Responding to Wii - Case Report

Joanna Nowicka-Jakubczyk                                                

EMBA XVII edition

“Responding to Wii” Case Report

As described in case “ Responding to Wii”, CEO of Sony Computer Entertainment Inc. -  Mr Kazuo Hirai in 2008 faced pressure due to Sony’s Playstation 3 video game console losing market share in favor of the Nintendo Wii. Mr Hirai stood in front of  a strategic business decision: how Sony should respond to the cheaper, more interactive, family oriented Nintendo Wii.

First of all, I would like to present shortly industry analysis and based on this present potential solutions, that would be reasonable and successful from my perspective.

According to Porters five forces analysis the videogame console industry in 2008 was not very attractive:

•  the industry was structured as an oligopoly in which there are few large players with differentiated product and high entry barriers,
• the three main competitors- Sony, Microsoft, and Nintendo- completely saturated the industry and held the majority of the market share.
• capital and fixed costs were very high for console developers and entry required third party software developers to build quality games to be sold with their platforms.
• the big players: Sony (Playstation 3), Microsoft (Xbox 360)  and Nintendo (Wii) due to internal battle created an environment of intense rivalry and small possible substitutes.

Sony has established itself as a technology leader, with products having wide scope of features and technological superiority. Compared to the other two rivals, the Nintendo Wii was less advanced but it was priced significantly cheaper which was met with enthusiastic customer reception. Nintendo also targeted all ages with simplicity, usability, and interactivity. The Nintendo Wii console compared to the Playstation 3 and Xbox 360 was the only competitor to actually make money on its console alone (Figure A from Case). Sony sold its console at a loss to make the product more affordable and competitive, while generating profit through games and accessories.

Based on all above-mentioned, I consider three options for Sony’s opportunities to reclaim of market leadership:

1/  Focus on their superior offering and try to attract existing  consumer segment  by leveraging its progress form the previous 2 generations and implementation of newest technology solutions, more high-tech solutions and features. Maintain its position as a global market leader.

2/ Respond to Nintendo by differentiation of consumer groups (various age, sex and needs), pricing and offering scope (complex home solutions vs. standard lower-cost entertaining device), that directly competes with Wii.