Nintendo has implemented a strategy, which encourages people around the world to play video games regardless of their age, gender or cultural background (Nintendo, 2006) and appeal even to people who aren’t interested in games (Business Week, 2006) and smiles on peoples faces (Nintendo, 2008).
Nintendo Co Ltd (Nintendo) and its new president Satoru Iwata believed due the complexity of games there are a lot of potential for gaming by other segments. Originally the games were built merely on action and targeted towards traditional over 18 year old male population (ESA, 2006).
Nintendo decided to bring in the non-gamers and create an all-new consumer segment. Simplicity was the game and uses real live situations in the game such as Wii Fit. Nintendo designed and marketed “Wii” as an entertainment centre for the family. The average age of those purchasing games was 33 in 2005 compared to 38 in 2006 and 2007, 40 (ESA, 2006, 2007 and 2008). The games are devised to involve all age and gender groups including those who would like to spectators. It also seems that this had encouraged not only young people of the family asking parents to buy gaming devises, but the elders as well started to show keen interest in buying Wii. ESA (2007) indicates that 67% of American head of households play a video or computer game. Further it indicates that only 28.2% of the games are below the age of 18 and 62% of the total games are male.
Wii created a competitive advantage by luring female and NPD (2009) indicated that 5% point increase in female gamers during 2009 compared to previous year and underscores the successes of Wii and other adult population who has not yet entered the gaming experience.
Moreover Nintendo, also look of attracting customers above 50 years old and therefore they must create games that attract these groups. Health conscious people has also bought in gaming as they integrate into their life style and found to be beneficial. It has move from the notion that games create couch potatoes (obesity).
Company
Following the entrance of Sony and Microsoft into the industry, as new players there were not many success stories but rather fights over who would become the number one game. Nintendo’s net sales stagnated since 2004 and shot up with the introduction of Wii in November 2006. The vision of the new leadership was very crucial and was tested with launch of Nintendo DS and its other variants with the biggest change happening with Nintendo Wii in November 2006 (Joshi and Tsang, 2009).
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The company financial results grew tremendously with net income tripling by end of 2008 (914.9 M US$ in March 2006 to 2.393.3 M US$ by March 2008) (Joshi and Tsang, 2009)). Cash dividends of 1,260 Japanese yen in 2008, almost 3 times higher than year 2006 (390 Japanese yen) (Nintendo, 2009 and 2006). Company’s stock prices rose to 64,500 Japanese Yen by end of 2008 from 17,880 Japanese Yen in year 2006 (Nintendo, 2009). Since the November launch of Wii until September 2009, company has sold over 53.97 M representing 48% of the total hardware sales by three main competitors (X Box 360, PS3 and Wii).
Nintendo doesn’t manufacture all of its own parts but depend on others. It usually buys parts from companies such as IBM (processors) and Panasonic (batteries) and so on. Nintendo has to keep good relations with these companies.
Nintendo also focus on technology that would achieve more with less. The software designers where at the helm of the hardware development that ensure there are sufficient games and that they suit the development concepts.
Competition
The irony is that instead of going head to head with Microsoft and Sony Nintendo more or less created its own niche market. Sony and Microsoft have pursued that combination of computing power and graphics of its game, which Nintendo viewed it as a limiting factor to success and targeting the non-gamers. Nintendo to all our surprise used a combination of blue tooth technology, infrared, and motion sensor instead to create a user friendly and easy set up console.
Moreover the simplicity reduced the cost and made it easy for its developers to design new games, which gave Nintendo a competitive advantage over its rivals. Nintendo gave a feeling of personalization by allowing users to create characters. The lack of high-end graphics such as HD could have been a competitive threat, but turned out to be an advantage since HD would take year to be established in homes.
A threat to Nintendo is the ever increasing online and computer games market. During 2006 51% of the frequent game players were also seen to be gaming online as well (ESA 2006). The Low price of Nintendo has proved to be its biggest competitive advantage.
There is a huge threat on the supply and demand of Wii, which could damage the market share of Nintendo through customer frustrations although Nintendo is quite comfortable with the current limited supply of the console.
In the latest figures from NPD (NDP, 2010), sales of games are recovering from -20 to 5 in term of % change in dollars sales from Oct 2009 to December 2009. These present significant opportunities for Nintendo.
