Nintendo is facing challenges maintaining market share with the Wii U not meeting sales expectations. The document proposes short and long term strategic options. In the short term, Nintendo could develop an online gaming console and partnerships. Long term, it could diversify into interactive learning and health games by building on successes like Wii Fit and leveraging R&D, talent, and distribution. The recommendation is to address competition short term while building a new "blue ocean" strategy long term moving gaming into education and healthcare.

1. MBA 2013-2014
Strategic Management

2. AGENDA
• Key business issues
• Company overview
• External analysis
• Internal analysis
• New strategy

3. Key Business Issues
• A Blue Ocean was created by launching the Wii.
- Target casual gamers (children, women, senior, families).
- It changed the way people played.
• They tried to sustain their increased market share by creating Wii U.
- Target both hardcore and casual gamers.
- However, it hasn’t achieved sales expectation.
• Another challenge is that there is an increasing current trend in online
and mobile gaming.
NOW WHAT?

4. INTERNAL OVERVIEW

5. Finance Overview

6. Nintendo’s History & Background
Fusajiro Yamauchi
• Historically the best known console manufacturer
• Longest running company in the market
• Long-time market leader of hand-held consoles
1889
Hanahuda
(1889)
1970
Color TV
Game 15
(1977)
1980
NES
(1983)
Game Boy
(1989)
1990
SNES
(1990)
Nintendo 64
(1996)
2000
Game
Cube
(2001)
Wii
(2006)
Nintendo DS
(2004)
2010
Nintendo
3DS
(2011)
Wii U
(2012)

7. Mission, Vision, Values and Behaviour
VALUES & BEHAVIOUR
• Equal commitment toward all
employees treating them the
same way as customers.
MISSION
“Providing customers with a ‘world of fun’,
which is both innovative and entertaining
with creative elements that have never
been experienced.”
• Create teamwork atmosphere
• High quality through
commitment and enthusiasm.
VISION
Expansion of the gaming audience, taking
risks and encouraging employees to make
creative decisions to challenge the notion of
what a video game is capable of being.
Source: Nintendo corporation, 2013

8. Business Model
CONSUMER
• High quality interactive games only
available for Nintendo’s HW.
• Games and HW system at a much
lower price than the competition
COMPANY
• Strong R&D: Innovation
• Strong game franchises
• Strong Branding
• Efficient manufacturing
CONTEXT
• Fast changing industry
• Lifestyle change
• Non-users emerging

9. Historic Strategy
1980-1994:
Customer value: High quality certified software
Key Resources in technology and brand
1994-2006:
Focus on technology: CPU performance and loading time
Cassette/CD as media
2006-2010:
VALUE INNOVATION: blue ocean + low cost
Target non-users (casual gamers) with Nintendo DS & Wii
2011-2013:
Entertainment system instead of just a gaming system
Target both, hardcore and casual gamers
Developing
games
that can only be
used with
NINTENDO HW

10. EXTERNAL ANALYSIS

11. Industry characteristics
Video Game Revenue Forecast ($ billion)
120.0
111.1
101.6
93.3
100.0
78.8
80.0
• Total Market Value of $79 bn in 2012
• 4 Key Market Segments:
• Video Game Consoles
60.0
• Handheld Video Games
40.0
• Mobile Games
20.0
• PC Games
0.0
2012
2013
• Consoles segment dominates the market.
Market Structure (2012)
18.3%
11.8%
2014
2015
Source: Gartner (Oct.13)
• Mobile games: the fastest-growing segment
• 3 Major Players : Sony , Microsoft, Nintendo
47.4%
• Short product life cycle
22.6%
• Rapid rise in consumers’ demand
Source: Gartner (Oct.13)

12. Competition
60%
50%
49%
37%
40%
30%
20%
Market Shares
31%
32%
31%
21%
40%
33%
27%
10%
0%
2010
2011
2012

13. Competitive 6 Forces
BUYERS
• Retailer bargaining
power
• Consumers’ demand
and high expectations
SUPPLIERS
• Medium bargaining power
• Game suppliers (in-house
mostly but powerful
external third parties)
• Raw materials
INDUSTRY RIVALRY
COMPLEMENTS
• DVD & blu-ray
• Online gaming
community
• Online marketplace
• Entertainment hub
(streaming, live
action TV)
• PlayStation 4
• Xbox One
ENTRY BARRIERS
• High Barriers for new
entrants in the
hardware console
market
•
•
•
SUBSTITUTES
PCs
Smartphones
Tablets

14. INTERNAL ANALYSIS

15. Competencies & Competitive Advantage
Core competencies
Competitive Advantage
Innovation
through
strong R&D
Simplicity as disruptive innovation to target
non-consumers by creating blue oceans.
Efficient
manufacturing
and distribution
Economies of scale enables them to sell
the base console at a higher profit than
competitors and with a fast time-to-market.
Developing
exclusive and
simple games
Strong Unique Selling Proposition
(USP) – Nintendo games can only be
played with Nintendo’s consoles.

