Critically analyse and evaluate the video games software industry dynamics - Essay Example

Some of the barriers to an entry to video game industry is: a) The Capital Requirement of Entry The capital requirement in video game software industry is very high as lot of money and resources is required for advertising, production, research and development (R&D). A company with less funding capacity neither can afford to make large bulk of orders nor it can survive in long term scenario (Altwein, 2006, p.3). Most of the companies that are already established have been facing fierce competition from new ones which have been coming up.

Some companies like Ataria of the United States collapsed in 1980s due to fierce competition from new entrants. (Brightman, 2006).b) Economies of Scale Although economies of scale is not a strong barrier to an entry to video game software industry yet a company can only compete to market if it has an ability to create good economies of scale in industry (Altwein, et al, 2006, p.4).1 c) Expected Retaliation and Access to Distribution ChannelThe expected retaliation and access to distribution channel also play an important role to an entry to an industrial sector as both factors determine the future prospective of a competitor in the market.

Same thing is applied for video game software industry too. For example in 1983, when Nintendo entered the market with the FAMICOM, although the expected retaliation was at quite a low point for the global video gaming market resulting the disillusionment of customers, yet as Nintendo was already a familiar player in the market having access to distribution channel network, hence it was much easier for it to distribute its products to a large market area (Altwein, et al, 2006, p.4).ii) Threat of.

This is because the industry is supported by growth in the information system sector which has not been affected by the economic recession. There have been no macro or micro economic policies which has affected the operations of the industry. On the world front, the growth of the economy in the world has translated to increased use of computers which has led to growth of the industry. There has been increased disposable income as the middle class continue to emerge in all parts of the world which as led to increased use of video games (Gold 2003, p. 65). There has been increased change in the culture in the world which has favoured increased use of video games.

As more and more communities of the world depart from their traditions, there has been increased use of video games as alternative entertainment for children. This has been recorded in the emerging markets of the world. But in general there has been increased use of computer games which are supported by video games. This has been a great shift in the culture of the people who have now embraced computer games as a wary of recreation. This change in culture has seen computer games become the culture of most adolescent in the world.