that the home video industry has dead. But Nintendo managed to recreate the home video game business. First, the head of Nintendo’s United State subsidiary Arakawa had an excellent foresight. He noticed the industry’s further potential and believe in people’s interest in games. He then implemented the successful marketing strategy which includes switching to new distribution channels and redesigning the machine to cater to American market. Second, when the home video game industry was booming, Yamauchi, the boss of Nintendo, successfully executed two strategies: one was that he developed Nintendo’s own video game machine, which is powerful and at low cost; the other was that they realized that software other than hardware, should be the main source of profit. Third, when focusing on software, Nintendo committed to develop the “most imaginative video games ever”. He found Miyamoto who combine cartoon with video games, and managed to develop several successful games that hit the market. In total, Nintendo recreated the business by its superior vision and innovative strategies. While Nintendo had successfully recreated the home video business, it then took actions to capture value from this industry. When their products were redesigned to suit the US market, they embedded a security system to prevent illegal and low-quality games to flood the market. After realizing the increasing thirst for new games, Nintendo licensed the rights to make games. This action made Nintendo to dominate the market with a 90% market share. Meanwhile, they control the quality of product by developing new licensing contract, so that they can consolidate the value.

Sega’ success
The success of Nintendo’s Famicom attracted Sega to enter into the home video game industry. Its 8-bit system released in 1986 commanded only less...
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