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1. For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation and marketing. The gaming industry has grown from the Atari selling 27million to Warner Communications to develop new home games to the production of the software increasing revenues of games to $19 billion in 2003.
2. The threat of new entrance is high. Because this is a profitable market that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by policies, the profit rate will fall towards a competitive level. Since 1972 there has been 9 different consoles built to keep up with competition. The demand for graphics and technology keeps demand high, keeping companies interested in creating the newest best game cube.
3. Bargaining power of buyers gives the customers ability to put the firm under pressure and it also affects the customer's sensitivity to price changes. Studies show that more than 63 percent of gamers are adults and 43 percent are women with the average age of 28 allowing a disposable income. Since consumers have available game options bargaining power of consumers has increased making it more difficult for firms to price gauge.
4. Bargaining power of suppliers of raw materials, components, ...