Nintendo Case Study Slide

1. Game Console Industry:
Nintendo

2. 1. Characteristics of game console
industry?
 Competitive technology-focused, with hardcore gamer as a target market.
Fast changing industry, since the product lifecycle is comparatively short.
People demand shifted as economy changes. Different specs, model, and
prices are needed to fulfill the ever-changing demand. Game console
company have to balance between suitable price and quality.
People are looking for new experience of game playing.

3. 2. The Five Forces
In the game console industry, the competition is a warzone between three big
game console company.
Substitute Products:
High. PC Game
Low. Arcade / Handheld game
Suppliers: Buyers:
Moderate Competitor:
High
Expand High
Loss
from single Sony. Purchasing
supplier Microsoft. Power in
into many recession
New Entrants:
Low
Strong brand/High distribution
barrier

4. 2. The Five Forces (continue)
Buyer:
<High> Customers lose their purchasing power due to economic recession,
however the customer group expands from just hard-core gamer into elderly and
female gamer.
<Moderate> Retailers also lose purchasing power (In order to survive recession).
Supplier:
<Moderate> Since Nintendo sorted more than one single supplier in year 2007,
suppliers have lost their bargaining power. In addition, due to the strong brand and
software development (cd game), suppliers find it hard to forward integrate into a
competitor.

5. 2. The Five Forces (continue)
Competitor:
<High> Sony.
 Higher price as Premium gaming console.
 Fast response to market change.
 Good technology capabilities and Innovation(blu-ray).
<High> Microsoft.
 Target in different levels of market.
 Produce variety of version with different price and service to target every
section of customer. (Lowest-end product has the same price as Nintendo
Wii and high-end match PS3)
<Low> China product.

6. 2. The Five Forces (continue)
Substitute:
<High> PC game
<Low> Arcade game
<Low> Handheld game (Mobile/Tablets)
New Entrants:
<Low> Hard to penetrate since it needs strong brand, marketing (reputation)
and high distribution power (global scale)

7. 3. Driving Forces
Strong Competition in technology among rivalry.
Nintendo cannot compete in technology with Sony and Microsoft; therefore
they diversified into targeting more casual customer. (Start from Nintendo‟s
Game Cube failure).
It is making the industry more profitable since it targets more groups of
customer. It also makes the competition more intense since it forces
Mircrosoft and Sony to step down into the same target group.
Especially Sony and Microsoft, they launched console which is similar to Wii.
 Sony : Playstation Move and Eyetoy
 Microsoft: Xbox Kinect

8. 4. Key success factors:
Giving players „new experience of game playing‟
(physical interaction, new controller).
Attract new casual group of customer who hasn‟t play game before
Strong brand of software game (Super Mario, Pokemon, etc)
that complements causal gaming.
Partnership with components manufacturing company.

9. 5. Strategy
Nintendo is using broad differentiation strategy as their generic competitive
strategy. They are targeting the market of hardcore gamer, casual gamer and
even someone who hasn‟t play game before. The price of Nintendo is
relatively much lower as compare to Sony and Microsoft.
Offensive:
Blue Ocean – Strategy to explore and create untapped elders/female and
non hardcore gamer market. So they always try to be the “first mover” to
beat out competitor in existing market.
Defensive:
Be more innovative than competitors since they are getting into this area.
(Wii Fit)

10. 6. Is Nintendo Wii a Blue Ocean
Strategy
Yes, because they are the first mover to explore this market. For example,
they have begun developing Nintendo Wii since the launched of Nintendo
Game Cube.
.

11. 7. Sign of financial problem?
According to latest 5 years financial report,
1. Quick ratio shows that liquidity is going down, because there is a risk in
holding inventory. They don‟t maintaining a war chest of cash as signaling
their rivals because of signaling is an effective defensive strategy.
2. Financial risk is increasing due to debt to equity ratio.
3. Net profit to revenue ratio shows that Nintendo might have some problem
in operation. The ratio is decreasing.

12. 7. Sign of financial problem?
Financial 2009 2008 2007 2006 2005
Ratio
Quick ratio 2.78 2.71 2.79 5.42 4.59
Debt to equity 0.428 0.465 0.429 0.192 0.228
Net profit ratio 0.151 0.153 0.180 0.193 0.169

13. 8. SWOT
Strength
Strong brand Weakness
First Mover (Creativity) Technology disadvantage
Internal game developer Lack of blockbuster games
Opportunities Threat
Competitors targeting casual
Changing people lifestyle (health,
game players
fit, fun = Wii Fit)
Recession (Less demand, rising
E-commerce boom (Online store)
logistic cost)

14. 8. SWOT (continue)
Analysis:
Nintendo‟s performance is not attractive.
 Nintendo‟s main competitive advantage is its creativity.
 Technology barrier makes Nintendo‟s approach is not sustainable.
 “Exhausting endeavor without assurance” – Using „creativity‟ to outrun
competitor is susceptible to competitors‟ copy and development effort

15. 9.Competitve Strength Assessment
Good product innovation capabilities and cost advantage compared to rival.
Strong brand name image.
Strong global distribution capability.

16. 10. Recommendation
Invest more in R&D to create a proprietary and superior technology.
Build stronger partnership with game-producer companies.
Continue to approach new gaming experience.