Define the context.
Japanese company specializing in the creation of video games and video game consoles.
The company was founded in Kyoto, September 23, 1889 Fusadziro Yamauchi.
In 1963 Nintendo Playing Card Company Limited was renamed the Nintendo Company, Limited.
In the 1970s, thanks to the development engineer Gunpei Yokoi, especially his toy «The Ultra Hand», Nintendo has started to create toys for children and built their own toy factory. Gunpei Yokoi after the success of toys «The Ultra Hand» was transferred from the Service Department to develop.
The next stage of the company were slot machines. In 1978, Nintendo has established a unit, the sole focus of which was the production and sale of arcade games.
In 1983, Nintendo released in Japan its first 8-bit video game console Family Computer (Famicom) and turned out to be the most successful at the time – the system will eventually took 90% of the Japanese market. In 1985, the United States entered the prefix called Nintendo Entertainment System (NES). After a few years after the NES in America, competitors consoles in the New World is almost gone. NES was the absolute leader in sales.
More in 1994 Nintendo released the Virtual Boy, 32-bit gaming system that is used to display three-dimensional graphics are several shades of red.
In June 2004, on the intranet briefing, Satoru Iwata announced that the company is working on a completely new system, codenamed «Revolution». In the development of close involvement of Shigeru Miyamoto and a team of engineers led by Genyōsha Takeda. For the first time in public, the exhibition TGS in 2005, was shown a new console controller. In May 2006, at E3, was shown all the console as a whole, and was declared the official name of the console – Wii. Initially, the console came out in the US market November 19, 2006 at a price of $ 249. In 2007, became the best console sales in Japan and the United States. On July 2012 worldwide Wii console has sold 96.56 million units, thus becoming the most successful console of Nintendo.
The company’s revenue for the fiscal year ended March 31, 2013, amounted to 635.4 billion yen ($ 6.4 billion), net profit – 7.1 billion yen ($ 72 million).
Adhering to long adopted company practicers/culture Nintendo seemed to be a late adopter to current market trends, such as mobile gaming.
Due to not having a flexible internal working strategy would not innovate much in the early days and attach strict regulations on publishers working with them.
By ignoring market trends it was on the path of once again gaining poor results and losing market share.
Even though information about the expanding mobile gaming platforms readily shows a potential that Nintendo could enter and gain market share, it chose to look into different things.
Nintendo was not sure on which areas to focus, whether it be to keep on releasing exclusive video game titles for its Wii console or begin developing games for the mobile gaming platforms which showed a promising future.
Nintendo’s target audience is slowly drifting from its console platforms to social and mobile platforms, and as shown in the past, if the company takes too long to make a decision it can lose out on market share thus decreasing its stock value and shareholder satisfaction.
With Iwata’s take over as the CEO of the company he brought about a big change from the traditional top-down management to a more open and ventilated atmosphere which led to the growth of some of the best video game IP’s and console innovations. The video game market however, similarly to the technology industry, continuously changes, and those that do not adapt or attune to the growing trends risk being left behind and late adopters can have a very hard time catching back up. Nintendo has once more to refocus on what to spend R&D on in order to keep its target demographic from switching platforms and keep them satisfied with Nintendo products, however the question is how what strategy does the company employ.
To analyze the strategy of Nintendo we have to ask ourselves some questions:
What should Nintendo do?
How they can improve their technology?
Do they really need it or there is no chance?
Nintendo always positioned themselves as a company that mainly concerned on kids and adolescents. Nevertheless in the mean time a lot of young people and adults are also like to play video games and therefore Nintendo is loosing in this battle against Xbox and PlayStation.
To make a better analysis it would be a good idea to use SWOT analysis, to understand what is going on inside the organization:
Huge experience on the market
Manufacturing their consoles in Japan, therefore high quality
They made some progression in their consoles, even though now they are not very successful
Nintendo Wii was a leader on the market
Difficulties with supply chains
High competition on the market
Margin per unit is not high
No HD on the consoles
Make consoles interesting to buy not only kids, but also for adults
Enable to play using wi-fi and internet
The entertainment industry is changing fast
Customers want new products every year
Due to that we can see that Nintendo has to act fast and be competitive to others. They have to release a new product and it has to that good, so customers will switch from PlayStation and Xbox to them.
