DOCSLIB.ORG

Value Chain Management and Competitive Strategy in the Home Video Game Industry

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Value Chain Management and Competitive Strategy in the Home Video Game Industry 1 Abstract Number: 008-0286 Abstract Title: Value Chain Management and Competitive Strategy in the Home Video Game Industry Fernando Claro Tomaselli Luiz Carlos Di Serio Luciel Henrique de Oliveira São Paulo Business Administration School – Getulio Vargas Foundation (FGV-EAESP) Department of Production Management and Industrial Operations Av. 9 de Julho, 2029 - 01313-902 - São Paulo - SP – Brazil. Phone: (55) 11 3281-7780 [email protected] • [email protected] • [email protected] POMS 19th Annual Conference La Jolla, California, U.S.A. May 9 to May 12, 2008 ABSTRACT The Videogame industry has a high clock speed (FINE, 1998), evolving at a high velocity, with a lifecycle of five to six years for consoles, which features a new generation of consoles, where new companies and technologies appear and disappear. As the disk drive industry studied by Christensen (2001), the short history of the videogame industry is characterized by the introduction of incremental technological innovations and disruptive innovation, which leads various companies to success or failure. This article seeks to analyze the structure and dynamics of this industry value chain, by comparing the strategy of the leading companies in this market, showing their similarities and differences in an attempt to redefine the business itself, by managing its value chain, showing that mistakes in this management process can lead to the loss of billions of dollars in one generation of consoles or to an almost monopolistic control of the market. Key words: videogame industry; innovation; value chain; strategy. 1. Introduction The world has changed from the industrial age to an economy that emphasizes services, which represents a shift from tangible goods to intangible goods and from the management of supply chains to the management of value chains. In this system, companies are increasingly inter- related and form partnerships even while competing more intensely with each other, without having a clear distinction between markets (Kim and Mauborgne, 2004). In this climate, leading companies arise in different industries, and companies that were never thought to be competitors, such as Sony and Microsoft, now compete for the home video game market, estimated at more than USD 33 billion (Cliff, 2006 and Edwards, 2006). Moreover, these companies seek to create a new market 2 not yet explored, with great potential for growth and profit (Kim and Mauborgne, 2004), and with the video game console 1 as the center of home entertainment that could dominate the digital living room. The video game industry is new and dynamic, existing only since the 1970s; its appearance was inter-related to the personal computer industry. In this industry, home video game consoles stand out as a segment with great economic significance. The video game console also presents a number of features of interest to the management field. Three factors make the video game industry particularly important for study. First, the industry of video game consoles has a high clockspeed (Fine, 1998), with a life cycle of five years for consoles, where each cycle introduces an incremental technological innovation that can lead to the success and failure of several companies (Christensen 2000). Second, there is a unique integration between consoles (hardware) and its main complementary good, the games (software) that form an integrated system that enables the study at each cycle of how value chains are managed, and the influence of new entrant competitors, buyers and suppliers (Porter, 1985) using the traditional manufacturing approach as well as by an the information economy in a sector characterized by strong network effects (Shapiro and Varian, 1998) point of view. The third factor, is that the Internet and the convergence of technologies is changing the way people deal with entertainment and the industry of consumer electronics. There were solutions for communication between devices and integration of functions in a single device, such as mobile phones. But this new era goes beyond the convergence of technologies. It’s characterized by Digital convergence, the integration of different technologies in the same digital environment, allowing for full integration between hardware, software and services, which is rendered possible by connectivity 1 A video game console is an interactive entertainment computer or electronic device that manipulates the video display signal of a display device (a TV, monitor, etc.) to display a game. The term "video game console" is used to distinguish a machine designed for consumers to buy and use solely for playing video games from a personal computer, which has many other functions, or arcade machines, which are designed for businesses that buy and then charge others to play. 3 (Tomaselli and Di Serio, 2007). The video game console is one of the best examples of the union of these factors. This paper seeks to identify the factors critical to success in the industry of home video game consoles and new factors that may arise and contribute to the success of this dynamic and constantly changing industry. Starting from the analysis of the structure and dynamics of the value chain industry of video games through comparison of the strategy of leading companies in this market, searches show similarities and differences in an attempt to redefine the management of their own business in the value chain. For this analysis, we use references as a theoretical basis to emerging strategy, value of innovation, management and dynamics of the value chain and the information economy. For the development of this research, we consider two specific objectives: mapping the value-chain and power relationship in the video game consoles industry, and identifying the vertical and horizontal movements in search of migration to links in the chain of value that have better earning potential. 