Running Head: NINTENDO 1

Transcription

1 Running Head: NINTENDO 1 Nintendo: Gaming Strategy Analyzed Sara L. Reed LDR 660: Case Study Professor Kara Werner February 24, 2013

2 NINTENDO 2 Background and Overview of Nintendo As one of the big three in the gaming industry, Nintendo has had a long history. They have also provided and delivered games and icons of legend, such as Super Mario Brothers, Zelda and Pokémon. By analyzing the history of Nintendo and the competitors within the current environment, consumers will be able to see that the era of video game consoles could be reaching a stalemate. In 1889 Nintendo began as a playing card manufacturing in Kyoto, Japan by Fusajiro Yamauchi. In 1907 the company began manufacturing Western playing cards. The company took the name Nintendo Playing Card Company in During the years from 1970 to 1985 Nintendo took a different turn and began focusing on the manufacturing of electronic toys and games. In 1977, Atari introduced its first cartridge-based home video system that became known as the Atari Nintendo did not release their video game console to the U.S. until 1985, and it was named the Nintendo Entertainment System (NES). To compete with the NES, Atari released the Atari 7800 in 1986, and Sega joined the gaming world with the creation and release of the Sega Master System (SMS) brought new releases in the video game industry again. This time, Nintendo focused on the concept of mobile gaming. They introduce the handheld system, the Game Boy, which allows consumers to play video games on handheld devices in black and white color. Two years later, in 1991, Nintendo releases a new gaming console, the Super Nintendo Entertainment System (Super NES). Nintendo wanted to do more for the consumer though. The vision was of the gaming system utilizing the CD-ROM experience. Nintendo partnered with Sony and worked at

3 NINTENDO 3 developing the concept, but the companies had a parting of ways after a lack of shared vision. Sony released the PlayStation, the vision combining Nintendo and Sony s concept of utilizing the CD-ROM, selling it for $299 per unit. Sega, also still in the gaming competition at this time, released the Sega Saturn. In retaliation, two years later, Nintendo launched the Nintendo 64 (N64), but still did not utilize the CD-ROM technology. PlayStation was considered by most in 1997 to be the most popular game console in the gaming industry. In 2000 Sony released the PlayStation2, which was better and more efficient than the original PlayStation. The popularity of the gaming console in the U.S. is off the charts, and the game console sells out in the early morning. Microsoft takes a competitive reaction and joins the gaming world in 2001 with the launch of the Xbox. Nintendo s reaction is to release the GameCube, finally capitalizing on the CD-ROM technology. The competition gets too stiff for Sega, and they announce the same year that they will no longer manufacture hardware. In 2004, Nintendo releases the Nintendo DS, a new innovation in technology. This handheld device takes gaming to a new level. It utilizes touch screen technology on one screen, and allows viewing on the second screen. To compete with Nintendo, Sony releases their portable gaming system, the PSP. The PSP has a large, high resolution display. The device is released in 2005, the same year that Microsoft releases the Xbox 360. The Xbox 360 utilized the technology and concepts of the original Xbox, but Sony and Nintendo retaliate to Microsoft s launch of the Xbox by releasing their own new gaming systems in Sony launched the PlayStation 3 (PS3), with a sophisticated design. It was also expensive. Nintendo released the Wii, a new innovative gaming console. This new innovation took the concept of gaming to the next level and worked its way into a new

4 NINTENDO 4 division of customers, non-gamers. The Wii system uses a wand as its controller and the motion sensor bar recognizes the motions and tracks the movements the gamer makes. Gamers can now swing the wand like a golf club or like they are bowling. The Wii was a success, and consumers found the Wii gaming consoles hard to find even though they had just released. To follow up the success of the Wii, Nintendo launched the Wii Fit, which came with a balance board, enabling consumers the ability to work on their balance, as well as strength their core with yoga and strength training. Once again Nintendo used innovation to reach a new clientele of non-gamers, those that were into fitness. Consumers no longer had to go to the gym to use the treadmill to exercise. They were able to do a free run, super hula hoop or step aerobics to get their cardiovascular and exercise in. Nintendo made a firm mark into the casual gaming industry and focused on bringing in new consumers. Nintendo has always been committed to its customers by providing high-quality entertainment products. In Nintendo s Mission Statement, a sentence that stands out, we are strongly committed to producing and marketing the best products and support services available ( 2013), and through analysis, it is evident that Nintendo has been committed to producing and marketing the best quality products and services that are available to the consumer. The launch of the Wii in 2006 was the mark of a new era in innovation of the gaming console. It boosted sales and Nintendo almost tripled sales figures as a result. Some of Nintendo s current products on the markets are the DS and various games, the 3DS and assorted games, Wii and various compatible games, and the newest addition in 2012, the Wii U and the various games. The Pokémon trading cards are also registered Nintendo products. Situation Analysis

