Case Study Competition in Video Game Consoles

The development of console games market is characterized by the growing competition between three major rivals which occupy the dominant position in games console industry, Nintendo, Sony and Microsoft. In this respect, it is important to underline the fact that the three aforementioned companies originally had quite different positions in the market since Nintendo is the only company that is focused entirely on game console industry, while Sony and Microsoft view this industry as an attracting field for investments, where they can gain considerable profits. At the same time, such a difference does not decrease the competitive position of either company. In stark contrast, all companies have their own advantages as well as flaws which can be used by their competitors. In such a situation, the introduction of new products Wii by Nintendo, Play Station 3 by Sony and Xbox 360 by Microsoft marked a new stage in the competitive struggle of the three giants of game console industry.

On analyzing the competitive position of each company, it should be pointed out that the introduction of new products is based on the extensive experience of the companies, which involve not only experience in the field of game consoles, but also in other fields of information technologies, telecommunications, software and hardware production. At the same time, it is possible to distinguish a feature, which is similar to all of the three companies involved in the rivalry in the game console market, – products of all these companies are highly technological and represent a considerable advancement in console games industry and technology.

However, Nintendo’s Wii seems to be in the most disadvantageous position from a technological point of view compared to other products developed by Sony and Microsoft. To put it more precisely, Nintendo traditionally avoid the competition with Sony and Microsoft in the field of highly technological, sophisticated game consoles. Instead, the company attempts to offer a simple and easy to use product which can attract customers due to its simplicity. In such a context, it is worth mentioning the fact that a part of the marketing strategy of Nintendo is the creation of moms-oriented product. This means that Nintendo’s products, such as Wii should be positively perceived by moms and parents of children, who are traditionally the target customer group for the company producing game consoles. Obviously, the creation of a positive image of Wii for parents is very important because, in such a way, the company can gain a considerable share of the market. In fact, it is parents who often take a decision concerning the choice of game consoles they buy for children.

At this point, it is worth mentioning another important factor that influences consistently the decision making process when parent are about to buy game consoles is the price of the product. In this respect, Nintendo’s Wii has an unbeatable price which gives the company a strategic competitive advantage because, due to the relative simplicity of the game console, the price is consistently lower compared to the major rivals of Nintendo, Sony and Microsoft. In such a context, the product seems to be almost perfect when the decision is taken by parents solely. In addition, it should be said that a number of adults using Nintendo’s Wii is constantly growing too that means that the company can count for a stable level of sales rates.

However, the simplicity of Wii does not necessarily mean that this game console is technologically backward. In contrast, the company is the leader in the production of mobile game consoles. In fact, it was Intendo that was the first company that produced a mobile console game. No wonder, the company used a new wireless wand controller in its Wii, which can be another advantage of this product compared to its competitors. In addition, unlike Sony and Microsoft, Nintendo is entirely focused on sales of game consoles and game software that implies that the company is able to provide its customers with the high quality of services and products.

On the other hand, competitors of Nintendo, for instance Microsoft, are not in a totally disadvantageous position in this regard. To put it more precisely, technical characteristics, such as CPU or hard drive of Xbox 360 is consistently better compared to competitors due to the extensive experience of Microsoft in the development of software and close cooperation of the company with leading hardware manufacturers, such as Intel. In this respect, it is worth mentioning the fact that Xbox was the only HD programming download service available for television in March 2007. Obviously, this technological advancement gave the company a strategic competitive advantage because its product was more functional compared to Nintendo’s and Sony’s products. In such a way, the company has got a one year lead in technology that a strategic competitive advantage because its competitors, mainly Sony, have to catch up with Microsoft, while the latter can introduce new products and innovative technologies and get the full benefit of its technological leadership.

In addition, Microsoft conducted quite an aggressive advertising campaign of its product. For instance, the company used a new strategy, viral marketing, which was supposed to and did attract a large number of customers to Xbox 360. In addition, the company offered customers Xbox Live Website where they could play online games. This was another technological innovation that put the company into the leading position in the game console market. Moreover, Microsoft attempted to increase its sales rates though close cooperation with Burger King, where Xbox 360s were sold. The choice of Burger King was determined by the concentration of Microsoft’s target customer group in Burger King’s restaurants. No wonder the sales rates of Microsoft’s Xbox exceeded those of their competitors, Sony and Nintendo.

As for Sony, it should be said that the company was not actually prepared to the launch of its Play Station 3 that leads to production problems because of shortage of materials and elements for Play Station 3. In this respect, it is important to underline that the company was forced to introduce its product before it has originally planned because of the introduction of Microsoft’s Xbox. Similarly to Microsoft, Sony also focuses on highly technological features of their game console. At this point, the company has managed to adopt advantages of both of its competitors, Nintendo and Microsoft. To put it more precisely, Sony’s Play Station 3 is a home entertainment system, which has blue-ray HD optical drive and connectivity to Internet. In such a way, Play Station 3 can compete easily with Xbox 360. At the same time, the company has developed Portable Play Station and, in this regard, Sony has entered the domain of Nintendo, which traditionally dominated in the field of mobile, portable game consoles.

However, in spite of all the advantages of Play Station 3, this product has a considerable drawback compared to its competitors, namely the price, which is the highest among all the three products discussed, since the price varies from USD 499-599, while Xbox’s price is USD 299-399 and Wii’s price is USD 249. As a result, Sony’s Play Station 3 has failed to outpace Xbox’s sales rates and ranked the second, while Nontendo’s sales rates ranked third.

Nevertheless, all three products are very popular and, today, they dominate in the game console market. This is why, in conclusion, it should be said that in the contemporary game console market all elements of the development, production, distribution and sale of the product do matter. What is mean here is the fact that technological advancements cannot always guarantee a one hundred percent success of the introduction of the new product. At this point, it is possible to refer to the production problems of Sony, which failed to develop a stable production chain at the beginning when Play Station 3 has been just launched. On the other hand, Nintendo, which is apparently less sophisticated attracts customers due to its simplicity and easiness to use. At the same time, the tremendous success of Microsoft’s Xbox is determined not only by its technological advantages, but also by wise advertising and marketing strategy. Hence, to maintain competitive advantage, it is necessary to combine technological innovations and effective marketing strategies.