Nintendo Ltd, strategic management of change, 2012


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Nintendo Ltd, strategic management of change, 2012

  1. 1. Strategic Management of Change BUMGT5926 Scenario PlanningSyafiqa Anneisa Abdullah 30089404Navaneeswary Ganesamoorthy 30089407Rei Lynn Lim 30089392
  2. 2. Presentation Overview (1/2)•Introduction•Company Profile•Microenvironmental Analysis•PESTLE Analysis•SWOT Analysis•Porter’s 5 Forces Analysis•The Industry Life Cycle•Nintendo’s Key Success Factors
  3. 3. Presentation Overview (1/2)•Analysis of Key Uncertainties•Analysis of Future Trends•The Scenarios & Implications•Conclusion•References
  4. 4. A Brief History of Video Games Atari to Wii
  5. 5. Introduction (1/2)• Video games have been around since the 1940s.• Over the decades, game machines continuously evolved to become powerful machines capable of stunning visuals and graphics.• In the mid 2000 to 2007, social media, smartphone and tablet technology entered the gaming scene.• Casual games become the norm attracting previously non-gamers into the market.
  6. 6. Introduction (cont 2/2) • As the dominant force of the mobile and gaming market, in the next coming 5 years, where does Nintendo see itself competing with threats from smartphones and other gaming platforms taking up its share of the market?• Scenario planning : To make strategic decisions that will be a sound foundation for all plausible and possible future scenarios.
  7. 7. Company Profile (1/3)• Founded in 1889 in Kyoto, Japan by Fusajiro Yamauchi.• Manufacturer of Hanafuda “flower” cards• Expanded in 1960s by Hiroshi Yamauchi.• Following the crash of the cards business, Nintendo entered the toy industry upon discovering Gunpei Yokoi, a mechanical engineer.
  8. 8. Company Profile (2/3)• 1970: Yokoi teamed up with Shigeru Miyamoto to create games – The Father of Modern Video Gaming, creator of iconic franchises including Mario, Zelda and Pokemon.• The rest is history.
  9. 9. Evolution of Nintendo Gaming Consoles
  10. 10. Industry Overview (1/2)• The video game industry is dominated by 3 gaming giants- Microsoft, Sony and Nintendo• Currently at the 8th generation of console production
  11. 11. Industry Overview (2/2)• U.S. computer and video game software sales grew six percent in 2007 to $9.5 billion – more than tripling industry software sales since 1996.• Halo 3, the best-selling title of 2007, took in more revenue in its first day of sales than the biggest opening weekend ever for a movie ("Spider-Man 3") and the final "Harry Potter" books first day sales;• On average, nine games were sold every second of every day of 2007• The average game player is 35 years old and has been playing games for 13 years.
  12. 12. Industry Analysis• The Microenvironment –C3SPM-Company-Customers-Competitors-Suppliers-Middlemen (Distributors)• The Macroenvironment : PESTLE Analysis
  13. 13. The Microenviroment (1/2) Suppliers Nintendo’s suppliers comprised of both hardware manufactuers and software developers. Hardware companies supply the various parts, components and provide the technology to manufacture Nintendo’s gaming devices.Distributors Online and offline distributors. The retailers: Includes specialised software boutiques, department stores, electronic stores and hypermarkets.Customers Diversified segment of consumers: Students, employees, military troops; seniors and parents.
  14. 14. The Microenviroment (2/2) The main competitors in this industry are Sony, Nintendo and Microsoft,Competitors Sony has about 70% share in the market and the latter commands the rest of the market. Nintendo faces competition from Apple Inc while in the casual gaming market, Facebook is a likely upcoming competitor.
  15. 15. The Macroenvironment PESTLE Analysis (1/2)Political Factor Target of political activist concerning controversy about violence in gamers. Entertainment Software Rating Board (ESRB) that assigns ratings for gaming content (ERSB, 2012)Economic Factor Purchasing behaviour is influenced consumer purchasing power. Console development cycle follows roughly the general computer industry cycle Consoles are not upgradeable, consumer has to buy complete new system. Social Factor Video games are played predominantly by young males. The current social trend on the rise are non gamers who have no prior experience or interest in video games. The number of female gamers are also on the rise. Digital downloads and in-game purchasing is gradually becoming the norm.
  16. 16. The Macroenvironment PESTLE Analysis (2/2)Technological Factor Technology has improved processor speed, visuals and memory capacity for gaming consoles. Disruptive innovation in the form of smartphones and tablets have significantly altered consumer lifestyles. Legal Factors The legal issues faced by the industry are trademarks, copyrights, licensing, online ownership and demands of intellectual property.Environmental Factors The video game industry uses a lot of plastic and metal resources for its hardware. In the current era majority people are environmentally aware. Manufacturing game consoles creates non-biodegradable waste which is the byproduct of this industry.
