Responding to Wii
In the Harvard Business Review case Responding to the Wii, Kazuo Hirai was faced with an interesting dilemma. Hirai, the chief executive of Sony Computer Entertainment Inc. faced pressure due to Sony’s Playstation 3 video game console losing market share to the Nintendo Wii. Hirai faced a major business decision in deciding how Sony should respond to the cheaper, more interactive, family oriented Nintendo Wii.
The Video Game Industry at a Glance
From an industry analysis standpoint, the videogame console industry in 2008 was not very attractive. The industry was, and still is, structured as an oligopoly in …show more content…
As a result, Sega easily claimed market share upon entry into the industry. Many other companies also took advantage of the low barriers to entry and followed suit. This allowed for increasing change and exploration; which over time, resulted in only a few companies succeeding in areas of size, market share, brand image, and customer loyalty. Over time, these main players like Nintendo and Sony, who have led the industry with their competitive advantages, have saturated the industry.
The video game market has also seen a significant shift. There is a greater emphasis on games and accessories, which bring companies higher margins. Sony should take history into account as they consider their options in responding to the Wii.
Slow and Steady
The first option that Sony could implement would be to capitalize on what they already do well. The Wii is intuitive, marketed extraordinarily well, and is uniquely differentiated (but not technologically elite) in its simplicity and usability. The history of the video game industry has rewarded bold innovation with market share. Sony could accept Nintendo’s advantage in the console market, and continue to sell their console for a loss, but market their games and accessories in order to benefit from the high margins. Sony could also simultaneously work to achieve economies of scale; this option would reduce prices for consumers and encourage existing customers to buy