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Technology Innovation And Competition In Gaming Industry Media Essay

Paper Type: Free Essay Subject: Media
Wordcount: 2860 words Published: 1st Jan 2015

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The purpose of this paper is to explain the effect of technology innovation on the competition in a global industry. After presenting some theoretical understanding on this issue, it is further illustrated thoroughly by the example of Gaming Industry and innovations done by the major players in it and how in these days the latest technology innovation by Nintendo altered the terms of competition in the whole industry. Innovation can have radical or drastic effects. Usually innovation is seen as the method of applying technical or specific progress to the market. In this sense innovation can be in relation to processes (i.e. a new method of making something better or cheaper or both) or products (i.e. a new or considerably better product of some kind), or may be a mixture of the two. Product innovation can generate new markets or modify the segmentation of already existing markets while Process innovation have an effect on the competitive balance in existing markets. Innovation brings productivity gains, product diversity and better quality product at fewer prices. With such clear consumer benefits, it also gives innovator competitive advantage by giving the ability to present entirely new products or processes or greater competence in existing techniques. For such competitive advantage it is not necessary to be permanent and other consequence is that it encourages other competitors also

And the benefits may be widespread, arising from their distribution through networks. (Peter Freeman, 2004). In other words, by innovation the incremental profits may increase the competition and thus promote R&D investments aimed at escaping competition. (Philippe Aghion, et, al, 2002)

Many innovations utilize technology. May be an innovation is “high technology” from the suppliers point of view, but if it is not apparent to the customer as improving and altering their business functions, that is radical innovation. Technological innovations are generally complex products, possessing attributes with which the potential adopting unit may be unfamiliar. Generally high technology innovations have high switching cost and costly in monetary terms. The concern is how this technology innovation alters the terms of competition in the global industry. These technology innovations may reduce cost of production or distribution and also helps in producing higher quality or innovative products that offer new benefits for the consumers. In technology markets, products of new generation often include new features instead of more core capabilities. The acceptance of technology innovation is positively associated with competition. (Thomas and Hubert, 1986). In fact, Abernathy and Utterback (1978) have suggested that as competition increases, the type of innovations adopted changes from major product innovations to process innovations. The accessibility to innovation is most pronounced if the strategy for preempting new entry requires new technologies for cost reduction or for gaining new segments. Therefore, the conditions for a positive effect of demand uncertainty on the rate of diffusion of innovation are: when existing competition uses cost as a barrier to entry and there is a potential for price reductions and when the preempting strategy is to fill the gaps in satisfying the heterogeneous needs of the market, given that the new products or segments require a technological innovation.

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There have been many management practices and demonstrations in today’s modern times on the requirements for companies to be innovative. It is also usually believed that without innovation companies will immediately lose their charm of competitive edge. Competitiveness of an industry is generally assessed by the number of competitors it has and also competition has reached such a level that only companies who can provide steady stream of innovative processes and products are successful in both domestic as well as international markets. The aim of technology innovation can either be to target new customers or the need of existing customers. This can be explained by taking the example of gaming industry, as gaming industry made a lot of technology innovations in memory and graphic components of gaming consoles since many years. The important feature of gaming industry is rapid and sustained technical innovation.


Since 70’s the gaming industry being a only factor in a short time period. It took them only few years to make their place in the market and people started becoming familiar with the gaming companies. Types of games where we stomped turtles and ate mushrooms are gone now. That time gaming industry was really successful and became a billion dollar industry, those were the days when Nintendo started launching games every month. In the early 1980’s their use to be a huge increase in demand for video games and has continued with constant increases in the following years. And then in 2000’s, the gaming industries supported US market of nearly $13 billion [1] and worldwide market of almost $24.5 billion. Right now, in the industry every firm is following different Business Model and the most successful is Nintendo’s Business Model as the price of their console is less and instead of following others, they are doing something innovative and this time they targeted the non-gamers in the market which the other two competitors could not even think of. The gaming industry tries to improve by releasing new games one after the other. To increase the sales and beat the competition every firm in the industry is trying to improve marketing techniques and games. They launch more powerful consoles with bigger game worlds, new graphics and better soundtracks.

