Nintendo’s Strategy in 2009: Battle with Competitors

Subject: Company Analysis
Pages: 14
Words: 3943
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Study level: PhD

Introduction

Nintendo Co., Ltd. is a Japanese company specializing in the multinational production of electronics. The company is located in Kyoto, in Japan, and was founded on the 23rd of September 1889, by Yamauchi Fusajiro – for the production of hanafuda cards, which are playing cards –used for playing a number of games. The specialty was the production of flower cards, which are used at playing the games classed by the same name Canada.

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By the year 1963, the enterprise had moved into the delivery of other services and businesses, including the hotel and the cab business. The company later moved into the video game industry, after which it grew into the most authoritative company within the game industry, and the third most flourishing enterprise with a market value of USD 85 Billion. The company also expanded its operations, creating Nintendo of America, which is a major shareholder of the “Seattle Mariners Major League Baseball team.

By October 2010, the company had traded more than 3.4 billion software applications and 565 million hardware units. The company has a shareholding of 507,027 shares, which are held by 18 institutional holders, these including NorthRoad Capital management LLC, Aerio Group, LLC, and William Harris Investors Inc, among others. The headquarters of the company is located in Kyoto, Japan – but the companies operations can be traced as far as America at Nintendo of America, and Europe, at Nintendo Europe in Germany. The company deals in-game applications, these including Game boy Line, NES, SNES, and virtual boy among others.

The Geographic of the company is not limited to any location, as its products are traded across the globe. The company’s size is limited to its operating income of USD 2.1132 billion in 2011 and was able to raise revenues of USD 12.358 billion, for the same year. Some of the key executives at the company include Satoru Iwata, who is the president, and Tatsumi Kimishima, who is the chairperson of the establishment.

The organizational structure of Nintendo Co., Ltd. constitutes of the Company’s president, Mr. Saworu Iwata, Yoshiro Mori, Executive managing director, in charge of Corporate supervision and analysis; Shinji Hatano, Executive Managing Director, in charge of the licensing; Masaharu Matsumoto managing director; and Reggie Fils-Aime, who is the president and CEO of Nintendo of America (Kent, 2001; Profile, 2012).

The following is the mission statement of Nintendo Co. Ltd:

At Nintendo, we are proud to be working for the leading company in our industry. We are strongly committed to producing and marketing the best products and support services available. We believe it is essential not only to provide products of the highest quality but to treat every customer with attention, consideration, and respect. By listening closely to our customers, we constantly improve our products and services (Profile, 2012).

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The vision statement of Nintendo Co. Ltd is centered on maintaining its status as the best company within the industry, treating the company’s clients with respect and consideration as well, as well as offering innovative products. The values of the company include the production and the delivery of the best products, offering services in a respectful and considerate manner to every customer, these including – offering what the customers need and offering invention and innovative ideas at all times.

The major goals of the company include maintaining the status of a well-recognized global brand, which can be identified as a company that delivers hardware products that enable the creation of unique gaming platforms that are usable by every customer. The company, also, seeks to maintain its ability in maintaining a diverse fan base, which fully identifies the company as an enterprise that delivers to all its customers. The company, also, holds a chief goal of updating its platforms and systems – by using up-to-date technology, especially, with the fast-changing demands of gaming customers.

For instance, there is a move from heavy gaming to the need for brief gaming – when the users can, and the impacts of new technologies, including the internet and others. As a result, the company has shifted from traditional approaches to take-in a revolutionary approach, which meets the demands of the market and technological dynamics. The company, also, intends to maintain its powerful software development teams, which have helped maintain its status as an innovator in the gaming industry. The company, therefore, holds the long-term goal of maintaining an unparalleled resource and talent base, which are the center, in its quest for the provision of innovative entertainment (Sloan, 2011).

The review and research of the video gaming industry – intended at shedding more light on the trends and the ways in which the business strategies of Nintendo Co. Ltd – in the regard of the trends taken, the choices made and the future plans to be adopted, will be based on a number of areas of consideration. These include the physical, mobile, political, digital, economic, demographic, technological, and socio-cultural realms – as these greatly shape the demand and the changes to be made, towards meeting market demand dynamics.

These will feature sales data trends, insights on video gaming trends, and industry analysis of the entire industry – which are based on consumer panel market trends research and point of sale research. The focus of this study is based on the fact that leading gaming industry players use the data in this category to uncover emergent consumer needs and behaviors – as well as help explore PC game trends and video gaming consumption (McLynn, 2012).

Economic environs and considerations

From an economic perspective, an account by McLynn (2012) following information from the NPD showed that 85% of the consumers of gaming products and services argue that the price of these products must be right if only they purchase them. As a result, deciding the accurate price has become an increasing issue for retailers and companies alike, as this has greatly influenced the extent to which a product will be purchased.

