Nintendos Revolution

MBAB 5P22: Global Business

Koushik Kuruvadi Govinda Raju (6121495)

Peiping Zhang (6108757)
Pratyusha Patnaik (6125546)
Vaibhav Kaushik (6125751)

Goodman School of Business

Brock University
Professor: Sheng Deng
March 6, 2017
NINTENDOS REVOLUTION 1

SUMMARY

Nintendo Co. Ltd. is a Japanese multinational consumer electronics and video game company, at

the meantime, is one of the world's largest video game companies by market capitalization. It has

created and released some of the best-known and top-selling video game franchises, such

as Mario, The Legend of Zelda. In order to consolidate itself dominant advantage and to dealt

with challenge which come from Microsoft and Sony, Nintendo followed different strategies and

innovation in their gaming console. By comparing and analyzing these three companies and their

product differentiation strategy we can find an optimal way for Nintendo and its new controller

& console to sustain in the market competition for long run.

INTRODUCTION

Nintendo Co. Ltd. was established in 1889, and originally produced handmade playing cards.

Abandoning previous ventures in favor of toys in the 1960s, Nintendo then developed into

a video game company in the 1970s, ultimately becoming one of the most influential in

the industry and Japan's third most-valuable company with a market value of over $85 billion. In

2007, Nintendo was ranked the second in Japan in terms of market capitalization. Nintendo

topped the world's best 40 companies list in 2009. Nintendo has been consistently opposing to

violence and pornography, developing excellent games that satisfy players of all ages, and

maintaining precious social responsibility and business ethics.

ANALYSIS

Early 2000s Trends in Video game industry

NINTENDOS REVOLUTION 2

At the beginning of 21st century, video game entered youth culture. According to the report

published by the Pew Internet and American Life Project, in 2002, 60 % people of age group

between 6 years and older in U.S. played video games and over 221 million video games were

sold. Obviously, video game became into an emerging industry that generate huge profit. Due to

the innovation in the games on continual basis, video game industry is the fastest developing

industry. At the meantime, the growing demand for console also increased the demand for

console related accessories.

Strategies of Nintendos console competitors Sony and Microsoft

Until the beginning of 21st century, Nintendo is the dominator of and most influential enterprise

in the video game industry. However, Sony and Microsoft start to challenge the predominance

position of Nintendo.

Sony initiated a fierce competition for Nintendo by launching PlayStation 2 in 2000 with

superior graphics and it would play DVD as well as game titles. What is more, it was designed to

be backwards-compatible with all games from the original PlayStation console. These features

increased the demand for PlayStation 2 and expanded Sony to 24 million in three years. On the

other hand, Sony launched PSP which was a portable device that had the most advanced graphics

available for a portable gaming device. The Sonys PSP attracted hardcore gamers whereas

Nintendo DS attracted children/non-gamers because it had no advanced graphics but it had

cartoon like effects with easy to learn and play feature.

Another competitor who exert pressure to Nintendo was Microsoft. Microsoft launched Xbox in

the market in 2001. The Xbox competed for hard-core gamers on hardware performance and

graphics tried to immerse players in realistic 3D environments, and depended on heavy-duty

processing power and a constant stream of new titles to keep players hooked.
NINTENDOS REVOLUTION 3

Nintendo had difficult time in facing these two console with such superior graphics and hard core

gaming features. Sony and Microsoft occupied the market widely as the market share of

Microsoft was 22%, Sony had 66% and rest 12 % was other companies in the market. Nintendo

at that point had low market share in the market and was thinking to develop a plan to fight the

competition and sustain the market.

In 2001, Nintendo launched GameCube console, with the size that was just like a lunchbox. The

processor of the console was designed by IBM yet the consoles hardware failed to the hardware

and graphics of PlayStation 2. Due to the low price and low-powered hardware, it attracted the

children and sold 22 million units worldwide as compared to 130 million units sales volume of

Sony PlayStation 2. Nintendo survived the market competition with Sony and Microsoft for a

long time and finally launched a console in the year 2005 which was the biggest hit in the market

with advanced graphics and high powered hardware.

The Nintendo Revolutions Controller

The company looks forward to making the home run with their unique concept of their controller

which enables single handed usage and this differentiates it from other major video game

consoles such as the Xbox and PlayStation. The uniqueness of the controller is that it changes the

whole game-play style of handling the controller with two hands and it has instead been designed

in a way that can be compared to an usual LED remote controller of a DVD player. Nevertheless,

there are a few concerns about the controller with respect to compatibility to the games primarily

designed for two handed gaming with the previous models i.e. the NES and the GameCube and

how would it be able to win the interests of the professional and traditional gaming fans that are

accustomed to playing with two handed controllers.

NINTENDOS REVOLUTION 4

Firstly, the company should focus on how they can get the new console and its controller

compatible with older games while also win the support of a few popular game developers who

were still looking to support the two handling controllers but wanted Nintendo to develop a new

type of gameplay.

Secondly, the company needs to figure out ways they can modify the controller to support two

handed action since few highly popular games such as the first person shooting ones which went

well with two handed action controllers and gameplay. This will help to win the interests of the

traditional gamers.

Thirdly, the company needs to test the commercial success of the product before launching it.

The below solutions are suggested based on the said concerns:

The company can look towards making an extended advanced model of a joystick along

with the rod-shaped controller which enables two-handed play for the game console. The

joystick can be used for two-handed games such as the first-person action games. This

will convince the traditional gamers to give the revolution a try as they will not lose the

two-handed gaming experience and would want to see if revolution can provide them

with a better and interesting experience compared to other consoles in the market.
The company can also look at possibilities of adding another removable one-handed

controller which complements the rod shaped remote in a way that can be compatible

with older Nintendos games and can be used for playing the two-handed games. Even

though gamers would use both of their hands to play some of the game titles by this

design, the style of playing will be quite different from playing with a two-handed

controller, as gamers would have two devices instead of one for playing two-handed
NINTENDOS REVOLUTION 5

games, and they will experience a new playing style by using two controllers at the same

time.
The company should also expand their game developer base who are willing to develop

games for their unique one handed rod controller and market them effectively to the mass

market as Nintendo seeks to win newer customers.

