Idea for innovators (1)
- 1. IDEA FOR INNOVATORS: LODHI ROAD 3 PRODUCT NAME: THE PROJECT X IT’S A GAMING CONSOLE WITH A PROJECTOR INCLUDED IN ITS HARDWARE TO ENSURE HIGH MOBILITY IN GAMING FOR KIDS AND TEENAGERS THESE DAYS. WITH THE HIGH RISE DEMAND IN GAMING AND ENTERTAINMENT THIS DEVICE WOULD BRING OUT A NEW ERA TO THE WORLD OF GAMING.
- 2. THE PROJECT X CPU Single-chip custom processor. Low power x86-64 AMD "Jaguar" 8 cores. Graphics 1.84 TFlops, AMD Radeon Graphics Core Next engine Memory 8GB GDDR5 RAM Storage Built-in. Unconfirmed size. Optical Drive Blu-Ray drive 6xCAV. DVD drive 8xCAV. Input/Outpu t Super-Speed USB (USB 3.0). AUX. Comms Ethernet (10BASE-T, 100BASE-TX, 1000-BASE-T). IEEE 802.11 b/g/n. Bluetooth 2.1 (EDR). Audio/Visua l HDMI. Analog-AV out. Digital output (optical) and projected at 2880 by 1440 CONVERSION
- 3. The Market for Video Game Consoles is Growing, but Competition is Fierce The market for interactive video entertainment is growing; this market grew four percent over the same period two years ago. However, all players in the market are facing increased competitive pressures. Substitutes for console gaming are growing rapidly (such as massive multiplayer online games), and as the first generation of console players reach maturity, many players will shift to these substitutes, a problem known as gamer drift. The consumer market is segmented mainly by age. The casual gamer, consumers who do not treat gaming as their main source of entertainment, represents 36 percent of the market. This group tends to be between the age of 18 and 24. Because the video game console market is sufficiently saturated, there are no realistic possible entrants, except in related markets such as portable gaming. There are many formidable barriers to entry. With the intense price competition, large economies of scale involved, and entrenched companies spanning the Hoteling line of quality versus price, entering the market would most likely not produce a favorable return on investment. A potential entrant would need to have experience with video games and consumer electronics, significant access to capital, and significant name recognition or a marketing campaign sufficient to earn such recognition. They compete with other publishers of PC and video game console interactive entertainment software and peripherals. Those competitors vary in size from small companies with limited resources to very large corporations with significantly greater financial, marketing, and product development resources than we have. For example, integrated video game console hardware and software companies such as Sony, Nintendo, and Microsoft compete directly with us in the development of software titles for their respective platforms. Certain of these competitors may spend more money and time on developing and testing products, undertake more extensive marketing campaigns, adopt more aggressive pricing policies, pay higher fees to licensors for desirable motion picture, television, sports, music and character properties, and pay more to third-party software developers than we do. They also compete with other forms of entertainment and leisure
- 4. activities. For example, the overall growth in the use of the Internet and online services by consumers may pose a competitive threat if customers and potential customers spend less of their available time using interactive entertainment software and more using the Internet and online services. A number of software publishers who compete with us have developed and commercialized or are currently developing online games for use by consumers over the Internet. Future increased consumer acceptance and increases in the availability of online games or technological advances in online game software or the Internet could result in a decline in platform- based software and negatively impact sales of our console and handheld products. Newer technological advances in online game software may also render products such as World of Warcraft obsolete. Direct sales of software over the Internet by competitors could materially adversely affect our distribution business as well. Competition in the interactive entertainment industry is intense and we expect new competitors to continue to emerge. Porter Forces in the game console market Customers The customers in this market are almost all individuals or families who purchase consoles. Customers tend to buy only one console at a time. Since console manufacturers suggest retail prices over entire countries or regions, individual customers have no bargaining power. Software purchased for one console cannot be played on other consoles so switching costs are high; if an individual wants to play a particular game, he or she is usually locked into the console that plays it. There is a tendency for console games to be increasingly complicated. Becoming involved in a game required a significant time investment to learn how to play. Game companies aimed mainly at servicing the "hard-core" demographic, which enjoyed this kind of game. Relatively few games were produced for the larger demographic of "casual gamers". Suppliers Suppliers are companies which make hardware and games for the consoles.
