Nintendo: The Illusive Competitive Advantage Luke Nguyen Raymond Estrella Toan Bui James Crosby on !

atley Jeremy "esterman The #niversity o$ Te%as at allas

Nintendo: The Illusive Competitive Advantage

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History The video game industry o'es mu(h o$ its popularity generated today to one (ompany: Nintendo) *rom its beginnings in the late nineteenth (entury+ Nintendo has proven the ability to survive throughout dire (ir(umstan(es+ but the (hallenging dynami(s o$ the video game industry proved (ompanies (ould not survive 'ithout adapting a variety o$ business strategies) In ,--.+ Nintendo 'as established by *usa/iro 0amau(hi and began as a (ard (ompany 1Jones+ &2,34+ produ(ing playing (ards similar to those $ound in (asinos and game parlors) The (ompany maintained this simple produ(t line $or over 52 years until the grandson o$ *usa/iro+ !iroshi 0amau(hi+ took over the (ompany and began to e%plore 'ays to e%pand the business) 6olidi$ying the $irst game (ard li(ensing deal in ,.5.+ 0amau(hi agreed to produ(e playing (ards $or isney7s i(oni( (hara(ters+ bringing in signi$i(ant revenue and a (hange o$ pa(e $rom the arena o$ gambling) 6u((ess driven+ 0amau(hi e%panded the (ompany into 8non9game related markets 'hi(h in(luded ta%i servi(es+ hotels+ and even the $ood industry+ all 'hi(h $ailed: 1Cohen+ &2,;4) Taking to a host o$ di$$erent ventures 'hile (ontinuing to produ(e the ma/ority o$ produ(ts $or the playing (ard market+ the (ompany $ell into debt and 'as at risk o$ $a(ing bankrupt(y) Nintendo needed to reinvent itsel$ and did so by de(iding to manu$a(ture toys $or (hildren and hired engineers to develop and run the produ(tion lines) <unpei 0okoi+ a re(ently hired me(hani(al engineer+ developed and (onstru(ted an e%tending arm toy on his o'n initiative) !is (reation 'as later dis(overed by 0amau(hi on a $a(tory visit) Nintendo developed and produ(ed this toy+ the 8#ltra !and:+ 'hi(h

Nintendo: The Illusive Competitive Advantage

be(ame an instant su((ess) 0okoi moved into the produ(t development division and the (ompany began to dabble in 'hat is no' re$erred to as 8video games:) Nintendo started to produ(e ele(tro9me(hani(al ar(ade (abinets and video games in the ,.=27s) A su((ess$ul breakthrough into the video game market o((urred 'hen 6higeru >iyamoto developed and released onkey ?ong) >ost ar(ade games in the ,.=27s primarily $o(used on shooting or driving simulations) Nintendo introdu(ed a ne' genre o$ gaming re$erred to as 8plat$orming:+ kno'n as gameplay 'here an avatar /umps upon plat$orms and dodges obsta(les) ue to e%treme popularity+ onkey ?ong 'as produ(ed $or multiple systems 'ithin the home video game market) A$ter years o$ initial su((ess+ Nintendo 'as greatly a$$e(ted by the video game market (rash in the early ,.-27s) A number o$ $a(tors signi$i(antly (ontributed to the (rash+ in(luding negative per(eptions+ market saturation+ and the introdu(tion o$ home (omputers 1 illon+ &2,,4) 6hortly pre(eding the (rash+ Nintendo 'as seeking to enter the market o$ home video game (omputers and tried to se(ure a deal 'ith Atari to distribute their system+ 8The *amily Computer:+ or *ami(om) Atari su$$ered $inan(ially $rom the (rash and never se(ured a deal to distribute the *ami(om gaming (onsole) As a result+ Nintendo developed and released the Nintendo Entertainment 6ystem 1NE64 into the Ameri(an market in ,.-5) !igh @uality (ontrol measures+ none%istent (ompetitors+ and $inan(ial (apabilities led to $irst9mover and (ompetitive advantages) Computers 'ere $ar too e%pensive and di$$i(ult to operate and the video ar(ades had be(ome less $amily $riendly over the years+ allo'ing Nintendo to (ontrol the entire home video game market) Re(ogniAing Nintendo7s su((ess+ rivals began to enter into the video game market) The immense su((ess o$ the NE6 planted the seeds $or the up(oming 8Console

