Case Responding to the Wii
Case 2 Responding to the Wii
Question 1: How structurally attractive is the videogame console industry in 2008?
There has been a lot of competition in the market of gaming console producers after the videogame industry started in 1972 when the television maker Magnavox introduced its gaming system Odyssey. Other producers like Atari quickly developed their own gaming systems and competition in this market was a fact. Over time other game console producers joined the market such as Nintendo, Sega, Playstation and eventually also Microsoft. After fierce competition the past three decades companies such as Atari and Sega left the market. When looking at Exhibit 2a we can clearly see that the market for gaming console producers in 2008 consists out of 3 major players with their latest gaming consoles. Microsoft with the Xbox 360 which was launched by the end of 2005, the Sony Playstation 3 which was launched a year later in 2006 and the Wii launched by Nintendo at the end of 2006.
There is a lot of competition between these player which is a logical result after the market proved to be very profitable as we can see in Exhibit 2b in the case where we see large operation profits over the years for gaming console producers. Although this market has proven to be very profitable there have been past events of a sudden down turn such as the one in 1983 where lots of companies involved in the game console market declared bankruptcy. After reaching a peak in 1982 the industry lost 97% of its annual sales volume in three years.
When looking at how the industry evolving over time we can use figure A given in the case reader. Here we can clearly see the market leaders in the gaming console industry over the generations. When looking at the product life cycle of each of the volume leaders, we can see that each console produced by the volume leader has an approximate life time of about 5 years. Technological improvements and competition over time have been the main
Question 1: How structurally attractive is the videogame console industry in 2008?
There has been a lot of competition in the market of gaming console producers after the videogame industry started in 1972 when the television maker Magnavox introduced its gaming system Odyssey. Other producers like Atari quickly developed their own gaming systems and competition in this market was a fact. Over time other game console producers joined the market such as Nintendo, Sega, Playstation and eventually also Microsoft. After fierce competition the past three decades companies such as Atari and Sega left the market. When looking at Exhibit 2a we can clearly see that the market for gaming console producers in 2008 consists out of 3 major players with their latest gaming consoles. Microsoft with the Xbox 360 which was launched by the end of 2005, the Sony Playstation 3 which was launched a year later in 2006 and the Wii launched by Nintendo at the end of 2006.
There is a lot of competition between these player which is a logical result after the market proved to be very profitable as we can see in Exhibit 2b in the case where we see large operation profits over the years for gaming console producers. Although this market has proven to be very profitable there have been past events of a sudden down turn such as the one in 1983 where lots of companies involved in the game console market declared bankruptcy. After reaching a peak in 1982 the industry lost 97% of its annual sales volume in three years.
When looking at how the industry evolving over time we can use figure A given in the case reader. Here we can clearly see the market leaders in the gaming console industry over the generations. When looking at the product life cycle of each of the volume leaders, we can see that each console produced by the volume leader has an approximate life time of about 5 years. Technological improvements and competition over time have been the main