Discuss about the Strategic Management of Nintendo Ltd Over the Rivals.
This report basically discusses about the strategic management about the company Nintendo Company limited. The report will cover the competitive advantage the company has in the market. Along with this, report will also cover functional level, business unit level and corporate level strategies which are adopted by the Nintendo Company limited to compete in the market. The Nintendo Company limited is an electronic company of Japan. It is a multinational company situated in the city Tokyo (Schilling, 2010). The company was founded in 1889 and now it is famous across the world for the revenue. The market value of the Nintendo Company is around US$ 85 billion and this is the reason that it is the third most valuable company in the world. In 2008, the company got seventh position among the world’s most innovative companies. The company has engagement process to bring transparency, improve risk management, targeting customers, providing information and increase efficiencies etc. By the engagement process, the company is able to set efficient objectives and measure the progress of the business (Thomson & Gamble, 2012).
Products of Nintendo Company
The current gaming console of Nintendo Company is Nintendo Wii. This is a small device made by plastic that can play games in either a horizontal or vertical position. The reason of its biggest sale is the unique motion controller. With the help of this motion controller, consumers can play games wirelessly. This type of features was unique for the gaming industry and it made a great success for Nintendo Company. This feature also differentiated the Nintendo Wii from two biggest competitiors in the market, Sony’s Playstation 3 and Microsoft’s X-box 360. Further, Nintendo released a series of accessories for the Wii (Chapple, 2013). Because of the unique features of Wii, Nintendo Company became able to attract more customers. The Wii balance board includes different features of gaming such as surfing, control skating and snowboarding games by a plastic board (The Economist online, 2011). Popukarity and selling of the Nintendo’s product in different countries can be seen by the graph:
Figure 1: Unit sales of Nintendo
(Source: Hitt, et al., 2009)
Competitive Advantage of the Company
Competitive advantage of the company refers to getting advantage by satisfying customers need and desires compared to other companies in the market place. To remain competitive in the market, the company needs to focus on developing synergy, creating value and core competencies. Basically, competitive advantage can be defined as the ability of the company to perform better than its competitors in the market. The company must focus on developing customer advantages because if customers do not value the company then it will not be able to compete in the market (Hitt, et al., 2009).
In the case of Nintendo Company limited, it has been seen that there are few numbers companies in this industry such as Nintendo, Sony, Microsoft and Sega. Despite of less number of companies, there is much competition in the market. There is a great battle in the market for competitive advantage (Nintendo, 2013). Analyzing competition in gaming console market, there are five forces given by Porter that impact on competition:
Figure 2: Porter's Model
(Source: Sawh, 2013)
Potential Entrants: The market of gaming console is regulated by some firms that have new technologies and good brand image among the customers. The new technology and reputation attract the target consumers and create the issues and barriers for those firms who are entering in the market. So, the new comer companies have to face barriers by existing large companies. On the other hand, continuous change in the life style also creates opportunities for the new comer firms (Sawh, 2013).
Substitutes: There are ample ranges of entertainment substitutes that compete with the video games now such as mobile phones, PC games, portable consoles etc. All theses substitutes of entertainment can directly impact the new firms. It can affect in targeting and attracting the customers.
Buyers bargaining power: Because of competitions from major rivals in the market, customers benefit from bargaining power with the firms. There are also wide ranges of substitutes so; the customers enjoy the bargaining power. There is one more reason of bargaining power that prices of hardware which is used in making video games are very low and it leads the strong bargaining power.
Supplier bargaining power: There is oligopoly in the market because of few large firms. But every firm plays an important role in the suppliers’ bottom line. For getting advantage gaming console companies must have good positions among the suppliers.
Industry competitors: Nintendo is not only the most leading firm in the gaming console market but also going to enter in new market segment. This is great opportunity for the Nintendo for targeting new generation and new customers. Thus, there is also a lot of competition of the company with Microsoft and Sony (MarketWatch, 2013).