Community
From the information available there was no major regulatory restriction on the major markets areas. The market seems free to operate and to take the full advantage to capture a high market share in Europe and the US. The simplicity of the games made it easy for the programmers to design more and more games at very low cost. Nintendo has also open up Nintendo to private engineers and has now over 792 games.
In terms of standards and guidelines for the industry ”The Commission of the European Communities announced to impose a fine of EUR149 million on October 30, 2002 referring that Nintendo’s past trade practices in Europe until 1998 fell upon “limitation of competition within the EU common market” which is prohibited by Article 81 in the EU treaty” (Nintendo, 2006).
The media can at times be a business’s enemy or a friend. Regardless which side it is on at any given time, the publicity the media gives helps position Nintendo and its products into the minds of consumers.
Nintendo doesn’t make all of its own components for the game. It buys parts from companies such as Panasonic, IBM and ATI. In addition, Nintendo may sell some of its own products online, but the majority of it sells is through other retailers (Walmart, Amazon, airport duty free shops, etc. are responsible for selling Nintendo’s products like the Wii.
The product is a simple console with a simple wand. The wand type thing was the unique feature that was able to recognize the human body motions. It requires physical movement from players, which was good for health conscious parents – especially for the kids. It is one of the reasons why this product was excellent for the family. The motion detectors would turn the hand movements into an on screen action simulating a real life experience. The product further evolved and included keeping fit as well whereby there is a combination of action on the screen together with physical exercise. The games were simpler to understand with a shallow learning curve.
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Price
Nintendo was indeed right to understand that we do more with the little technology. Wii did not require heavy graphics and came with only a small 512MB flash drive. This enabled Nintendo to keep its console production cost low. Couple with that was a lower software cost as well. Wii was launched for USD 250 only, well below USD 399 being charged for XBOX 360 and USD 499 for a PS3 (Joshi and Tsang, 2009). Recently it is understood that they have reduce the Wii by USD 50.
Nintendo due to lower cost generated profits from both hardware and software. Furthermore Nintendo was able to generate profits of up to USD 49 per console in US, Sony and Microsoft were loosing USD 300 and USD 125 per console at their respective launch prices (Joshi and Tsang, 2009).
Place
Wii were able to place and display the product at major super markets and shopping malls. However, after a year of its launch Nintendo failed in meeting the demand for the game. Nintendo has realized the uniqueness of the product, the willingness of consumers to wait to buy this product rather than look for alternatives. It seems the experience with Wii is unique that it is a game in a different league.
Promotion
Wii was designed for all age and gender and its advertisement reflected this philosophy. Nintendo used word of mouth (Joshi and Tsang, 2009) as its advertisement strategy. They made families (father to the child), hard-core gamers and modern moms as their ambassadors. They would play and share experiences with others. A number of kiosks were set up at many shopping malls show casing its features. Moreover their Commercials always showed groups of people, including generations of families, playing and interacting with each other. A classic example was the grandfather who mistook the Wii for the TV remote control and got stuck with the Wii. Nintendo has used all the classic methods of sales promotions, such as discount voucher and holidays give-ways.
According to Sliwinski (2006) Nintendo expected to spend over USD 200 m in all of its promotional activity over the next year and is the largest advertising campaign in Nintendo’s history. About 80 percent of the budget will be spent convincing adults to purchase the system and shaking off Nintendo’s traditional consumer perception of being for children and teens.
4. If you were the VP of Marketing for Sony, how would you respond to the Wii.
In its current state, the gaming industry is an attractive one with a total market opportunity of over $49.9 billion projected for 2001 and $85.7 billion in 2006 Joshi and Tsang, 2009)
In the short term as the VP for Marketing is convince the developers to see how reduce the cost of X Box without diminishing its high quality. It might be an excellent to do like Nintendo bridge the gap between hardware and software development. New games should be introduced to attract women players.
In the long-term as the VP for Marketing X-box should move in the same direction as Nintendo, the motion sensor technology and compete directly with Nintendo. This would be an additional functionality on the X-Box. We should move on the basis for doing more with X-box for less. The X-box should also be able to integrate with Windows operating system allowing interoperability between the system and become one.
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