Timing of Market Entry Strategy of E-Sports - Literature review Example

Timing of market entry strategy of E-sports The choice over when to enter into a particular market is one of the core determinants over whether a new product will be successful or fail. This is because the risks and opportunities that accompany a new product are significantly impacted by changes that occur in the overall economy, any changes to the preferences of a customer as well as an overall evolution of the life cycle of the product’s industry. In this regard, the decision to enter the market should be effectively timed in order to actively balance the risks that come with early entry or the chances that are missed as a result of late entry. In this paper, I will review the nine factors that influence market entry with a focus on e-sports. The market for electronic sports is growing but all the major players in the market are facing significant competitive pressure as substitutes for gaming are growing at a rapid pace(Gawer 2011). Moreover, the first generation of players are reaching maturity which essentially means that many players will shift to alternatives such as multiplayer online games. The electronic sports industry is one of the fastest growing bringing in revenue of well over $ 58 billion (Binken & Stremersch, 2009). Schilling (2013) argues that one of the factors that influences optimal timing of entry is customer certainty and here the focus is on ensuring that the needs of the customer are clearly understood since the more clear they are the more likely it is that the product will be able to make it into the market much earlier. Electronic sports essentially center around competitions that focus on online video games many of which feature gamers who have turned professional (Dube et al, 2010). The size of this community is significant with over 32 million people playing electronic games on a monthly basis. Players of electronic sports are diverse and their needs and preferences are therefore unique. the large majority of players involved in electronic sports are men aged between 26 and 30 years and similar to their female counterparts, these men have at least one child which means that they have responsibilities that ensure they are not players full time(Herrewijn & Karolien, 2013). Whereas male players love gadgets and sports, the female players love shopping and travelling. Electronic sports companies that have this information can be at a better position in terms of entering the market with products that will better appeal to the consumer- either male or female depending on their targeted demographic (Gret, 2010a). Schilling (2013) also contends that the level of innovation is another core factor that significantly impacts on the success of a company. This is because innovations that are perceived to have more improvements than other products in the market will more likely take on more customer acceptance. The electronic sports industry is a competitive one therefore being first to the market provides a significant amount of sustained advantage over the market share. However, being a late entrant is not necessarily a bad thing; companies such as Nintendo, Sony and Microsoft have been dominant in this market for a long time however, new companies can take over since the companies can take advantage of the distinct gaps in the products that these companies provide (Roquilly, 2011). For instance, Sony is no longer a dominant player in the market with the demand for its gaming consoles increasingly going down. Companies such as these two need to be in a position to aggressively react to or anticipate the potential entrants. In addition to consoles, electronic sports also incorporate video gaming that takes place across a wide range of interactive networks as well as a host of mobile devices that range from smartphones and tablets (Di Benedetto & Crawford, 2008). Consider as an example the fact that Nintendo has managed to acquire a larger market share as a result of the fact that it brings in a significant amount of innovation in terms of game play control and usability, an area where Sony has failed to impress(Gretz, 2010a). According to Schilling (2013) the requirements for innovation or the enabling technologies also play a distinct role in impacting on the optimal time for entry. In this regard, the present of technologies to sustain the technology and the level of maturity of these technologies might determine the amount of time that it will take a technology to enter into a market. Sony one of the major players in the electronic sports field waited a long period to incorporate Blu-Ray technology into their PS3 consoles which essentially provided Microsoft a chance to take the lead in terms of sales of PS3 consoles (Herrewijn & Karolien, 2013). In 2015, Nintendo announced that it was finally making the decision to enter the gaming market of smartphones far behind its rivals Sony and Microsoft. For long the company has refused to take part in this particular segment of electronic sports and the decision over which characters could be available on smartphones and tablets could further delay their entry into this lucrative market (Gretz, 2010a). Schilling (2013) puts forward another factor which is the impact of complementary goods and more importantly the extent to which they are available. If the innovation in question requires any type of good to complement it, the extent to which these goods will be available will significantly impact on the acceptance of consumers. Electronic sports are played using videogame consoles which means that for these players, the most critical aspect is the installed base since it impacts on aspects such as the number of other gamers that the individual can be able to play with (Di Benedetto & Crawford, 2008). Moreover, the availability of complementary goods might be critical since in many instances, a console is often only as good as the games that might be played on the console. However, the technological functionality of a device is also critical as seen in the case of Sega which was able to take away a significant market share from Nintendo when it offered players a system that offered them faster animation than Nintendo (Gawer, 2011). In the same way, Sony and Microsoft were better able to break into the market for video game consoles by offering its players more improvements to the technological functionality of their consoles. This was in spite of the fact that both Nintendo and Sega had great working video game consoles and the advantage of complementary goods (Binken et al, 2009). Schiller (2013) argues that the threat of competitive entry is another element that impacts on the extent to which a firm will enter a market. This is because high barriers to entry essentially mean that the firm might mean that it is unnecessary to rush a product to market especially as a way to increase on returns ahead of others. The electronic sports market is a largely saturated market which means that there is no realistic way for a new entrant to come into this market except perhaps in markets that are related to the sport such as portable gaming (Gawer, 2011). New entrants will find themselves dealing with difficult barriers to entry such as strong competition for prices and companies that are already established. This means that entering the market would most likely not result in any positive return on investment (Dube et al, 2010). In addition a potential entrant would require a high level of experience with either video games or consumer electronics, a big access to capital, recognition of their name or a marketing campaign that is big enough to earn the company this recognition. As an example Blizzard Entertainment, a producer of computer games, or Apple Inc, which deals in consumer electronics might have the financial resources and experience that would enable them to enter the market(Herrewijn & Karolien, 013). Increasing returns to adoption is another factor put forward by Schiller (2013) and this refers to the fact that when there are increasing returns to adoption, then a firm allowing competitiors to gain an early start would be more risky for a firm entering a new market. When a technology is perceived to be more valuable it is far more likely to be adopted which means that it has a greater opportunity to be improved. In electronic sports, the producer of a video game console must strive to attract both the players, who place great value on the number of games that they can play on the console as well as software companies who place a significant amount of value on the number of consumers who are drawn in to buying and using a particular console (Binken & Stremersch, 2009). The extent to which the firm can withstand losses in the early stages is another factor put forward by Schiller (2013). Here this refers to the fact that a first mover into the market often has to deal with a large amount of the expenses related to research and development and a big amount of time without revenues. In addition, it is often the case that the earlier that a firm gets into the market, the larger the amount of capital resources that it requires (Schilling, 2013). In the early days of the electronic sports industry, video consoles were sold at either the set out cost or even less in an effort to ensure that the producers were in a position to create an installed base. Sony found itself losing a large amount of money with very few customers buying its games (Gretz, 2010a). This was a mistake that Microsoft learned from as they sought to enter the market; the company removed the DVD playback feature that had been put into the Xbox, their gaming console, unless consumers also bought an additional DVD playback kit (Roquilly, 2011). Schiller (2013) argues that the extent to which the firm has the requisite resources to ensure that it increases the level of acceptance within the market. Firms which have a significant amount of money can invest in more aggressive marketing as well as development of their suppliers and distributors which enables them to have a faster rate of adoption of their products (Schiller, 2013). As was mentioned before the video gaming industry is a competitive one which means that each day there are new games being developed. As opposed to other products, marketing of games begins right before they are released which means that there needs to be a significant game development team that will enable the company to get its products to the consumer before its competitors (Di Benedetto & Crawford, 2008). The reputation of the firm is another factor that impacts on the optimal timing of entry. This is because innovations that come from firms that have a good reputation might be more willingly adapted thereby ensuring that the firm has a successful rate of entry (Schiller, 2013). Atari was the first electronic sport company that was founded in 1972 however it quickly gained a reputation as a maker of poor quality games which soon saw it lose out on its credibility(Herrewijn & Karolien, 2013). This provide the chance for Nintendo and Sega to enter; Nintendo quickly became dominant as a result of its strict policies on licensing however this alienated developers and distributors which gave the opportunity for Sega to take over Nintendo’s market share as a result of the fact that its gaming consoles had higher levels of technology(Dube et al, 2010). Conclusion Determining the right time that a firm can bring a product to market is critical since it impacts heavily on its success. According to Schilling (2013), factors such as the reputation of the firm, whether it has the right amount of resources with which to carry out effective marketing, the extent to which the firm can be comfortable with losses in the early stage of the product’s entry into the market as well as the availability of complementary goods. The electronic sports industry is one of the most competitive with strong barriers to entry which means that firms entering this market must have significant resources for marketing and to remove already established firms. References Binken, J. L.G & Stremersch, S. (2009). “The Effect of Superstar Software on Hardware Sales in System Markets,” Journal of Marketing, 73(2), 88–104 Di Benedetto, A.C., Crawford, C.M. (2008). New Products Management. (9th Ed). New York: McGraw-Hill Irwin. Dubé, J.P., Günter, H., Hitsch, J., Chintagunta, P.K. (2010). “Tipping and Concentration in Markets with Indirect Network Effects,” Marketing Science, 29(2), 216–49 Gawer, A. (2011). Platforms, Market and Innovation. New York: Edward Elgar Publishing Gretz, R.T. (2010a). “Hardware Quality vs. Network Size in the Home Video Game Industry,” Journal of Economic Behavior & Organization, 76(2), 168–83 Herrewijn, L., Karolien P. (2013). “Putting Brands into Play: How Game Difficulty and Player Experiences Influence the Effectiveness of In-Game Advertising,” International Journal of Advertising, 32(1), 17–44 Roquilly, C. (2011). “Control over Virtual Worlds by Game Companies: Issues and Recommendations,” MIS Quarterly, 35(3), 653–71. Schilling, M.A. (2013). Strategic Management of Technological Innovation (4thed.). New York, New York: McGraw-Hill. Read More