Nintendo, like its competitors in the video game industry faces similar threats however it does have a competitive edge. By having exclusive IPs with some of the best recognized and adored brands it can capitalise on that by developing games for the mobile gaming platform. That way it can satisfy both sides of the party, the long term fans and the shareholders of the company who have started losing faith in how the company is being guided.
Convergence was evident within Nintendo as the company ever since its inception was run by family members adhering to long run traditions and culture with everything being run by one person in a top management style. Iwata changed that in order to allow for increased openness and the flow of information and ideas through a simpler system.
In terms of collaboration, in the early days Nintendo had an idea to work together with Sony when developing the CD-ROM addition to its consoles. This idea however fell through, but had it succeeded the companies could have been at very different places. Collaborating in grand scale projects can prove effective and help with sharing technological breakthroughs and operations.
The basic way of coordinating in a company such as Nintendo would be through the standardisation of norms in the sense that each worker believes in producing a product that will bring joy and entertainment to the family. A sense of direct supervision would not work in such an industry and especially such a culture, where the finished product is of outmost importance vis a vis its quality. If Nintendo feels that quality is suffering due to time limitations, it will readjust its deadlines only to make sure the highest of quality games are released to their fans. This coordinating mechanism is functional within such a company, however it can allow for too much focus on internal operations and provide a disarrayed perspective on external forces such as growing market trends.
As such Nintendo can be described to be an innovative organization which was formed with the introduction of Iwata as the new company leader allowing for power to be distributed throughout the structure. Thus the distinction between strategic apex and structure is less evident. This allowed for Nintendo to come up with an innovative product, the Wii, which managed to capture their core message, Gaming for Everyone, paving the way for which soon competitors followed with their own hand-motion products.
In terms of technology, something that is always at the forefront or should be for Nintendo, it has to adapt to emerging technologies with a willingness. Originally Nintendo felt that it would focus on software more then hardware, but with change of strategy the best decision was to combine the two teams and work together on a product that would work seamlessly together. The result thus was the Nintendo DS, a handheld device that was widely successful in terms of sales. By continually experimenting Nintendo should challenge the industry standards and look beyond where the market is heading, understanding the new trends and adaptations that their demographic seems to be shifting towards to and try and adopt it in their product segments.
– Generic Strategies
Nintendo’s core business finds itself ranging from upstream to downstream segments, where it manufactures, ships and sells its products over a geographic expanse. This means that economical fluctuations can have a great bearing on how well the company performs.
Nintendo determines its core strategy through product and quality differentiation where it aims to provide unique product features that no other competitor can provide and quality products through its few yet widely popular IPs.
Nintendo studies its product life cycle and along with other competitors during big events such as E3 announces new products or consoles that will create hype and varying expectations from its customers. It employs a product differentiation strategy, where it releases a new product, game, and console every once in a while.
Nintendo widely covers most of its operations, thus it is a vertically integrated company, from manufacturing to shipping and selling.
Nintendo’s core business is producing games and entertainment consoles but perhaps its model and strategy of achieving its goals may be slightly skewed with what market demands and trends are. It would have to look and reanalyse where its focus should be, and whether the mobile gaming platform would have an impactful effect on its stock price.
Another key aspect to look at when studying video game industry is the product life cycle. In general, every console has a an average life span of 6 – 8 years after which the hardware becomes obsolete and has to be replaced to meet with growing industry demands and software progress. The Nintendo Wii had a very successful start with highest sales figures, after which like most other consoles sales started to dwindle with high hopes towards the newest product.
Porter’s five forces:
Threat of new entrants: Low
Market share is divided among big players
Very expensive and hard to enter the market
A lot of experience needed
Bargaining power of buyers: Medium
Few large electronic shops, who is doing the distribution in the US
High distribution worldwide
Homogenous products exist
Threat of substitutes: Low
Bargaining power of suppliers: Low
A few number of suppliers
They produce a lot by themselves
Intensity of rivalry:
Therefore it would be interesting for them to compete on the market, because there are only a few big players, which makes it difficult for new entrants to come in.
Five P’s for strategy:
Strategy as Plan: In the case of Nintendo it would be a good idea to launch a new product and make a plan that will help them to deal with their current situation.
Strategy as Ploy: This strategy would also work for Nintendo, because they will have to make a product that will be sold at a good price, therefore it would outwit an opponent or competitor.