  17. 17. SWOT Analysis (1/2) STRENGTH WEAKNESSES Nintendo has Shigeru Miyamoto, the creator  Console power weaknesses of Nintendo’s most successful game  Limited selection of software for hardcore franchises and intellectual property. gamers. Low upfront costs  Brand name –Long perceived by the gaming The Nintendo brand name is a world cultural community as a kid’s toy or for casual icon synonymous with video games. gamers. Nintendo has past success with family  Shigeru Miyamoto may eventually retire gaming model from the gaming business. Nintendo has had extensive experience in the video game industry. Uniqueness of hardware motion detection when it comes to the Nintendo Wii
  18. 18. SWOT Analysis (2/2) OPPORTUNITIES THREATS The first to introduce motion technology in  Sony and Microsoft are capable of mimicking and video games. improvising on Nintendo’s technology. The availability of technology  Disruptive innovation caused by Apple’s iPhone and iPad successful ventures in the mobile and smartphone Variety of multiple gaming platforms. market. Design games for novice and casual gamers  Third party software developers choose to develop including seniors and adults games for smartphones and Facebook due to lower cost of production and higher potential returns.  Social media gaming on Facebook is gaining popularity amongst casual gamers.  Loss of potential customer due to limited sophisticated games selection for the hardcore gamers.  Slow to adopt an online model for downloadable content and microtransactions on a wide scale for games on its systems.
  19. 19. Porter’s 5 Forces Analysis Bargaining Power of suppliers HIGH COMPETITIVE RIVALRY Threat of WITHIN THE INDUSTRY Substitute ProductsThreat of New Entrants (HIGH) HIGH MEDIUM Bargaining Power of Buyers HIGH
  20. 20. Video Games Industry (1985 – 2012)Image source:
  21. 21. Nintendo’s Key Success Factors (1/2) Key Success FactorsDefinition: The combination of factors requiredto accomplish organisational business goals (Thebusinessdictionary, 2011)
  22. 22. Nintendo’s Key Success Factors (2/2) • Dominance over the casual gamers and portable gaming market -In 2001 – 2006, Nintendo have a big share over the casual and mobile gamers market with the Nintendo Wii and Nintendo DS. • Pricing advantage -Nintendo’s consoles are more affordable than its competitors. • Strong brand name. -Nintendo is well known for its games including Super Mario, Pokemon and Zelda.
  23. 23. Analysis of Key Uncertainties• Rapid advancement of tablet and smartphone technology- Tablets and smartphone becoming more powerful• Uncertainty to the market size and potential returns• Other alternative forms of digital entertainment.-Facebook, digital platforms, Google +, internet TV, Apple TV
  24. 24. Analysis of Future Trends (1/5)• Increase in social networking, mobile and digital markets- Social networking platforms become morepopular.-Availability of cheap or free games fordownload on digital platforms, ieiTunes and Facebook.-Smartphones and other mobile devicesWill penetrate into Nintendo’smarket share
  25. 25. Analysis of Future Trends (2/5)• Tablets as the next generation of console games-The gaming industry will drive the evolution of technology fortablets.-Apple is already using games to promote and sell its iPads-Developers viewing tablets as the ideal foundation fordeveloping games
  26. 26. Analysis of Future Trends (3/5)
  27. 27. Analysis of Future Trends (4/5)• Shift into games-as-a-service model-Games are evolving to become a service.-More social games and virtualworlds are created to fill in market space.-Subscription base models,in-gamePurchases and premium membershipMemberships, virtual goods andmicrotransactions will become the revenuestreams for such games.
  28. 28. In-game purchases (3/5)
  29. 29. Analysis of Future Trends (4/5)• Slowed growth of traditional game retailing and publishing-Console game manufacturers will continue to decline in sales in both hardware and software-Traditional retail game stores will gradually exit the market.-Gaming giants will produce their final console (8th generation) before going completely digital.
  30. 30. Analysis of Future Trends (5/5)• Emergence of digital content and new publishing models-Third-party software developers suchas Ubisoft and Electronic Arts willconcentrate on developing games forthe mass market and serious market.-Business models for gaming willchange.
  31. 31. Scenario Themes: Pokemon Evolution
  32. 32. Scenario Themes and Implications (1/7)Scenario Theme 1: Pokemon Evolution- The market for digital contents and games grow rapidly- Increasing trend in casual gaming- Smartphone and tablets become a populargaming platform-Third party game developers (Ubisoft and Electronic Arts choose to develop games forDigital platforms, i.e. Apple iTunes)- Perception of console games as being too costlyto develop for
  33. 33. Scenario Themes and Implications (2/7)Strategic Implications of scenario-Nintendo need to adapt and change its existing model to fit thetrends.-Include a digital platform for casual gamers to access their vastlibrary of affordable or free games.-Redesign existing popular franchises (i.e. Mario) tosuit the casual gamers market-Create new games that appeal to the casual gamers-Design a console that attracts both casual gamersand existing gamers.
