Strategy Management Essay Example for Free

Strategy solicitude Essay1. Current space overviewNowadays, the world icon seconds grocery store has become conspicuous and profitable, ensueed by rapid increase of amount by photo secret plans players. The advert assessment for winning in television set supports food market is to cajole the consumers to buy and localize. Meanwhile, the menses situation of scene bet ons application has become to a greater extent competitive, which dominated by Nintendo Wii, Microsoft Xbox 360 and Sony PlayStation 3. This case sketches a framework of picture show stakes historic development for past a few decades and the incoming strategic prospection by Nintendo Wii, Microsoft Xbox 360 and Sony PlayStation 3. In addition, this case likewise describes the innovations and course of actions for broadening the market sh ar holding by Nintendo, Microsoft and Sony. Moreover, those companies keep re impertinented their avow condole with genesis and technology in order to gai n competitive advantages in the flick games market. During the recent symbolize of picture show games development, the players are not only focusing on just playing a game, but also they will consider the games design, art, animation and quality assurance.2. Summary of macro milieu synopsisThe macro environment summary is relevant to the long-term strategic thinking which focus on the circumstanceors in the wider environment, those factors include stinting, political, social, demographic, international, sustainability and technological. The purpose of the macro-environment analysis is to summarize the complex and uncertain information in particular the club impact by macro-environment to figure out the demand for products and service in the market. Determining the macro-environment is the way that firms in an fabrication produce and distribute their outputs, and the way in which organizations are able to compete with one other (Hubbard, Rice Beamish 2008 p. 76). In additi on, macro-environment analysis is also able to distribute the product and service and install the trends for the future development of the attention (Haberberg and Rieple 2008, p.105). Those factors concerned acquire been canvas in appurtenance 1, also including the determent of do on the industriousness growth ( substantiative or ostracise).2.1 stinting factorBy viewing the analyzed contents in appendix 1, overall information analyzedhas been installd that the current economic situation for the flick games exertion is definitely seems to be worse because of the economic recession worldwide. The trend of the purchasing function for telly games ease seems to be downwards by recent years because of the devolve of peoples disposable income. Further more than than, generally considering the reasonable inflation of raw material and hardware accessories is getting gameyer and prouder, which whitethorn result to the terms for consoles is change magnitude.2.2 Political/l egal factorPolitical factors define the legal and regulatory parameters within which firms must(prenominal)iness operate (Pearce Robinson 2009, p.97). These affect the cable and its managers to a great extent. As the political factors analyzed in contents of appendix 1, it is expect to subscribe to a cast out effect on future fabrication growth. For instance in China, the government has issued the regulation on video and online games, which has limitation for playing by 4 hours per day which people who low 18. People must make a registration via internet by updating their identification card number, real names and address who under 18. Considering some of the customers with video games are 17 to 33, this regulation may have negative impacts on the video games industry. Additionally, the government also issued the baron restriction in the video games market, which classifies the ferocity level to the games, in order to protect the children to avoid trespass and violence .However, as the fact that, match to the evidence showed by Dietz (1998, p.425), nearly 80% of the video games includes aggression or violence as part of the strategy or object. While 27% of the games contained socially acceptable aggression, nearly half included violence tell specifically at others and 21% depicted violence directed at women. According to the establishment showed as above, most video games contains huge amount of aggression and violence contents, the government regulation should have negative impact on video games industry growth beyond reasonable concerns of mental protection for children.2.3 Social/ heathenish factorAs this part of factors impact by social and cultural, this part probably does not have too much impacts whether positive or negative on industrygrowth. Accomplishing with the globalization over the world, video games are hot and popular in current stage of period in development. Focusing on this circumstance, the video game industry tends to desig n the games with cultural diversity and socialisation preference. For instance by Xbox 360, has designed some games which suitable for some countries under preference, much(prenominal) as some sports games like NFL in US, AFL in Australia. Furthermore, Sony also designed a game Dynasty Warriors, which describes a real history in ancient China, a dynasty with disorder. Moreover, some cultural factor by faith difference must be also concerned for the industry growth. Actually in some countries, such as some mid-east countries, the violence games are banned under religion efforts.2.4 Demographic factorBy reviewing this part of analysis, the demographic factor should be considered with population, gender and age, and indeed have positive effect on the industry growth. The video game industry is in a flash attempting to look for their new players belonged. The industry has been designed more contrastive types of games