Finally, the company is not willing to test the product with focus groups as it fears on the

chances of product information leaks. Nevertheless, its always good to do some scale of

testing as to see how successful would the product in the product by taking customer

reviews. The company can perform product trials on focus groups internally i.e.

employees and their near family members who play console games which will greatly

reduce the reduce the risk of leaks.

Reactions from competitors

The competitors can react in several different ways. Firstly, they will start offering discounts to

their existing consoles to win new customers that may have become Nintendos customers and

offer their games at a higher discounted price to keep the market share of their existing customer

base. They might also tie up with financial companies to come up with financing schemes for

customers who could not afford.

Secondly, they would focus on coming up with ways they can win a competitive edge over the

Nintendos Revolution. For example, the main competitors of Nintendo i.e. Sonys PlayStation

and Microsofts Xbox promoted their innovative graphics and high definition capabilities. Also,

Microsoft and Sony might as well come with an idea of a one-handed joystick comparable to the

Nintendos Revolution.
NINTENDOS REVOLUTION 6

Thirdly, the competitors might start attracting the major game developers who currently work

with Nintendo to switch to them by offering them better money which will throw Nintendo out

of business.

INDUSTRY COMPETITION

According to Porters five forces analysis we can explain industry competitiveness based on

competitive rivalry, threat of new entrants and threat of new substitutes.

Competitive Rivalry

Since console video game industry has only 3 main players: Sony, Microsoft and Nintendo,

industry rivalry is high. Since Sony already had experience in consumer electronics with strong

distribution channels, Sony commercialized its console very quickly. Like Sony, Microsoft was

also an established company and by using a similar architecture as their personal computers they

could transform PC gaming into console gaming. Thus, Microsoft and Sony could spend vast

resources on research and development, marketing, and advertising. On the other hand, Nintendo

is dependent on video game consoles which can be seen as a major disadvantage compared to

other competitors.

Threat of New Entrants

Although decreasing costs of electronic components and other factors of production favours the

new entrants, the threat of a new company penetrating the console video game market is

medium. The market is controlled by established global companies who spends their vast amount

of resources in research and development which might be a big challenge for new entrants.

Threats of New Substitutes

NINTENDOS REVOLUTION 7

Threat of a new substitute is relatively high for Nintendo. As Microsoft and Sony, offer similar

products and capitalize on constant research and development, the product life cycle of a model

keeps on reducing and Nintendo should have such a strategy that before launching their product

in the market they should start working on another product which can give Nintendo a

competitive edge. Also, competitors can reduce the price of a model and damage Nintendos

market share even more.

RECOMMENDATIONS

Marketing Strategies for Nintendos new controller and console

The interactive video game industry has grown remarkably in the recent years. Since 2001, three

major players have dominated the market: Sony, Microsoft, and Nintendo. Of these, Nintendo

had the least market share, even though the company had historically dominated the market. In

2004, when Nintendo faced strong competition from larger and wealthier rivals, they came up

with an innovative strategy to maintain profitability. The optimal strategy Nintendo believed in

was differentiation. They targeted the neglected segment of the market. This allowed them to

focus on casual gamers who wanted a simpler, more intuitive gaming experience. The estimated

growth rate of the company has been diminishing and the market trends have been changing due

to new launches by competitors. Our goal is to implement strategies That will help Nintendo

increase their market share and to recover their current losses.

Targeting the Core Gamer:

Rookie Gamers is a segment that focuses on the youth of the consumer console industry. The

demographics include students, under the age of 18. This is a significant part of the market

because this target segment is the future of the industry and presents us with an opportunity to
NINTENDOS REVOLUTION 8

gain product and brand loyalty. They are also a part of the millennial generation, high levels of

innovation and digital media is key in attracting this segment. Most amateur gamers tend to be

male with only 27% female. Psychographics include high involvement of online social

networking within their routine life. By focusing on the amateur gamers target audience, we can

hold on market share that may be altered by future emerging competitors.

Multi-Screen Advertising:

The consumer base is most susceptible to convert their purchasing decision from Nintendo to an

advanced technology of the rivals. Therefore, to persuade these users Nintendo must once again

differentiate itself horizontally.

According to a research on the behavior and attitudes of multi-screen consumers, adults aged 18

to 34 find more value in multi-screen experiences. Multi-screens enhance the content

consumption experience for this younger market segment. Naturally, a younger generation that

can afford multiple, connected devices, and is actively engaged on social networks is a desirable

advertising target. As todays consumers demand pervasive connectivity and accessibility,

implementing a multi-screen strategy would be beneficial. It leads to an increased brand

awareness creating a competitive edge in the market. Influence the consumers brand association

and buying behavior by constantly engaging them with meaningful dialogue and branded

experiences.

Promotional Strategy:
NINTENDOS REVOLUTION 9

Nintendos largest assets are its brand reputation and its intellectual property and these must be

fully leveraged. Nintendo should capitalize on this reputation more. We can adopt supply and

demand strategy as our promotional strategy. The supply of the product would be low in the

introduction and increase in the demand of the product would lead to bidding wars on various

online websites including Amazon and eBay. These wars could be advertised globally as The

worldwide countdown for gaming consoles. This would not only build interest among the hard-

core gamers, but would eventually result in several press releases. The supply and demand

strategy can boost sales of the product.