Running Head: NINTENDO
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Nintendo:
Gaming Strategy Analyzed
Sara L. Reed
LDR 660: Case Study
Professor Kara Werner
February 24, 2013
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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 1951. 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 2600. 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).
1989 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
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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 2006. 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
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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”
(www.nintendo.com, 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
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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
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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.
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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.
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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.
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References
A history of video game consoles. (2012). TIME: Business. Retrieved from
http://www.time.com/time/interactive/0,31813,2029221,00.html.
ESRB Ratings Guide. (2013). Rating categories, content descriptors, and interactive elements
from ESRB. Retrieved from http://www.esrb.org/ratings/ratings_guide.jsp
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 http://www.g4tv.com/thefeed/blog/post/706637/video-game-inflation-theprice-of-a-console-part-one/
Nintendo. (2013). Nintendo of America’s corporate mission and philosophy. Retrieved from
http://www.nintendo.com/corp/mission.jsp
Nintendo. (2013). Company history. Retrieved from http://www.nintendo.com/corp/history.jsp
Snow, B. (2012, November 09). Why console gaming is dying. CNN. Retrieved from
http://www.cnn.com/2012/11/09/tech/gaming-gadgets/console-gaming-dead
Spencer. (2009, November 13). Who are Nintendo’s competitors? Siliconera. Retrieved from
http://www.siliconera.com/2009/11/13/who-are-nintendos-competitors