Assignment 1-2 - Nintendo Case - Week 1 PDF

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Assignment 1Case 11: Nintendo's disruptive strategyQuestion 1:First of all,​ we will be looking at the threat of new entrants. The gaming industry is lead by three big companies: Nintendo, Sony, and Microsoft. The less time and money it costs for a new company to enter the gaming industry and be a v...

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Assignment 1 Case 11: Nintendo's disruptive strategy Question 1: First of all, we will be looking at the threat of new entrants. The gaming industry is lead by three big companies: Nintendo, Sony, and Microsoft. The less time and money it costs for a new company to enter the gaming industry and be a valid competitor, the more a company's position may be significantly weaker. In this case, the gaming industry is on an excellent economy of scale, producing immense amounts of products by assembly lines. There is a lot of product differentiation in the game industry because the three companies sell different products (PS2, DS, and the XBOX360), and each of them is different from each other. The capital requirements are very high for new companies, because of the investments in factories, technology, and production. When switching from one company or product to another, there will be some switching costs. All the games purchased for one console are not available for another console. The threat of new entrants in the gaming industry is low. Secondly, we will look at the power of buyers. If the industry contains a high amount of buyers it will result in a lower power of buyers. Their buying power is low when customers purchase products in small amounts, like a new game or a new console. The products in the gaming industry are differentiated by different consoles, which will decrease the power of the buyer. Because they suffer switch costs mentioned earlier, this will also decrease the power of the buyer. The power of the buyer is low. Third, the threat of substitute products. Three big companies rule the gaming industry. This means that there are not other products performing the same or similar functions in other means. Like we mentioned earlier, the switching cost is high. All together results in a low threat of substitute products. Fourth, the supplier power. The suppliers are more concentrated than the industry they sell to. There are a lot of buyers and a few suppliers which gives the supplier power. However, there are multiple other substitutes to buy, which lowers this power. The suppliers do not depend heavily on the revenues in the gaming industry. That is because sony sells TV's and Microsoft develops, manufactures, licenses, supports and sells computer software, consumer electronics, personal computers, and related

services. Also, the suppliers offer products that are differentiated. This results in a high supplier power.

Fifth, the rivalry among existing competitors. This force depends on the intensity in which companies compete in the industry and the basis on which companies compete. The growth within the gaming industry was decreasing when you look at the revenue of each company every year. There are a few competitors. There are no exit barriers. So the rivalry among competitors is low.

Question 2: Iwata wanted to win back the people that had quit gaming due to the time-consuming issue to get familiar with games, and also get to the people who never gamed before. By making amuch more easy-to-use controller, using touch screens accompanied by a stylo, and also using the WI-FI connection to be able to have people play with each other through this wireless network, he made the market bigger. Making the game scenarios based on real-life situations instead of fantasies would also be more attractive and familiar for people to get attracted to the game. Question 3: Iwata dealt with Porter's Five Forces by not thinking in a competitive way towards all the other big suppliers. He let the whole gaming market grow by bringing in many more gamers, new and old. Because of this, he grew enormously and became a leader at that moment in this industry, but also let his competitors potentially grow as more people joined the gaming industry. After the production of the Wii and the DS, the power of the buyers decreased. The number of customers increased rapidly. The differences between competitors grew because there were two new unique products on the market produced by Nintendo. Noah Vaal...