Strategic Management of Change

BUMGT5926
Scenario Planning

Syafiqa Anneisa Abdullah 30089404

Navaneeswary Ganesamoorthy 30089407
Rei Lynn Lim 30089392
Presentation Overview (1/2)
Introduction
Company Profile
Microenvironmental Analysis
PESTLE Analysis
SWOT Analysis
Porters 5 Forces Analysis
The Industry Life Cycle
Nintendos Key Success Factors
Presentation Overview (1/2)
Analysis of Key Uncertainties
Analysis of Future Trends
The Scenarios & Implications
Conclusion
References
A Brief History of Video Games
Atari to Wii
 Introduction (1/2)
Video games have been around since
the 1940s.
Over the decades, game machines
continuously evolved to become
powerful machines capable of stunning
visuals and graphics.
In the mid 2000 to 2007, social media,
smartphone and tablet technology
entered the gaming scene.
Casual games become the norm
attracting previously non-gamers into
the market.
 Introduction (cont 2/2)
As the dominant force of the mobile and gaming market, in the
next coming 5 years, where does Nintendo see itself competing
with threats from smartphones and other gaming platforms
taking up its share of the market?

Scenario planning : To make strategic decisions that will be a

sound foundation for all plausible and possible future scenarios.
 Company Profile (1/3)
Founded in 1889 in Kyoto, Japan by
Fusajiro Yamauchi.
Manufacturer of Hanafuda
flower cards
Expanded in 1960s by Hiroshi
Yamauchi.
Following the crash of the cards
business, Nintendo entered the toy
industry upon discovering Gunpei
Yokoi, a mechanical engineer.
 Company Profile (2/3)
1970: Yokoi teamed up with Shigeru Miyamoto to
create games The Father of Modern Video Gaming,
creator of iconic franchises including Mario, Zelda and
Pokemon.
The rest is history.
Evolution of Nintendo Gaming
Consoles
 Industry Overview (1/2)
The video game industry is dominated by 3 gaming
giants
- Microsoft, Sony and Nintendo
Currently at the 8th generation of console production
 Industry Overview (2/2)
U.S. computer and video game software sales grew six
percent in 2007 to $9.5 billion more than tripling industry
software sales since 1996.
Halo 3, the best-selling title of 2007, took in more revenue in
its first day of sales than the biggest opening weekend ever
for a movie ("Spider-Man 3") and the final "Harry Potter"
book's first day sales;
On average, nine games were sold every second of every day
of 2007
The average game player is 35 years old and has been
playing games for 13 years.
 Industry Analysis
The Microenvironment C3SPM
-Company
-Customers
-Competitors
-Suppliers
-Middlemen (Distributors)

The Macroenvironment : PESTLE Analysis

 The Microenviroment (1/2)
Suppliers Nintendos suppliers comprised of both hardware manufactuers
and software developers.
Hardware companies supply the various parts, components and
provide the technology to manufacture Nintendos gaming devices.

Distributors Online and offline distributors.

The retailers: Includes specialised software boutiques, department
stores, electronic stores and hypermarkets.

Customers Diversified segment of consumers:

Students, employees, military troops; seniors and parents.
 The Microenviroment (2/2)
The main competitors in this industry are Sony, Nintendo and Microsoft,
Competitors
Sony has about 70% share in the market and the latter commands the
rest of the market.
Nintendo faces competition from Apple Inc while in the casual gaming
market, Facebook is a likely upcoming competitor.
 The Macroenvironment
PESTLE Analysis (1/2)
Political Factor Target of political activist concerning controversy about violence in
gamers.
Entertainment Software Rating Board (ESRB) that assigns ratings for
gaming content (ERSB, 2012)
Economic Factor Purchasing behaviour is influenced consumer purchasing power.
Console development cycle follows roughly the general computer
industry cycle
Consoles are not upgradeable, consumer has to buy complete new
system.
Social Factor Video games are played predominantly by young males.
The current social trend on the rise are non gamers who have no
prior experience or interest in video games.
The number of female gamers are also on the rise. Digital downloads
and in-game purchasing is gradually becoming the norm.
 The Macroenvironment
PESTLE Analysis (2/2)
Technological Factor Technology has improved processor speed, visuals and memory capacity for
gaming consoles.
Disruptive innovation in the form of smartphones and tablets have
significantly altered consumer lifestyles.

