Nientendo's Wii and Playstation 3 's Competitive Advantage Over Microsoft's Xbox 360

Microsoft’s Xbox 360 has two main rivals, the Nintendo Wii and Play station 3.The Wii is preferable to the Xbox 360 due to its low price and gaming experience. The Playstation 3, on the other hand, has the advantage of high differentiation. In other words, both competitors of the Xbox 360 have different competitive strategies.

Nintendo's Wii Advantage Through Price and Gaming Exprience

One way the Nintendo Wii competes is through cost.The Wii offers a single model that is cheaper than a range of models of both the 360 and playstation 3. The low cost of the Wii threatens the Xbox 360. It is "humbly priced at $250"', while Xbox and Playstation 3 are well over $350 for their low-end model and ranging up to over $ 500 for their high end system (Moats 9). Not only is the machine itself cheaper, but also Wii’s games in 2007 were $10 less than the Xbox 360 and Playstation 3 (Moat 10). The low price gives consumers a high bargaining power. Consumers have the power to choose between the three machines and are more likely to take the cheapest one available. Also, the Wii locks in consumers by including a free game with each Wii unit they buy. Most other units do not provide free games, and if they do, they increase their price by $20-$50 (Moat 10).

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Furthermore, Nintendo is trying to widen their market by enhancing and differentiating their product. Nintendo provides special features in their machines without raising their price as Xbox 360 does for the same features. One of these features includes a free WiFi connection which allows one to play certain online games against friends and others (Moat 13). On the other hand, Microsoft’s Xbox Live supplies similar experiences that cost $7.99 per month or $49.99 per year (Qualls 3). By enhancing the Wii, Nintendo is trying to expand the uses of the Wii into our daily lives by providing more gaming entertainment. Today they have titles such as “Wii Fit” and the Wii Balance Board which hope to help fight obesity levels by getting gamers off their couch and up and moving around (Moat 8). By enabling activity, they hope to attract new customers and explore new opportunities never before possible with gaming companies.

Nintendo is also expanding their target market by having games for people of all ages. Generally, video games are targeted to the younger market (ages between 5 and 22) (Moat 13). Nintendo Wii is trying to break away from the youth group by offering games for a wide selection of people while still developing games for specific markets like Legend of Zelda, Super Paper Mario and Mario Galaxy that are focused on the younger group (Moat 13).

In addition, Nintendo has created a new controller to make the Wii more natural to play (Pigna4). The controller includes motion sensitivity, IR sensors (used to target things on the television screen), and a port to allow for a variety of controller add-ons to be used (Pigna 4). Already a number of add-ons have been created for the Nintendo Wii. The Wii has its own add-on called the Nunchuk which has 2 extra buttons and a joystick used for many games (Pigna 5).Games like Guitar Hero 3 allow one to actually plug in the Wiimote into the guitar. These new fuctions make the Wii a lot more responsive than the Xbox 360 and Playstation 2&3 models. A classic controller has been made for users to play the Virtual Console games; the controller can also be used for many Wii games as a substitute for the Wiimote (Pigna 5). More add-ons are currently in development.

Sony's Playstation 3 High Differentation and Prices

Sony’s Playstation 3, Microsoft’s other major competitor, has a strategy that is a little different.While the Playstation 3 has high differentiation and prices, it offers better graphics and hardware. The Playstation 3’s256MB GDDR3* graphics card has more realistic graphics than the Wii’s 64MB GDDR3 graphics card (Moat 4). As usual, with high differentiation come high prices. The high prices have cost Sony market share. The PS3 is falling behind the race for market share, in spite of having the best raw computer power, presumably due to its high price (Moat 9). NPB group research showed that January PS3 sales in the U.S were lower than both the Wii and the Xbox 360, and that the PS3 was also outsold by its predecessor, the PlayStation2 (PS2). To battle this, Sony is trying to compete by lowering their prices instead of continuing to differentiate their product. According to a New York Times article, “Sony set prices below the cost of production during the introduction phase to establish a large enough installed base. Lowering their prices has cost Sony to a quarterly operating loss of $446 million for its game division” (Fackler 1). Sony desperately wants to bolster demand even if it cost them millions. The New York Times article also states that,“Sony executives and analysts have suggested that a further price cut is possible and even necessary” (Fackler 2). Further price cuts on the PS3 may be bad news for Sony. The PS3 is already sold well below the cost of production (Fackler 2). It is almost impossible to match the price of the Wii or the Xbox 360 due to the Playstation’s 3 high differentiation (Fackler 2).

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Critics are arguing that if Sony wants to gain market share, they going to have to invest in enhancing the PS3 so that their costumers will want to pay the high price. One thing Sony could do is invest in making more games.A research group from California Institute of Technology found that “studies show that consumers value a 1% increase in game titles as equivalent to a 2.3% price cut in the market” (Cheng 5). Although the Playstation 3 has a lack of games, Sony has the ability to make large amounts of games. One of their biggest advantages over Microsoft and Nintendo is their ability to “generate a large quantity of game titles through strong networks of game publishers” (Cheng 5). If Sony wants to be successful, they need to use this ability to create more games. Moreover, Sony is facing the problem of the PS2 outselling the PS3. The bargaining power of the consumers allows them to buy the cheaper PS2 instead of the more expensive PS3. PS2 is generating the majority of the profit for Sony from software royalties and hardware sales” (Cheng 7). As mention before, the problem is that PS2 owners are slow to upgrade to PS3: "While most hardcore gamers are expected to upgrade to the PS3 soon, the more casual gamers are typically more price sensitive and therefore prefer the PS2 to the significantly more expensive PS3” (Cheng 7). Sony needs to continue have structure by selling the PS2 and trying something new by enhancing the PS3 :“Sony should have the PS3 compete with the Xbox 360 in the high-end market and have the PS2 compete with the Wii in the low-end market. Provided that the PS mote is available as an optional add-on, the PS2 will be competitive against Wii by offering comparable gaming experience at a lower price” (Cheng 7). Sony needs to change their strategy to gain competitive advantage.

Both the Nintendo Wii and the Playstation 3 are Xbox 360 major competitors. The Playstation is losing market share and is going to need to adjust their strategy to be competitive. The Wii’s low price and new gaming experience make it a strong competitor.

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