Strategy as Pattern: Bringing their games online will make a huge improvement in their situation.
Strategy as Position: Nintendo had a strong position on the market and even though now it is not that stable, still they have their own niche and they are able to compete.
Strategy as Perspective: Nintendo has a good brand image and they have their reputation.
Nintendo should focus more on online games and providing better technology for their consoles, this will make an impact on their sales.
Strategy in the Era of open innovation:
From closed to open: The boundaries of the firm are more expanded now and therefore the innovation is can be done simpler and expand the business. Nintendo should not only concentrate on electronic games, they also have to make innovations in online gaming system.
How prevalent is open innovation: Nowadays it is, because especially in the technology segment they have to be innovative in all spheres.
The different modes of innovation: there are 3 main areas where innovation can be focused- funding, generating and commercializing.
Funding innovation: is a hard question, because there should be spent a lot on it and therefore it might be a good idea to use investors.
Generating innovation: High qualified people, that are probably should be young and having an experience in such questions.
Commercializing innovation: The main problem of all companies is bringing the product to market. Nintendo had a huge experience in this and therefore it would not be a problem for them to make a good commercial advertising.
Long live open innovation: very hard to satisfy customers and produce a good product that will stay for a long time on the market.
Provide Alternative Courses of Action.
In order to gain advantage of the growing mobile and social platform market Nintendo could develop a game using its iconic brand IPs (Mario, Zelda) and develop a game for those platforms. The staggering number of mobile users downloading apps from the app store is not something to be ignored and by looking into and developing a fun game that would stick by the word’s of Iwata, ‘Games for everyone’ could make up for the poor performance of its console line. Moreover such a decision would grow to please analysts and shareholders and be a new avenue for Nintendo to explore and experiment with. The growing trend with apps and in-app purchase can be a very lucrative course of action for Nintendo.
Another option for Nintendo to consider would be developing a new console that focuses on both hardware and software improvements that appeals to both demographics of Nintendo, hardcore and casual gamers. This would allow for the distribution of games that both use the full potential of the new hardware allowing for impressive visuals and compelling gameplay as was the focus of Nintendo in the early 90’s. This would be an appealing decision that would make up for the dismal sales the Wii U brought which was intended to compete with the newly released and more promising consoles from competitors.
Choose A Course of Action.
In order to determine which alternative plan of action would be best suited a total of 30 points will be accumulated for each idea, with each criteria scaling from 1 – 10, with 1 being the worst and 10 being the best.
Develop An Action Plan.
Alternative 1 has a higher scoring according to the different weights. With the current market trends it would be wise for Nintendo to explore this avenue and create an interesting product, one that has not been done before, especially if Nintendo would like to appeal to gamers everywhere, no matter what age. It could develop the idea further by creating an appealing spin-off of an existing game or a new title:
Look at popular game titles such as Zelda or Super Mario
Explore Online compatibility, market shows that people and gamers enjoy being social and competitive, and being able to show off achievements
Choosing such an alternative sticks with the alignment of the company
Costs for such a project will be minimal when compared to console development costs
As for marketing strategies it could employ:
Marketing such a product would not require much, as the channels where gaming news are always followed by Nintendo fans expecting to hear news about their favourite video game franchises
Through the use of social platforms, the project itself would market itself as now this industry is more connected than before
Nintendo can mass market it to newer markets where buying consoles or games would be too expensive, now new gamers have a chance to experience Nintendo quality at a fraction of the cost
Research & Development
Nintendo already has a house of software engineers, all of which are skilled and talented enough to produce a product of the utmost quality
With already a lot of spending being funnelled into R&D at Nintendo, the ideas should be easy to come by
The mobile market is very attractive market segment, one that almost every other competitor has explored and it would be ignorant to not focus on targeting gamers in this avenue as well. This course of action can prove to be a very lucrative one, one that can help Nintendo focus on where it needs to focus and explore whether it has the right approach as it did before when producing innovative consoles and quality games.this will attract customers also.
1. Mintzberg, Henry, James Brian Quinn, Sumantra Ghoshal, and Joseph Lampel. The Strategy Process: Concepts, Contexts,cases. Fifth ed. London: Pearson, 2014. (Ch. 1-10,13,14,17, Case Study 22)
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