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The U.S. Video Game Industry Essay

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Updated: Apr 2nd, 2021

Introduction

The value of technological invention or innovation is usually determined by the extent to which individuals understand and use innovation. This means that it is important to have an effective and appropriate deployment strategy when dealing with technological inventions or innovations. Examples of key elements used to achieve an effective deployment strategy include marketing, timing, distribution, pricing, and licensing. This paper seeks to answer questions about why companies need to craft an effective deployment strategy in the US video gaming industry.

What factors do you think enabled Sega to break Nintendo’s near-monopoly of the US video game console market in the late 1980s?

There are numerous factors that explain why Sega managed to break Nintendo’s near-monopoly in video game industry in the U.S. Nintendo’s near-monopoly can be linked to the lower prices charged by the company and enactment of very strict policies in licensing. These policies limited the number of titles that a given developer could produce in one year. It also restricted developers from developing similar games. However, Sega broke this monopoly by introducing the 16-bit Genesis video game in the U.S. market which had a higher performance than the 8-bit system. In addition, Sega ensured that all its arcade games were leveraged to the 16-bit Genesis. At the same time, they were compatible with the earlier 8-bit system games. By 1989, Sega had managed to produce 20 Genesis game titles.

Why did Nintendo choose not to make its early video game consoles backward compatible? What were the advantages and disadvantages of this strategy?

The main reason why Nintendo was against its early video game consoles was that the company feared cannibalizing the sales of its 8-bit system. This was also based on the views of the company’s developers who assumed that the technological advantages of the the16-bit system were extremely less than that of the 8-bit system. According to them, there was no reason for giving a lot of attention to the 16-bit system. This move turned out to be very advantageous to Sega since it was compelled to increase its sale of consoles to approximately 600,000 in the year 1989 while NES sales were only 200,000. In the following years, both companies increased their individual game titles, and Sega managed to realize more sales than that of the competitor.

Nintendo’s strategy had both advantages and disadvantages. It is important to note that the advantages of this strategy were less than the disadvantages. In terms of the advantages, the company was only able to maintain its current sale of the 8-bit system. On the other hand, the disadvantages included a reduction in sales of its 16-bit system and reduced customer awareness. By failing to introduce the 16-bit system in the United States, it meant that customers could only purchase the 16-bit system produced by Sega. Consumers became used to Sega’s 16-bit system to an extent that they did not shift to Nintendo’s new system even after being introduced to the U.S. market. Nintendo exited the market in the year 1991 because it failed to catch up with Sega. By 1994, Sega’s performance had greatly increased thereby making the company become the market leader in the United States.

What strengths and weaknesses did Sony have when it entered the video game market in 1995?

Sony had both strengths and weaknesses when it entered the video game market in 1995. One of the strengths was the ability of the company to enter the video game industry by introducing an advanced 32-bit system. The company also invested heavily especially in game development and leveraged its clout with the distributors. A major weakness of the company was its inability to predict new competitors (like Microsoft) who were emerging in the industry.

What strengths and weaknesses did Microsoft have when it entered the video game market in 2001?

Just like Sony, the major strength of Microsoft was its ability to enter the video game with a highly advanced 128-bit system in late 2001. This system was higher than the 32-bit system that had earlier been introduced by Sony in 1995. Other strengths of the company included the availability of advanced machines and equipment and the minimal time spent on games and marketing. It is worth to mention that Microsoft’s Playstation2 sales were more than one million units. The only weakness of the company was its inability to handle the increasing number of hits on its website.

Comparing the deployment strategies used by the firms in each of the generations, can you identify any timing, licensing, pricing, marketing, or distribution strategies that appear to have influenced firms’ success and failure in the video game industry?

The different deployment strategies used by companies in all the generations had an effect on the company in terms of both success and failure. For example, Nintendo adopted the use of lower prices and strict licensing policies. This move contributed to the company’s success because lower prices helped it to increase the demand for video games. On the other hand, the enactment of strict licensing policies made it difficult for new entrants to gain access to the industry. This meant that Nintendo enjoyed the availability of a ready market until the emergence of competitors such as Sega. When Sega entered the industry, it embarked on extensive advertising in order to increase consumer awareness of its products. In addition, Sega established favorable licensing arrangements. This move attracted several developers who had an interest to develop game titles for the company. The introduction of the 32-bit system by Philips failed to achieve the set objective because the system was quite complex and had unclear technical specifications.

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