Nintendo: The Illusive Competitive Advantage

"ars: bet'een Nintendo and a ne'ly $ormed Japanese gaming (ompany+ 6ega) Boasting additional $eatures $rom the ar(ade s(ene su(h as a light gun+ 6ega attra(ted so$t'are developers 'ho 'ere unhappy 'ith the stringent re@uirements en$or(ed by Nintendo) En/oying marginal su((ess+ the 6ega >aster 6ystem prompted the (ompany to produ(e a ne' generation o$ hard'are) The ,B bit generation began to tou(h on limitations o$ storage te(hnology) Nintendo and 6ega used (artridges to house physi(al memory (hips in order to store their video game so$t'are) Capa(ity $or the so$t'are 'as prohibitive to game design and additional memory in(reased the pri(e o$ games signi$i(antly) These te(hnologi(al limitations led Nintendo and 6ega to resear(h C 9RC> storage based te(hnology) Nintendo entered into a partnership 'ith 6ony+ an ally 'ho had reliably produ(ed the sound pro(essor $or the 6uper NE6) Initial development produ(ed several 'orking systems to evaluate $or produ(tion+ but the (ompany gre' 'eary as they 'ere not able to a(hieve a satis$a(tory li(ensing agreement 'ith 6ony 1 illon+ &2,,4) 6ega released the C 9RC> add9on to a la(kluster re(eption+ but the industry had begun the movement to'ards opti(al drive systems using (ompa(t dis(s $or storage) *o(using e$$orts on more advan(ed video pro(essing te(hnology+ Nintendo 'anted to adhere to the internal mantra o$ 8@uality over @uantity: developing the Nintendo B; 1NB;4) The NB; 'as a (artridge based system 'ith innovative hard'are a((essories but still remained true to the rigid Nintendo stru(ture o$ li(ensing and @uality (ontrol) 6o$t'are developers unhappy 'ith Nintendo7s stri(t internal pro(edures moved to a ne' (ompetitor+ the 6ony Dlay6tation 1D6N4) The $ailed partnership 'ith 6ony produ(ed the D6N+ debuting a $ull year ahead o$ the NB;) Nintendo7s delayed entry and high (ost o$

Nintendo: The Illusive Competitive Advantage

development eventually led the D6N to dominate the NB; in terms o$ sales+ availability+ and market share) In rea(tion to the D6N+ Nintendo7s ne%t system release+ the <ameCube+ sho'(ased mini9 E te(hnology and multiplayer $o(used hard'are+ similar to (ompetition $rom 6ony) >any developers readily a((epted the ease o$ li(ensing and development $or the D6N+ leaving Nintendo 'ith $e' @uality titles produ(ed by in9house so$t'are development teams) #n(ertainty in the home video game market (ontinued as 6ega le$t the (onsole market a$ter 'eak sho'ings $rom the 6aturn and ream(ast (onsoles) 6ony en/oyed unbridled su((ess 'ith the release o$ the Dlay6tation & and >i(roso$t emerged to (hallenge the industry 'ith limitless $inan(ial means+ $or(ing Nintendo to rethink market strategies) Competing in an in(reasingly (ompetitive market re@uired the (ompany to develop a broader approa(h to $uture produ(ts) Relying on innovative te(hnology+ Nintendo released the "ii and sho'(ased motion (ontrol as a ne' style o$ gameplay) The system gained mass market appeal by attra(ting an audien(e 'ho previously avoided video games and o$$ering an online servi(e 'ith a((ess to a library o$ Nintendo (lassi(s) To date+ it is Nintendo7s best9selling (onsole) Riding the 'ave o$ su((ess o$ the "ii+ Nintendo (ondu(ted an internal analysis to dis(over inspiration $or the ne%t system+ the "ii #) The $o(us o$ multiplayer gameplay that the "ii o$$ered did not please some o$ the (ompany7s long time $ans+ so Nintendo attempted to remedy the (omplaint by on(e again o$$ering a uni@ue pie(e o$ hard'are+ taking (ues $rom the handheld <ameBoy produ(t line) The "ii # gave players a tou(h s(reen devi(e that players used on the go and at home+ never sa(ri$i(ing progress due to leaving the base (onsole unit) Competitors (ontinuously out sell the "ii # by large

