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Porter's Five Forces
Transcript of Porter's Five Forces
THREAT OF NEW ENTRANTS
Competitive Rivalry Within the Industry
BARGAINING POWER OF SUPPLIERS
Threat of Substitute Products
Porter's Five Forces
- Inputs have little impact on cost.
- Nintendo has many suppliers to choose from; a great advantage is how large their software library is, including:
- Ubisoft, Electronic Arts, Disney, etc. Although they've had trouble in the past with using third-party developers, something that damages their sales even today, they've started shifting to use more and more of them; however, the Wii U makes it difficult for third party games and developers to migrate to it.
- Strong brand name: Nintendo has been a powerful brand name since the 1980s; the Mario franchise alone is the best selling video game franchise of all time.
- Strong distribution network: There are several divisions and headquarters in Japan (NCL), America (NOA), Europe (NOE), and even in Australia (NAL).
- Customers are loyal to long-lasting, existing brands, making it difficult for new entrants to pull them in.
- High Learning Curve: Many new entrants are fresh in the world of gaming; Nintendo's longevity gives them an advantage and knowledge of their playing field, as well as time to refine their strategies and economy.
- High barriers: Nintendo's patents and government regulations make it difficult for new entrants to enter the market.
- Large industry size: Nintendo is, of course, fairly huge, and has been in the market for a long time. Newer companies are still learning the business strategies to reach economies of sale.
- Sony and Microsoft suffered losses with the PS3 (poor sales and high selling price) and XBox 360, letting the Wii rocket ahead. However, Nintendo incurred a loss with the Wii U so far due to a thin game lineup.
- Low storage cost: This means the producers don't have to sell all their inventory as fast as possible, which could be a major money-saving advantage or a heavy loss.
- Limited substitutes; it'll be hard for someone to find a similar product to Nintendo, as not only is their software limited only to them, but their games are geared toward a demographic that isn't usually catered to (the younger side, and even some elderly have reportedly been able to play Nintendo products with greater ease).
- However, with casual gaming, cloud gaming, and mobile products on the rise and Nintendo slow to catch on, it's possible they'll be left in the dust if they don't quickly take advantage of what is and isn't popular, like Sony and Microsoft are doing.
- There has been a recent rumor of Nintendo working on a new console, so we'll see where that goes.
- Manufactures regularly suggest the retail price through every division, so buyers have no real say over the price. In addition, there are a large number of customers for Nintendo, so no one buyer has real leverage.
- Switching costs are high, as Nintendo's products cannot be used elsewhere, and thus customers are usually locked into console if it plays the game they want.
- So far, few games have been made to appeal to the growing number of casual gamers, which is a major blow against them.