Running head: CASE ANALYSIS OF NINTENDO 1

MGMT 481 Strategic Management

Dr. Gertrude Hewapathirana

Nintendo Company Case Analysis

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CASE ANALYSIS OF NINTENDO

INTRODUCTION

Nintendo is one of the world’s leading video games console companies. The company was

established in 1889 in Japan as a playing cards company but has improved over time

specializing in video games. The company faces stiff competition in the video game console

industry from two other companies that also specialize in video game console, Sony and

Microsoft. This competition has kept all the three companies on toes with each company

trying to modify its console in the best way possible to win the largest market share of the

industry. Since early 1990s the market leadership has been alternating among the three

companies based on the release of new and updated consoles by the companies.

In the recent past, the video game console industry has been facing a threat from the entry of

mobile phone games which are providing gamers with an option. This has greatly affected the

industry. Although all the three companies, Nintendo, Sony and Microsoft have been affected,

Nintendo has been hit most recording years of losses and declined market share. Nintendo’s

troubles have been worsened by the growth of its competitors who have overtaken its market

share.

This case analysis seeks to investigate the video games console industry and the strategic

steps that Nintendo has made and is planning to make to regain its position in the highly

competitive market and also increasing its revenues to profitable margins again. The analysis

will focus on the internal and external factors that are a hindering the company’s success and

ways on how those challenges can be overcome to have the company back to its old golden

days of success.
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Analysis of the current Vision and Mission

Mission statement: providing customers with a world of fun which is both innovative and

entertaining with creative elements that have never been experienced. (Nintendo Corp. 2013)

Vision statement: expansion of the gaming audience, taking risks and encouraging

employees to make creative decisions to challenge the notion of what a video game is capable

of being (Nintendo Corp. 2013).

With the current (above) mission and vision statements for Nintendo, I do not see the need of

coming up with another option. The mission statement focuses on what the company does,

creating games, and goes beyond just games but games that are innovative and creative

creating a new experience for the players. This mission is perfect. The company has a vision

of expanding the gaming audience and using its employees to develop much better gaming

devices. This is the dream of every company in the video gaming industry.

SWOT Analysis

SWOT analysis is an assessment technique that is used to investigate the strengths,

weaknesses, opportunities and threats facing a project or a company.

a. Strengths

Nintendo is one of the largest and most popular video game console companies there is. The

fact that it has been a market leader at several times give it’s a motivation to reclaim its lost

glory. Nintendo has good marketing strategies that enabled its Wii console to withstand stiff

competition and outdo the sales of Microsoft’s Xbox 360 in the US in 2008 even with Xbox

being American. Nintendo has another strength in its innovative workforce that has been

behind the various releases of consoles that have taken the video game market by storm.
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b. Weakness

Nintendo has been outdone by its competitors because the company has not invested properly

in technology something that Microsoft and Sony have thus overtaking it. The company also

has poor strategies for attracting and maintaining gamers from shifting to competitor brands.

With the entry of mobile phone gaming into the gaming industry, Nintendo has not laid the

appropriate strategies to curb this threat which is affecting the console business.

c. Opportunities

The changing demographics in the consumer base of video game consoles with more

females joining the gamers is an opportunity for Nintendo as it opens a larger viable.

Another opportunity arises from the environmental awareness. Nintendo can use this

opportunity to exalt its name in the market.

d. Threats

The main threat to Nintendo is from its main competitors Sony and Microsoft who have

invested heavily in technology. Rapid developments and changes in technology offer

another threat in that a leading console can be outdone by another console from the

market leadership just by slight advancements in its performance. Nintendo therefore has

to keep its consoles running with the most recent technology at every time.

Another threat comes from mobile phone gaming which is providing an option to gamers

mainly because it is cheaper and easily portable compared to consoles. Online gaming is

also another threat especially with fast and improved broadband connections thus making

the use of consoles unnecessary.

EXTERNAL ENVIRONMENT ANALYSIS

a. Economics
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From the case on Nintendo’s disruptive strategy, the company was able to win a large market

share with its Wii video game console by taking advantages of the available economic

opportunities. Nintendo outsourced nearly all the production of Wii and DS. Having multiple

suppliers facilitated cheap supply. This reflected in the market as Wii console were the

cheapest among Sony’s PS3 and Microsoft’s X box 360.

Nintendo took the opportunity to develop its own games rather than depending on third

party developers. This played a great role in increasing the company’s revenues. Another

economic opportunity arose from in-game advertising which provided an alternative

income for the company’s revenues.

