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Nintendo presentation 3.0 Nintendo presentation 3.0 Presentation Transcript

  • A change in strategyat Nintendo
  • Index Introduction Market analysis Nintendo before the change The change Post-change analysis and benefits Nintendo today & Recommendations References
  • Introduction Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Nintendo in few words • One of the three largest video game companies • Workforce ≈ 5,000 • Based in Kyoto, Japan • Foundation: 1889 • Three large markets: Japan, Americas and Europe Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • The industry Consoles Games Accesories Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • The industry Home Handheld Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Market Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Market overview » Red Ocean strategy • Compete in existing market space • Focus on gaining market share and outsell competitors • Exploit existing demand Defend current position and beat the rest Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • The Market: industry strategy » Industry evolving in technological cycles product generations (currently at 7th generation) Generation X Incremental Change life cycle Disruptive Revolution Generation Y Incremental life cycle » Generation life cycle shortening Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • PESTLE analysis LEGAL → Piracy, intelectual property issues, content age restriction SOCIAL → Population Ageing ENVIRONMENTAL → Environmentally friendly materials recycling packaging Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Nintendo Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Nintendo before the change » Competition is based on technology performance » Gaming consoles are sold at a loss » Suffering years of declining market share and shrinking markets margins » GameCube is out-competed by Xbox and Playstation 2 Specification Comparison 2004 Console Xbox GameCube Playstation 2 Main Processor 733MHz 485MHz 295MHz Release Date Nov 15, 2001 Sep 15, 2001 March 4, 2000 Source: Own work based on NPD Group Data Base Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • SWOT 2004 STRENGTHS WEAKNESSES • Reputed brand • Financial difficulties • Global enterprise • Strong supply chain dependency • Best sellers are first-party • Targeting low margin and narrow segment • Exclusive games empower brand • Less capabilities (DVD, music...) • Backward compatibility • Handheld market leadership Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • SWOT 2004 OPPORTUNITIES T H R E AT S • Emerging network technologies • Fierce competition • Growing industry • Quickly changing demand • Big potential market (casual • Emerging network technologies players) • Short product lifecycle • Backward compatibility • Merchandising • Increasing purchasing power Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Nintendo 2004 Game Console sales (units) Follower in a 60 50 Red Ocean 40 Millions of $ Microsoft 30 Nintendo Sony 20 10 0 2003 2004 2005 Source: Own work based on Seeking Alpha article Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Change Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Change Drivers » The lifecycle of the 6th generation consoles is nearly over • 7th generation, strong consoles are coming • Dead-end strategy • Poor market focus (7-16 segment) Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Change »TIME TO REACT !!! Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Blue Ocean Strategy Strategy focusing on creating new demand in places where there is none, thus making the pie bigger instead of fighting over whom gets the largest slice of the pie. Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Blue Ocean Strategy The Wii : Radical changes to the strategy 1. Game Play 2. New Approach 3. New Consumers Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • 1. Game-Play Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • 1. Game-Play » Focus on a more user-oriented strategy (controllers) » The wireless controller "liberates" gamers » Endless options (Kart wheel, fishing rod, shield and sword, blaster) Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • 2. New Approach » Game-packs giving many hours of fun and entertainment in a highly competitive, mobile and fitness-oriented environment. • Wii Sports package • Wii Fit • Just Dance Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • 3. New consumers » From a younger audience into the “casual gamers” category “More casual players arent as likely to be attracted by hardware features, so its all about delivering a fun, easy-to-use and addicting game experience” A. Frazier, Video Game analayst