Nintendo Case Study

Executive Summary

Nintendo Co. Limited (Nintendo) is considered to be one of the top three manufacturers in the video game industry and has been a major player since the mid 1980s. However, in the early 2000s there was a shift in the gaming industry and the latest release from Nintendo, the GameCube, did not perform as well as Microsoft’s Xbox or Sony’s PlayStation.

Nintendo realized that the gaming industry had been focused on meeting the demands of the current, limited, market place and in an effort to reposition the company at the top of the video game industry introduced a new strategy that would disrupt and expand the types of consoles on the market.

While Microsoft and Sony continued to focus on developing the hardware of their game consoles and enhancing the graphical displays to impress hardcore gamers, Nintendo focused on an entirely new market. In 2006, the Nintendo Wii was introduced and was designed for gamers outside the hardcore category. This new system was marketed to new categories of gamers, such as families and various age groups. With this disruptive technology, Nintendo was able to gain new customers and with the technical simplicity of the machine it was sold at a much cheaper price point than its competitors.

With the success of the Nintendo Wii, it is likely that rivals Microsoft and Sony will respond with similar technologies. Therefore, Nintendo needs to continue this trend of disruptive innovation to hold its stance in this new market while also trying to regain consumers from the already dedicated gamers market.

Data Collection

Nintendo has an extensive history of manufacturing electronic games, and first entered the video gaming industry in the late 1970s with the introduction of the Color TV-Game, followed by the Game & Watch in the early 1980s - both of which were arcade style games created for home and personal use. These technologies were introduced in Japan, with limited gaming capabilities, but proved to be successful and Nintendo built on this success with the launch of a family computer, the Famicom, in 1983. In 1985, the Famicom was released in the United States under the name Nintendo Entertainment System (NES) and was a major hit that redefined the global video game industry (Dunn, 2017).

Nintendo’s success continued throughout the 1980s and 1990s with other game consoles including the Game Boy, Super Nintendo Entertainment System (SNES), Nintendo 64, Nintendo GameCube and the Nintendo DS (Nintendo, n.d.). Nintendo has always been a dominant player in the industry and since introduction of the NES had sold more than two billion games (Farhoomand, Joshi, & Tsang, 2009, p.2). Although the Nintendo systems appeared to be a dominant design in the market, the video game industry became competitive when both Sony and Microsoft began producing game consoles.

Within the video game industry there is a trend to release new game consoles every five to six years. This cycle creates a battle between the competitors to see who will create the next innovative console and emerge as a winner (Farhoomand, Joshi, & Tsang, 2009, p.4). In 1995 Sony introduced its PlayStation in the United States which had an enormous impact on Nintendo’s foothold in the industry. The market competition hit an all time high in 2000 with the introduction of the Sony’s PlayStation 2 and Microsoft’s Xbox in 2001; Nintendo had introduced its GameCube around the same time but it did not make a huge impact in the industry. Nintendo, which was once the dominant design, was now left with only a small piece of the market. Of the three game consoles on the market at that time, the PlayStation 2 had achieved the most success and by 2008 more than 140 million units were sold worldwide (Farhoomand, Joshi, & Tsang, 2009, p.6).

It was at this pivotal time that Nintendo appointed Satoru Iwata as president of the company, with the hopes that a change in senior leadership would lead to a new strategic plan for the company. Mr. Iwata had many years of experience and a great knowledge of the market; he was able to identify the potential issues the industry would face and implemented a strategy to develop game consoles which would appeal to an untapped market – the ‘non-gamers.’ To accomplish this, Nintendo was to create video games that would be simple, easy to use and based on real-life situations that appealed to people who wouldn’t normally use gaming consoles. It was under this strategy that Nintendo developed the Nintendo DS (DS), a portable game console, and the Nintendo Wii (Wii), a family oriented home console.

The DS was launched in 2004 as an expansion on Nintendo’s previous handheld devices. The DS included new features such as a touch-screen that allowed users to tap the screen or use a stylus pen to complete actions without the use of buttons or joy-sticks. Further expansion of the DS line involved the Nintendo Wi-Fi connection, which was a service that allowed users to connect and play with others over wireless networks. The DS was a huge success and allowed Nintendo to continue to maintain a hold of over 90% of the market share of handheld devices (Farhoomand, Joshi, & Tsang,2009, p. 5). Not only did the DS allow Nintendo to introduce many innovative concepts, it also tested the strategy that non-gamers could be a new market for gaming systems. Many of the game titles that were most popular for the DS were geared towards non-gamers, such as Nintendogs and Brainage (Farhoomand, Joshi, & Tsang,2009, p. 5).

With this strong foothold in the portable console market segment, Nintendo also needed to regain its market share in the home console market segment. Sony and Microsoft had focused on developing the hardware of their gaming systems, making them faster and enhancing the graphical displays. Much of Sony’s success with the PlayStation was due to its backwards compatibility, meaning that games developed for the original PlayStation could also be played on the PlayStation 2(Farhoomand, Joshi, & Tsang,2009, p. 7). The game console could also be used for CDs and DVDs, marketing the system as a total entertainment package. The next generation of system from Sony, the PlayStation 3, was also a multitasking system and had the capability to play Blu-Ray and streaming services. However, Nintendo did not follow this trend of technological advancements and instead focused on what it had learned from the handheld devices and potential new markets.

The Nintendo Wii was developed to reintroduce users to Nintendo’s line of home consoles; the timing of the release was strategically planned with the release of Sony’s PlayStation 3 and Microsoft’s Xbox 360. The Wii console was a slim design that was controlled by a controller that resembled a TV remote, targeted towards non-traditional users (Farhoomand, Joshi, & Tsang,2009, p. 5). The controller was designed to be user friendly, a simple technology that used motion detectors to translate the movements of the user into the action of the game. The Wii also gave the user the option of connecting to the internet view new updates and weather information. The console did not use Nintendo’s previous cartridge technology, but instead was games were discs similar to that of a DVD. While the Wii could not be used as a DVD player, it had built in connectivity to a Wii shop which allowed Nintendo to sell digital versions of its classic NES and Super NES games for download.