which suitable for women and all the same the elder. The tren d of impact by demographic factor is rapidly increasing by recent years in particular with the demand by women and the elder for video games. As the fact that has been mentioned before, the most video game consumers is 18-44, now, the new strategy for broadening the consumer base is now expected and being concerned by the video game industry. This may devote to increase the population by playing video games, which may result to increase the sales of consoles. In fact, Nintendo, Microsoft and Sony have also cogitate on difference breakdown by gender and age, which means that to make the games be varied and multi-suitable for people.2.5 supranational factorGlobalization has been contributed to the success for video game industry, which breakdown the trade barriers between countries. In fact, according to Consalvo (2006), the video game industry and culture can be recognized in the transnational corporations that contribute to its formation and development, which contribute to the cultural exchange between countries. This also advantages to the video games industry which has positive effectson industry growth because the games may become more acceptable for the people who under different cultural context.2.6 Sustainability factorThis factor is considering the sustainability of the video game industry in future. In fact, the video game registertainment absolutely has many substitutes. therefore, the trend for the industry development maybe seems to downward in future depend on the changing and unpredictable peoples favors. People have rights to select their own favors to socialize as they want, such as sports, karaoke, twitter, and facebook. Moreover, the current video game market situation is possible to be saturated, which Grand (2010, p.687) states that, almost 40% of the US households have their own consoles, which means that the industry must spend huge amount of money to renew the consoles annually to keep their products be competitive and prefera ble in order to make the console be sustainable.2.7 Technological factorTechnology is the most significant factor which must be considered by the video games industry. From the evaluation by the appendix 1, the industry growth displayed an overall negative effort on the video game industry. In fact, a console generation regeneration must spend nearly a decade period from structuring to publishing, which spend too much time and money to renew. Despite the huge be and longtime preparing on console renewing, make up the games titles also must be spend a lot of time. Actually, according to the study by Grant, (2010, p685) thither are some evidences to show that a new title game which from designing to publishing, approximately winning 18-36 months to make love based on a new platform.Comparing with the big 3 in this case, they have their own advantaged ambits in technology development. For instance, PS3 has Blu-ray DVD strategy on their consoles, which have fantastic games feature , Xbox 360s positioning eschewed technology in favor of versatility, design and hardwares multifunctionality, Wii even lacked the sophisticated features of either the Xbox 360 or PS3, but its remote wand-like controller is modern and easy learning, which can concludes that overall the advantaged area by the big 3, is based on the technology support, which means that the technology factor is kinda significant to thevideo game industry. Therefore, the trend of impacting power by technology is increasing.3. Summary of industry environment analysisMichael Porter claims that the five competitive forces influence the state of emulation in any industry, and together with determine the profit potential of the industry as whole (Hubbard, Rice Beamish 2008). The purpose of the industry analysis is to determine the ultimate profit potential in the industry, where profit potential is measured in terms of long-run return on invested capital.3.1 Threats of new entrantsThere are some sufficie nt evidences which demonstrate that the threats of new entrants are extremely low. In fact, the video games industry is dominated by the big 3 in this current stage of period. PS3, Microsoft and Nintendo have their own loyalty with the brand, which ensures the consumers confidence on their product. On the contrary, the new entrants do not have such brand loyalty as the big 3 does. Consumers maybe have less confidence rather than PS3 or Xbox 360 on the product quality. In addition, the big 3 has incomparable advantages, which leading in technology and experience on software development. Furthermore, the capital of equipment and technology cost huge amount of money, the big 3 have their own go through and professional designing squad for innovation and technological development. New entrants are difficult to maintain and develop their business unless sufficient finance supports.3.2 Bargaining power of suppliersThe overall impact raking for bargaining power by the suppliers is high, based on the appendix 2 bargaining power of suppliers analysis. In fact, the supplier also called publisher is few and monopoly in the video game market, which result to the profitability with the supplier. The publishers are responsible for financing, manufacturing, marketing and distributing video games. Grant (2010, p.688) also states that video game publishing is increasingly dominated by a few companies, such as electronic Arts, Konami, take-two Interactive and Activision. This may contribute to the suppliershave more powerful bargaining power to the industry. In addition, the supplier has low switching cost in the market.3.3 Bargaining power of buyersThe consumers have low switching cost on the products, which depends on the products quality, price and product preference by the consumers. Moreover, the video game industry must also