NPD Group (Source Forbes) Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • 3. New Consumers Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Benefits Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Benefits Complementary Benefits » Wider customer profile bring more money » Competitive advantage on cost » Brand awareness increase Core Benefits » Sales explosion » Profits as never before Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Price Decrease Release Pricing (US) Xbox 360 PlayStation 3 Wii $279 Low-end model n/a n/a (Xbox 360 Arcade) $349 $399 Mainstream model $249 (Xbox 360) (PlayStation 3 40 GB) $449 $499 High-end model n/a (Xbox 360 Elite) (PlayStation 3 80 GB) Specifications Xbox 360 PlayStation 3 Wii Micro Processor 3,2 GHZ /3Dual Core 3,2 GHz/ 7 Core 729MHz 5 Core Video Memory Bandwith 21,6 GBps 22,4 GBps 3,9 GBps 512 MB GDDR3 265 MB XDR RAM Main System RAM 64 MB GDDR3 (700MHz) (3GHz) 12x Dual-Layer DVD HD DVD Optical Drive Blue Ray Proprietary Optical drive Drive Source: Own work based on NPD Group Data Base Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Non-conventional uses » Fight obesity » Used for medical rehabilitation “Helps with range of motion and helps me extend and push it as far as I can go” Chris Schroeder, 24, Walter Reed Army Medical Center » Used in retirement homes "But once they get it, you can see the change in some people. They are more talkative and have a sense of humor. Theres a lot of joking going on in here." Earl Davis, 73, retired Marine, USA Today Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Sales Increase Console sales in the US 16 14 12 Millions of units 10 8 Xbox 360 Wii 6 PS3 4 2 0 Source: Own work based on NPD Group Data Base Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Profit Increase Overall Nintendo Profit 3000 2500 2000 millions of $ 1500 1000 500 0 2005 2006 2007 2008 Source: Own work based on NPD Group Data Base Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Conclusions & Recommendations Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Conclusions The strategic change was a big SUCCESS » Low-cost » Focus on new market (casual gamers) » Generating revenues from both “sides” Is the change still appropriate? NO Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Current situation Net sales 20,000 » Competitors have catched up: 18,000 16,000 14,000 • Loss of competitive edgeMillion of $ 12,000 10,000 8,000 • Blue Ocean turning Red 6,000 4,000 2,000 0 » 2012 losses: ($526,884,000) 2006 2007 2008 2009 2010 2011 2012 Source: Own work based on Nintendo’s Annual Reports Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Current situation Sales 2012» Loss of leadership» Again a follower 33% 45% Sales 2009 Xbox PS3 24% 31% 22% Wii 45% Source: Own work based on www.vgchartz.com Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • Current situation Nov2012 Next launch: Wii U Widely pointed as an early failure Incremental change Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • RecommendationsIn a market that evolves in waves: Nintendo have resigned itself to compete in a Red Ocean Dropping sales – loss of market share - follower 1) They need a DISRUPTIVE change! Either blue, green, or purple 2) When they compete in the „classic‟ market no good results are achieved 3) We suggest to look for competitive advantages that could bring the differenciation Nintendo needs to get back to the lead Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • ReferenciesPatricio O‟Gorman (2007) Wii: Creating a Blue Ocean The Nintendo WayNintendo corporate site (2001-2012) Financial Statementshttp://www.nintendo.co.jp/corporate/en (accessed 03/12/2012)The Video Game Industry Why Nintendo Has Dominant Market Sharehttp://sites.duke.edu/soc142-videogames/global-value-chain/market-power/why-nintendo-has-dominant-market-share-2 (accessed 04/12/2012)Gamespot UK (2006) 2005 a record year for US gaminghttp://uk.gamespot.com/news/2005-a-record-year-for-us-gaming-6142407(accessed 04/12/2012)Seeking Alpha (2006) Seventh Generation Gaming Consoles: ThinkingOutside the Box http://ce.seekingalpha.com/article/22075(accessed 06/12/2012)
  • ReferenciesForbes Magazinehttp://www.forbes.com/2008/11/28/nintendo-wii-wii2-tech-personal-cz-cs-1201wii.html (accessed 03/12/2012)Toy Directoryhttp://www.toydirectory.com/monthly/article.asp?id=3350 (accessed 03/12/2012)Time Magazinehttp://www.time.com/time/business/article/0,8599,1584697,00.html(accessed 03/12/2012)USA todayhttp://usatoday30.usatoday.com/tech/gaming/2008-05-14-wii-retirement-medical-centers_N.htm (accessed 03/12/2012)
  • Questions please Nintendo today &Introduction Market Nintendo Change Benefits Recommendations
  • A change in strategyat Nintendo