  34. 34. Scenario Themes 2: Link
  35. 35. Scenario Themes and Implications (3/7)Scenario Theme 2: Link-Trend for casual gamers growing but not as fast.- Existing digital platforms (i.e. iTunes) are flooded with low-quality, no brainer games.- Existing games on smartphones and social media lack the sophistication of console games.- Many third-party game developers are-Still uncertain of the new revenue model.
  36. 36. Scenario Themes and Implications (4/7)Strategic Implication of Scenario- Nintendo to protect its reputation for producing quality games.- Leverage on its brand assets by making their games available across various platforms including social media, iPhone, iPad and smartphones.- Spread brand awareness of its games to gradually win casual gamers over as Nintendo fans.
  37. 37. Nintendo’s Popular Game Franchises (5/7)
  38. 38. Scenario Themes and Implications(6/7)Scenario Theme 3: Bob-omb- Video game console industry continues to decline and traditional retail and online game shops dies off.- Tablet technology catches up to the performance of game consoles.- Popularity of casual games and gamers increase .- The revenue generated attracts well-known third party game developers.- More quality games are produced for thesmartphone, social media and other digital platforms
  39. 39. Scenario Themes and Implications(7/7)Implications of Scenario- In the worst case scenario, if Nintendo doesnot keep up with the trends, competing socialand mobile devices will take over the casualgamers market.-Third party game developers will not want todevelop games for Nintendo due to it being toocostly.-Nintendo will eventually pull out of thehardware market to cut its losses-Will focus on developing games for existingPlatforms instead.
  40. 40. Conclusion• The console gaming industry matures and is entering the decline phase.• Console manfacturers are facing stiff competition from tablet, smartphone and social media technology.• Casual and mobile gamers are on the rise.• In order to compete and sustain in the long-term, Nintendo must evolve according to the technology and social trends.• Its strength lies in its popular game franchises.• To compete effectively, Nintendo needs to spread its brand awareness through its franchises and create games that appeal the casual gamers market.
  41. 41. Q and A
  42. 42. Thank You Very Much
  43. 43. ReferencesBaker, Liana. (2012) RPT-Apples new iPad making waves in video game market retrieved from on the 13th of May 2012Brightman, James (2009) Can GameStop Survive a Digital Future?Retrieved from on the 12th of May 2012Brightman, James (2011) New Years Resolutions for Sony, Microsoft and Nintendo Retrieved from on the 10th of May 2012Brightman, James. (2010) Games as Packaged Media Is Dead. says Venture Capitalist Retrieved from on the 10th of May 2012Caoili, Eric. (2011) Ubisoft seeks to capitalize on social game benefits of next-gen consoles Retrieved from php on the 10th of May 2012Grant, Robert. (2006) Contemporary Strategy Analysis. (5th Edition) Singapore. Blackwell Publishing Limited.Matthews, Matt. (2011) The US Video Game Industry Is Declining. Retrieved from on the 10th of May 2012Minkly, Johnny (2012). Gaming’s White-Knuckle Transition.Retrieved from on the 13th of May 2012Meyer, De Wit. (2010) Strategy Synthesis. (3rd Edition) United Kingdom. Cengage Learning EMEA.
  44. 44. ReferencesBrightman, James. (2011) Nintendo Needs to Change Strategy Drastically, says Analyst. Retrieved from on the 10th of May 2012Schoemaker, Paul (1991) Retrieved from,%20Paul%20J.H.%20When%20and%20How%20to%20Use%20Scenari o%20Planning-A%20Heuristic%20Approach%20with%20Illustration.pdf on the 13th of May 2012.Schilling, Chris. (2012) Wii U App Store: How Nintendo will take Apple on at their own gameSchilling, Chris. (2012) It needs to be "intuitive, functional and simple" developers tell Nintendo GamerRetrieved from on the 14th of May 2012No Author. n.d. Fun Facts about Nintendo. Retrieved from on the 14th of May 2012.No Author. (2011) The Transformation of Video Games Industry. Retrieved from on the 10th of May 2012Scanlon, Jessie. (2007) Getting Serious About GamingEveryone knows video gaming is a growth industry. Whats less well known is how Web 2.0 and big business are contributing to that growthRetrieved from +the+power+of+gaming_the+power+of+gaming on the 13th of May 2012N.a. n.d. Nintendo Company History Retrieved from on the 10th of May 2012.