be aware the other levytainment, which have possibility to substitutes the video game industry. Furthermore, the buyer profitability factor is co nsidering with the buyers disposable income, if the income is high, the bargaining power by the consumers is high, otherwise is low. As the fact that, the current situation for the economy is worse and unemployment rate is getting higher, thus the buyers are seem to be unprofitable, indeed the bargaining power for buyers is low.3.4 actor of substitutesThe power of substitutes is strong, which displayed by the competition between PS3, Xbox 360 and Wii. The big 3 companies have dominated the video game market and attempt to gain competitive advantages via using their innovative ideas and technology. The most important factor considered by the consumers is the products price and quality, focusing on this concern, the Wii may win in the market by sales because of the cheaper price of consoles. However, it not means that the Wii can substitute either Xbox 360 or PS3. Actually, the key assessment for winning in video games market is to catch the consumers propensity. Furthermore, despite the internal competition by the industry, also the other entertainments have possibilities to substitute the video game industry. Thus, it is difficult to predict the video game whether may be substituted in the future.3.5 Intensity of industry rivalsIt is absolutely high barriers to exit in the video games industry, unlike the PC games industry. According to the study by Williams (2002, p46), which states that PC games manufacturing fees are significantly disdain versus console games, because PC games need only CD duplications, a jewel box, instructions and a box, typically $2-3 total per unit. However, comparing with the PC games industry, console development requires development kittypically costing $10 to $20 thousand. In addition, Grant (2010, p688) also mentions that the huge cost by video games development is result of the demand for multi-featured, which contribute to the significant cost on technological talents hiring, equipment cost and advertising. Thus, video games in dustry must be high barriers to exit because of the significant cost efforts.4. Interconnections between macro-environment analysis and industry environment analysis Reviewed to the above macro-environment analysis and industry environment analysis, there are some interconnections between them, which are sustainability factor, tie in to the presence of substitute inputs. This highlight must be considered by the video game industry, because the preview of sustainability to the industry development is quite important. The key assessment for the industry development is to keep their products un-substituted and competitive. Therefore, the industry must focus on the innovation and technological development by their games and console in order to keep the video game long-being for the future.5. RecommendationTechnology and innovation play a main role in the video games industry. The video game industry is so profitable that many new entrants may want to enter the industry. However, the in dustry looks like unhealthy because PS3, Xbox 360 and Wii have dominated the industry for a decade. Furthermore, the current economic situation is still on recession, and may last a few years. This may contribute the cost of consoles increase, and decrease the sales of consoles result by the peoples income decrease. Actually, it is hard to preview the future of video game development, but, by now, the video game market has saturated, even the technology and innovation is good.Form the figures evaluated by Flacy (2011), the video game sales over July dropped over 25 percent year over year and have fallen to the lowest levels since 2006. Total sales in July 2011 amounted to $707 million while sales just a year ago in July 2010 topped $960 million. The reasons for the decline by sales should be varied, as mentioned before, which causing by the economic recession and market saturation. Moreover, the peoples favors mayalso change video game playing is not the only way for people to enter tain because people can entertain by the other ways. Thus, the video game industry development is getting tough and unpredictable for the future, even the recession has over.Appendix 1 details of macro-environment analysisEnvironment factor Comment Effect on industry growthEconomic factor global finance crisis Widely impact on the manufacturing industry negative inflation price of raw material and console accessories increased, result to the cost increase negative Economic recession Peoples disposable income decreasedreducing purchasing power negative Overall negativePolitical/legal factor Government issue for video game violence Legislation for classifying the amount of violence under age. negative Regulation for playing limitation Time limitation for playing under 18 negative Overall negativeSocial/cultural factor Multiculturalism Different cultural backgrounds people may have different type of favors on video games Positive righteousness Some violence games is restricted b y some countries under religion efforts Negative Overall mean(a)Demographic factor Population numbers Attracting more new consumers possibly. Attracting more customers means increasing sales. positive Gender difference breakdown Designing more games which suitable for women playing, make the games be varied. positive eon difference breakdown moving picture game is not only designed for 18-33, which could possibly consider to attract some aging player Positive Overall positiveInternational factor Globalization reducing the trade barriers for games imports and exports positive Overall positiveSustainability factor Substitution by other entertainments More and more entertainments can substitutes the video games, such as sports, karaoke, twitter, facebook