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Home Video Game Industry Analysis

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Subject: The Home Video Game Industry: Industry Analysis

History

In 1949 the video game was thought of for the first time by an engineer named Ralph Baer but it would be years before video games would enter the spotlight.1 In 1972 Steve Bushnell started the first gaming company Atari. Until 1978 there were very few games for the home system. In 1982 Atari releases a newer version and sales start to sore. In 1985 Nintendo enters the market with the NES. Nintendo still outsells both companies 10 to 1.

In 1995 Sega releases Sega Saturn three months before the projected date and there are not enough games released because of this and sales are dismal. The same year Sony releases the Playstation at $100 less than expected with a variety of different game titles, sales are strong. In 1996 Nintendo releases the N64 which is received well by the public. Sega lowers prices to stay competitive.

In 1999 Nintendo and Sony are in an intense pricing war on their competing systems. Microsoft also announces they will be entering the market with the X-Box. Nintendo releases the Gamecube and the Gameboy advance the same year. X-Box is released in 2001 and is received well and is out of stock most places.

With all of the systems and game prices very high, piracy is becoming more and more of a problem with Mod Chips being developed that allow for pirated games to be played on all consoles. In late 2005 Microsoft releases the X-Box 360.2 The following year Nintendo releases the Wii and Sony releases Playstation 3 and the problem of piracy still continues to this day.

SWOT Analysis

Industry strengths include well developed brand image for the leading three competitors. Each of the three leading competitors has successfully exploited its target consumers in age categories. They all have excellent advertising campaigns and have high corporate attention and resources.

Industry weakness include rising cost of materials and R&D, the expenditures for developing additional high tech systems and games for the system at a reasonable price is becoming increasingly difficult leaving much lower profits for corporations.

Opportunity exists when entry into the market is preceded by all others in the industry. Industry trends are leaning towards older population who appreciate graphics and complexity of games and have the resources to pay more for those games. Many gamers are ready to upgrade systems as new technology emerges.

Threats to the industry include strong market competition, rapid development of technology, the cost of technology and the rating system given to games. Sub-markets are also gaining popularity including the handheld market and online gaming, which threaten market share.

Business and Corporate Strategy

Corporate and business level strategies for this industry are equivalent. The inferred industry mission is to provide entertainment through interactive technology. The industry as a whole falls into the maturity segment of the life cycle. Generic competitive industry average is differentiation among games, graphics, and abilities/extras of the game console. In the beginning the strategy focused on the hardware to make profits.3

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