2. The Theoretical Background 2.1. The Entertainment Industry The entertainment industry is growing increasingly global in importance. Issues such as quality of life and improvements in the quality of individuals’ free time are increasingly relevant in the context of modern society. Thus, the entertainment industry is increasingly gaining economic importance. Voguel (2001) says that entertainment is something that stimulates, encourages and manages conditions of pleasant amusement and adds that the entertainment should emotionally 4 involve the individual, either passively or actively (e.g. listening to music or playing the piano), in a pleasurable experience that is satisfactory for the body and soul. The concept of entertainment is associated with free time that one can devote to this activity. The demand for entertainment is related to the cost of the time required to produce and consume, and to various activities of entertainment competing for the limited time and money of consumers (Voguel, 2001). Thus, the participants in the video game industry compete not only among themselves but also with other forms of entertainment, as the hours that a person goes into a cinema, for example, are hours that he can not spend playing video games. Voguel (2001) reports that in 2000, Americans spent 120 billion hours and 200 billion dollars on entertainment. Overall, the total expenditure came in the middle trillion dollars (increasing each year), and time spent with video games was distributed as follows: 2% on home video games, 0.2% in arcades 2, 0.3% in the cinema, and 1.6% on home video (which was less than the time spent on TV, estimated at 46.1%). Increasingly, the video game is occupying the space of traditional media such as television, especially among the new generations, and the fact that the Internet evolved beyond the personal computer, allowing access via mobile phones and video games, increases this potential and creates opportunities for new business models (Venkatraman, 2000), which include, for example, games online, in networks, via video game consoles, via personal computers and even via mobile phones. In this new reality, home entertainment products have greater relevance to the consumer electronics industry and entertainment, and become a central theme in companies’ strategies. Proof of this was the relevance of the issue during the Consumer Electronic Show (CES), the largest consumer electronics fair in the world, held in January 2006, where companies such as Toshiba, Sony, Dell, Intel and AMD displayed versions of their home entertainment products. Several 2 Exclusive video game equipment for commercial use, available in public places such as theme parks, or specialized establishments. 5 companies announced associations with various partners, such as Intel, which partnered with actor Morgan Freeman for filmmaking, and with the network NBC to broadcast the winter Olympics via Intel Viiv 3 technology. These examples show the current trend towards convergence between various media and technology. 2.2. Innovation and Competitiveness Christensen (2000) defines two concepts of technological change: "incremental changes", which are enhancements of the product on the dimensions of performance usually valued by customers, and the "radical changes", which redefine the trajectories of performance and bring a new proposal of value to the customer and additional features. These radical changes are the only discernible source of competitive advantage and enable the emergence of new markets. Companies try to boost the technology within their markets and thereby become prisoners of the financial structure and the
Load more

Recommended publications
  • A History of Video Game Consoles Introduction the First Generation
    A History of Video Game Consoles By Terry Amick – Gerald Long – James Schell – Gregory Shehan Introduction Today video games are a multibillion dollar industry. They are in practically all American households. They are a major driving force in electronic innovation and development. Though, you would hardly guess this from their modest beginning. The first video games were played on mainframe computers in the 1950s through the 1960s (Winter, n.d.). Arcade games would be the first glimpse for the general public of video games. Magnavox would produce the first home video game console featuring the popular arcade game Pong for the 1972 Christmas Season, released as Tele-Games Pong (Ellis, n.d.). The First Generation Magnavox Odyssey Rushed into production the original game did not even have a microprocessor. Games were selected by using toggle switches. At first sales were poor because people mistakenly believed you needed a Magnavox TV to play the game (GameSpy, n.d., para. 11). By 1975 annual sales had reached 300,000 units (Gamester81, 2012). Other manufacturers copied Pong and began producing their own game consoles, which promptly got them sued for copyright infringement (Barton, & Loguidice, n.d.). The Second Generation Atari 2600 Atari released the 2600 in 1977. Although not the first, the Atari 2600 popularized the use of a microprocessor and game cartridges in video game consoles. The original device had an 8-bit 1.19MHz 6507 microprocessor (“The Atari”, n.d.), two joy sticks, a paddle controller, and two game cartridges. Combat and Pac Man were included with the console. In 2007 the Atari 2600 was inducted into the National Toy Hall of Fame (“National Toy”, n.d.).
