2. Index
Introduction
Market analysis
Nintendo before the change
The change
Post-change analysis and benefits
Nintendo today & Recommendations
References
3. Introduction
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
4. 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
5. The industry
Consoles Games
Accesories
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
6. The industry
Home Handheld
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
7. Market
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
8. 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
9. 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
10. 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
11. Nintendo
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
12. 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
13. 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
14. 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
15. 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
16. Change
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
17. 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
18. Change
»TIME TO REACT !!!
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
19. 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
20. 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
21. 1. Game-Play
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
22. 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
23. 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
24. 3. New consumers
» From a younger audience into the “casual gamers” category
“More casual players aren't as likely to be attracted by
hardware features, so it's 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
25. 3. New Consumers
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
26. Benefits
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
27. 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
28. 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
29. 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. There's a lot
of joking going on in here."
Earl Davis, 73, retired Marine, USA Today
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
30. 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
31. 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
32. Conclusions
&
Recommendations
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
33. 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
34. Current situation
Net sales
20,000 » Competitors have catched up:
18,000
16,000
14,000 • Loss of competitive edge
Million 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
35. 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
36. Current situation Nov2012
Next launch: Wii U
Widely pointed as an early failure
Incremental change
Nintendo today &
Introduction Market Nintendo Change Benefits
Recommendations
37. Recommendations
In 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
38. Referencies
Patricio O‟Gorman (2007) Wii: Creating a Blue Ocean The Nintendo Way
Nintendo corporate site (2001-2012) Financial Statements
http://www.nintendo.co.jp/corporate/en (accessed 03/12/2012)
The Video Game Industry Why Nintendo Has Dominant Market Share
http://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 gaming
http://uk.gamespot.com/news/2005-a-record-year-for-us-gaming-6142407
(accessed 04/12/2012)
Seeking Alpha (2006) Seventh Generation Gaming Consoles: Thinking
Outside the Box http://ce.seekingalpha.com/article/22075
(accessed 06/12/2012)
