The current paper is committed to the analysis of Nintendo Company’s Wii product. When conducting this analysis, a conclusive description of the company in made. The analysis begins by highlighting its current CEO, total profit and sales, as well as its performance in the industry. To help analyze both internal and external environments of the company, SWOT analysis is undertaken using the information in the case study. The presentation is also devoted to analyzing the competitiveness of the industry where the company operates using the Porter’s five forces model.
Located in Kyoto in Japan, Nintendo has continued to operate as a multinational company. It was established in 1889 primarily for making or producing playing-cards. Since its inception to produce handmade cards, the company has been an important player in the video game industry. However, Nintendo Company first developed its video game systems in 1979, easily recognized as TV Game 6 and TV Game 15. The company has since become most influential in the industry with constantly developing innovative products like portable LCD video game with a microprocessor and the Nintendo Entertainment System which is the 8-bit video game console. With 3000 employees and CEO Iwata, as at 2008, the company managed to gather revenue amounting to $16.4 billion. The company not only came behind Microsoft Corporation and Sony Corporation in terms of sales, it as well derived its sales revenue from the business of video games.
The company’s performance in the video game industry has continued to fall with drastic falls made in its revenue. As opposed to the industry peers like Sony and Microsoft, Nintendo’s revenue has decreased from $20,035.6 million in 2008 to a lower $12,151.9 million in 2011. This signifies its poor performance in terms of revenue generation. This means that the company as well is registering a decreasing bottom line. There is a drastic reduction in the company’s net income. For instance, the registers $3,083.03 million in 2008 and only manages to register a lower $929.9 million in 2011. The company’s profitability in fiscal 2011 was negative with -0.17% return on assets, -0.21% return on capital and -1.69% return on equity. These of course compared negatively to those of its industry peers like Sony and Microsoft which recorded positive profitability ratios.
Strengths
The company has strength of being innovative and unique. Its innovativeness is reflected in its unique Wii product. Its product has unique features. For instance, it stands out as the only company that produced a Wii Menu, a product that easily incorporated itself in the users’ everyday lives. The company’s strength also rests on its innovation of Wii which is unique home console. For instance, it made Wii which was the first console with online capabilities. This however stems from its ownership of unprecedented interface and innovation. The company as well has distinctiveness of hardware motion recognition.
Besides making unique and innovative products, the company also has lower costs of software and hardware. The company has its costs lower than its industry peers as it has maintained its hardware and software costs at reduced value.
Also, it has outstanding target audience. It has constantly targeted broad audience. Its Wii games can be played by individuals of all age groups. In addition, the games are easy to use as opposed to the complicated controllers of Microsoft Xbox 360 or Sony PlayStation 3. Generally, it has strength of intuitive usage.
Weaknesses
Low earning is its weakness. Japanese sales have fallen below that of Sony's PlayStation 3 in 2009. The company also has a weakness of a limited selection of its software. It lacks ownership of motion sensing software owned by its competitors. Generally, it has lower earnings, low quality of graphic, as well as not being environment friendly.
Opportunities
The company should focus on majoring in business to consumers and business to business marketing strategies so that it boosts its sale volume. Also, being that it has lower costs, it should focus on occupying a larger market share. For instance, it should focus on penetrating new markets in Europe, Asia and Middle East. The company also has an opportunity of conducting extensive research on how to avoid emissions. It can as well focus its marketing strategies to the novice gamers, adults and seniors inclusive. With superb innovative interfaces, it can focus om further designing an appealing product.
Threat
The major threat is loss its potential customers. The company lacks software selection and thus is likely to lose its customers to industry peers. There is also likeliness of losing market share in the stern challenge of seventh generation of video game consoles.
Company analysis using Porter's five forces model
In essence, Nintendo’s behaviour and competiveness in the gaming industry will be in influenced by intensity of rivalry of existing industry players, power exerted by its customers, power of suppliers, potential treat of new industry entrants as well as threat arising from substitute products (Porter, 1998; Wheelen and Hunger, 1998).
The Intensity of Industry Rivalry
Even though the industry has fierce rivalry arising from Microsoft Xbox 360 and Sony PlayStation 3, the gaming industry is so broad that it is hard for either of the competitors to steal market share from each other. Basically, the larger industry size is a plus for Nintendo Company. However, degree of rivalry is high as there is threat arising from Microsoft Xbox 360 and Sony PlayStation 3substitute products.
Threat of new entrants
The economies of scale enjoyed by Nintendo Company are likely to keep off new competitors. The company has a strong distribution channels which is positive for its existence in the industry. Besides, Nintendo’s brand name is superb. In a situation that new entrants improve value of their brand, the company will be positively affected (Porter, 1998). Also, Nintendo’s unique products will lock out more industry entrants and thus reducing level of competition.
Threat from substitute products
Based on the lower product switching costs in the gaming industry, substitute products are threat to Nintendo Company’s profitability. Nintendo charges higher prices as compared to its competitors. This is likely to make potential customers turn to that cheaper competitor product with similar performance (Wheelen and Hunger, 1998). This will reduce the industry’s profitability to Nintendo Company.
Buyer power
The concentration and the higher level of buyer knowledge of the products highly determine the industry’s profitability (Porter, 1998). Buyers are larger in size and highly decentralized. Due to the fact they are highly informed about video gaming products, Nintendo Company is likely to face stiffer buyer powers. Consumers as well are very much aware of the company’s competitor differentiation. This increases their bargaining power in the industry (Wheelen and Hunger, 1998). The industry is also characterized with lower switching costs which give consumers bargaining power.
Supplier power
The bargaining power of suppliers is higher as characterized by higher switching costs. It is difficult for Microsoft Xbox 360 and Sony PlayStation 3 suppliers to offer same services to Nintendo Company. Also, suppliers have higher bargaining power as evident by their prospect of engaging in forward integration.
Generally, there is intense competition in the industry due to existence of stronger threats of substitution and entry as stronger power of suppliers and buyers (Porter, 1998).
References
Case 35 Nintendo's Wii.
Haberberg, A. and Rieple, A. (2001). The Strategic Management of Organizations. Essex: Pearson Education Limited.
Nintendo Corporation’s Financial Statement fiscal year 2011. Retrieved 17 March 2012 from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=NTDOY:US&dataset=incomeStatement&period=A¤cy=US%20Dollar
Porter, M. (1998).Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York. Free Press.
What is Porter's 5 Forces analysis? Retrieved 17 March 2012 from http://www.coursework4you.co.uk/essays-and-dissertations/porter-5-forces.php
Wheelen, T. and Hunger, J. (1998).Strategic Management and Business Policy, 6th ed. Reading. Addison-Wesley.