The economic status of the video game companies was threatened by the high cost of

developing the games. A lot of money had to be invested; it cost about US$12 million to

US$20 million to successfully develop one game.

b. Physical

Nintendo is a Japanese company that has spread wings across the whole world. The home

population gives the company a large market for its video gaming gadgets before exporting

them to the US and Europe which are its other market strongholds. However, the home

market is under stiff competition from fellow Japanese electronics company Sony.

c. Demographic

Human populations have been changing from time to time due to various factors; social,

political and geographical. This changes in demographics have also affected the video games

industry creating threats and opportunities at the same time.

d. Political/Legal
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Nintendo is registered locally in Japan and also internationally in all the countries it conducts

business. Nintendo follows all the rules pertaining to gaming in developing games which has

facilitated its entry to many countries of the world. This has helped expand Nintendo’s

market. In the US, for example, the senate mandated the Entertainment Software Ratings

Board with the responsibility to gauge the content of games (Ferguson, 2013).

e. Technological environment

The video game industry is wholly based on technology with technological advancements

playing the biggest role in the improvement of the games developed. Technological

advancements create room for improvements for existing gadgets. Seizing and applying new

technology is key in the highly competitive business. The success of Nintendo’s DS and Wii

consoles was based on better technology then the competitors’ consoles. The technological

environment creates an opportunity for improvement while on the other hand causing a

challenges due to rampant and unpredictable changes in technology.

f. Social-cultural environment

Globalization has resulted in homogenization of habits and lifestyle due to the interaction of

people from different cultural and social backgrounds. This has reduced the necessity for

customizing product for each and every target market. This has further opened up the market

for Nintendo although the company has been reluctant to release consoles and game software

compatible with all markets.

g. Global business environment

The global business environment has been empowered by technological advancements in

information and communication which has been the driving force behind globalization. The

global business environment has facilitated the entry of internal companies in many parts of
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the world. A person can place an order online and have a console shipped from oversees if it

is not available locally. This has empowered business.

Porter’s five forces model

a. Threat of New Entrants

The highly competitive video gaming industry a threat to all the companies in that industry.

Nintendo being the pioneer company in this industry has encounter stiff competition from

Sony and Microsoft companies which joined the industry later on. Each of the three

companies, Nintendo, Sony and Microsoft, all struggle to have the best console running with

the latest technology to win the largest market share.

b. Rivalry among Competing Firms

The longest rivalry in the industry has been between Nintendo and Sony. The rival kicked off

after disagreement arose when the two companies were working on a joint project in 1991.

The cooperation between the two companies ended and Sony decided to venture in the video

game industry.

Rivalry among the three companies, Nintendo, Sony and Microsoft has been tough with each

company considering itself the best. In 2008, Microsoft announced that the sales of Xbox 360

consoles had overtaken those of Nintendo’s Wii and Sony’s PS3 (Wakabayashi 2008) but the

figures released in June the same year proved others with Wii leading the market sales.

c. Threat of Substitutes

The development of mobile gaming is a major threats to the video game consoles industry.

Mobile phone devices are easily portable as opposed to consoles. They are also relatively
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cheaper despite being multifunctional. Online gaming platforms are another threat to this

industry.

d. Bargaining Power of Suppliers

To have a console successfully complete, Nintendo relies on hardware and software supplies

from other companies. There are many companies that supply similar services in hardware

and software but the companies that require theirs services are not that many. This denies

them the bargaining power as suppliers and therefore they have to maintain prices that are

good for their client companies to prevent them from seeking the services elsewhere.

e. Bargaining Power of Customers

Most of the consoles are sold through Nintendo’s online platform which limits one on one

interaction with the customer thus reducing the bargaining power of that customer. Large

retail companies such as Amazon, Walmart and Alibaba have a better bargaining power that

individual customers due to ability to reach many customers.

f. Complementary Products

Advancements in technology have come up with new ideas that complement existing

technologies to make them better. When Nintendo launched DS in 2004, the device was

complement by a Wi-Fi connection that made it unique from the previous consoles which had

wired playing pads/ joysticks. The use of complementary products is rapidly changing the

video game industry as companies seek for the ways to complement their console in order to

remain relevant in the market.

COMPETITOR ANALYSIS

Nintendo has two main competitors in the video game industry;

a. Microsoft
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Microsoft joint the videogame consoles industry in 2001 after realizing the potential

threat posed to their PC stronghold by video games. It marked its entry by launching their

first console named X box. Since then, Microsoft has been redesigning and improving its

console to keep up with the market competition from Sony and Nintendo.

