The Wii Report, Essay Example

Strategic Management

Strategic management is the process through which an organization formulates implements and evaluates decisions that will help the organization to achieve its long-term goals (Jones 72). After setting these goals and strategies the strategic management groups then reassess each strategy to see  whether it was successfully implemented or whether it needs replacement to meet changes in technology ,a changed economic environment, new competitors, and changes in financial social and political environment (Miller and Dess 12). Strategic management gives a business specific thought to overcome current problems and to look to the future. The main aim of strategic management is to foresee business value in the future, to eliminate the possible risks in the environment, and to look for the changing markets trends.

• Providing better and up-to-date information about the organization’s current position and predicting the future stand of the organization.
• Providing the opportunities to managers for evaluating the company’s budget according to the situation
• Alerting managers and other members in an organization about the opportunities and threatening development in their corresponding field and helping the organization to unite its managerial and organizational efforts
• Creating a more proactive management posture so as to promote the development of a constantly evolving business model.

Strategy formulation

Several business analysis models are employed in strategic analysis. These include PEST analysis model, PORTERS FIVE FORCES model and SWOT analysis. The five porters’ model provided by Michael Porter shows that business as being influenced by five forces. This model can be used by astrategic manager to understand better the industry context in which a firm operates and thus be able to develop an edge over rival firms. The five forces are rivalry, buyer power, supply power, barriers to entry, and threat of substitutes.

The following diagram summarizes the five forces model. And hence helps analyze the market as it relates to video game market of Sony Corp.

Each of the parts of the five forces model link with each other, due to this interplay, the five different forces have to be studied well and extensively and managed uniformly to ensure that there is a good flow of information. All the different threats and barriers are analyzed and viewed as flowing towards each other with rivalry being the central factor that has to evaluated effectively\

To give an effective analysis of the videogame market, we will analyze each of these factors as they appear in the videogame market and as they relate to Sony play station 3 markets and the competition they face from Nintendo’s Wii.

Rivalry –All firms will work towards getting a competitive advantage over others and its competition among rivals that reduces profit. Nintendo’s Wii has two major reasons that play in its favor as the reason why it is selling higher volumes. First, Wii has packed more features in its game as opposed to Play station three. To counter this shortcoming Sony has two options at their disposal. One they can re-engineer their video game and offer the consumers improved functionalities or cut down the price to reflect their inferior features. This however is not likely to go down well with the consumers who want real value for their money.

Supplier power – Producing industry requires supply of labor, raw materials and other infrastructure.  The powerful suppliers can influence the market. However, Sony has the upper hand on this aspect since they have a richer history of higher sales. They also have a good history of meeting demand on most occasions. Considering that Nintendo were not able to meet their market demand in the first one whole year, and then Sony should utilize this loophole and ensure that they have enough production capacity to meet demand.

Threats of substitutes –A threat of substitute occurs due to changes in price of substitute product and hence its demand is affected. When there are more substitutes customers will have more alternatives and hence demand becomes more elastic. The existence of Wii is a serious threat to the Play station 3. The substitute also offers more features and therefore it becomes more attractive and better still it is cheaper.

Buyer power-when buyer is strong that is more suppliers are available and there is only one buyer, the buyer sets the prices hence they exert an impact on the producing industry.  This is Nintendos major strength considering that they have captured the imagination of all possible play station customers who span from 8 year olds to nursing home residents. To this end Sony needs to incorporate more games in their play station and also market it well to ensure that they diversify their buyer power away from what has been a predominantly youth market.

Barrier to entry – Apart from threats posed by rivals in an industry, entry of new firms in an industry also affects competition hence pose a threat to a firm. Barriers to entry allow industries to prevent entry of additional rivals into the market and protect high levels of profit for firms. These barriers help in maintaining profits for already existing firms and they come from different sources. These sources include barriers created by the government monopoly and through regulation and permitting monopoly, economies of scale and product specificity.  This however does not pose a big threat to Sony might encounter is in their efforts to penetrate their upper age bracket market since they have to understand their needs well and ensure that they satisfy them.

To be able to wrest the leadership from Nintendo, Sony needs to reinvent by making a drastic change on their focus market as well as their pricing strategy. In order to implement a strategy successfully, managing the process is also vital. This involves evaluating the efficiency and efficacy of the process and making changes where necessary, monitoring the results and establishing control for variances. They need therefore to monitor for any complains from Wii users and capitalize on them to produce a game that will give both a unique and superior experience to the users. They more importantly need to monitor the response of their own customers.

The 2008 video game market is quite unwelcoming for us taking that the market share taken by Nintendo is quite mammoth. However considering that a new market in the form of the elderly has been opened up, there is still a lot of capacity in the market for us to exploit. We need to capitalize on the extensive following and good customer records that Sony has enjoyed in the recent past hence ensure that we do not cede too much space to this new threat.

The game developers fit in the in the suppliers category since they serve to promote the quality and the acceptance of the game into the market. This is mostly due to the fact that the developers have a direct impact on the quality and hence the eventual acceptance of the game in the market. The developers also go a long way in determining the treatment that the game receives in the market. They do not differ in any way from the suppliers since in the video game market they form part of the supplier group.

Nintendo’s Wii is placed at the very heart of the porters five forces model since it is the key concern of our analysis and it forms the rivalry. By providing more features to the consumers at a lesser cost, it threatens to push Play station out of the market. The lessons that Sony should take from the evolution of the video game industry are three. First the competition is stiff and they should look at offering distinctive features in their game. A weakness hand could be damaged reputation, lack of marketing expertise, and poor quality goods or services undifferentiated products in relation to competitors among others, (Saloner, G, Shepherd, A and  Podolny, J. 31). The second lesson is that the video game industry has taken rapid expansion hence they need to diversify the market. Thirdly, the customers have become more informed hence they will not go for second rate products. The general downward trend in the profitability of the video game industry can be attributed largely to competitive pricing which is forcing the video game producers to cut their prices to meet the market forces. For a company to fit into its market through development of proper strategy, then accurate forecasting of the market environment is necessary, (Eliot, Timmerman & Granger 54).

Sony has two strategic options to regain market leadership. One they have to reinvent their games and make them more acceptable to the consumers. They therefore need to increase the features of their games to increase customer demand. Secondly they need to do a more customer friendly and cut their prices to a range close to the competitors to ensure that they afford the consumers a good chance for choice. Hirai needs to ensure that they capitalize on any mistakes made by the competition. The other key factor is continuous revision of the strategic plan to ensure that they remain relevant despite the changes in the market.

Works Cited

Eliot, T, Granger, J & Timmerman, A.  Handbook of economic forecasting. Sydney: Elsevier. 2006

Jones, R and Hill, C. Strategic management: An integrated approach, Houghton Mifflin Company, New York.

Miller, A and Dess, G.  Strategic management. London : Mcgraw Hill 1996

Saloner, G, Shepard, A and Podolny, J. Strategic management. Washington : John Willey . 2001.

Strategic management, available at http://www.quickmba.com/strategy/porter.shtml