5 NINTENDO 5 General Environment Nintendo s most recent strategy was with the Wii gaming console. Nintendo wanted to reach into the demographics that had been neglected in the past. Nintendo had the goal to reach out to the category of gamers that had long been neglected in the past. Non-gamers of all ages and genders was the new vision of Nintendo, and many of the games they released were rated E for everyone (ESRB 2013). However Nintendo s focus on making video games accessible to everyone could be eliminating a core group of consumers to the gaming world, and that would the serious and hardcore gamers. Nintendo currently has a debt free status, but if the current trend in game consoles continues to decline, then Nintendo could see an economic threat. They have a global presence, with the main locations being Japan and the United States. The global presence allows for Nintendo to develop in many different markets. As Nintendo wants to remain innovative and utilize technology in design, it is imperative they stay current with the latest technology innovations and trends. Industry Analysis It is unlikely that Nintendo, Sony or Microsoft have threats of new entrants in the video console market, so the threat is medium. It is expensive to develop, produce and market video game consoles (Snow, 2012). Nintendo has refined the process and been able to market their product at a visibly reduced price than the Xbox 360 or the PS3. Buyers have a significant amount of hold in the video game industry. Nintendo s main source of revenues is in the sales of game consoles and their games. With Microsoft and Sony in the markets, buyers have options. If Nintendo cannot offer a gaming console with games to meet the needs of the consumers, then consumers will purchase a different product that will meet their

6 NINTENDO 6 gaming needs. Rivalry in the video game console is competitive and intense as they continue to climb the ladder to the ranking of the best overall gaming unit. Competitive Analysis The actions of Microsoft and Sony determine Nintendo s reactions. Microsoft and Sony were striving to obtain the faster, best gaming console with the most amount of storage. Nintendo choose to market their gaming products to non-gamers, which brought a new category of casual gaming to the gamer world. They created the innovative gaming console, the Wii. Microsoft retaliated by releasing the Xbox 360 Kinect, where game play was similar to the Wii, but controllers were not used to detect the motion. Sony worked at refining the PlayStation 2 and released the PlayStation 3, claiming it was bigger, better and faster than the other gaming console systems. However the price of the PS3 when it was first launched was high priced and not well received by gaming consumers. Internal Analysis Nintendo has currently focused on creating consoles and games geared towards the casual gamer, with a sleek, easy-to-use design. Nintendo, currently managed by Satoru Iwata, spends much of their resources on research and development team, the marketing team, the process of manufacturing and the company s management team. Iwata has a knack for being able to predict the trends in the video console industry. It is his vision, tied with the resources and innovation of the research and development team, and manufacturing and production team that holds some of the company s core competencies. The core competencies of being valuable, rare and temporarily non-substitutable allow Nintendo to stand apart from the rest of the gaming world, and helped to create the brand loyalty.

7 NINTENDO 7 SWOT Analysis Nintendo has key strengths to make competitors jealous. One of the key strengths is that they have a debt-free status. This gives them a competitive advantage because they are able to invest more in research and development. It also allows more financial flexibility for Nintendo. Iwata has shown that Nintendo can make sound management decisions. A weakness of Nintendo is through their dependency on outside manufacturers. This was apparent in late 2006 when Nintendo launched the Wii and it sold out. The product was hard to find in stores, because the manufacturers refused to speed up the production and manufacturing of the gaming console to meet the demands of the consumer. Nintendo s fun for everyone slogan excluded those that were serious gamers, who craved more of a challenge when it came to their gaming systems. The serious gamers choose gaming consoles from Microsoft and Sony to fit their needs. Nintendo has an opportunity for growth in the software game market. Nintendo can also tap into the rapid growth of the gaming console market in India. This market creates new opportunities for Nintendo to expand and grow. Nintendo needs to look at the popularity of online gaming and social media gaming. This market offers huge potential, and currently Apple and Google have a foot in this industry. There are threats that Nintendo needs to account for. Sony has an increasing market share, and Nintendo needs to address this before Sony is uncatchable. The gaming consoles also have a short life cycle, and consumers are unable to perform system upgrades to the consoles. Instead, they have to purchase the new and updated gaming consoles offered. The smart phone and tablet competition in the casual gaming market could be Nintendo s biggest threat, as many are going to the casual gaming while in the doctor office.

8 NINTENDO 8 The Future of Nintendo In order for Nintendo to keep its hand in the gaming market, they need to capitalize on the new upcoming trend for gaming via the smartphones, ipads and tablets being offered to consumers. Many game programmers are able to create simple and easy to afford game applications through mediums such as Apple s itunes and the Android Market of Google Play, the two largest application software download sites. These gaming applications such as Zynga s Farmville, allows for consumers to make in-game purchases to enhance their game play. Nintendo needs to also consider how to design a medium that allows most gameplay to be a digital experience. They could do this through utilizing the current game consoles available to consumers, as well as the Wii ware, miiverse and other online Wii downloading software platforms. Nintendo needs a gaming console that appeals to both the casual and serious gamers and has the games to go with the console at an affordable and economic pricing.

9 NINTENDO 9 References A history of video game consoles. (2012). TIME: Business. Retrieved from ESRB Ratings Guide. (2013). Rating categories, content descriptors, and interactive elements from ESRB. Retrieved from Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Competitiveness and globalization: Concepts and cases (9th ed.). Mason (OH): South-Western Cengage Learning. Kelly, K. (2011, January 20). Video game inflation: The price of a console - part one. G4tv.com. Retrieved from Nintendo. (2013). Nintendo of America s corporate mission and philosophy. Retrieved from Nintendo. (2013). Company history. Retrieved from Snow, B. (2012, November 09). Why console gaming is dying. CNN. Retrieved from Spencer. (2009, November 13). Who are Nintendo s competitors? Siliconera. Retrieved from