    [Show full text]
  • 1. Introduction
    Latest Gaming Console 1 1. INTRODUCTION Gaming consoles are one of the best digital entertainment media now available. Gaming consoles were designed for the sole purpose of playing electronic games. A gaming console is a highly specialised piece of hardware that has rapidly evolved since its inception incorporating all the latest advancements in processor technology, memory, graphics, and sound among others to give the gamer the ultimate gaming experience. A console is a command line interface where the personal computer game's settings and variables can be edited while the game is running. But a Gaming Console is an interactive entertainment computer or electronic device that produces a video display signal which can be used with a display device to display a video game. The term "video game console" is used to distinguish a machine designed for consumers to buy and use solely for playing video games from a personal computer, which has many other functions, or arcade machines, which are designed for businesses that buy and then charge others to play. 1.1. Why are games so popular? The answer to this question is to be found in real life. Essentially, most people spend much of their time playing games of some kind or another like making it through traffic lights before they turn red, attempting to catch the train or bus before it leaves, completing the crossword, or answering the questions correctly on Who Wants To Be A Millionaire before the contestants. Office politics forms a continuous, real-life strategy game which many people play, whether they want to or not, with player- definable goals such as ³increase salary to next level´, ³become the boss´, ³score points off a rival colleague and beat them to that promotion´ or ³get a better job elsewhere´.
    [Show full text]
  • OBS Transforming CX
    Winning the Global Consumer Electronics Industry A checklist for global, consistent and secure CX "The Age of Experience will be defined by personalized technology that meets your needs… the devices you use will understand you as an individual, blurring the boundaries between the digital and physical worlds." HS KIM President and CEO of Consumer Electronics Division Samsung Electronics Smartphones, smart TVs, laptops and tablets, The global electrical appliances, wearable devices – the US$1 trillion consumer electronics industry permeates every aspect consumer of our lives. It is a proof of the incredible pace of Global consumer electronics innovation around us. electronics market The intense competition especially from many of the size in 2019 industry industry’s Asian leaders such as Samsung, Huawei, Sony, Xiaomi and LG, renders differentiation around product and pricing difficult. COVID-19 has accelerated competition as consumer behaviours shift from purchasing and in-person browsing to their digital equivalents. Companies are looking to create unique personalized Key trends: experiences that optimize every stage of the customer journey across each interaction, be it in-store, or via a Increased demand in website, a mobile app, social media, smartphones, or the emerging markets e-mail, to deliver the right experiences at the right Growing dominance time. Done well, enriched customer experiences will enable businesses in the consumer electronics of Asian companies industry to build customer loyalty in driving Convergence of sustainable competitive advantage in the long-term. technologies, devices and industries ¹ Consumer Electronics Market Size, Global Market Insights Key trends shaping the future Localization drives conversions As consumer electronics giants such as Xiaomi, Huawei, and Samsung compete for market shares in new geographies, a nuanced approach is crucial for building a strong brand presence across diverse markets.
    [Show full text]
  • The Evolving Electronics Industry Courting the Customer Through Insight and Innovation
    Smarter electronics Point of view The evolving electronics industry Courting the customer through insight and innovation Transistor by transistor, the electronics industry is literally changing the world. Consider this: today’s fastest computer can now achieve 17 quadril- lion calculations per second1, and by 2015 there will be more than seven billion mobile devices in the world consuming and generating massive amounts of data.2 Right now there are more than one billion transistors for each person on the planet.3 With innovations like these, it is no surprise that the electronics industry continues to be a leader in research and development investment across the world.4 However, despite an impressive track record of pioneering technology, today’s electronics industry is in a state of disruption. Product life-cycles are compressing, emphasizing the need to create innovative products and services faster and more cheaply than ever before. Competitive pressures are at an all-time high, with aggressive new entrants vying with a continuing need to contain operational costs. And though profit margins for some electronics segments remain relatively high, most are under heavy margin pressure. Together, these trends are driving electronics companies to find new growth opportunities. Many believe that the best way to do this—perhaps the only way to do it—is to transform their business models by getting closer to their customers. In fact, the 2012 IBM CEO study revealed that 86 percent of global electronics CEOs are implementing extensive changes in their organizations to deepen their understanding of individual customer needs, while enabling faster, more relevant responses to markets and individuals.5 CEOs realize that innovative products and services are only successful when they deliver on customer needs.