16. SWOT ANALYSIS
OPPORTUNITIES
THREATS
• Increased market demand for
education and medical devices
due to lifestyle change (concern
for fitness & health)
• Online purchasing/e-marketing
STRENGTHS
•
•
•
•
Innovative mindset
In-house talent
Strong brand name
Expertise in video games
development
WEAKNESSES
• Technological
disadvantage (power of
console)
• Lack of new blockbusters
• Third party relationships
• Increase of Smartphone and
tablet games
• Increase in online gaming
• Competitors also targeting
casual gamers
• Refining their products to take
advantage of lifestyle
change(ex. medical and
education products)
• Use in-house talent and
strong brand name to
develop online and mobile
device applications
• Align new console launch with
new blockbuster game launch
• Build third party relationships
• Utilise open innovation to
to develop exclusive games for
keep technological
the Nintendo experience
advantage and develop new
innovations
• Enhance the console’s ability to
purchase games online
• Improve relationships with
third parties
• Create strong online gaming
community

17. NEW STRATEGY?

18. Strategic Options
SHORT TERM – address threats from competition
1. Develop a console for online gaming and develop online
gaming for target audience.
2. Build partnerships with third party developers
3. Develop new games for smartphones/tablets
LONG TERM – develop differentiated products
4. Build on success of Wii fit and Brain Train to create innovative
games for a new target audience – educators and medical
professionals

19. Value Chain Model
Short Term: Develop a console that suits online gaming for target audience
(children, women, seniors, families).
Develop new competence:
Build third party
relationships to develop
exclusive games

20. Value Chain Model
Short Term: Develop a console that suits online gaming for target audience
(children, women, seniors, families).
Build on existing competence:
Foster internal talent, recruit
new talent

21. Value Chain Model
Short Term: Develop a console that suits online gaming for target audience
(children, women, seniors, families).
Develop new competence:
Use open innovation to
develop online gaming

22. Value Chain Model
Long Term: diversify to interactive learning and health content
Develop new competence:
Create links with health and
education professionals, and
incorporate specialists into
current product development
structure

23. Value Chain Model
Long Term: diversify to interactive learning and health content
Build on existing competence:
Utilise strong R&D, internal
talent and open innovation to
adapt consoles and products

24. Value Chain Model
Long Term: diversify to interactive learning and health content
Build on existing competence:
Build on current distribution
network to develop medical
distribution network

25. Value Chain Model
Long Term: diversify to interactive learning and health content
Build on existing competence:
Refocus marketing campaign
to educate new target group

26. Our Recommendation
SHORT TERM – address threats from competition
•
Develop a console that suits online gaming and develop
online gaming for target audience (kids, families, women,
seniors)
•
Build partnerships with third party developers
LONG TERM – diversify to interactive learning and health content
•
Build on success of Wii fit and Brain Train to create
innovative games for a new use (physiotherapy , interactive
learning)

27. Performance Measures
DEVELOP A CONSOLE FOR ONLINE GAMING AND
DEVELOP ONLINE GAMING FOR TARGET AUDIENCE
• Console designing team assembled within 1 month.
• Console designed within 6 months.
• Team assembled to build partnerships with third party
developers within 1 month.
• Market share increased to 41% 1 year following product
release
DIVERSIFY TO INTERACTIVE LEARNING AND HEALTH CONTENT
•
•
•
•
Team assembled to liaise with medical and education professionals
within 3 months
Developer team assembled to create new games within 6 months
New games developed in 3 years
Reach 30 million new users within 3 years following product release

28. Conclusion
To recapture market leader
position Nintendo should:
Build on its existing target audience and
its core competences to create a
new blue ocean strategy
to move gaming into
interactive learning and health content.

29. THANK YOU