2. What is competition like in the video game console industry? Do a five-force analysis to support your answer. Which of the five competitive forces is strongest? Which is weakest? Would you characterize the overall strength of competition in video game consoles as fierce, strong, moderate to normal or weak? Why? What forces are driving changes in the video game console industry? Are these driving forces acting to make the industry more or less competitively intense? Are the driving forces acting to make the industry more or less profitable in future years? Answer :
Issues arising from the 5 forces model (Porters model) below allow an analysis of the overall nature of competitive forces affecting growth and future profitability in the video games console industry. [pic]
Rivalry amongst competing sellers is the strongest force at play in this industry. In order to gain market share on the “battlefield” companies such as Sega, Nintendo, Sony and Microsoft have competed by “developing products that were technologically superior and more powerful than the offerings of rivals” (case 6). Each new console release was quickly followed by a superior offering by industry competitors. Some members including Sony and Microsoft were losing money on console sales in the hope of increasing market share and profiting from the subsequent games sales. This cycle of using technological enhancements to differentiate consoles was broken when Nintendo launched the Wii. This simple and new approach to gaming appeared risky and shocked industry commentators. However it proved successful for the firm as by 2009 they had sold 51.6 million Wii consoles which almost amounted to the combined sales for Microsoft’s Xbox 360 and Sony’s PlayStation 3. The case study refers to competition in the video games console business having intensified due to factors such as “new entrants, consolidation and the continuous development of new products”. At present however it could be said that the...
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