Case Study Nintendo Strategy In 2009

Case Study: Nintendo’s Strategy in 2009

The ongoing battle with Microsoft and Sony

4/7/2014

Sean Forester (G00278185), Pascal Ebosele (G00279572 ), Philip Cheung (G00275012), Mariama Bah (G00282320)

Question 1: What is the defining business and economic characteristics of the video game console industry? What is the industry like?

The dominant Economic characteristics of the video games console industry:

Market Size and Growth rate:

Overall the market size of the video game industry is large. In 2008 the industry recorded sales of $23 billion. To put this into perspective, that is 19% greater than the previous year. This would indicate that the industry was still growing at rapid pace in 2008. However as of the June 2009, sales

The industry experiences rapid product innovation and products experience relatively short product life cycles. To succeed in this industry R&D is of great importance important. The Wii had been developing in concept from 2001, 5 years before its release.

The case proves that when a competitor is first to the market with the latest innovative product, there are possibilities to overtake competitors. By the mid-2009 the Nintendo Wii had higher cumulative sales than the Xbox 360 and the PlayStation 3.

Pace of Technological change:

Similar to product innovation, the pace of technological change is a key characteristic of this industry and one of the drivers of change in the industry. Advancing technologies play a massive role, as technologies improve competitors fight to try and incorporate the best features in their new products.

This means that companies must have strong technological capabilities to survive in the industry, to adapt the constantly changing environment. These technological capabilities are key to eh success and survival of competitors within the industry.

Vertical

Once again there are a number of factors and characterise that can be used to determine the overall threat of new entrants. The two aspects that determine the threat of new entry are barriers to entry and the attractiveness and potential growth of the industry. Based on these we conducted the following analysis:

Increase Threat of entrants:

Market Growth: in 2008 the industry did report record sales, some potential entrants may have decided to make a move at this stage and could potentially be launching a product in the near future.

Decrease threat of new entrants:

• Entry Barriers are high: Entry barriers to the console industry are high. The main reasons for this are:

o There are sizeable economies of scale in production of video game consoles o Brand preference and customer loyalty is high o Large capital and resource requirements are needed o Cost and resource disadvantages associated with learning curve o Industry members have the resources and capabilities to launch attacks against any potential new comer to the