Over the last couple of years there is a direct connection between the introduction of next-generation video game hardware and the rise in demand. Through technological upgrading, Video game console manufacturers have gradually moved from 8-bit to 16-bit to 32-bit to 64-bit, resulting in continuous improvement in performance and quality of games. As Sony and Microsoft concentrated on improving their consoles, Nintendo came up with new technology that allows the player to play physically with proper moves unlike the other consoles. The introduction of new product by Nintendo that is Nintendo Wii, game console is an easier to use interface that targets at current non-gamers where as Microsoft’s Xbox 360, another console is introduced as high definition gaming. So Microsoft’s behavior is accelerating the technology treadmill and when the new feature has an alternate presentation aspect to attract new customers as in Nintendo’s case, so this is referred as stepping off the technology treadmill. So, to alter the terms of competition in the gaming industry, Nintendo came up with technology innovation and launched Nintendo Wii, console in which a motion sensitive controller is used and adopted totally different strategy and with its technology innovation altered the terms of competition in the global industry. Sales and marketing vice-president of Nintendo described the strategy of his firm by citing two popular managerial books, the Blue Ocean Strategy (Kim and Mauborgne 2005) and The Innovator’s Dilemma (Cristensen 1997): “Looking at the current state of the video game market, we believe there is a strong argument for expanding the audience beyond the current core players, attracting players by rethinking what a videogame means, and delivering our entertaining in a more convenient and affordable fashion” (Casamassina 2005). The video game market is strongly subject to changes and is highly dynamic.


The gaming industry is dominated and contested by 3 giant players, namely:



SONY Play Station

Once the definite global leader of the video game industry, Nintendo now for the number-one spot in the industry has to compete with Sony. For its home video game systems as well as the hand-held Nintendo DS, Nintendo itself manufactures and markets hardware and software. Nintendo DS has controlled around 90% of the U.S. hand-held market in 2003, the 16-bit Super Nintendo. In the history Entertainment System (SNES), and the performance-driven Game Cube was the fastest-selling video game system. The superior 3-D graphics of Game Cube’s and well-known games (Nintendo’s 50% profits are derived from software) have enabled it to retain itself in the video game competition. In 2005, US gaming consoles has highest market share from Sony with 56.4% share which is followed by 24.9% share of Microsoft and then third one was Nintendo with 18.7% as shown in the figure given below:

March (2005)

NINTENDO’s INNOVATION: Motion Controller

Because of the introduction of the innovative motion controller, The Wii has been on fire since it hit the market and US unit, sales have increased to 20 million, making it the highest selling video game console in history and ushering in unique family gameplay with some of the titles such as Mario Kart Wii and WiiPlay. As Microsoft and Sony continued to improve their games, Nintendo tries its best to change the technology. They decided that rather than enhancing their cars, they would considerably build a new vehicle, which would reform the industry. Sony and Microsoft target the older players of human population with their games and consoles, instead of young people. Nintendo instead tried to bring technology innovation to the table and win over the adolescent generations, which are the future. The fact behind the Nintendo Wii’s success is that it’s a cool technology and parents can see their kids exercise. Basically Nintendo did not introduce Wii with the HDTV where as its competitors did with their latest consoles. This seems relatively a sensible step as the bulk of homes do not have HDTV and the acceptance rate of TV will comparatively slow because non HD TVs do a flawlessly good job. Even elder people like this console, especially if sometimes they prefer to change their inactive lifestyle, or if they are interested to lose some weight. This is why when Nintendo comes to race with its other two competitors, Microsoft and Sony it has the advantage over them. Like Sony some companies depends mostly on their reputation, whereas the ones who wins the race in the long run are those who innovate. The advantages to Nintendo are that, firstly it makes their console low-priced to manufacture, which means that they can sell the console base at a profit while their competitors have to invest in the retail price. Another advantage is that games are a lot cheaper, quicker and easier to develop. This, obviously, has immense effect on what appears generally and when it appears on the game shop shelf. (Peter Freeman, 2004)

According to the NPD Group (which track retail sale), in November 2008, the company sold 2 million Wii players more than twice the number of PlayStation 3s and Xbox 36Os combined. And in the same month it sold 700000-plus Wii-fit exercise boards. But Nintendo’s success isn’t limited to the Wii. Its portable DS system is the top seller in its category too. In March Nintendo sold 601,000 Wii consoles in the U.S that are more machines than Microsoft and Sony Corp.


