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.
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
Blu-Ray drive 6xCAV.
DVD drive 8xCAV.
Super-Speed USB (USB 3.0).
Comms Ethernet (10BASE-T, 100BASE-TX, 1000-BASE-T).
IEEE 802.11 b/g/n.
Bluetooth 2.1 (EDR).
Digital output (optical) and projected at 2880 by 1440
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
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
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 are companies which make hardware and games for the consoles.
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.
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.
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.
Overall, there is strong rivalry in the console market.
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
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
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
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.
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
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
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
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
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
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
software sales. They get the console into the household by selling it
cheaply then they capture the customer on the premium price for new
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
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.