Legal Factors The legal issues faced by the industry are trademarks, copyrights, licensing,
online ownership and demands of intellectual property.

Environmental Factors The video game industry uses a lot of plastic and metal resources for its
hardware.
In the current era majority people are environmentally aware.
Manufacturing game consoles creates non-biodegradable waste which is the
byproduct of this industry.
 SWOT Analysis (1/2)

STRENGTH
Nintendo has Shigeru Miyamoto, the creator
of Nintendos most successful game
franchises and intellectual property.
Low upfront costs
The Nintendo brand name is a world cultural
icon synonymous with video games.
WEAKNESSES
Console power weaknesses
Limited selection of software for hardcore
gamers.
Brand name Long perceived by the gaming
community as a kids toy or for casual
gamers.

Nintendo has past success with family Shigeru Miyamoto may eventually retire
gaming model from the gaming business.

Nintendo has had extensive experience in

the video game industry.

Uniqueness of hardware motion detection

when it comes to the Nintendo Wii
 SWOT Analysis (2/2)
OPPORTUNITIES THREATS
The first to introduce motion technology in Sony and Microsoft are capable of mimicking and
video games. improvising on Nintendos technology.

The availability of technology Disruptive innovation caused by Apples iPhone and

iPad successful ventures in the mobile and smartphone
Variety of multiple gaming platforms.
market.
Design games for novice and casual gamers
Third party software developers choose to develop
including seniors and adults
games for smartphones and Facebook due to lower
cost of production and higher potential returns.

Social media gaming on Facebook is gaining popularity

amongst casual gamers.

Loss of potential customer due to limited sophisticated

games selection for the hardcore gamers.

Slow to adopt an online model for downloadable

content and microtransactions on a wide scale for
games on its systems.
 Porters 5 Forces Analysis
Bargaining
Power of
suppliers
HIGH

COMPETITIVE
RIVALRY
Threat of
WITHIN THE
INDUSTRY Substitute Products
Threat of New Entrants
(HIGH) HIGH
MEDIUM

Bargaining
Power of Buyers
HIGH
 Video Games Industry (1985 2012)

Image source: http://13plymouth.com/wp-content/uploads/2010/09/lifecycle.bmp

Nintendos Key Success Factors (1/2)

Key Success Factors

Definition: The combination of factors required
to accomplish organisational business goals
(Thebusinessdictionary, 2011)
Nintendos Key Success Factors (2/2)
Dominance over the casual gamers and portable
gaming market
-In 2001 2006, Nintendo have a big share over the casual
and mobile gamers market with the Nintendo Wii and
Nintendo DS.

Pricing advantage
-Nintendos consoles are more affordable than its
competitors.

Strong brand name.

-Nintendo is well known for its games including Super
Mario, Pokemon and Zelda.
 Analysis of Key Uncertainties
Rapid advancement of tablet and smartphone
technology
- Tablets and smartphone becoming more powerful

Uncertainty to the market size and potential

returns

Other alternative forms of digital entertainment.