The major variants that the markets – the potential customers put into consideration before making the purchases of gaming products include special deals availability; price trumps marketing, convenience, and customer services. This information was delivered by the NPD group, which is a leading marketing research institution and an economy tracker, specializing in the monitoring of consumer spending sentiments, with reference to spending and economic variances.

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By income, 87% of those falling under the household income level of USD 25 to 50,000, price played a critical role, in deciding whether to spend on the purchase of products. Among other income classes, 85% among those between USD 50,000 and 100,000; 82% among those of the USD 100,000 and above bracket – cited price as an important consideration when making purchases. With reference to age, 79% of those between 18 to 34, 86% of those between 35-44, 88% of those between 45- 54, 89% of those between 55 to 64, and 86% of those of 65 years or older cited price as a highly significant variable – when deciding whether to make purchases or not.

Market dynamics studies, further, indicate that shoppers are becoming savvier when making choices on spending, mainly because they can make a comparison of prices over the internet at their homes, or while at the stores – towards deciding whether to purchase certain commodities or not. Consumers are moving into an age of calculated spending, where prices are serving as a principal indicator in purchase decisions. From the same study by the NPD, the sophistication of consumers, varying shopping habits, and the soft nature of the U.S economy are further, serving to make price setting a difficult task, and strategic consideration for both manufacturers and retailers (Farhoomand & Joshi, 2009; McLynn, 2012).

Political and Legal environs and considerations

The political and legal issues to be given central focus by Nintendo include those inclined to the censorship of the government, on the basis of the content presented through such games. One such consideration is the censorship of the government – over the violent content levels depicted through the games under sale. For instance, the legal statutes of California prohibit the sale of video games containing violent content, especially to minors.

Further, in the area of legal restrictions over the violence in the content contained in video games, there is also, a contentious issue of defining ‘extreme” violence with reference to the legal provisions of the areas that the company is pursuing. Another legal consideration that the company should check is the move by Washington State – when it offered a course of law to govern the crime committed at virtual worlds. During the event, state and local parole and law enforcement officers were engaged, taking part in training – aimed at equipping them with ideas on how to identify, prevent and investigate crime incidences involving online video gaming and virtual worlds.

Further legal issues to be given principal consideration is the overlap that exists amongst the different classes and levels of legal revisions, including freedom of speech concerns, intellectual property legal provisions, privacy issues, defamation considerations, employment concerns, and proper practices of licensing. There is also a political issue, where the promotion of social changes over the video gaming context, including the activities ranging from case studies, demos, and roundtables among others.

The learning issues offered, over the video gaming platform is another area of principal focus, as these are used by authorities in federal systems, corporate training markets, and healthcare models – which are often, used by governments – like the US government. Traffic authorities, for instance, those involved in the University of Minnesota disruption dodger, have borrowed greatly from the video gaming industry, thus imposing legal and political issues in the way of the company, in the area of business strategy formulation. All of these legal and political issues touch closely, on the present and future strategies of video gaming companies, including Nintendo.

Socio-cultural environs and considerations

Under the socio-cultural sphere of the market of the video gaming products, the experience of game players and digital games, the socio-cultural values, morals, restrictions, and standards are introduced into the preference and the choice of gaming products. On the basis of such understanding, the players within the video and digital gaming industry should focus on the delivery of a more holistic game experience – which can be used and preferred by the different potential consumers from varied socio-cultural backgrounds.

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Further, the inception of video and computer games has fascinated – as well as caused great concern among different cultural proponents, these including educators, scholars, politicians, and the general public. An example is the United States is the case of Ronald Reagan in the 1980s, who extolled the features of games, to bring about an age group of highly talented cold war warriors. Another example is that of U.S surgeon Everett Koop, who argued that games fall among the top health risk causing factors facing Americans. Further, scholars of the mid-twentieth century held the fears that television, film, and games would addiction – forcing people not to leave their houses as well as pervert the perspectives of the users.

There is also the concern of the differences in attitude towards the violence and other culturally-engaging contexts, as video gaming is an issue among the different ideas expressed through the gaming platforms, on the basis of the cultural variations of different groups. An example of the incidences that shed light on the cultural considerations surrounding the context of video gaming is that of the Columbine school shooting, which was apparently fueled by gaming experiences. The growth of video games into social platforms form another consideration, which any player within the gaming industry should check, as games have grown to form social network platforms, a promotion to new social activities – which further cerates new possibilities of gaming experiences.

Technological environs and considerations

A few years back, video gaming was not an important entertainment sphere, as compared to others like the television, radio, and the emergent internet. However, in the past few decades, gaming has taken up a vital part of the entertainment and media sector. The areas served by the developments in the gaming industry include sports, politics, legal issues, and traffic among other societal sectors – thus, a cause for the technological development evident in many of these identifiable sectors.

