Responding to Wii

Topics: Video game console, Microsoft, Barriers to entry Pages: 2 (551 words) Published: March 24, 2012
Porter five forces
Let’s analyze the gaming console industry.
Supplier Power
We can define two types of supplier: the hardware supplier and the software supplier. The hardware suppliers providing the elements needed to build the consoles have a low bargaining power because there have very low switching costs and there are a lot of them. On the other hand, the software suppliers (developers) have a high bargaining power because they choose and set the conditions to work with each console. Entry Barriers

Entry barriers are high because of high R&D costs and the high capital investment needed to start a business in the console industry. Internal Rivalry
There is high internal rivalry among competitors because the core player market is growing slowly, competitors have high exit barriers and the products developed turn obsoletes in less than 5 years due to the fast progress of technology. The players in the industry are: Sony, XBOX and Nintendo. Buyer Power

The bargaining power of buyers is high because there are many options with very low switching costs. Substitutes
Low substitute power because they are not very similar (like TV or other entertainment device) and don’t fulfill the same exact purpose.

Sony has few competitors due to high barriers-to-entry and startup costs but buyers and suppliers (game developers) have high bargaining power and low switching costs.

Sony should target a new market as Nintendo did. We could call this market the casual players market. In order to get in this new segment, Sony will have to develop a more interactive way of using their console without dropping the numerous features to avoid losing their core player market share. The key of success for Sony is to adapt a new technology such as Nintendo did with Wii that will enable the company to target a broader market and not only the males from 16-36 years old.

The advantage of entering those two markets with one console is that Sony will enter a bigger market with...
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