-Facebook, digital platforms, Google +, internet TV, Apple TV
 Analysis of Future Trends (1/5)
Increase in social networking, mobile and
digital markets
- Social networking platforms become more
popular.
-Availability of cheap or free games for
download on digital platforms, ie
iTunes and Facebook.
-Smartphones and other mobile devices
Will penetrate into Nintendos
market share
 Analysis of Future Trends (2/5)
Tablets as the next generation of console games
-The gaming industry will drive the evolution of technology for
tablets.
-Apple is already using games to promote and sell its iPads
-Developers viewing tablets as the ideal foundation for
developing games
Analysis of Future Trends (3/5)
 Analysis of Future Trends (4/5)
Shift into games-as-a-service
model
-Games are evolving to become a service.
-More social games and virtual
worlds are created to fill in market space.
-Subscription base models,in-game
Purchases and premium membership
Memberships, virtual goods and
microtransactions will become the revenue
streams for such games.
In-game purchases (3/5)
 Analysis of Future Trends (4/5)
Slowed growth of traditional game
retailing and publishing
-Console game manufacturers will
continue to decline in sales in both
hardware and software
-Traditional retail game stores will
gradually exit the market.
-Gaming giants will produce their final
console (8th generation) before going
completely digital.
 Analysis of Future Trends (5/5)
Emergence of digital content and
new publishing models
-Third-party software developers such
as Ubisoft and Electronic Arts will
concentrate on developing games for
the mass market and serious market.
-Business models for gaming will
change.
Scenario Themes: Pokemon Evolution
Scenario Themes and Implications (1/7)
Scenario Theme 1: Pokemon Evolution
- The market for digital contents and games grow rapidly
- Increasing trend in casual gaming
- Smartphone and tablets become a popular
gaming platform
-Third party game developers (Ubisoft and
Electronic Arts choose to develop games for
Digital platforms, i.e. Apple iTunes)
- Perception of console games as being too costly
to develop for
Scenario Themes and Implications (2/7)
Strategic Implications of scenario
-Nintendo need to adapt and change its existing model to fit the
trends.
-Include a digital platform for casual gamers to access their vast
library of affordable or free games.
-Redesign existing popular franchises (i.e. Mario) to
suit the casual gamers market
-Create new games that appeal to the casual gamers
-Design a console that attracts both casual gamers
and existing gamers.
Scenario Themes 2: Link
Scenario Themes and Implications (3/7)

Scenario Theme 2: Link

-Trend for casual gamers growing but not as fast.
- Existing digital platforms (i.e. iTunes) are flooded
with low-quality, no brainer games.
- Existing games on smartphones and social media
lack the sophistication of console games.
- Many third-party game developers are
-Still uncertain of the new revenue model.
Scenario Themes and Implications (4/7)
Strategic Implication of Scenario
- Nintendo to protect its reputation for
producing quality games.
- Leverage on its brand assets by making
their games available across various
platforms including social media,
iPhone, iPad and smartphones.
- Spread brand awareness of its games to
gradually win casual gamers over as
Nintendo fans.
Nintendos Popular Game Franchises (5/7)
 Scenario Themes and
Implications(6/7)
Scenario Theme 3: Bob-omb
- Video game console industry continues to decline and
traditional retail and online game shops dies off.
- Tablet technology catches up to the performance of game
consoles.
- Popularity of casual games and gamers increase .
- The revenue generated attracts well-known third party game
developers.
- More quality games are produced for the
smartphone, social media and other digital platforms
 Scenario Themes and
Implications(7/7)
Implications of Scenario
- In the worst case scenario, if Nintendo does
not keep up with the trends, competing social
and mobile devices will take over the casual
gamers market.
-Third party game developers will not want to
develop games for Nintendo due to it being too
costly.
-Nintendo will eventually pull out of the
hardware market to cut its losses
-Will focus on developing games for existing
Platforms instead.
 Conclusion
The console gaming industry matures and is entering the
decline phase.
Console manfacturers are facing stiff competition from tablet,
smartphone and social media technology.
Casual and mobile gamers are on the rise.
In order to compete and sustain in the long-term, Nintendo
must evolve according to the technology and social trends.
Its strength lies in its popular game franchises.
To compete effectively, Nintendo needs to spread its brand
awareness through its franchises and create games that appeal
the casual gamers market.
Q and A
Thank You Very Much
 References
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