- 5. Nintendo designs some of the hardware components for its consoles, but manufacturing and assembly are often outsourced, and many components are purchased "off the shelf" from large companies. This keeps costs higher than competitors like Sony and creates a threat of forward integration by parts suppliers, who could potentially manufacture their own consoles. Switching costs are also high, as Nintendo software is made to be compatible with technologies supplied by the outside companies. Threat of new entrants The console market has a strong threat of new entry. There is very little patentable technology in game consoles, and most consoles tend to have similar features and functionality. The greatest barrier to new entry is the economy of scale; producing consoles is prohibitively expensive unless done on a very large scale. In addition, a potential entrant would have to develop games to sell alongside the console. An exceptionally strong marketing campaign would be required since Nintendo, Microsoft, and Sony are already household names in many countries, which gives them a strong advantage in this sort of competition. Substitutes Though they have negligible bargaining power, customers have a wide range of available substitutes, spanning over all sorts of possible forms of entertainment. In addition to competitors' products available to them, they may choose television, movies, PC games, board games, literature, sports, etc., in their leisure time. Thus, game consoles have to make an effort to be wanted since they are not needed. Complements Strong complements are an important part of getting customers to choose game consoles. The greatest complement to consoles is games, without which a console is useless. Controllers and memory cards are also complements, as is the Internet, which allows players to network with each other and play video games with their friends. Rivalry Overall, there is strong rivalry in the console market.
- 6. Challenges Faced By The Video Game Industry 1. Growth demands of a public company It is one thing to lead a company past $10MM; it is another to lead it past $100MM; it is a whole different ballgame leading it past $1B. And this is what the management of the big video game companies are now learning. Stockholders of public companies demand steady double digit growth. That means a $1B company must grow revenues by at least $100MM. Challenges 2 and 3 make this a tough requirement for this industry. 2. The structure of the video game industry Steady revenue growth is generally based on building on the previous year's revenue. This rule does not apply to the video game industry because most of the video games that form these companies' revenue bases have development times of 18 - 24 months. That means the sequels to games that delivered the bulk of revenues in year 1 won't be released in the year 2. This means that the games that will support this year's revenues targets will be a whole new group of games than those that supported last years $1B in revenues. That's alot of hit games! 3. Insufficient infrastructure to support growth needs So those two
- 7. annual cycles of games that are needed to fuel the video game company's growth demand - they require game concepts, producers, project managers, developers and artists. Analysts and reporters like to harp on the cost of developing blockbuster games ($15-25MM); big video game companies have plenty of cash - what they lack are the people to develop the games. Remember, video games is a young industry. Their processes to develop and manage studios are immature. This creates a big capability gap to be able to build the games needed to deliver consistent revenue growth. For those of you pointing out that video game companies have recently closed studios, I suggest that the quality of the studios is the real reason. Studios that are able to consistently put out top quality games are fine, the studios that are closing are those that struggle to meet deadlines or produce sub-standard products. If you don't have the people to build the products, you will never meet your growth targets. 4. Failure to recognized need to address, smaller, faster growing segments Finally, it is hard for video game makers to not stay focused on blockbuster titles because the hardcore gamer market is still growing strong (although slowing) and it is what they know how to do. However, these companies are ignoring other faster growing customer segments such as casual gamers, online gamer, and social gamers. The problem is that from the perspective of the large video game developer these markets are still relatively small to the core gamer market, today - therefore not a dependable, significant source of revenue growth in the short term. However, in a few years these markets have the potential to be a substantial source of growth. The other problem is that these new segments present new customers and new business models for big video game companies. To tackle these segments they will need to set up independent groups who are focused solely on these markets in order to learn about the market and build capabilities to develop those types of games (different from core gamer games). Of the big video game companies, only EA is attempting to address this market. So to sum it up, big companies require big money growth, the video game industry demands two cycles of games, and they are not developing the infrastructure to support these demands. Lastly, they are ignoring the new emerging gaming markets because it is not a reliable immediate source of big revenue which will haunt them in a few years when one or more of those markets become huge.