Microsoft was the first company which introduced the seventh generation of gaming console. Company has advantage of developing new software so it is the major competitor in the market. Although Microsoft had late entered in the market but it had introduced Xbox 360 in 2005. By introducing Xbox 360, the company has proved that it has proactive strategy rather than reactive strategy. Thus, Microsoft is still famous company in the gaming industry (Cnet, 2013). On the other hand, Sony is the famous company for its unique designs and hardware. Sony is a strong competitor. This company has experience of current market. Sony has unique strategies for segmenting the target market. The main targets of the Sony are women, children, family and other gamers who have interest in games. That is the reason the company Sony is big player in the industry (MaRS, 2010)
Despite of many rivalries, Nintendo has got core competency in the market. The company has created values by targeting the market of gamers and unique gaming console. The company has created value for women and family members. It has developed various games which are suitable for the target market and the games developed by the country provide great experience to the users. The strategy of Nintendo is very successful compared with its rivals. One of the important steps taken by the Nintendo for getting success in the market was cutting off the cost of the product and creating more values for the targeted customer. Cutting off the cost is just like a weapon in the market to stay competitive (Nagata, 2009). The competitive strategy of Nintendo against other competitors can be seen by the graph:
Figure 3: Strategy of Nintendo
(Source: Wesley & Barczak, 2010)
The company Nintendo has adopted some strategies such as powerful hardware processing, better gaming graphics, and innovative or creative non-gaming function. But implementing these strategies required lots of time and money. So, to reduces expenses and target more customers the Nintendo cut off the cost incurred in unnecessary functions. The company cut off the cost by launching its products simple, resolutions in games with more fun for the customers. This strategy is very helpful for the product Nintendo Wii. The strategy makes the product unique, perfect for the users such as elders, women and family members. The strategy is helpful to the Nintendo for getting competitive advantage in the market. When the Nintendo had launched its product with the strategy of cutting off the prices, both Microsoft and Sony faced loss in the every unit of hardware. On the other hand, the product Nintendo Wii was earning profit of around $ 50 in US. In 2007, Microsoft and Sony faced loss and on the other hand, Nintendo got a big success in the market. With the raising funds and increased brand image among the customers, Nintendo got big success and competitive advantage over its rivals while launching new products (Wesley & Barczak, 2010).
Strategic Analysis of Nintendo Company
The strategic analysis of Nintendo has been done on the basis of corporate level strategy, business level strategy and functional strategy. After realizing the competition in the market, the Nintendo Company has adopted some new strategies. The strategic analysis of the Nintendo is as follows:
Business level Strategy: The main business level strategy of the Nintendo is to differentiate its product from the competitors in the market. The purpose of the company by business level strategy is to implement the incorporated cost leadership. The business level strategy can be described as the set of actions which is taken to produce a product or service with an acceptable cost. The product must create value among the customers and must differentiate itself from the competitors. The product Nintendo Wii was well-designed with unique features. It was a small machine which could be controlled by an operator. By this, the games can be played wirelessly by the consumers. It was unique product and it was helpful for Nintendo in getting competitive advantage. The product had wide target, low cost and easily use facility (Mohr, Sengupta & Slater, 2009).
Corporate level Strategy: In the corporate level strategy, Nintendo’s has adopted innovation strategy in its products. Innovation strategy has played very important role in getting competitive advantage. The analysis of Nintendo’s strategy shows that the company has used innovative business model to stay competitive in the market. The aim of the company by adopting innovative business model is to position itself different from the competitors and to understand the customers completely. Along with this, Nintendo has used technological touch to target the gamers (Bainbridge, 2011). Company organized a largest advertising campaign with the cost around $200 million. The company offered easy-to-use and family-family products to the customers. In product innovation strategy, company introduced innovative designs such as Wii-mote and infrared pointer (Farhoomand, Joshia & Tsang, 2009)
Functional level Strategy: Nintendo is very much focused on the innovative products which are family friendly while Microsoft is focused on the budget gamer and Sony is focused on providing high quality products with high cost. It company Nintendo is much focused on the differentiation strategy. The company’s strategy includes open innovation, Wiishop channel, and low cost leadership and Wiiware differentiation (Kendall, 2009).
From the above discussion, it has been analyzed that the Nintendo is getting competitive advantage in the market. It is surviving effectively over the rivals in the market. The report has covered the competitive advantage the company has in the market. It has also been analyzed that there are functional level, business unit level and corporate level strategies which are adopted by the Nintendo Company limited to compete in the market. The company has engagement process to bring transparency, improve risk management, targeting customers, providing information and increase efficiencies etc. The company introduced unique product named Nintendo Wii and because of this product the major competitors such as Microsoft and Sony faced loss. The sale or profit of Nintendo compared to the competitors is also shown in the table. There is a great battle in the market for competitive advantage. For this, competitive advantage is analyzed by the model of Porter. Nintendo has adopted some strategies such as powerful hardware processing, better gaming graphics, and innovative or creative non-gaming function. It had also done cost cutting strategy for attracting customers. The strategy of Nintendo was very successful compared with its rivals. When the Nintendo had launched its product with the strategy of cutting off the prices, the both Microsoft and Sony faced loss in their sales. So, in the conclusion, it can be said that the company Nintendo has made its position in the market over the rivals.
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Nagata, K., (2009). Nintendo secret: It's all in the game. Japan Times. Retrieved on 27th October 2016 from https://www.japantimes.co.jp/news/2009/03/10/news/nintendo-secret-its-all-in-the- game/
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