    [Show full text]
  • Openbsd Gaming Resource
    OPENBSD GAMING RESOURCE A continually updated resource for playing video games on OpenBSD. Mr. Satterly Updated August 7, 2021 P11U17A3B8 III Title: OpenBSD Gaming Resource Author: Mr. Satterly Publisher: Mr. Satterly Date: Updated August 7, 2021 Copyright: Creative Commons Zero 1.0 Universal Email: [email protected] Website: https://MrSatterly.com/ Contents 1 Introduction1 2 Ways to play the games2 2.1 Base system........................ 2 2.2 Ports/Editors........................ 3 2.3 Ports/Emulators...................... 3 Arcade emulation..................... 4 Computer emulation................... 4 Game console emulation................. 4 Operating system emulation .............. 7 2.4 Ports/Games........................ 8 Game engines....................... 8 Interactive fiction..................... 9 2.5 Ports/Math......................... 10 2.6 Ports/Net.......................... 10 2.7 Ports/Shells ........................ 12 2.8 Ports/WWW ........................ 12 3 Notable games 14 3.1 Free games ........................ 14 A-I.............................. 14 J-R.............................. 22 S-Z.............................. 26 3.2 Non-free games...................... 31 4 Getting the games 33 4.1 Games............................ 33 5 Former ways to play games 37 6 What next? 38 Appendices 39 A Clones, models, and variants 39 Index 51 IV 1 Introduction I use this document to help organize my thoughts, files, and links on how to play games on OpenBSD. It helps me to remember what I have gone through while finding new games. The biggest reason to read or at least skim this document is because how can you search for something you do not know exists? I will show you ways to play games, what free and non-free games are available, and give links to help you get started on downloading them.
    [Show full text]
  • Modern Challenges in the Electronics Industry
    Volumen 41 • No. 19 • Año 2020 • Art. 19 Recibido: 12/02/20 • Aprobado: 14/05/2020 • Publicado: 28/05/2020 Modern challenges in the electronics industry Desafíos modernos en la industria electrónica GAVLOVSKAYA, Galina V. 1 KHAKIMOV, Azat N.2 Abstract The paper analyzes the challenges and current trends in the global electronic industry, carries out a literature review and highlights the gaps in the study of the features of the development of world radio electronics. The article gives a brief historical review of the electronic industry development, provides a characteristic of the modern world electronics market and considers the most important challenges and current trends in the development of the electronic industry. key words: Electronic industry, radio electronics, digital economy, microelectronics. Resumen El documento analiza los desafíos y las tendencias actuales en la industria electrónica mundial. Lleva a cabo una revisión de la literatura y destaca las lagunas en el estudio de las características del desarrollo de la radio electrónica mundial. El artículo ofrece una breve reseña histórica del desarrollo de la industria electrónica, proporciona una característica del mercado electrónico mundial moderno y considera los desafíos más importantes y las tendencias actuales en el desarrollo de la industria electrónica. Palabras clave: industria electrónica, electrónica de radio, economía digital, microelectrónica. 1. Introduction 1.1. Relevance of the research Electronic industry as a machine-building sector today is one of the state’s competitiveness factors in the global market, an instrument for ensuring the economic development of the state in the conditions of an unstable environment and an engine of economic growth for other sectors of industry.