Nintendo: The Illusive Competitive Advantage

margins and the $uture is unkno'n+ but e%amining key de(ision points in Nintendo7s history give insight as to ho' the (ompany arrived here) Three Critical Decision Points Decision Point One: Nintendos Reaction to the Crash of 1982 Eideo games proved popular throughout the latter part o$ the &2th (entury+ but inade@uate system advan(ements and market stagnation led to the do'n$all o$ the gaming industry in ,.-&) Industry revenues $ell .=F $rom 3 billion dollars to /ust under ,22 million dollars in nearly a year 1"erner+ &2,,4) >ultiple gaming plat$orms had $looded the market 'ith la(kluster systems and poorly designed games+ leaving (onsumers uninterested) Drior to debuting in Ameri(a+ Nintendo en/oyed $inan(ial su((ess in Japan allo'ing the (ompany to take advantage o$ te(hnologi(al advan(ements despite their un$amiliarity o$ the market 1>(*erran+ &2,34) The (ompany realiAed their innovations and gameplay 'ere rare and the threat o$ rivalry 'as minimal $ollo'ing the (rash in ,.-&) Through their e%ternal analysis+ Nintendo dis(overed opportunities to e%ploit the market) Nintendo7s ne' game (onsole+ the *ami(om+ 'as released in Japan in ,.-3) It 'as thoroughly redesigned and rebranded to e%ploit $irst mover advantages in the Ameri(an gaming market 1Jones+ &2,34) The *ami(om 'as renamed to the Nintendo Entertainment 6ystem 1NE64 to introdu(e a produ(t similar to the DC+ yet distin(t $rom previous video game (onsoles) *eaturing an en(losed (artridge slot $or the so$t'are games and (ontrollers 'ith improved $un(tionality+ Nintendo di$$erentiated the produ(t by in(reasing the per(eived value $or their (ustomer base) The NE67s physi(al ar(hite(ture 'as (ompletely overhauledG the (hildlike hard'are 'as redesigned into a

Nintendo: The Illusive Competitive Advantage

mature ele(troni( produ(t+ (ombating the negative per(eption o$ pre9(rash video game (onsoles) *a(ing heavy skepti(ism $rom retailers+ Nintendo entered into non9e@uity allian(es 'ith distributors and managed to sell 52+222 units o$ the NE6 during the holiday season o$ ,.-5 1?ohler+ &2,24) To $urther persuade the Ameri(an market+ the (ompany implemented a ne' mission statement: 8)))By listening (losely to our (ustomers+ 'e (onstantly improve our produ(ts and servi(es: 1Nintendo+ &2,;4) Droviding the $oundation $or (ompany branding and design+ Nintendo di$$erentiated their produ(t $rom every gaming (onsole prior to their release by e$$e(tively marketing 'ithout deterring (onsumers) At the end o$ ,.-B+ over , million units o$ the NE6 'ere sold 1Dolsson+ &2,;4) "ith su(h high demand and popularity+ multiple game developers 'anted to produ(e titles $or the NE6) Nintendo di(tated third9party so$t'are developers to limit produ(tion to no more than 5 titles and all (artridges manu$a(tured held the 8,2NE6: se(urity (hip+ preventing unauthoriAed games $rom being released 1C%$ord+ &2254) 6uperior standards allo'ed the (ompany to have total (ontrol over the produ(tion and development o$ games) Nintendo $ully (ontrolled third party li(ensees+ providing the (ompany 'ith a sustained (ompetitive advantage 'ithin the video game market) This style o$ (ontrol 'as un$amiliar to so$t'are developers a((ustomed to total $reedom throughout the development pro(ess) The 8,2NE6: se(urity (hip permitted the (ompany to uphold their mission statement and reiterate @uality standards to the (ustomer base) Evaluating the general environment+ Nintendo de(ided to pursue a diversi$i(ation business level strategy by developing the 6uper Nintendo Entertainment 6ystem 16NE64) The 6NE6 improved on the aging 'eaknesses inherent in the NE6+ but (arried over t'o

