Business & Corporate Strategy Video Games Industry

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Business & Corporate Strategy

Case Study
Competition in Video Game Consoles: The State of The Battle For Supremacy

Julie Petitdemange
MGE – 2ème Année
24/11/2010
Ecole de Management Strasbourg

I. Analayse the Industry of Video Games

History:
The video game industry grew in prominence with the 1985 introduction of the Nintendo entertainment system and was well into battle for supremacy among third generation consoles in 2008. The development of video games began in 1947 with the introduction of the first games: “Tennis for Two” and “Spacewar”. The first patent for video game was created in 1968 by Ralph Bear. Until 1983 consumers could only play simple arcade-type games, but Nintendo rescued the video game industry in 1985 with the introduction of NES (Super Mario Brothers). The sale of game systems and software declined as the installed as the installed base grew and consumers had purchased “must have” titles: industry sales slowed considerably between 2003 and 2005. 2005 represents the launch of a new generation games which offers unparalleled computing power and high definition (HD) graphics and in the same year sales of video games equipment in the US exceeded 10 billion dollars. The most popular category of games is Action with 30,1% of related PC games in 2005. The global size of the market is quite high with 35,248 million dollars in 2005 (compared to 24,352 million on 2000) and the “boom” is continuing over the years. Competition

Producers of video game consoles:
Nintendo’s ability to create innovative game systems leaded to a competitive, technology driven industry. Today, the industry of video games is clearly composed of three main competitors that have exclusive possession on the market with their products: * Microsoft Entertainment and devices division

* Xbox system (Nov 2001)
* Xbox 360 (2005)
* Xbox Live Website

* Sony
* Play Station (1995)
* Play Station 2
* PSP (March 2005)
* Play Station 3 (Nov 2006)
* Nintendo
* Game Boy (1989)
* Nintendo 64 (1996)
* Game Boy Advance (2001)
* Nintendo DS
* Nintendo Wii

* Sony PS3, Nintendo Wii, Microsoft Xbox 360 proved to be must have gifts 2006-2007 * Game software developers focused their efforts on Nintendo and Sony * Microsoft, Sony and Nintendo each allied with IBM in the development of the console microprocessor; all three companies maintain similar relationship with makers of graphic processing units to display HD quality graphics and 3D effects, which increases the competition. PC manufacturers:

* AMD
* Intel
* Falcon Northwest
* HP & Dell (the world’s two largest manufacturers of Desktop and laptop computers in 2008): created PC model with advanced graphics Value chain allies (such as discounter, electronic retailers, and toy stores): * Wal-Mart

* Target
* Best buy
* Circuit City
* Toys R us
There was little competition among retailers in the sale of video games consoles and software. More price competition at the retail level was found with video game accessories. Sony, Nintendo or Microsoft tended to sell at comparable price points across retailers.

Game systems:

* Installed base consoles
* Handheld consoles
* Online gaming
* Mobile gaming

Consumers
In 2008 about 300 million people worldwide played video games. Majority of video players are preteens, teenagers, and young adults but the average age is rising as teenagers continue to play in their adult years. Video game enthusiasts spend 6 or more hours per week playing video games; the average American was said to play 75 hours annually playing video games in 2003 There has been a dramatic increase in the amount of time consumers playing video games during the late 1990s and early 2000s (due to the improved capabilities of game consoles). Avid gamers purchase the largest percentage of the industry’s game...
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