etc. negative Strikes by online games Computer games are seemed more popular and preferable. Negative Market saturation More and more rivals tend to enter the video games market to gain advantages. Negative Overall negativeTechn ological factor Lack by renewing generation encourage generation needs to spend a lot of time and money for generation renewing negative Long time for designing a new title game Taking 18-36 months to complete a new title based on a new platform negative Console generation (PS3) Fantastic games feature (HD) based on Blu-ray drive technology. Positive Console generation (Xbox 360) largish amount of titles by games, multifunctionality based on high-technology support. Positive Console generation (Wii) Easy to control, hand heading based on their innovative ideas and technology. Positive Overall positiveAppendix 2 details of industry environment analysisItems Issue analysis Impact ranking extremely low, low, medium, high extremely high. Threats of new entrants Product differentiation If a company wants to survive even win in the competitive market, a unique product with considerable difference must be offered. Wii, Xbox 360 and PS3 has achieved this as well Extremely high Bran d loyalty Company must have their own brand loyalty which can keep new entrants from making their way into the market. Wii, Xbox 360 and PS3 have extremely great loyalty with their brand. Extremely high Economic of scales Wii, Xbox 360 and PS3 have large sales on their product every year. It is tough for new entrants to have such huge finances to fund Medium Capital equipment and technology development Wii, Xbox 360 andPS3 have their own experienced and professional designing team for innovation and technological development. New entrants are hard to maintain their business unless sufficient finance supports. High Government policy Many industries are either owned or regulated by the government, causing barriers for entry. high Overall extremely high Bargaining power of suppliers geological fault cost of suppliers The switching cost of suppliers is low Medium Supplier concentration The supplier will have strong bargaining power if there are only a small number of suppliers. (mon opoly) There are some publishers for the video game industry (electronic Arts, Konami, take-two Interactive, Activision etc.) high Information about suppliers product The suppliers should be aware their product (consoles, software and title games), as these suppliers have minimal competition, they hold strong power and influence. Low Supplier profitability Suppliers are able to bargain because there are few rivals and passing profitable nature. Extremely high Overall mediumBargaining power of buyers permutation be of buyers shifting costs of buyers is low the power of buyers will be high. Buyer can easily switch to a rival product, which depends on the products quality and price and there are almost no switching costs for customers Extremely high Buyer concentration The number of buyers is related to whole industry. Massive numbers of buyers on video game industry. Medium Presence of substitute inputs The big 3 is not just competing against with from each one other, they are also competing against other entertainment, such as online games and twitterThere are lots of substitute are give in to convert the buyer Extremely high Buyer profitability If the buyers are unprofitable, they are unable to bargain.Since economic decrease and high levels of unemployment, people will be entertaining less. High Overall highPower of substitutes Relative price/quality of substitutes Wii, Xbox 360 and PS3 although have their own specialties and advantages in different areas, but substitution isalso available and possible. It depends on price and quality of the console. Extremely high Buy propensity to substitutes Video games market is huge, customers tend to be varied. The key assessment for winning in video games market is to catch the consumers propensity. contrive their own advantaged area, and create a new strategic to attract the new customers. Extremely high Switching cost The ease of buyers switching products.It is very simple for the customers to switch to a different product as it cost them less and with similar experience. High Overall extremely highIntensity of industry rivals diligence growth rate Growing rapidly in recent years, but grow slowly now because of the economic recession. However, the trend is positively growing. Extremely high Exit barriers Significant exits costs because the capital to enter the industry is so high (including technological talents hiring, equipment cost and advertising) and spends too much time for preparing. Extremely high Overall extremely highReferencesConsalvo, M 2006, Console video games and global corporations Creating a hybrid culture viewed 28 August 2011 http//nms.sagepub.com/content/8/1/117.short Dietz, T, 1998, An Examination of Violence and Gender Role Portrayals in Video Games Implications for Gender Socialization and Aggressive Behavior Volume 38, No. 5-6, p425-442 Flacy, M, 2011, NPD Video game sales in July fall to the lowest level in five years viewed 29 August 2011 http//www.di gitaltrends.com/ childs play/npd-video-game-sales-in-july-fall-to-the-lowest-level-in-five-years/ Grant, R.M., 2010, Contemporary Strategy Analysis, Sussex. Wiley p.680-691Hubbard, G, Rice, J Beamish, P, 2008, Strategic Management Thinking, analysis and Action, 3rd edition, Pearson Education, Australia.Haberberg, A, Rieple, A 2008, Strategic Management Theory and Application, Oxford University Press, NY.Pearce, JA 2009, Formulation, implementation, and control of competitive strategy, 8th edition, McGraw-Hill, America, New York.Williams, D, 2002, Structure and Competition in the U.S. Home Video Game Industry the International Journal on Media Management Vol. 4, No. 1, p.41 54