Nintendo: The Illusive Competitive Advantage

ma/or $la's: the stri(t li(ensing measures and the limited storage (apa(ity o$ (artridges) The (ompany7s strategy did not allo' $or (hanges to the li(ensing stru(ture+ but a solution to the storage limitation 'as dis(overed 'ithin the value (hain) A strong history o$ su((ess bet'een Nintendo and 6ony allo'ed $or ta(it (ooperation+ produ(ing a hard'are based solution to storage issues+ but the produ(t 'as never introdu(ed into the market) Decision Point Two: Failed Partnershi with !ony Nintendo en/oyed su((ess $ollo'ing the video game (rash o$ ,.-&+ but the (ompany $a(ed $ormidable unit (osts and limited game @uality based on dependen(e o$ the (artridge $ormat) Dartnering 'ith 6ony in ,.--+ Nintendo developed a C 9RC> add9 on into the 6NE6 allo'ing $irst9mover advantages 'ithin the video game market) Nearing (ompletion+ the t'o parties $ailed to agree on a (ontra(t $or the use o$ the te(hnology and as a result+ Nintendo (ontinued the use o$ (artridges 'hile 6ony be(ame a ne' (ompetitor in the market) Nintendo7s internal analysis $o(used on @uality and an in(rease in per(eived value) A ,..3 /oint venture bet'een Nintendo and Argonaut produ(ed the 6uper *H RI6C mi(ropro(essor used in sele(t so$t'are titles su(h as 6tar *o% 1>(*erran+ &2,34) The $le%ibility o$ the 6uper *H (hip allo'ed so$t'are developers to enhan(e the graphi(al (apabilities 'ithout re@uiring the (ustomer to buy a ne' (onsole+ enhan(ing the value o$ the 6NE6) Implementing the (hip proved di$$i(ult and in(reased (ost to games+ resulting in a la(k o$ @uality titles) 6ony took advantage o$ the situation 'ith the release o$ the Dlay6tation 1D6N4 in ,..;+ attra(ting third party developers $rustrated 'ith Nintendo7s stri(t li(ensing pro(edures 1>alik+ ,..=4)

Nintendo: The Illusive Competitive Advantage

Nintendo lost signi$i(ant ground in hard'are and so$t'are development as a result o$ the delayed release o$ the ne%t system+ the Nintendo B; 1NB;4 in ,..B) Consumers desired a larger variety o$ games $eaturing ne' and e%(iting (hara(ters Nintendo $ailed to provided) "ith a large so$t'are developer base+ ne' titles released $or the D6N introdu(ing (onsumers 'ith a desired gaming e%perien(e+ giving a (ompetitive advantage to 6ony) Nintendo $o(used primarily on in(reasing graphi(al hard'are (apabilities instead o$ pursuing a C 9RC> based produ(t) This de(ision a$$e(ted Nintendo7s overall outlook $or the $uture as the (ompany sought $or a 'ay to regain a (ompetitive advantage in the video game market) Nintendo7s produ(t development slo'ed (onsiderably due to the de(ision to rely on (artridges rather than adopting C 9RC>7s) The re@uired spa(e $or game development advan(ed 'ith hard'are (omple%ity+ in(reasing the value o$ C 9RC>7s $or so$t'are developers) #nlike (artridges+ C 9RC>7s on the D6N allo'ed $or a signi$i(ant in(rease in megabytes o$ data+ 'ith B52mb (ompared to only ,Bmb on the NB; 1>alik+ ,..=4) Nintendo7s high @uality strategy retained a hand$ul o$ so$t'are developers and produ(ed limited numbers o$ popular titles) The D6N had ,52 titles released by June o$ ,..= in (omparison to only ,= $or the NB; 1Bro'der+ ,..=4) Nintendo (ontinued to maintain a strategy o$ @uality over @uantity) "hile (ertain graphi(s are (learer+ the sales numbers do not ne(essarily mat(h the (ompany7s strategy) 6ony had about I5 billion in video game revenues in ,..B and Nintendo ended the $is(al year 'ith sales o$ I3)& billion 1>alik+ ,..=4) As a result+ Nintendo 'as $or(ed to $ind methods to signi$i(antly (ompete in an industry 'here the (ompany en/oyed a sustained (ompetitive advantage previously)

