This report examines how Nintendo has transformed the video game industry by implementing a
disruptive strategy. Using Pestle analysis factors exhibited in the industry, the report highlights
how the firm paired its assessment of external industry factors (patterns, threats, and
opportunities) with its strategic goals to implement a new-market disruption strategy, resulting in
a new value network.
PESTLE Analysis
Factor
Economic
Emerging Trends: Prior to Wii’s Launch
Product purchase is dependent on consumer
purchasing power. Potential to appeal to a new
market if the cost of consoles is decreased.
Social
Increasing interest from female gamers and
non-gamers.
Technological Limited innovations in console technology:
centered on sustaining technology strategy
targeting existing gamers.
Legal
Copyrights, trademarks, digital ownership of
intellectual property.
Nintendo Strategy
Reduce the cost of production by
outsourcing and partnering with
multiple suppliers, thus reducing
the sale price of the console.
Targeted consumers of all ages,
gender, and gaming experience
Innovative Design: Make the
games easier to play. Build social
communities via wireless
networks. Go beyond gaming;
integrate non-gaming applications
and make an all-in-one tool for
any internet use.
Extend the capabilities of the Wii
by granting access to indie game
developers. This will further
expand the functionality of the
console, i.e., its use as an exercise
tool. Creating new value networks.
Thus, noting its competitor’s adhesion to technological evolution through a sustaining –
technology strategy; focusing on superior technology tailored to existing gamers. Nintendo
recognized that market trends called for a new strategy targeted at non-gamers (nonconsumption). Its ability to adopt innovative manufacturing and sales strategies; simpler design,
easy to use, and cheaper, enabled the firm to reverse its declining position against its
competitors.
However, as Sony's failures demonstrate, simply innovating does not guarantee a competitive
advantage in this constantly evolving market. Nintendo must consistently rely on market factors,
and consumer trends to maintain its lead in innovation. A fact Nintendo has neglected following
the success of the Wii as competition from the smartphone market has disrupted its hold on the
market; evinced by the failure of the Nintendo Wii U due to consumers' increasing preference for
mobile games on their smartphones. To reverse its current position, Nintendo must learn to tailor
its products to these new market realities.