- 8. DIFFUSION Like any other startup, our main barrier would be "capital" , on how to get it for the idea to shape and how to make more money selling the idea. Since this is a promising product (and we assume that the market survey reinstates this) , getting money from the angel investors , would not be much of the problem once we are able to project the future income out of this. On the other hand selling this idea requires a lot of effort and capital, since this is in a nascent stage and the need for the product is not active , heavy marketing needs to be done to put this product on ground and sell it well in the market. Given our capital we will Create a Planning and Product Launch Strategy
- 9. In virtually all cases, however, a successful new product launch will result from the planning and execution of an integrated planning, product development, and marketing process that is focused on identifying and solving for potential obstacles up front. While you will need to make dozens of decisions and coordinate a hundred or more activities around your new product introduction, let's review a number high level areas related to effectively launching a new product. 1.) Market Research is Critical: Many entrepreneurs and companies justifiably get excited about their ideas – after all that is how innovations happen… But without making even a small investment in market research you may end up wasting time and valuable capital. Market research around your product launch it provides critical information about consumer needs and the needs of potential distribution partners. It helps to define your feature set and pricing strategy and, potentially most critically, helps you to understand the competitive landscape. 2.) Developing a Product Launch Project Plan: Capital – both human and financial are scarce resources. But you can spend less and earn more by developing a detailed project plan that outlines the timing coordination required for each aspect of your new product introduction. This includes: branding, packaging, prototyping, testing, manufacture, shipping, promotion and more. Many products need to be timed to critical points in the business cycle, and if you miss those milestones you will invite failure, lose credibility, and lose sales! 3.) Manufacturing Capacity and Product Sourcing: Your strategy with regard to product sourcing could very well determine whether you can produce your product on your own or whether you will need to license it to another company. If you have limited resources, the former may require you to have a “go-slow” approach to distribution so that you do not have challenges with fulfilling orders. A licensed approach can get you to market faster and more broadly, but your income will be restricted to a small royalty and you will lose control of your new product line. 4.) Establishing Your Distribution Plan: Have you thought about who is going to sell the product? While large companies may already have
- 10. existing distribution and sales departments, many entrepreneurs, inventors, or small companies do not have these resources. Additionally, they may be great at inventing product, but not good at selling them. Finally, they need to make sure they are able to put their products into the right sales channels – retail, web, direct-to-consumer, etc. at the right time and in the right amount. There are many companies that can assist you with your product sales plan. 5.) Marketing and Promotion Programs: Finally, you need the product marketing program to support the introduction of your product. This includes things like advertising, trade shows, promotional literature, technical literature, samples, incentives, market development funds, web site development, seminars, and press releases/public relations. This needs to be coordinated with your production, shipments, marketing, and training programs. Without an effective marketing plan your new product will simply sit in your warehouse or you will be forced to take returns from distribution partners. 6.) Managing the Product Lifecycle: Do you have one new product or a complete product line? Most distribution partners including major retailers and distributors will want more than one item, so you will need to consider creating line extensions. Plus, since your competitors are not standing still, you will need to consider what next season’s product line looks like. You will also need to think about how you will handle things like product returns and warranties. Common marketing techniques which we will use to have an advantage to enter the competitive market: 1. Limited editions: Many if not all of the games console manufacturer offer limited editions of their consoles. Nintendo Wii has introduced a black edition, while PlayStation introduced slim editions of their products. 2. Bundle deals: Another common strategy is the use of bundle deals in an attempt to attract customers. Manufacturers may offer more additional controllers, remote controls or games in order to tempt them away from competitors. 3. Captive deals: As price of games consoles fall, console manufacturer release much hyped games that can only be played on their platform. Games console manufacturers usually make most of their money on
- 11. software sales. They get the console into the household by selling it cheaply then they capture the customer on the premium price for new game releases. 4. Optional strategies: Game console manufacturers are now adding optional extras giving consumers a choice of increasing the benefit they gain from their console. Nintendo with their Wii console are very good at this strategy. They have successfully marketed the Wii Fit Board as an optional extra and now also with the Wii Motion Plus. Xbox are doing the same with their Wii rival add on the Xbox Kinect 5. Pricing Strategies: Another common strategy used by the games console industry is the clever use of pricing during the life cycle of the product. Our diagram below looks at this common strategy. When a new games console is introduced into the market the manufacture charges a premium price, the innovators within the market rush out to buy the product, because they want to be the first to own it. As the games console moves through the life cycle, the price is lowered, until eventually after a number of years the games console is at its lowest price point. At this lowest price point, laggards are most likely to buy the product, they have waited for a while and purchase at the point where the manufacturer will probably launch the replacement for their fading games console. PRICING STRATEGY PLANNED
- 12. CONCLUSION Launching this product as the epitome of innovation will bring out an era of new gaming experience in the whole world and increase mobility and joy for gamers around the globe.