Nintendo: The Illusive Competitive Advantage

,2

The ability o$ Nintendo to implement a proper strategy 'as (ru(ial to their su((ess $ollo'ing a $ailed partnership 'ith 6ony) espite the popularity o$ the NB;+ the

(ompany had $ailed to (reate a proper $irst9mover advantage in the (reation o$ innovative hard'are (omponents into their systems) Nintendo needed to dis(over methods to regain a (ompetitive advantage 'ith the e%ponential gro'th o$ te(hnology) Decision Point Three: Post "ii #nalysis Entering a ne' era in gaming 'ith the su((ess o$ the 6ony Dlay6tation 3 and >i(roso$t Hbo%+ Nintendo $a(ed pressure to release a devi(e to revolutioniAe the gaming e%perien(e) The (ompany proposed to target an e%tensive demographi( neither 6ony or >i(roso$t 'as (apable o$ a(@uiring and developed a (onsole both young and mature audien(es (ould en/oy) 6atoru I'ata+ the (urrent CEC o$ Nintendo states+ J"eKre not thinking about $ighting 6ony+ but about ho' many people 'e (an get to play games) The thing 'eKre thinking about most is not portable systems+ (onsoles+ and so $orth+ but that 'e 'ant to get ne' people playing gamesJ 1Chang+ &22=4) Continuing a trend o$ produ(t di$$erentiation+ Nintendo introdu(ed ne' te(hnology to e%pand upon their (onsumer base) Introdu(ing the Nintendo "ii in &22B+ the system @ui(kly be(ame a popular (onsole on the market by implementing motion9(ontrolled gaming+ e%ploiting $irm linkages 'ith Net$li% and !ulu+ and (reating intuitively simplisti( games) To date+ the "ii has been Nintendo7s best9selling (onsole 'ith over ,22 million units sold+ initially selling over 3 million units in its $irst @uarter alone 1>a( onald+ &2,34) The groundbreaking te(hnology o$ the "ii attra(ted ne' (onsumers+ 'hi(h $ul$illed I'ata7s goal o$ having 8)))ne' people playing games: 1Chang+ &22=4) *ollo'ing the "ii7s su((ess+ >i(roso$t and 6ony released (ompeting produ(ts in

Nintendo: The Illusive Competitive Advantage

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order to (hallenge Nintendo7s7 (laim o$ the entire market) "ithin a year+ >i(roso$t and 6ony (reated a (ompetitive parity 'hi(h impeded Nintendo7s advantage) The release o$ >i(roso$t7s L?ine(t7 and 6ony7s L>ove7 te(hnology @ui(kly overshado'ed the "ii+ de(reasing overall sales by 3&F 1>urphy+ &2,,4) "ith the "ii sustaining signi$i(ant losses+ Nintendo relied on the handheld gaming strategy to remain pro$itable) Nintendo has held a sustained (ompetitive advantage in the mobile gaming market) "ith the release o$ the original <ameBoy in ,.-.+ the (ompany pioneered the development o$ the portable gaming market by introdu(ing a mobile plat$orm $eaturing the @uality titles available on the home system) *ollo'ing the trend o$ building high @uality produ(ts+ (ompetitors 'ere unsu((ess$ul in introdu(ing an alternative to (hallenge any handheld devi(e produ(ed by Nintendo) As home (onsole sales de(lined+ the (ompany (ontinued to innovate by o$$ering the Nintendo 6 in &22; and the Nintendo 3 6 &2,&) "orld'ide+ the 6 a((ounted $or over ,52 million units 'hile the 3 6 has sold over ;2 million units to date 1E< ChartA+ &2,;4) The overall pro$it earned by handheld gaming devi(es $urther (ompensated $or the "ii7s loss in sales) The (ompany then sought a$ter a ne' strategy 'hi(h 'ould help regain (ompetitive advantage through produ(t di$$erentiation) Nintendo (ondu(ted an e%ternal analysis o$ several markets+ but misinterpreted the needs o$ (onsumers) Te(hnologi(al advan(ements have led into a ne' era due to the popularity o$ tou(h s(reen mobile devi(es) The ma/ority o$ Ameri(an (onsumers (urrently o'n a smartphone or tablet proving tou(h9s(reens 'ere the $uture o$ te(hnology) Nintendo sa' the opportunity to gain $irst9mover advantages by utiliAing tou(h9s(reen development to essentially redesign ho' intera(tivity 'ould on(e again be

