Sony vs Microsoft - Strategies and Business Model

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Entering the Economic iVIodels of Game Console iVIanufacturers Nabyla DAIDJ & Thierry ISCKIA Telecom & Management SudParis

Abstract: This paper deals with the video game console market. We are not interested here in portable consoles nor in PC games. Our work focuses on the role of core competencies in console wars, analyzing the way these competencies are activated within the firms' business models. The home console market also exhibits crossed network externalities, which requires console manufacturers the ability to conciliate the interests of both developers and gamers. From a strategic point of view, core competencies are closely related with market performance. Today, Sony's and Microsoft's business models are quite similar. However, Microsoft and Sony remain far behind Nintendo and its Wii, which suggests that core competencies do not discriminate on performance as much as the positioning choices made upstream when the strategy is crafted. The link between core competencies, economic model and strategy is at the heart of this study. Key words: video game console, business model, core competencies, two-sided market, platform.


his paper examines the way firms leverage their core competencies in order to achieve market dominance in the video game console sector. Since the end of the 9O's, the home console market has become a full-fledged component of the entertainment industry. This cyclical market is characterized by network externalities, the increasing sophistication of video games and game consoles and the surge of strategic marketing. All these aspects are approached in the 1®' part, which provides a general description of this market.

Since the beginning of the century, this industry has witnessed major developments: the arrival of Microsoft in 2001 onto the game console segment, a growing interest of game publishers in other platforms, the emergence of new platforms such as smartphones, the development of online services as illustrated by...
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