Five Forces Analysis of the Video Game Industry Essay

950 Words Nov 6th, 2012 4 Pages
Five Forces Analysis of the Video Game Industry

The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It includes video game consoles, game software, handheld devices, mobile games and online games. The video gaming industry has been growing exponentially in recent years with Sony, Microsoft and Nintendo competing for the higher profits in the market. This essay will analyze each of the five forces acting on the industry: threat of new entrants, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among existing firms. Then it will be determined if the video game industry is still an
…show more content…
In the United States, the threat of this substitute replacing video game consoles is very low, because they are not completely similar. If anything, video game consoles are edging out personal computers in the gaming industry because of their superior graphics and game experience. There is also a high switching cost to costumers because they would have to spend more money if they decide to change their video gaming experience from a video game console to a personal computer, making the threat of substitutes low. In 2008, the bargaining power of buyers did not play a huge role in the video game industry. There was a large number of very intrigued buyers who were willing to pay the requested amount of money for the video gaming consoles. Therefore, Sony, Microsoft and Nintendo faced low pressure from their buyers. On the contrary, suppliers did have an effect on the video game industry. Software suppliers, who develop the technology for these consoles, have a low switching cost as they can use their products in other electronics including televisions, and especially personal computers. Therefore, they impose a high bargaining pressure on the video gaming companies. This is not the case for the hardware suppliers who develop the physical pieces to ensemble the consoles. Their products are specifically designed to fit the companies’ request, so they impose a low bargaining pressure on the video game industry. Hence, the bargaining power of suppliers as a whole

Related Documents