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Introduction Atari fell off the map as a major player in the video ...

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Atari employed them. Rival firms could easily and cheaply buy an Atari game. system (either an arcade system or home system) and reverseengineer how Atari ...

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Introduction Atari fell off the map as a major player in the video game industry (both the arcade Page 1CASE ANALYSIS MEMORANDUMTO:PROFESSOR JERRY SMITHFROM:JOHN Q STUDENTSUBJECT:THE DEMISE OF ATARI THE SUCCES OF NINTENO AND WHY DATE:12/31/00IntroductionAtari fell off the map as a major player in the video game industry (both the arcade video game market and the larger home video game market) after pioneering this industry in the early to mid1970s because the firm and its leadership failed to grasp that its technological innovations did not have economic staying power as Atari employed them. Rival firms could easily and cheaply buy an Atari game system (either an arcade system or home system) and reverseengineer how Atari made these systems work. Once Ataris innovative electronics were understood close copies of the system could be made without the associated significant R&D expense. Economic Rent & Ataris Corporate FailureAtaris single largest downfall was its corporate inability to recognize thedifference between a sustainable Ricardian economic rent and a fleetingSchumpetarian economic rent. The former comes from owning or controlling a truly scarce resource and has real economic staying power; the latter comes from an imitable innovation that lasts only as long as it takes for unchecked imitation and diffusion to set in.1A fine example of Atari failing to realize what type of rent it could extract can be seen in the introduction of Pong. The Pong video arcade game was introduced in 1973 and quickly became the rage in video arcades throughout the United States;however as the HBS Power Play (A) case depicts rampant copying followed Pongs innovate debut. By 1974 only 1 in 10 Ponglike video games were in fact Pong games made by Atari.2Rival firms simply copycatted Ataris idea added some relatively cheap innovations and flooded the market with products that were 1D. Collis & C. Montgomery Corporate Strategy A Resource ...

Source: www.olin.wustl.edu

 

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