    [Show full text]
  • Why the Mexican Consumer Electronics Industry Failed
    World Development Vol. 27, No. 8, pp. 1427±1443, 1999 Ó 1999 Elsevier Science Ltd. All rights reserved. Printed in Great Britain www.elsevier.com/locate/worlddev 0305-750X/99/$-see front matter PII: S0305-750X(99)00064-9 Foreign Investment and the Global Geography of Production: Why the Mexican Consumer Electronics Industry Failed NICHOLA LOWE Massachusetts Institute of Technology, Cambridge, USA and MARTIN KENNEY * University of California, Davis, USA Summary. Ð Explanations of industrial development in late-developing countries have become narrowly focused on the capability of governments to promote, pressure, or punish nationally-owned ®rms. Often overlooked is the contribution of ®rms, both national and multinational, in propelling, coordinating, and determining the path and location of such development. This paper examines the conditions that led to the decline of Mexico's consumer electronics industry and presents new evidence to support a more complex account of the role of both industrial and state actors within this process. In contrast to the traditional market- or state-based theories, we argue that the decline of Mexico's consumer electronics industry largely resulted from its foreign investment regime, particularly the timing of investment and the geographical locations of local and foreign manufacturers, and the subsequent depth and quality of the rela- tionships between these ®rms. The dierences between Mexico's regime and that of Taiwan during the same period provide further evidence of the important role that foreign ®rms play in inserting local suppliers into the global production chain. We argue that Mexico's foreign investment regime and the resulting weak local-foreign ties, rather than inadequate state policy, sealed the fate of Mexico's once thriving domestic elec- tronics industry.
    [Show full text]
  • Game On: an Analysis of the Video Game Console Industry
    Of Hedgehogs and Plumbers: An Investigation of Marketing Strategies in the American Home Console Industry By: Daniel DeMaiolo Michael G. Pontikos ADVER 3711 Marketing Communications Research April 23, 2008 Daniel DeMaiolo Michael G. Pontikos ADVER 3711 23 April 2008 Of Hedgehogs and Plumbers: An Investigation of Marketing Strategies in the American Home Console Industry From rescuing damsels in distress locked away in castles, slaying foul monsters in mythic lands, zooming through loop-de-loops in bizarre environments to realistic simulations of everyday life, the American video game home console industry emerges vibrant as ever. Even more interesting is the ability of such tiny pixels and sound bits to capture American minds and wallets. Through examination of the origin of the industry and the subsequent targeting, pricing, and positioning strategies, a portrait of the lucrative home video game console industry emerges. Although many of the major home console manufacturers over the years share a similar goal of selling home consoles to consumers, most of the corporations began in a completely different industry long before the birth of the gaming business and the subsequent console wars. To illustrate, Nintendo Co., Ltd. initially manufactured playing cards in 1889 “called ‘Hanafuda’ [which were] tenderly hand crafted using the bark from the mulberry and mitsu-mata trees” and later expanded to “love hotels” and “instant rice” (N-Sider Media, “Nintendo”). In addition, Sega Corporation, formerly known as Honolulu-based Standard Games in 1940, “began importing jukeboxes to supply American military bases in Japan…[and] eventually expanded into amusement game imports [with the slogan] ‘service and games’ ” from which their name is taken (Pollack, “Sega”).
    [Show full text]
  • Microscopy 2
    nano n my e > 1 Introducing Nanoscience to Second-level Students www.crann.tcd.ie As a Partner of Trinity College. NEATEC is authorized to use and distribute this module to Non-Profit Organizations. This project is sponsored in part by the National Science Foundation under Grant #1003574. Any opinions, findings and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect those of the National Science Foundation. nano in my life -7 microscopy 2 •microscopy The aim of this module is to provide students with an introduction to the methods used to observe and manipulate nanomaterials. Using a PowerPoint presentation and worksheet, students will be introduced to the wave nature of light and the limitations of the light microscope. They will also be introduced to a variety of electron and scanning probe microscopic techniques. The practical aspect of this module is designed to re-acquaint students with the preparation and viewing of a variety of samples using a light microscope; the students will then be able to compare their results to images of samples taken using CRANN's electron microscopes. Learning Outcomes In this module, students will: • Appreciate the small scale at which nanoscientists work. • Recall the parts and functions of the light microscope. • Outline the limitations of the light microscope. • Differentiate between the variety of microscopy methods used to examine nanomaterials and discuss the limitations of the individual techniques. As a Partner of Trinity College. NEATEC is authorized to use and distribute this module to Non-Profit Organizations. This project is sponsored in part by the National Science Foundation under Grant #1003574.
