MKTG6340 Contemporary Issues in International Marketing
Case Study: Now underway in your living room: The Video Game Console Wars
1. Compare and contrast Nintendo’s marketing strategy for the Wii with Sony’s strategy for PS3.
By the end of 2006, two game console industry giants, Nintendo and Sony had launched their respective new products; the Wii and PS3. Various marketing strategies were implemented by both rivals and this writing attempt to analyse common and differing elements.
Similarly, both companies had a product differentiation strategy, with the aim of being distinctly set apart from their competitors by the viewing market. However, different elements of this strategy were focused on by the firms. For instance,
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Nintendo appears to have implemented a market-penetration pricing strategy. The Wii at a cost of $250 is 50% less than the 20-gigabyte PS3 (smaller hard drive machine). At this lower price, it is easier for the product to penetrate the market due to affordability in most segments. This aligns with the assumed company’s aim of maximising market share in the current and new segments. To achieve this, Nintendo ensured that the Wii was less costly to manufacture. Moreover, a higher sales volume may lead to lower unit costs and higher long run profits. Conversely, Sony is believed to have a market-skimming pricing strategy. The company invested $2 billion in technology, so this strategy aims at recovering the maximum amount of revenue to cover the high costs incurred in the early stages of the product life cycle. Additionally, Sony has a strong brand due to the success of their previous machines (PS2 and playstation) and the high price assists in communicating the image of a superior product with quality.
2. What is the key to the Wii’s popularity?
The key facet responsible for the Wii’s popularity lies in the innovative design, which “calls to action” the player with physical movement. The writer views the wireless motion sensitive game console as a new, simple and fun method of gaming for all age groups. As a result, it may appeal not only to the traditional expert video game player like the PS3, but other individuals outside that segment. It thus
Nintendo’s strategy for pricing of consoles and games was to lock-in the network effects consoles offered by pricing them at- or below- cost and reaping profits by pricing video games at significant margin. Nintendo took these actions because it knew that if consumers used the NES/ Famicom console, they would be a captive audience for its higher-margin video games which were necessarily more perishable from a consumer taste perspective. This affected the value created by
However, GameStop is still at a disadvantage, because there are such a large number of competitors in the industry. Buyer’s bargaining power are high, since there is no brand loyalty in the industry. Customers are very well aware of the market price of a product and will look for the best deals they can find. Suppliers have high bargaining power since suppliers can choose to integrate forward and sell their products themselves. The success of the retail gaming industry is very dependent on the availability of supplier’s goods. Additionally, since there are low barriers of entrance, substitute products and new entrants often appear in the market. Since most competitors in the industry do not have a strong presence, the expected retaliation towards new entrants is low. An increasing popularity of smartphone games and social media games such as Farmville on Facebook, allows customers to play against friends. Although these social media games do not offer the same experience as a video game, the fact that virtually no switching cost is associated with switching to a competitor’s game and since they are so cheap compared to video game disk and consoles, can easily drive customers from video gaming to online gaming. (Exhibit 2)
Video games have become as pervasive an aspect of our society as television, with many people spending more time playing video games than watching television. There are many perspectives with which to gauge videos games’ effect on society, from a functionalist, conflict or interactionist perspective. (Schaefer, 2011) Each of these sociological theories can provide a different view of video games, how they affect society and the subcultures that develop around them.
• Every company produce video game for different consoles, consoles are developed new generations fast, game developer should compete to gain license for new generation console.
To regain some of its market share in its “growth driven” and “stable profit generators” sectors, Sony can reposition its competition in the minds of consumers. For instance, Sony can use comparative advertising to demonstrate that its brands are superior to its competitors. In this situation, Sony can attempt to alter the portrayed image of its competitor, Nintendo, and position its PlayStation game console as the better-quality product (Positioning(marketing), n.d).
Differentiation strategy is generally reserved for companies with a clear competitive advantage. Companies such as Mercedes and Apple employ this strategy. Differentiation strategy is demonstrated when a company provides value to customers through unique unique features and characteristics of a company's products rather than by the lowest price (Open Learning World 2010).
The first argument that arose out of the video game world was the debate of video game violence. Still unresolved, this debate has actually allowed for the video game industry to come fully into the main stream. As the din over violence quieted the fans of the game society began to focus on issues more akin to their own style. So then began the debate of game play vs. the video game narrative. The question arose; can a game also be a story? While the semantics would suggest that, no, a game cannot be a story, we do realize that a game can contain a story. However,
Shopping, for example, has now become as simple as going online and selecting what you need from a list, and the company delivers your purchases to your front door. We are now able to go on virtual tours through existing buildings as well as those that are yet to be built. The most common and accessible of these interactive replacements is the Nintendo Wii. The Wii is a gaming console that has reached the point where is has wireless operation and reacts to and with human motion. Its games range from common play station gaming like world of warcrafts and tactical gaming, to fitness and sport orientated games and programs with which you can play virtual matches or have simple workouts.
To attempt counteract this cyclical slowdown, EB games have introduced an ever-growing variety of accessories with games to increase the revenue raising capacity of their respective consoles, as well as maintaining the loyalty and attention of a fickle gaming public. Some types of games have been released, with specialty controllers to great success, mitigating the expected lull in sales in the lead-up to new consoles. Recently however, the competition has become slightly skewed. Nintendo’s newfound dominance of the market is causing some headaches for Sony and Microsoft.
Sony, Microsoft and Nintendo have been competing for a decade with Sony dominating the market throughout most of the years because of their superior technological products. The video games industry faces an entirely new rivalry situation. In 2008, Sony lost its strong position on the market, because of Nintendo’s success with their dynamic Wii over Sony’s high-tech PlayStation 3 and Windows’ Xbox 360. Although the Wii was technologically much less advanced than PS3 and Xbox 360, the Wii's cheaper price, ease of use, innovative motion-sensitive controller, and simple but fun games, made the console a hit all demographics from 9 to 65 years old, male and female. All these factors resulted in Nintendo’s Wii dominating sales and surpassing Sony’s by an impressive ratio of 2:1.
Bargaining Power of Buyers: In 2008, the bargaining power of buyers did not play a huge role in the video game industry. Buyers were very intrigued by these products and were willing to pay fairly high products to get them. In the future that may not always be the case, since prices are often fueled by demand, if the draw to video game consoles drops significantly then the power of buyers will have a greater role. In 2008, there were an abundance of buyers, more than the supply could meet in many cases. Buyers like their brands and they trust the products that are being made so they are generally willing to pay a fairly high price for these products.
Both Sony and Microsoft focused their efforts on hard-core gamers and offering processing power and cutting-edge features to attract them. On the other hand, Nintendo has been trying to attract new customers that traditionally are non-gamers. The
The fifth and final force is that of the intensity of rivalry. This is the strongest force in the video game industry. Nintendo was very strategic in targeting an audience that Microsoft and Sony neglected. While Microsoft and Sony focused on the typical gamers, males ages 18-34, Nintendo focused on a broader audience “everyone” when creating their Wii. In the video game industry rivalry Microsoft and Sony are battling for the same market, while Nintendo has much of its audience all to itself. This is why
The role of technology is vital in this industry as it focuses on technological efforts for competitive advantage. Every new development uses new technology. Though there are restricted innovations in the gaming industry, the speed of technological transfer is very high. Nintendo’s role from playing cards to toys to video games and then with each console introduced, included many technological changes. Technological up gradation increased hardware costs and discouraged innovation. The online capability of Nintendo Wii was a major change in the technology of the video game industry though they were not able to do as well as their competitors (Sony, Microsoft).
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