The Objective of Nintendo 200w

The objective of Nintendo 200w

In the period of 2003 and 2008, the video game industry has been stuck and locked into the existing market in which there are three competitors such as Nintendo, the company with the longest experience in game industry; Sony and the newest operator Microsoft. While Sony and Microsoft dominated the video console which is the big chunk of game industry under two products Playstation of Sony and Xbox of Microsoft, Nintendo is just positioned in the third stage and considered the follower for a long time. The main characteristic of game industry in this period is that all participants emphasized on beating the competition, achieving higher market share through attracting customers from other competitors and exploiting the existing demand, especially focusing on value and cost trade off. It can be said that game industry is operated under Red Ocean strategy. However, with the launch of the latest console for the seventh generation which is called Wii at the end of 2006, Nintendo achieved the big success in aspect of sales and market share and was in the top 10 of Business Week in 2008 (Business Week, 2008). As evaluated and studied by many studies, this success has been brought through the strong value innovation on Wii combined with the cost reduction. It means that Nintendo has implemented its cost leadership and differentiation strategies (Porter, 1980) or Blue Ocean strategy (Kim and Mauborgne, 2005). Implementing Blue Ocean strategy shows the objectives of Nintendo as to create new demand which is not available before and to make the bigger pie of market in order to achieve the bigger market share

Aims and objectives of the report 150w

It is difficult to image that Nintendo became one of 10 companies or brands in Business Week in 2008. Even though Nintendo was ranked at the third position in the game industry, it always followed Sony and Microsoft while Nintendo was the longest experience brand in this industry. However, Nintendo changed its position after launching its new product named Wii. Many studies and scholars explained the reason for the success of Nintendo is Blue Ocean strategy (Kim and Mauborgne, 2005; Porter, 1980). The main point of this strategy is to create new market and to achieve bigger market share. This report will focus on analyzing how Nintendo applied Ocean Blue strategy to break its big success in the game industry. To find out the success behind the launch of new product Wii, the objectives of this report are to understand the environment which Nintendo operated and its core competencies; to find out the problems which Nintendo faced before launching and to clarify the reasons why Nintendo applied Blue Ocean strategy

The report structure 100w

As mentioned above, this report needs to handle three objectives such as to understand the environment in which Nintendo has done its business, to know problems Nintendo faced under the pressure of strong competition with Sony and Microsoft and to clarify Blue Ocean strategy applied by Nintendo. Hence, this report will follow the structure with four important steps. Firstly, external environment needs to be mentioned to know its influence to Nintendo’s business through two popular models such as PESTEL and Five Forces. Secondly, with the purpose of maximizing strengths, minimizing weaknesses as well as catching opportunities and avoiding threats, internal analysis through SWOT is also mentioned. Moreover, some core competencies such as financial power and value chain are analyzed. Thirdly, the problems which Nintendo faced will be found as the background and motivation to apply Blue Ocean strategy. And lastly, how Nintendo apply Blue Ocean strategy will be explained. The report structure will be summarized as follows

Step 1: External analysis

• PESTLE analysis
• Porter’s Five Forces analysis

Step 2: Internal analysis

• SWOT analysis
• The value chain
• Financial analysis

Step 3: Nintendo’s problems

Step 4: The application of Blue Ocean strategy model

The value chain 300w

It is argued that when gaining competitive advantages, the organization is considered under the broader context including suppliers, firms, distributors and consumers. As defined by Porter (1985) and cited in Thompson and Martin (2005), the cooperation between four parties mentioned above is considered the value chain to achieve cost reduction and service differentiation. The model of value chain analysis is Porter’s value chain which has been shown in the figure 1 (p. ).

Figure 1: Porter’s Value Chain model

[pic 1]

Source: Porter (1985) cited in Thompson and Martin (2005)

As considered a part of value chain analysis, the results of internal analysis through SWOT analysis and external analysis through Porter’s Five Forces have been applied (Robson, 1994). As analyzed above, to maximize its strength as exclusive games empower brand, to minimize its weakness in targeting low margin and low segment as well as catching new opportunity from big potential market as casual players, Nintendo has put its focus on high quality/low cost products which can offer customer service differentiation. As stated by BOD of Nintendo (2008), the main strategy of Nintendo is to produce the less powerful system to reduce the production cost to offer lower price products to customer, even a few hundred dollars lower. To lower the operation cost, it is suggested that Nintendo has focused on reducing the cost of production and the cost of delivery down in the stage of Inbound logistics, Operation and Outbound logistics. Moreover, SWOT has suggested that Nintendo needs to focus on catching the big potential market as casual players who require the product differentiation. Hence, Technological development is improved and reorganized by Nintendo with the purpose of keeping updated with the industry process, especially the stage of Research and Development. Whereas Microsoft and Sony launched many different versions of their consoles, Nintendo just emphasized on creating the differentiation on two versions of its consoles. As the results of effective Inbound logistics, production and outbound logistics, Nintendo was reported that the production phase achieved 1.8 million per month and the distribution workforce increased three times to meet the demand. As shared by CEO of Nintendo Reggie (2008), the solid supply chain was built by merchandising products to customer’s hands through third party logistics specialist, distribution network and order fulfillment (Genco, 2008). Moreover, the supply chain of Nintendo has been supported by marketing strategy and sales. According to Thomas Wailgum (2008), Nintendo became the global brand through shrewed marketing strategy to keep high demand on its products.