Strengths

i. Microsoft has a strong brand name from its popular computer operating system

Windows.

ii. It has a big financial muscle than Nintendo and Sony

iii. Has a very large home market in the US

iv. It has been able to incorporate its games in its Windows operating system for

computers.

Weaknesses

i. Microsoft has most of its efforts focused on their Window OS somehow neglecting

the gaming section.

ii. Poor marketing strategies for its X box consoles

b. Sony

Sony has the oldest rival to Nintendo in the video games consoles industry. Sony marked

its entry to the industry in 1994 with the launch of its console, the first version of PS.

Sony has over the years been upgrading its gadgets in order to win and dominate the

highly competitive market.

Strengths

i. Financial resources backed up by its electronics wing of the company.

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ii. Skilled and able human capital

iii. Popular brand name

Weaknesses

i. High and uncompetitive market prices for their consoles

ii. Complicated and difficult to use consoles compared to Nintendo’s Wii.

Internal organization analysis

Internal analysis is aimed at investigating the factors within a company or an organization

that give or deny it an upper hand against its competitors in the same industry (Barney and

Hesterly, 2010). Competencies within an organization that give it advantages over

competitors are known as strengths while the limitations the organization faces are called

weakness (Dyson, 2004). Strengths are analyzed from the company’s side while weaknesses

are analyzed from the customer’s or client’s side.

Two main areas are investigated in the process of conducting a company’s internal analysis,

these are resources and competences.

Resources

Resources are classified into two groups; tangible and intangible resources.

a. TANGIBLE RESOURCES

i. Company buildings

ii. Machinery

iii. Electronic devices

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iv. Vehicles

b. INTANGIBLE RESOURCES

i. Technology

ii. Skilled human capital

iii. Reputation

iv. Brand

Capabilities

Capabilities refer to an organization’s or a company’s ability to deploy the available

resources to achieve its set goals (Helfat and Raubitschek, 2000). Capabilities are a product

of the integration of tangible and intangible resources. The capabilities of Nintendo lie in the

following areas;

i. Technology

ii. Human resource

iii. Procurement

iv. Firm infrastructure

Competencies
Competencies form the basis of an organization’s or company’s advantages against its

competitors in the same industry. Nintendo enjoys the following competencies;

a. Economies of scale

b. Unique selling prepositions

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c. Simplicity

d. Experience in the gaming industry

e. Ability to seize opportunities before the competitors realize of their existence

VALUE CHAIN ANALYSIS

Value chain analysis is a strategy where a company or an organization its support and primary

activities that add value to its services or products. These activities are then analyzed to help

in coming up with strategies to either increase differentiation or lower costs (Jurevicius,

2013). This strategy is used in analyzing the internal activities in a company determining

which of the services are more important and which ones require improvement to raise the

company’s competitive ability.

This model was introduced by Porter (1985), and focuses on five functional areas of an

organization or company.
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Source. www.strategicmanagementinsight.com

Primary activities
a. Technological development

Nintendo has all its activities based on technology. In short, technology runs Nintendo.

Developments in technology result in the development of new and better consoles. To keep

up in pace with its competitors in the video game console industry, Nintendo has to always

invest in new technology.

b. Sales and marketing

With Nintendo stiff competition from Sony and Microsoft, sales and marketing are a primary

activity in the company. Each of the three companies is always working on ways on how to
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improve its existing console to the best possible form. This necessitates Nintendo to always

market its new consoles to make it known to the target market. Nintendo has created

marketing branches of the company in the US and Europe.

c. Operations

Nintendo is a Japanese company where it has its manufacturing plant. This is where all the

consoles are assembled before being released to the market. Operations are key to the success

of this company because for it to survive in the highly competitive market, it has to

manufacture better consoles than her competitor.

Support activities
a. Human resource
The success of Nintendo can be attributed to its employees, from the highest ranking down to

the bottom one. The employees are always motivated to work which positively impacts on

their productivity.

b. Infrastructure

Infrastructure is inclusive of all the other departments that ensure smooth running of the

company. The buildings housing the company, machinery used in manufacturing the

consoles, and all the facilities used to facilitate the arrival of a console to the customer all fall

under infrastructure. Nintendo strong infrastructural foundation have enabled it to a main

player in the video game industry.

Summary of SWOT analysis.

Opportunities for the organization Threats for the organization
Changing demographics Rapid changes in technology
Technological advancements Mobile gaming
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Environmental awareness Online games

Increased demand for educational and
medical related content
Copyrights of designs

Weak areas in the organization

Strengths within the organization Poor investment in technology
Brand name Lack of a proper strategy to deal with rising
Skilled human capital threats
Financial muscle
Efficient manufacturing

PROPOSED STRATEGIES

a. Global business strategy

Global level strategies refers to the process and efforts of expanding services and products to

the international globalized markets (Study.com). Nintendo is already a popular brand in parts

of the US and Europe. To reclaim its glory in the global market, Nintendo should ensure that

its gadgets are running on the latest technology because many gamers replace their consoles

with newer versions for better gaming. The company should also focus on the Africa which is

a large and viable market for its consoles.

