Electronic Arts Essay Example | Topics and Well Written Essays - 1250 words

Electronic Arts - Essay Example The EA has a significant market share of sports and hero-based video games. The Electronic Art's core competence is its ability to develop high-quality sports and feature games and offer a fascinating gaming experience to the kids, teens, and young adults in many countries around the world. Concentration: Although there are relatively few large competitors in the worldwide video game industry, it is still a heavily saturated market. The high fixed costs of developing a new game lead to increasing competition among the game programmers for the additional unit sales. Product Differentiation: Attributable to EA's efforts to diversify its products from other video games, it has been able to gain a competitive advantage over its competitors. They have a few areas in which true product differentiation exists - graphics, price, use of celebrities and licensed themes etc. Cost Conditions: due to the short product life and low customer price sensitivity the economies of scale do not have significant impact on the industry performance. Nevetherless, the learning curve effects are present. There is little threat of entry from companies outside of the video games market, however, within the market there is possible threat from manufacturers not yet fully established in the video games (i.e. manufacturers of game consoles), and even then there are significant barriers. Capital Requirements There are moderate capital requirements associated with entering the video games market as supplies can be outsourced and no major investment into R&D and equipment is needed. Access to Channels of Distribution The channel of distribution is another barrier to entry. This has to due to the fact that the retail channels are already saturated with a variety of competing products from established brands. In addition, there may be preference for distributors to sell products with higher margins or greater marketability and volume, making entry difficult. Threat of Substitutes/Complements Buyer propensity to substitute: There are very few other forms of entertainment that can be considered as direct substitutes for video games. However, within the video games market segment there are a number of substitutes because each manufacturer offers their own product range and the customers rarely have high brand loyalty. Complements: video games constitute a complementary good themselves with regard to the game consoles. Although the demand for them can not be considered purely derived, the video games market capacity does depend on the spread of the gaming devices. Bargaining Power of Buyers Price Sensitivity: the end customer perceives price as an indicator of quality and, therefore, is often price insensitive within certain price range. Concentration: Size of the end customer (i.e. consumer) is small and size of one purchase is small, so the end customer itself lacks the bargaining power. However, the wholesale distributors and retailers are bigger in size and their purchases have impact on the total amount of purchases, so they have also more