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Nintendo

Nintendo's Business Strategy Moving Forward
by

brandon parker

on 4 July 2011

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Transcript of Nintendo

By: Dan Hamilton
& Brandon Parker History and Background Discussion Questions Case Study Introduction Video game industry born in 1970s
Notable players: Atari from the US and Namco from Japan
Video games for teenagers in the form of arcade games
Video games made their way into households with introduction of PC games and proprietary game consoles Nintendo orginated in 1889 in Kyoto, Japan
Started manufacturing playing cards
1963 Nintendo went public
1970 - 85 Nintendo began focusing on manufacturing
electronic toys and entered video game industry 1985 introduced "Famicom" in the US as the
Nintendo Entertainment System (NES)
1989 Nintendo released the Gameboy
1991 Nintendo released the Super Nintendo
(SNES) in the US
1994 Super Gameboy released which enabled
Gameboy software to be played on TVs
1996 N64 was launched
2001 Gamecube was launched
2004 Introduction of Nintendo DS In 2006 Nintendo releases the General Environment Analysis Social/Demographic Traditional video game users have been
young adult males (teenagers) to middle aged
men with desposible incomes
Females and family oriented users encompass more of the video game industry
Population size has doubled from 1959 to 1999
and will continue to increase but at a slower pace
in the twentith century
More eco-friendly, health conscious video game users Technological Emerging institutes for graphic design
Huge progress in just last decade
Increases in graphic quality, controller uses with wireless motion sensing devices, and entertainment capabilities
Huge increase in R&D in gaming industry
Incorporate streaming internet Economic Less desposible incomes to use on video games
More cost-sensitive purchases of video game
consoles
Slow increase in economies of scale for hardware and
software
Outsourcing the manufacturing of parts
More time spent working vs personal time Environment Transportation
Competitive location
Ecological issues Political/Legal Patents
Contracting with developers
Copywriting Nintendo Campaign Mode Vission: "[Nintendo will continue to go after] Gaming Population Expansion [by] putting smiles on many people’s faces by offering brand new entertainment that anyone can enjoy, regardless of age, gender or gaming experience." Strategy and Mission Statement: "Nintendo’s strategy is to accelerate current sales momentum from ‘must-have for every family’ to ‘must-have for everyone.’" Current Strategies Develope cost-efficient gaming consoles
Reach "new" gamers, target more than "traditional gamer"
Use "first-party titles" developed by software designers
Innovative gaming technology: "Superior technology is driver of dynamics"
Disruptive technology
"Exergaming" Free-for-all Deathmatch Opponents: Microsoft and Sony Focus more on complex, graphic driven games, and hardware processing/capabilities
Target market is more narrow/specific
Similar consoles, games, and entertainment purposes
Spend huge amounts on traditional media advertising
In-house production of consoles, outsourced production of games Video Game Industry 1. What aspects of Nintendo's strategy made it a game-changer in the video game industry?
2. What impact has it had on the competitive dynamics of the industry?
3. How did competitors fail to anticipate a dramatic change in the terms of competition?
4. What conditions now serve as barriers to effective competitive response?
5. Based on the strengths, capabilities, and resources of each competitor, what strategic options are most likely to support a promising competitive strategy? The Competitive Industry Threat of New Entrants Buyer Power Supplier Power Substitutes Intensity of Rivalry Low Low High Low to Medium High New trends enter industry- use of motion sensing devices, interaction, new users New strategies: cost-effectiveness, disruptive technology, reach new gamers SWOT Analysis Strengths Established brandname
Established games
Nintendo dominates handheld market with Nintendo DS
"Classic Game" catalog
First mover status
Cost leader
Games built into Wii system
Good word-of-mouth strategy with mothers
Disruptive technology
Captured more of the video game console industry than Microsoft and Sony
Use of I/O based, and Resource based AAR model
Strong web presence with social marketing approach Weaknesses Low graphic quality with games
Not targeted towards traditional gamers
Additional components
No established "live" multiplayer
No DVD playing capabilites
Not very many complex games
Long wait time for introduction of Wii
Late entrance into Netflix/entertainment segment Opportunities Interactive, complex, high graphic games
The development of an interactive "live" community
Further disruptive technology, including the elimation of controllers altogether
Small subcontractors developing the next "smash" hit
The correlation between certain game type and sales of consoles Threats Imitation
Limitation
Losing cost-leader status
Difficulty getting hands on future consoles - potential bad word-of-mouth
Losing diruptive technology competitve advantage Recommendations Questions? Continue using a business-level strategy that encourages contracting with "first-party title" software developers
Spend a good majority of R&D bugdet on disruptive technology innovations
Use resources to develop more complex, graphical, interactive games
Develop online community
Release new console simulataneously with release of a "game winner"
Continue producing young, and family-oriented games Pros and Cons Pros:
"First-party title" developers will fully maximize game potential on new consoles and be cost efficient
Furthered competitive advantage with disruptive technology
The release of a "game winner" and new consoles simultaneously will establish console sales success
More complex games
Continued sales growth with new gamers as well as targeting traditional gamers Cons:
Loss of simplistic advantage with games
Higher costs
Overshadowing effect of other games with release of new console and game
Loss of younger generation and family oriented gamers with more targeted games
Not enough money spent on in-house creativity in games
Losing brand positioning while trying to develop more complex games Top competitors in the industry: Microsoft, Sony, and Nintendo
Revolutionary strategy was to develop a wide array of games with high-quality graphics and increasing complexity
Industry experiences trends in console entertainment uses, online libraries, faster processing speed, HD/Blu-Ray, and wireless capabilities Game Over 2006-2008 Source: VGChartz 2008 -Nintendo Company Statement
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