Nintendo: The Illusive Competitive Advantage per(eived)

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Introdu(ing the "ii # in &2,3+ Nintendo pursued a strategy o$ produ(t di$$erentiation) By adding te(hnologi(al $eatures and (ombining elements $rom the handheld and home (onsole market+ the (ompany attempted to in(rease its per(eived value) *or e%ample+ an individual (ould remotely use the (ontroller as a handheld (onsole+ in addition to the regular home use on a television) This uni@ue e%perien(e into playing video games introdu(ed a ne' style o$ innovation+ di$$erentiating itsel$ $rom other (onsoles) espite the (reativity o$ the produ(t+ the "ii # has already $a(ed setba(ks su(h as pro/e(tion o$ sales) *or e%ample+ Nintendo altered their global "ii # sales $ore(ast $rom nine million to &)- million units $or the year to >ar(h 3,+ &2,; 16"CT+ &2,;4) This (hange in pro/e(tion signi$i(antly alters the $uture su((ess o$ the produ(t and its ability to remain relevant) Nintendo7s histori(al la(k o$ attra(ting third party developers (ontinued 'ith the ne' system) The library o$ available titles remains small+ relying on in house developed games 'ith a $o(us on younger audien(es) The stri(t (ontrol measures $rom the original NE6 remain in pla(e and severely limit the @uality and @uantity o$ titles) The digital (ontent poli(ies dire(tly tie produ(ts to an individual devi(e+ sho'ing Nintendo7s la(k o$ ability to adapt and remain relevant to an in(reasingly mobile audien(e) #lternate History A ne' generation o$ gamers demanded more innovation 'ith the home entertainment system sin(e the beginning o$ the &,st (entury) Remaining in the market+ but o$ten overlooked+ Nintendo made the de(ision to release the "ii # in hopes o$ regaining relevan(e) #n$ortunately+ their e%ternal market analysis 'as greatly

Nintendo: The Illusive Competitive Advantage

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misinterpreted as the produ(t 'as not 'ell re(eived) At this moment in Nintendo7s history+ the release o$ a home entertainment system 'ould bene$it the (ompany7s stan(e 'ithin the video game market+ allo'ing them to (ompete 'ith their biggest (ompetitors+ >i(roso$t and 6ony) The (ompany analyAed their e%ternal market in &2,3 to position themselves to'ards a (ompetitive advantage 'ithin the gaming industry) Nintendo sa' home entertainment systems and DCs dominating the market 'hile the desire $or mobile gaming units @ui(kly de(lined) 6martphones and tablet game appli(ations 'ere taking over the mobile market 'hile home entertainment systems 'ere grossing revenues at re(ord highs due to their demand) This resulted in Nintendo7s de(ision to (reate a ne' innovative produ(t+ the NE9#6 entertainment system+ setting them apart 'ithin the industry) *ollo'ing (are$ul internal analysis+ Nintendo realiAed they did not have the (apabilities to immediately (ompete against the market giants su(h as >i(roso$t and 6ony) The (ompany entered into a /oint9venture 'ith the Ealve Corporation 9 a video game developer and digital distribution (ompany 1 unn+ &2,34) This resulted in the $ormation o$ a subsidiary (ompany+ the Nintendo9Ealve #niversal 6ystems Corporation 1NE#64) Nintendo sought out the venture due to Ealve7s 'orld'ide a(tive user base and their dominan(e 'ithin the DC gaming industry) Nintendo en(ompassed the (apabilities to (reate a ne%t generation (onsole 'hile Ealve (ontained a valuable resour(e to di$$erentiate itsel$ $rom the other home entertainment systems) 6team+ the 'orld7s largest online gaming plat$orm (reated by Ealve+ (onne(ts over 35 million a(tive users 'ho (an 8easily buy+ play+ share+ modi$y+ and build

