Instructor’s Manual
ANSWERS TO OPENING CASE DISCUSSION QUESTIONS
1. What factors do you think enabled Sega to break Nintendo’s near monopoly of the
U.S. video game console market in the late 1980s?
Nintendo was earning high profits on its 8-bit systems and was unwilling to cannibalize sales of
8-bit games by introducing a new 16-bit console. This gave Sega a window of opportunity to
2. Why did Nintendo choose to not make its video game consoles backward
compatible? What were the advantages and disadvantages of this strategy?
Nintendo chose not to make its video game consoles backward compatible because they felt they
had enough of an edge in the market that they could force consumers into buying entirely new
libraries for the next level game. Video game console producers sell the consoles for a price that
1
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Instructor’s Manual
By not making their new product backward compatible Nintendo leveled the playing field for
Sega by causing customers to incur switching costs to upgrade that were comparable to the costs
to switch to Sega’s products.
3. What strengths and weaknesses did Sony have when it entered the video game
market in 1995?
When Sony entered the video game market their primary weakness was a lack of experience and
reputation as a game manufacturer. This weakness was far outweighed by their ability to
leverage their reputation and distribution network for consumer electronics to give them a
4 What strengths and weaknesses did Microsoft have when it entered the video game
market in 2001?
When Microsoft entered the video game market, they had to overcome a lack of experience with
arcade games and consumer electronics. They were also a new entrant in a market with a very
strong leader that had the bulk of the market share. Microsoft also had to build on their
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Education
Instructor’s Manual
5 Comparing the deployment strategies used by the firms in each of the generations,
can you identify any timing, licensing, pricing, marketing, or distribution strategies
that appear to have influenced firms’ success and failure in the video game
industry?
Looking at the different generations of competition in the video game industry, it appears that
important strategies include:
Timing: being willing to cannibalize existing generations before competitors do, and timing
Licensing and compatibility: making new generations of video game consoles backward
Pricing: consoles must be priced at or below cost, somewhere under $300 in order to facilitate
3
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Education
Instructor’s Manual
ANSWERS TO DISCUSSION QUESTIONS
1. Can you identify one or more circumstances when a company might wish to delay
introducing its product?
A company might choose to delay introducing a new product when they have an existing product
2 What factors will (or should) influence a firm’s pricing strategy?
Pricing strategy is a function of the need to recoup initial investments, competitor presence or
3 Pick a product you feel you know well. What intermediaries do you think are used
in bringing this product to market? What valuable services do you think these
intermediaries provide?
Students should provide examples from their own experience. A previously provided example
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Instructor’s Manual
4 What marketing strategies are used by the producers of the product you identified
for question 3? What are the advantages and disadvantages of these marketing
strategies?
From the previously provided example: “Netflix, the DVD rental agency, uses a number of
5
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