Five Forces Analysis Video Gaming

Although, seeing as video games are increasingly popular today, not everyone met as unfortunate of a fate. Today, many could credit this to the video game development corporation known as Atari, which arose in 1972 and continuously flourished until about 1982. In 1972, Atari came out with PONG, the first electronic arcade game, and it was an enormous accomplishment that exploded into what is now called the electronic gaming revolution. As time passed, Atari managed to triumph over its competition time and time again, but that is not to say that each of the failed corporations did not feature something that is used today. In fact, a couple of the failed organizations contributed something original to what is common today. For instance, Fairchild Camera and Instrument creating the first system that could play several different games, rather than just one. Another aforementioned group, RCA, was the first to produce and utilize keypad controllers instead of paddles or joysticks. Other consoles that came along, such as Intellivision and Vectrex, sported better graphics than the Atari’s consoles and games, but they still did not manage to gross the amount of money that Atari did because Atari was still on top of collecting all of the most entertaining and enjoyable games of their time. Keep in mind what attracted the masses to video games in the past: fun and addictive gameplay, not how good they looked. Now that the principal eras of gaming have been

The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through head-to-head competition. The most valuable contribution of Porter's “five forces” framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness.

The Five Forces Model as defined by Dr. Michael Porter of Harvard University uses five different strategic factors to explain Competitive Rivalry a company or industry faces. The fiver forces that comprise the model are Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products, Potential Entrants and Completive Rivalry (Porter, 2008). The intent of this analysis is to rank-order each of these five factors from the standpoint of their influence on Target Corporation (NYSE:TGT) and their competitive position in the retailing industry. Each of the five forces are rank-ordered in terms of their importance to Target.

As sales of Nintendo’s Wii and DS dominate the PlayStation 3 and Xbox 360, and PlayStation Portable, respectively, the pressure continues to mount on Sony and Microsoft to move to the next level in the ongoing console wars. Sales of the Wii in 2008

We shall apply the Porter 's 5 Forces model to examine the PC market and see how forces of competition influence the profitability of the market players.

In the five forces model by Porter, four forces will influence the fifth one (see the model on the right). The bargaining power of suppliers, the bargaining power of customers, the threat of substitute products and the threat of new entrants will influence the fifth force: the level of competition in the industry (S.Clegg, C.Carter, M.Kornberger, & J.Scheitzer, 2011).

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It includes video game consoles, game software, handheld devices, mobile games and online games. The video gaming industry has been growing exponentially in recent years with Sony, Microsoft and Nintendo competing for the higher profits in the market. This essay will analyze each of the five forces acting on the industry: threat of new entrants, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among existing firms. Then it will be determined if the video game industry is still an

Threat of Substitutes: The main substitute for a video game console would be a personal computer. They can both be used for playing different types of video games and be used for entertainment. The threat of this substitute edging out video game consoles is very low, because they are not completely similar. If anything, video game consoles are edging out personal computers in the gaming industry. The threat of substitutes in the video game is not very high. In 2008, this was not a very strong force in the video game industry.

Microsoft introduced the new console (Xbox 360) one year before Sony, the industry leader, unleashed the PS3. Microsoft with the first mover advantage built a large customer base and has the largest library of games. The PS3 console has the best raw power and blue-ray capabilities. Nintendo, although with the less advanced console (Nintendo Wii), has successfully distinguished itself from their competitors with an innovative controller whith motion-sensor capabilities.

Global Video Game Console Industries must try to maintain a sustainable competitive advantage through innovation such as creating an upgraded version of the game every year or increase their on and off line presence to better satisfy their customers. There are many competitors in the Video Game industry that include PlayStation 3, Xbox 360 and Wii. These gaming consoles compete in terms of price, durability and loyalty. With Intensity Rivalry being a major determinant of competitiveness, video game companies work towards dominating the industry as well as gaining the major part of the industry profit pool. (Blackwell, 2002)

Nintendo appears to have implemented a market-penetration pricing strategy. The Wii at a cost of $250 is 50% less than the 20-gigabyte PS3 (smaller hard drive machine). At this lower price, it is easier for the product to penetrate the market due to affordability in most segments. This aligns with the assumed company’s aim of maximising market share in the current and new segments. To achieve this, Nintendo ensured that the Wii was less costly to manufacture. Moreover, a higher sales volume may lead to lower unit costs and higher long run profits. Conversely, Sony is believed to have a market-skimming pricing strategy. The company invested $2 billion in technology, so this strategy aims at recovering the maximum amount of revenue to cover the high costs incurred in the early stages of the product life cycle. Additionally, Sony has a strong brand due to the success of their previous machines (PS2 and playstation) and the high price assists in communicating the image of a superior product with quality.

When it comes to entering the video game console market there are a lot of costs that are incurred. This limits the amount of competition that is coming in from an outside source. Microsoft spent over 100 million dollars on research and development alone for the Xbox one controller (Ron, 2013). This is a huge cost that new companies usually cannot absorb when first starting out. There is also a huge cost difference from new producers and long standing producers due to experience and the economies of scale that the top companies have. The last factor that really deters companies from entering the console game is the fierce brand loyalty that inhabits the video game market. Most consumers once they pick a side stick to it, this can span as far back as childhood. On release the PlayStation 4 had better specs then the Xbox One, and yet 42% of previous Xbox owners choose the Xbox One over the PlayStation 4 (Sakraida, 2014).

Porter’s five forces analysis is a tool is useful for us to analyse the threat of competition in an industry. Porter believed that the industries were influenced by five forces; competitive rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and the threat of substitutes. Analysing these areas can allow you to see attractiveness of the market and find a competitive advantage.

According to Michael Porter, “Every industry has an underlying structure, or a set of fundamental economic and technical characteristics, that give rise to these competitive forces” (Porter 1998:23). The forces mentioned above are: industry rivalry, threat of new entrants, threat of substitute products, bargaining power of suppliers and bargaining power of buyers. Additionally, Porter mentioned that: “Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda or action” (Porter 1998:22).