Strength of Competitive Rivalry: Strong

Group 8 Electronic Arts

Strength of Competitive Rivalry: Strong

The competitive rivalry among video game software is quite high. Over the years, companies such as Sony, Microsoft, and Nintendo were making their own games to compete against EA as well as their consoles. Although, these companies were manufacturing their own games and market is growing up, prices were remaining in the similar range for gamer products because of competition. The independent game developers for these companies need to come up with different software, in order to develop games that will be intriguing to customers to play on their gaming systems.

Bargaining power of suppliers: Moderate to Strong

Bargaining power of suppliers is quite strong and sellers switching cost is also high. The reason is because EA' packaged games are operated and provided through major manufacturers' platforms such as Sony, Nintendo, and Microsoft and negotiations between two always occur. Additionally, console manufacturers can be considered suppliers as well and are able to set royalty fees. Sellers switching cost is high because it is difficult for sellers to switch into suppliers. Furthermore, high sellers switching cost makes backward integration hard. Because of differentiated EA's games, patents by laws and brand, it is even harder for sellers to do backward integration. Also, it is difficult for EA to do backward integration because it takes quite long time and money to develop their games. However, EA can negotiate volume discounts by having multiple sources of supply for all the functions that were outsourced to third party suppliers. Thus, generally Bargaining power of suppliers is moderate to strong.

Threat of New entrants: Weak-Moderate

The threat of new entry into the market is low and moderate although the video game industry expected in the future to increase by $23 billion in a period of two years from 2005 to 2007 and some companies like Disney are trying to invade this industry with their customer relationships. Buyer demand for video games is increasing rapidly, which makes new companies try to enter the market. However, entry barriers are high and a number of game developers had been struggling to earn good profits, facing merges as only hope of survival to make profit. Because of the high development costs, console manufactures requirements, license acquisitions, time, and high competition between existing companies Entering video games market, it is hard for new firms to enter the market.

Substitute: Strong

EA video game company substitute factor bargaining power is strong. For example, movie theaters, television, music are strong substitutes that are readily available and attractively priced. They are a different