Case Study 11 - Research Paper Example

There is extreme competition to be the first to market between the three major companies. The first company to market with new capabilities has historically been able to capture the major suppliers of video games for each console. Once the console is able to capture enough game titles, the company console will have secured the main amount of revenue. With the gaming industry, although the console companies might attempt to be the low-cost provider, the discount and retail companies do not attempt to sell the consoles below a certain standard price.

Among manufacturers of consoles there is a price effect for products with similar capabilities and this was evident when the Nintendo DS was able to continue to hold the leader in sales of hand-held consoles. The Nintendo DS was $130, and the PSP was $150. The industry is highly focused on graphics and having the best resolution for the games. The focus of the major consoles has been to capture the avid gamers who want High definition graphics and higher computing power. “The processing capabilities of the Sony PlayStation 2, in particular, allowed game developers to create complex games that were presented at a high screen resolution.” 2. .

This part of the industry is important because consumers will not purchase the system unless there are enough games to warrant such a purchase. The strongest competitive force are the competitive rivalry between each game console and the customers bargaining power. The reason the competition is the strongest force is due to the fact that each of the companies rush to be the firs to market with the next great thing, causing great pressure on rivals to produce something either similar or better.

When Sony tried to compete with the new Xbox, it rushed the PS3 along too quickly and lost sales in the process. The weakest force is the threat of new entrants who would have to pay large amount of research and development costs in order to enter into the market. The costs are between $2-7 million for research and development and then production would be even more costly. The emerging competitive force that would have the great effect on industry attractiveness is the bargaining power of buyers.

A new console would enter into a market with a lot of buyers, who as shown by the Nintendo Wii would like to play an interactive game within the family or in a group setting. Once the technology is available the new entrant could also produce a new console, undoubtedly at a higher cost and possibly capture some of the new market. The fact that the market hasn't competed on price in most cases also is an attractive factor for a new entrant. 3. How is the video game system industry changing? What are the underlying drivers of change and how might those driving forces individually or collectively change competition in the industry?

The video game industry is