Gaming has also played an important role in the promotion of economic value drawn from technology. For example, the case of America, where the gaming industry generates more than USD 25 billion in annual revenues – and a source of employment to more than 120,000 people. Following developments like those of the internet, any player within the video gaming industry should push for changes, embracing technology – as this is a major requirement for the modern time player, who needs to get the video gaming client population at an international level. Therefore, Nintendo as one of the players within the industry should be able to adjust to the technological demands of the highly conscious customer population (Taylor, 1975).

Nintendo’s Internal Analysis

Farhoomand and Joshi (2009) documented the disruptive strategy of Nintendo, which greatly impacted the video game industry as a whole. The company was ranked as one of the most innovative companies, following its strategy, where it had gone against the expectations of the other players within the industry. The case was depicted after the introduction of a new generation video game console was introduced in 2006.

Following the introduction, Sony and Microsoft continued with their initial strategies of boosting the computing abilities of their previous inventions – the PlayStation 3 and Xbox 360. According to Nintendo’s strategists, the video game industry had focused greatly on the existing gaming consumers, neglecting the potential consumers among the non-gamer populations, who would push the success of these companies to higher levels of success.

Through the Wii strategy, Nintendo envisioned the success that could be captured from capitalizing on meeting and capturing the needs of the non-gaming population, as opposed to meeting the demands of the already gaming population. The company realized great success, from the fact that it was able to capture the needs of both the gaming and the non-gaming populations – by introducing them into the gaming field. The strengths of this strategy and that of the company, in general, may be traced to the recognition of meeting the needs of the non-gaming populations, as opposed to walking the developed path.

The resource strengths of the company lie with the pricing of the products policies of the company. For example, the pricing model employed during the launch of the product Wii, whose pricing was t be done at either the cost or above the set cost of the product. The pricing of the Wii was to be done during October – December 2006. The policy models of the company include the considerations it made included the considerations of the dynamics of the market and evaluations of the costs to be set for the product.

For instance, the pricing of the Wii was based on the sales trends of the E3 and the DS, incorporating its unique concepts, and incorporating the traits intended at introducing new customers into game consumption. The company, also prides itself in its business strategy planning, for instance, before the launch of the Wii, the targets were set to meet the sales volumes realized by the GameCube or more. Further, the business directive before the launch of the Wii was that the failure of Wii, in meeting the set sales level would lead to the scrapping of the product from sale, to change to other innovative products. However, the sale of the Wii was way beyond the expectations, thus the company continued with the sale of the product long after its launch (Masten, 1984).

The company identifies with the strategy of introducing products like the DS, GameCube, and the Super NES – as opposed to the strategies of their competitors like Sony, who are inclined to the improvement of the already launched products – boosting their capabilities and potential of performance. Another identifiable financial analysis-related strategy of the company, which continues to push it to higher levels of such success includes increment of the R&D budgets for some years, especially after the launch of their products. These were the strategies implemented at introducing the innovative input of other players within the video gaming industry.

This is the approach based on the rapid evolution of technology, which forces the company to introduce the input of external development experts and resources to supplement those of the internal development of the company. This, therefore, calls for the move of the company, in investing their R & D budgets to a number of fields, towards the generation of both – the products to be launched in the short, medium, and long term.

Before the implementation of this strategy, the company had faced setbacks, for instance after the launch of the GameCube, whose sale was a god – making all the products get sold. However, after the sale after the launch, the company was not able to offer strong software brands to the market. Following the situation, the company was not able to leverage the initial offering momentum – which they sought to avoid, after the launch of the Wii, thus the increment of the R & D budgets (Johnston & Lawrence, 1988).

The company also prides on its ability to produce brands that sell handsomely to other market centers, including America and Europe, where a big target for the sale of the Wii was set. Besides the foreign market projection, the company has an inherent characteristic of perfecting the sale conditions at its different markets. For instance, an interview with Iwata cited that the company sought to solve the shortage problems in Japan, so that their product users would not have issues, with purchasing their products at retail outlets.

In the given case, the issue surrounded the supply shortage of the DS Lite, whose global production stood at 2 Million per month and Game Boy at 2.3 Million per month. Therefore, the company identifies with producing upon demand to meet the demands of their products – both at the local market as well as at the foreign markets, which have served to push the company to the great heights it is identified with. The company further identifies with the production of the quality standards they have always delivered to the customers – which was the case that affected the supply of the DS Lite, as the inputs in the class of bicolor molding were in low supply.

As a result, the supply sent to the demand for the product had to be deficient, which helped maintain the credibility of the brands of the company, as it did not compromise the quality of their products – so as to meet the increasing demand. Also, the company capitalized on this production consideration – noting the areas likely to impair their production, thus using the strategy as a stepping stone to push it to higher levels of success (Dyer, 2000).

