Rivalry in Video Games Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Rivalry in Video Games

Barriers to Entry

The video gaming industry is one of the growing sectors of the industry, it encompasses the development and marketing of different categories of video games. The industry incorporates software’s of games, video game consoles, mobile based games, online games, etc. The competition in the industry revolves around Sony, Nintendo and Microsoft for the purpose to achieve higher profits in the industry. Porter Five forces that can affect the industry are as follows:

Threat of New Entrants:

The threat in the industry has high because of massive capital investment required in research and development to start a venture in the console industry. For the new entrants, one of the big tasks is to focus on technology based innovations as per the market practice. That was one of the reasons that the sales of Sony, Microsoft and Nintendo were massively declined in 2008.

Threat of Substitute

The threat of a substitute in the industry would be a personal computer because it can be utilized for playing several kinds of video games and for entertainment purpose also. The threat of a substitute for video game console in the United States is very low, because they are not entirely comparable. Switching cost is also high because customers have to spend more if they opt to change from video gaming to a personal computer game.

Bargaining Power of Buyers

There is a large number of fascinating buyers who are keen to bear the higher cost to enjoy the video gaming consoles. That's the reason why Sony, Nintendo and Microsoft have low pressure from the buyers. Therefore the bargaining power of buyers is low in the video gaming industry, which make it easier for the established players to compete in the market.

Bargaining Power of Supplier

The bargaining power of suppliers is medium in the industry because suppliers can make a huge difference in the video game industry. Usually the switching cost of software suppliers is low who develops the technology in the gaming. On the contrary, hardware suppliers who design the physical elements to assemble the consoles impose a low pressure on the video game industry.

Rivalry in the Industry

There is an enormous competition in the video gaming industry, competitors in the market have high barriers of exit. Sony, Nintendo and Microsoft are contesting in the industry for a decade. Sony is dominating in the market during the last couple of years because of heavily investing in innovation in the products and services.

Economies Of Scale

The two major local arcade game's producers have subsidiary firms that promote their games as well as produced by other producers in the United Sates. Some smaller domestic manufacturers of arcade games claim that the distributors are frequently pressurized to market the games made by their associated companies, and this factor causes a drawback to the other producers in the market. Usually market practices do not provide a competitive advantage to the domestic and foreign producers of video games of handheld video games.

Product Quality and Price

Though there is a disparity among United States producers, several market sources contend that the arcade video games' quality of production tends to be higher for the local manufacturers as compared to the Japanese companies. Labor and overhead cost consisting of only 12 percent of the direct manufacturing cost of an entire arcade video game. The relative labor cost usually does not give a competitive advantage to the producers either in the United States or in Japan.

Local Japanese producers of video games acquire specific electronic components at the global level that provide some edge to them over other dealers in the market. Moreover, producers and importers in the United States declared that price do not provide a competitive advantage considering the competition in the Japan and United States. Various market sources specified that price is the precarious factor to import games to gain a competitive edge in the United States market. Low labor cost and low quality materials in the products usually provide some competitive advantage in the short term, because various research and development cost as well as license fee ignored in that process.

The Incentive To Invest In Innovation

It is the era of globalization and social media. Every firm wants to gain competitive advantage in the industry via utilizing current trends of technology and innovation. People always like change and eager to enjoy the latest technology based products and services.

Nintendo, Microsoft and Sony are offering various innovative based products and services to the customers because they know the significance of it.

There is a significant increase in the competition in video gaming industry and the firms are eager to invest in research and development to .................

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