The company should also have sales representatives in all countries who sell and services the

consoles. This maybe expensive but it put Nintendo up with Sony who have representatives

selling and servicing PlayStation consoles together with other Sony electronics.

b. Corporate level strategy

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Corporate level strategy is the highest level of decision-making in an organizational setup.

The organizations top leadership is mandated with the role of making decisions maters or

resources acquisition and allocation based on the organization’s strategic plan. Poor

leadership of a company results in poor decisions which in turn affect the performance of the

company. The development of Nintendo’s DS and Wii consoles was a corporate level

decision lead by the CEO Mr. Iwata. The decision to come up with an easy to use, quiet, and

little energy draining console was behind the development of Wii console which took over

the market by storm after its launch in 2007.

c. Business level strategy

Business level strategy is mainly applied in companies or organizations with more than one

business ventures. Under this strategy, the various business ventures are managed

independently to ensure that they achieve their set goals from the resources allocated to them.

In the case of Nintendo, there should be independent business management for the various

consoles and gaming devices. Each type of console should be managed as an independent

business. This will make it easy to realize which one is making good sales and which is not.

The purpose of any business is to make sales and increase profits which raises its

competitiveness in the market.

d. Functional level strategies

Functional level strategy is based on a plan for setting goals and allocating resources for

specific functions within an organizational or company setup. It also focuses on the

coordination between different operations towards the achievement of the set goals (Hitesh

2017).
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For any company to flourish in its business, there must be proper coordination between all the

departments. This ensures smooth running through the entire production period and even in

sales and marketing. Nintendo should ensure that all is departments are coordinating with

each other and producing the expected results in line with the set targets because the

departmental performance reflect in the company’s overall performance.

After production, the marketing level carries the responsibility of making the products known

to the target markets. This is important in increasing sales and market competitiveness.

Strategy Implementation and Control

A balanced scorecard is a strategic management tool used to gauge performances but

managers and keep reports of activities by employees under their jurisdiction and the

outcomes of those actions (Kaplan and Norton 1996). The use of a balanced scorecard relates

what appear as minor activities within a company or organization with the organization’s

goals, mission and vision.

I will use a balanced scorecard in the following ways;

a. Communicating to the staff under my jurisdiction what we are trying to achieve as a

department and as an overall company.

b. I will ensure that all the activities carried each and every day are in line with the

company’s strategic plan, mission and vision.

c. I will monitor and measure the progress of the activities in the department under me

towards the achievement of the company’s strategic goals.

Conclusion
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After falling behind its competitors in the sale of consoles in recent years, Nintendo needs to

plan and reorganize itself on how to catch up with now the market leader Sony. After the

launch of Wii console that performed pretty well in the market sales, Nintendo has not been

able to launch another market winner which has in turn favored the success of Sony’s PS4.

In strategizing for a comeback, Nintendo will have to produce high quality consoles and

games better or like those by the competitors. It has also to take its marketing strategies to

higher levels to make its new consoles and games known to the people of the target markets.

Nintendo should also focus on the upcoming market in Africa and other developing countries

to boost the sales.

Nintendo should also focus on being unique. The success of Wii was based on its unique

features compared to Microsoft’s X box 360 and Sony’s PS3. It should find other

complementary functionalities that can be incorporated in the consoles to make it different

from the competitors’ consoles. If Nintendo focus on these areas, it can be assured of

regaining its market share gradually.

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Appendices and charts

Industry analysis - Porters Five Forces Model
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References
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Dyson, R. G. (2004). Strategic development and SWOT analysis at the University of

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Helfat, C. E., & Raubitschek, R. S. (2000). Product sequencing: co-evolution of knowledge,

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Jurevicius, O. (2013). Strategic Management Insight. Retrieved from

https://www.strategicmanagementinsight.com/tools/value-chain-analysis.html on 24th Apr.

2018

Kaplan, R. S., & Norton, D. P. (1996). Using the balanced scorecard as a strategic

management system.

Porter, M. E., & Millar, V. E. (1985). How information gives you competitive advantage.

Wakabayashi D. (2008). Xbox sales surpass Wii, PS3. Reuters. Retrieved from

https://www.reuters.com/news/technology, on 25 June 2008