Tuesday, February 27, 2007

A Brief Follow-Up

I ran across an article published today that makes some of the same points I did with my blog yesterday. It mainly makes the point that companies should be focused more on being independently profitable rather than concerned with holding more market share than their competition. The crux of the article is here.

"The harm that competitor-oriented objectives can cause the companies that pursue them was the subject of a December 4, 2006, article in The New Yorker by James Surowiecki, the
magazine’s business writer. Surowiecki describes how Sony, with its PlayStation 3, and Microsoft, maker of the Xbox 360, are beating each other’s brains out trying to capture the biggest share of the video-game market.

Meanwhile, third-place Nintendo, with its new game console called Wii (pronounced “wee”), has quietly become the most profitable game console company in Japan.

Nintendo “has not just survived out of the spotlight; it has thrived”, Surowiecki writes. “It has $5 billion in the bank from years of solid profits, and this past year, though it has spent heavily on the launch of the Wii, it made close to a billion dollars in profit and saw its stock price rise by 65%. Sony’s game division, by contrast, barely eked out a profit and Microsoft’s reportedly
lost money. Who knew bringing up the rear could be so lucrative?”

My own comments are obviously in my previous blog, but this article was so in-line with my points that it had to be shared.


Anonymous Tim said...

you just hate anything that dosen't have nindendo stamped on it.....good articles btw

March 01, 2007 1:16 PM  
Blogger Benjdude said...

In one sense you are right, but it is the sense that Nintendo is pursuing a non-confrontational stance and they are being wildly successful in this approach. I don't think every company can do this. Microsoft is a ready example. They are a monsterous company in terms of size and structure. I doubt that they could exist on a smaller market share (not of videogames but of operating systems and such) because they are not as efficient a company. They have to act and react in different ways to protect themselves.

More importantly though is the fact that most Japanese corporations are unconcerned with market share. Take Toyota for example. They make and sell more cars than any other company in the world but they aren't focused on increasing market share. They are concentrating on being profitable and they do that by making great products and trying to diversify the market.

In contrast Sony and Microsoft are vying for the very same market demographic and if you don't add more people into the consumer side of videogames the dollars will dry up fast due to skyrocketing development costs. Thanks for your comment.

March 01, 2007 8:12 PM  

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