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Electronic Arts Case Study

6251 words - 25 pages

Question 1As all industries, the video game industry is made up of both business and economic characteristics. The most important players in this industry are the suppliers and the consumers. Suppliers are made up of those who manufacture the hardware, that is, the consoles and those businesses who supply the software, the video games. There are also certain businesses who manufacture both.The industry is made up of video game consoles, handheld players, and arcade machines; game developers, retailers of video game players and video games, and companies that have Web sites for online game play.One vital characteristic for this sort of business are the consumers, that is, the players of video games that add up to between 250 million to 300 million people worldwide. If it wasn't for them, who the majority of them are preteens, teenagers and young adults, then enterprises in this industry would not survive.Innovativeness is the major business characteristic that is very important for companies which make up such an industry. Sony, Microsoft and other hardware and software firms still manage to exist in the video game industry, because of the Innovative solutions they provide customers with on the market. In fact a lot of money is spent on research and development to achieve the best product to improve it upon.During the 1990s, video game developers created increasingly sophisticated, multi-featured games that allowed players to compete in a host of sports events, pilot supersonic fighter jets and spacecrafts, and enter mystical worlds. Firms that lacked innovativeness failed to survive in this industry such as Nintendo and Sega which from 1985 to 1994 dominated the market for video game consoles, with a combined market share of 90%. Then in 1995, competitive rivalry in video games took on a new dimension when Sony entered the market with its new PlayStation, emerging the undisputed leader worldwide in 1998. Nintendo's market share dropped to 26% whereas Sega unable to regain lost market share, exited the market for video consoles in 2001 and turned its full attention to developing video games.Innovativeness leads to a lot of investment by firms in research and development. During 2003 development costs ran from $2 million to $7 million per title, an increase of over $1 million from those relating to 1996. Some titles could entail development costs of up to $30 million.Firms in this industry seek to secure the service of the best resources available on the market, the most important being human resource, as this resource is the main component for new ideas. It comprises both employees who make up development teams as well as support staff. Support staff includes celebrities who provide their service, such as, providing their voice to the main character of the video game, producers and film crew that give permission to utilize original film setup for the game to make the game more realistic and similar to the film itself, and Technological Equipment,...

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