Nintendo is also advantaged by the strongly established product brands, as its devices and software are unquestionably reputable among the consumers of video gaming products. The company has been realizing healthy revenue growth, which has enabled it to reduce the costs of production and maintain a reputable production and sale track record, thus its strength within the gaming industry. The company, also, prides itself on its strong cash flow drawn from its local and foreign operations, including the sale of their products – which has helped propel the success of the company to higher levels. However, the company has continually been affected by its inability to maintain an increasing inventory, a case which affected the production of certain products like the DS Lite, due to the shortage in supply of bicolor molding inputs (Willcocks & Sauer, 2000).

From the external environment and the company’s market in general, the company has continued to exhaust the rising demand for the products and the software traded by the company. Due to the constantly increasing demand, the company has been able to adjust its productivity to meet the increasing demand, which has made it a highly credible producer in the industry. The US games software consumer population has been on the increase, and this has boosted the company, pushing its revenues to greater heights and inventive levels – which has earned the company great credibility. The increasing demand for online gaming, especially with the establishment of increasing usage of the internet has also favored the company greatly, as it has provided an expansion platform for the company (Lorenzoni & Lipparini, 1999).

Company SWOT Analysis

The company’s strengths lie in the strongly established products of the company, the continually increasing revenue growth, and the strong cash flow resulting from the expanding coverage of the company’s market control. The weaknesses of the company may be identified with the inventory shortages facing the company, which have pushed it into failing to meet the demand for its products at given times.

There is the example of the limited supply of the DS Lite, following the limited supply of the company, with bicolor molding inputs. The opportunities presented to the company include the continually increasing demand for the products and the software of the company and the increasing demand for online gaming platforms, which are available to the company. Other opportunities to the company include the growth realized under the games software market in the U.S as well as that at the global video gaming market.

The threats that may limit the success of the company in the future include the short lifecycle of their products, which may be serving as an opportunity for the company’s rivals to push the company out of its current success. Another threat is the slowdown in the growth of the European, Japanese, and US economies, which are the major consumers of the company’s products (Dyer & Nobeoka, 2000).

Front-burner issues, Solutions to the issues, decision criteria to be used, Recommendation and Implementation plan

The front-burner issue facing the company includes the inventory shortage problem facing the company and the short lifecycle of the products of the company. In the case of the company, the inventory shortage affected is production, towards meeting the demand of DS Lite, which resulted from the shortage in the inputs required for the production of the product. Towards addressing these issues, the company should revise its inventory policies, to ensure that the company will always have more than enough of the inputs required for the production of the products of its product. This can be revised, by ensuring that the company will continually have at least a month’s inventory in-store (Farrell, 2006).

The most effective decision criteria for the company, towards implementing these changes, a multi-criteria model should be applied – as it will help in the consideration of the cost, quality, and other variables like economic development. The decision should consider other aspects like the business excellence framework, lean production, and business process reengineering as the change should affect the company in a positive way.

The recommendations for the course of action include that the entirety of the company’s employees should be involved in the decision-making and the policy and production revision models. The implementation plan used by the company should reflect the input of the different employee levels, include training and education for all workers, offer a definition of roles and responsibilities of the different groups – towards the implementation, offer communication and referral protocols, offer the policies to be observed and establish performance indicators – to evaluate the success of the implementation (Prahalad & Gary, 1990).

References

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Farrell, D. (2006). Smarter Outsourcing. Harvard Business Review.

Johston, R., & Lawrence, P. (1988). Beyond Vertical Integration: The Rise of Value Adding Partnerships. Harvard Business Review, 94–101.

Kent, S. (2001). The Ultimate History of Video Games: The Story Behind the Craze that Touched our Lives and Changed the World. Roseville, California: Prima Publishing.

Lorenzoni, G., & Lipparini, A. (1999). The Leveraging of Interfirm Relationships as Distinctive Organizational Capabilities: A Longitudinal Study. Strategic Management Journal, 20, 317–38.

Masten, S. (1984). The Organization of Production: Evidence from the Aerospace Industry. Journal of Law and Economics, 27, 403–17.

McLynn, K. (2012).Determining the Right Price an Increasing Challenge for Retailers: Eighty-Five Percent of Consumers Say the Price Needs to Be Right before They Shop, Reports NPD. Web.

Prahalad, C., & Gary, H. (1990). The Core Competences of the Corporation. Harvard Business Review, 79–91.

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Sloan, D. (2011). Playing to Win: Nintendo and the Video Game Industry’s Greatest Comeback. New York: Wiley Press.

Taylor, F. (1975). The Principles of Scientific Management. Bulletin of the Taylor Society, 19 (16), 12-13.

Willcocks, L., & Sauer, C. (2000). High Risks and Hidden Costs in IT Outsourcing. Mastering Risks, 3 (4), 12-13.