The couch-potato world of video gamers was dazed when the Wii, was launched with its motion-sensitive remote control. Users can play Wii Golf, tennis and lot more games for instance, by swinging the remote like a golf club, or like a racket in the air. In September, Nintendo added one more accessory in its collection that is a $20 remote-control accessory called Wii Motion Plus that was introduced to add more accuracy to game motions, it make the Wii’s motions feel more realistic. But it works only with Wii Motion Plus Games. Wii also encourages users to walk around in more ways than just playing with a remote: Its Wii Balance Board, works like a digital exercise step, which is included in the Wii Fit Plus game in a $100 bundle, It records changes in the body’s weight and all the moves for activities from wake boarding to yoga. The Internet access is included in Wii and users can compete against each other online. Around 655 packaged games are accessible for between $30 and $50.


Microsoft Corp. developed the world’s first sensor to combine multi-array microphone, an RGB camera and custom processor that allows players to control games with the movement of their bodies, this was an attempt to magnetize the casual players who have fueled Nintendo’s recent success. The device of Microsoft is a bend on Nintendo’s smash hit Wii game console, which allows users to swing a racket of tennis or other games equipment by just holding a wand of plastic in their hands. The Microsoft camera doesn’t require gamers to hold any thing in their hands to control on-screen action. The camera sits near the television and captures when players move their hands, legs or head. The camera represents another attempt by the gaming industry to get to consumers with more instinctive playing methods than usual game controllers, with their range of joysticks and buttons. To give players more perfect

control over games than earlier game cameras actually did. Microsoft’s camera uses 3-D technology


Sony Computer Entertainment, on the other hand, will be competing with Nintendo head-on via a new PS3 motion-control technology set to launch in spring 2010. The PlayStation Eye, Sony’s proprietary digital camera that detects the slightest hand gesture, reads movement on the device. On-screen, the controller can then become anything from a bow and arrow to a novelty baseball bat that opens up a wealth of possibilities for PS3 game designers. Sony is also going head-to-head with the current twin handheld device of choice, the Nintendo DS. Sony Corp. plans to upgrade its PlayStation 3 console for 3-D games with a free software upgrade, but for that consumers will have to buy a new TV and glasses.


Nintendo Co. is planning to sell a new 3-D gaming device without the requirement of wearing glasses while playing as everyone doesn’t like to wear glasses. The device will succeed as the DS; which is the best-selling hand-held videogame till date, with more than 125 million units sold since its launch in late 2004. Especially among casual videogame fans, Apple Inc.’s iPhone (Smart phones) have started to come forward as a threat to gaming stuff such as the DS. The new system will also play current Nintendo DS games. From TV sets to digital cameras, electronics companies are turning to 3-D as a way to produce better products.

Source: Flurry Analytics


The history of the video game industry belongs to Nintendo. But in 1990’s, Nintendo’s market share was reduced completely as the preferences of video game players shifted from uncomplicated fun games to technical and superior video games offered by Sony and Microsoft, which entered the market in 2001 with the Xbox. It was basically the technological prowess of Sony and Microsoft, which stole the whole market from Nintendo. When the company was almost falling like a house of cards and it seemed that the competition in the gaming industry was only between Sony Play Station 3 and Microsoft Xbox360. Nintendo launched Wii, a console that had unconventional design. Though Wii was not in direct competition with Microsoft’s Xbox and Sony’s PlayStation, but it managed to steal and fans of both the players and substantial market shares. The Nintendo Wii wiped the sales floor with its competitors.

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As a response to the massive success of the Nintendo Wii, Microsoft came up with Project Natal, ditching physical peripherals and controllers completely with the world’s first sensor to combine multi-array microphone, custom processor and RGB camera. Sony also did not lag behind as it launched a new PS3 motion-control technology to meet the competition head-on. These innovative devices again disturbed the sales of Nintendo and aiming to revive sales of portable game machines, Nintendo Co. brought about a new 3-D gaming device known as the Nintendo 3DS.

So, this can be seen that through a series of innovations and technological advancements, each of the three companies has altered the terms of competition in the gaming industry. Every company is trying to capture the largest market share by bringing about innovative gaming consoles.

So, in case of the gaming industry, Innovation is the main mover of the market and it helps in altering the terms of competition in any industry to a great extent.


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