    [Show full text]
  • When Was the Nintendo Wii Released
    When Was The Nintendo Wii Released Fiberless Felice extravagates highly and sequentially, she save her navigability necks unsympathetically. Is Nealon vindictive when Barry unfreed contemptibly? Man-to-man and irreversible Obadiah rubberise her lobbyist unwrinkle while Leonardo cha-cha some ouabain slam-bang. New Wii Hardware Revision Drops GameCube Support. Mulana is going to a short supply of the snes used in my older sister, was when the nintendo wii. Caleb troughton licensed under travel rules, was when the nintendo wii released in the day one. Nintendo's Wii U off to sold-out start USA Today. Super Mario Odyssey was the trump-selling game save the Nintendo Switch with 907 million copies sold since earth was released in October. Been releasing their Just Dance games on the oven ever since. The Final Wii Game show Been Revealed Game Rant. Wii U Sell Prices What you mean expect to sell for mainland of 121620 Selling a Wii U Expect just get between 17 and 121 depending on model and condition. Nintendo Releases the Wii World of Project. It plays video games made rich the Nintendo Wii and the Nintendo GameCube The last paid to be released on the Wii was Just Dance 2020 which was. How much warmth I sell my Wii for 2020? Who still uses the Wii Quora. The sd card memory for the wii was released in rigidity movement in japan on the catacombs of. How weird would gamestop offer me however my Wii Nintendo Wii. How man do Pawn Shops Pay for Wii For exercise of 2020 the average Wii pawn value is 14 The maximum offer have on a Wii was 40.
    [Show full text]
  • Electrical Electronics Engineering Technology: Programmable Logic Controllers
    Electrical Electronics Engineering Technology: Programmable Logic Controllers ABOUT THE PROGRAM This Electrical/Electronics PAY Engineering Technology: The median annual wage for Programmable Logic Controllers electrical and electronics Technology certificate is designed engineering technicians to provide students with in- was $65,260 in May 2019. depth instruction in the field of Programmable Logic Controllers JOB OUTLOOK (PLC). This program will prepare Employment of electrical students for employment in and electronics engineering the ever expanding Electrical/ technicians is projected to Electronics industry as entry- have little or no change from 2018 level programmable logic to 2028. These technicians work in controller programmers and manufacturing industries, many technicians, instrumentation of which are declining or growing technicians, field engineers, and slowly. However, growth rates will sales and marketing engineers. vary by occupational specialty. Job opportunities should be best WHAT DO ELECTRICAL ELECTRONICS TECHNICIANS DO? for applicants who have either an Electrical and electronics engineering technicians (also known as associate’s degree in electronics, programmable logic controller technicians) are mostly employed in certification, or related work manufacturing settings or in research and development. Electrical and experience. electronics engineering technicians help engineers design and develop computers, communications equipment, medical monitoring devices, Bureau of Labor Statistics, U.S. Department navigational
    [Show full text]
  • The Evolution of Electronic Systems Technology and Its Impact on Methods of Innovation Kevin Leahy and Dr
    The Evolution of Electronic Systems Technology and its Impact on Methods of Innovation Kevin Leahy and Dr. Gary Oster Regent Global Business Review 8 regent.edu/rgbr Innovation is the creative development of a specific in new products, materials, computer-aided design product, service, idea, environment, or process with tools, and manufacturing processes. With the the fundamental goal of pleasing customers and rapid expansion of semiconductor technology and extracting value from its commercialization (Rogers, electronics packaging technology, entirely new design 2003; Oster, 2011). Purposeful differentiation and manufacturing disciplines also have evolved. must continue apace to avoid being overtaken by This has changed the nature and focus of innovation, historically known competitors, as well as those who significantly increasing the diversity of design teams have yet to appear on corporate radar (Hamel, 2002). and the need for collaboration across technical and If the rate of change outside the organization exceeds business disciplines. that inside the company, survival is highly unlikely (Slater, 2004). In this decade, failure to address The Historical Evolution of Electronics environmental pressures has caused thousands of companies to slash product development programs, and the Impact on Innovation reduce the size of the workforce, merge with other From the first patent issued to Alexander Graham companies, or close down entirely. To survive and Bell for the Telegraphy in 1876 (Inventors Hall thrive in the hyper-competitive global
    [Show full text]