How Structurally Attractive Is the Video Console Industry in 2008?

1. How structurally attractive is the video console industry in 2008?

   According to Porter’s 5 forces --- suppliers, buyers, new entrants, substitutes, industry competitors --- which can be used to analyse industry structure for attractiveness and profitability, the video console industry in 2008 was relatively structurally attractive.

   Considering to suppliers, in 2008, a huge quantity of third-party game developers could supply video games to consoles, and a high-technology console could service as a platform of choice for gaming online. In other word, there were plenty of games available in the consoles. As a result, this was able to add extra value to the products for customers and the video console industry was consequently attractive.

   Buyer was another factor to make the video console industry more attractive. Nintendo’s Will appealed to more gamers who were traditionally not videogame users. The new gamers consisted of both the male and female between ages 9 and 65. Thus, the consumer group became obviously wide in 2008. Then, the more game users, the more attractive was the video console industry.

   Although the three giants --- Sony, Microsoft, Nintendo --- and probably update of console were great threats, few new entrants, according to the previous video console industry history, was a favorable factor which caused the video console industry to being attractively.

   To sum up, the video console industry in 2008 was relatively structurally attractive.

1. What are the most important lessons from the evolution of the video game industry that Kazuo Hirai and Sony’s should keep in mind as they try to formulate a strategy for regaining industry leadership from Nintendo? How has the structural attractiveness of the industry changed over time, and why?

   Sony should gain several important lessons from the evolution of the video game industry, given that Sony lost its leadership in the video console industry with the current generation. Firstly, Sony should broaden its customer group, like Nintendo. Nintendo’s Wii attracts 9- to 65-year-old males and females, whereas Sony’s PS3 only focused on the 18- to 34-year-old males. Secondly, Sony should snatch the first-mover advantage for the next generation. For instance, Microsoft launched the Xbox 360 in November 2005, a full year before Sony’s PlayStation 3 and Nintendo’s Wii hit U.S. store shelves in November 2006. Then, Microsoft achieved a considerable success. Finally, Sony should make a quicker step in technologically updating the consoles, and Sega is a good example. Sega launched its Genesis console with a 16-bit microprocessor in October 1988, more than two years before Nintendo released its own 16-bit Super NES, which caused Sega to replacing Nintendo’s dominance in the console industry.