UNIVERSITY OF ONTARIO INSTITUTE OF TECHNOLOGY
Nintendo’s Strategy in 2009
The Ongoing Battle with Microsoft and Sony
Group 7 Jeremy Abbaterusso 100217118
Strategic Management 1 BUSI 4701
April 1st, 2011
Word Count: 1246
The Attractiveness of the Console Video Game Industry (Porter 5 Forces) Suppliers (Medium to Low)
Suppliers include Foxconn Precision Components, IBM etc. for chip manufacturing, product assembly, video game creators, and content providers. Each supplier would provide a small piece of the complete product and as such bargaining power would be low (pg. 282). Buyers (Low)
Buyers consisted of various retailers that carry the product and would vary in bargaining strength depending on their size. From the sheer number of retailers that carry the product along with the global presence of the major competitors in the industry there is no single retailer in a position to exert any significant level of power. Substitute Products (Medium)
Direct substitutes for the console video game industry are personal computers, arcade machines, and handheld game devices which vie for consumer spending (pg. 279). These substitutes are near in cost and provide no switching costs aside from their price. Combined with the presence of a large number of near substitutes vying for entertainment expenditures there is a threat from substitute products. Threat of New Entrants (Low)
Large capital investments, distribution channels, technological complexities and other critical factors within the game console industry would be barriers for new entrants. Also the creation of an assortment of games and accessories would bring down the threat of new entrants even further as this would be a huge obstacle to overcome. Rivalry among Competing Sellers (High)
Rivalry within the video game console industry would be high. Microsoft, Sony, and Nintendo would “battle for market supremacy” (pg. 275). This battle would weaken differentiation by competitors developing products that were technologically superior and more powerful than the offering of rivals (pg. 283). This benchmarking lead to price wars by competitors squeezing profit margins and limiting market share gains (pg. 281).
Conclusion With the recession making 2009 sales decline to $382.6 million from $617.3 million in 2008 (pg. 283) and with the overall assessment of the five forces the video game console industry would not be attractive. This accompanied by the high risk technological complexities and the increased intensity of competition the industry would be considerably unappealing.
Success in the Game Console Manufacturing Industry
The 3 – 4 critical success factors are:
1. 2. 3. 4. Advancement in Technology Price and Strategy Research and Development Quality and Innovation of Gaming Accessories (ex. Games, remotes, etc.)
a) Distinctive Resources/Capabilities Leverage by Nintendo: 1. Differentiating the User Interface and Remote Value There is a high value in Nintendo’s ability to differentiate its product offering in comparison to Microsoft and Sony as it allows Nintendo to appeal to a new market segment which included people who did not generally play video games (pg. 281). This value is best shown with Nintendo’s dominance in unit sales for 2009 (exhibit 4, 5, and 6). Rarity The user interface and remote was rare as Nintendo was the first to bring together a Bluetoothactivated wireless controller which provided gamers with a wide range of motion capabilities (pg. 280). This new ability harnessed by Nintendo allowed users, “to physically interact with the virtual world, significantly changing the experience of video gaming (pg. Pg.280).” Imitability Patent protection would protect this technology from being duplicated, but the remote capability and interface could be substituted by competitors. In fact, Microsoft and Sony had announced intentions to create a variety of ways for their consumers to interact with games on their systems (pg....
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