Nintendo: The Illusive Competitive Advantage

,;

(ommunities: around multiple independent game titles 1Ealve+ &2,;4) The so$t'are is a $ree appli(ation and programming inter$a(e developers (an use to integrate 'ith their produ(ts su(h as net'orking+ mat(hmaking+ in9game a(hievements+ (loud saving+ and (ommuni(ation $un(tionality 1Ealve+ &2,;4) i$$erentiating itsel$ $rom >i(roso$t7s

LLive7 and Dlaystation7s LD6N7 inter$a(e+ 6team enhan(ed both the e%pe(tations o$ DC and (onsole gamers) The so$t'are also allo's $or uni@ue (onne(tivity options+ granting users multi9server a((ess+ enabling them to (hoose 'hi(h games to /oin) #ser (ontrolled (onne(tivity allo'ed gamers to /oin their pre$erred server based upon their lo(ation) #ser satis$a(tion 'as in(reased by eliminating laten(y issues and (onsistent server dis(onne(tions) The modular ability o$ the NE9#6 (onstantly allo's an upgrade $rom a variety o$ hard'are options) Bene$iting $rom the evolving DC hard'are market+ (onsumers (an pur(hase and install any (omponent 'ith appropriate driver pa(kages to enhan(e the ra' per$orman(e o$ the individual7s system) By giving the (onsumer (ontrol over hard'are sele(tion+ the NE9#6 gives the (ustomer the (hoi(e bet'een a system that in(orporates high amounts o$ produ(t $eatures versus tailoring to a spe(i$i( use) As a home entertainment system+ the 6teamC6 $eatures video+ audio+ and streaming (ontent playba(k) The (onne(ted abilities o$ the NE9#6 give the (onsumer a((ess to any so$t'are (urrently loaded on the devi(e and o$$er an enhan(ed e%perien(e 'hen (onne(ted to the internet) i$$erentiating the system allo'ed Nintendo and Ealve to establish a $irst9mover advantage by allo'ing the DC and (onsole (ommunities to unite $or the $irst time in gaming history) *or years+ the gaming industry sought 'ays to bridge the gap by

Nintendo: The Illusive Competitive Advantage

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attempting (ross9plat$orm (onne(tivity) Through the use o$ Ealve7s (loud inter$a(e+ users 'ho play on the 6team so$t'are 'ere able to (onne(t and play against ea(h other on a (onsole or DC) This (reated per(eived value allo'ing $or the user to keep 'ith their o'n style o$ gameplay by either using a keyboard and mouse or handheld (ontroller) #sers (ontrolled the (apabilities to (ustomiAe and (reate di$$erent appli(ations su(h as maps+ levels+ and game types to enhan(e their gaming e%perien(e) The (loud te(hnology removed the dependen(y $or C 9RC>s as multiple games (ould be do'nloaded dire(tly through the 6team appli(ation and saved onto the user7s a((ount) This led to a redu(tion in (osts $or game distribution as development studios no longer needed to invest in prote(tive hard'are $or their games) <ame storage 'as made virtually limitless by allo'ing s(alable hard'are $or the (onsumer+ attra(ting more third party developers to'ards the NE9#6 system+ generating ne' and uni@ue titles) !istori(ally+ Nintendo remained stri(t 'ith third party li(ensing agreements by re$using developer7s games to be released upon any system 'hi(h did not align 'ith their (ore values) The (ompany re(ogniAed game variety played a ma/or role in generating revenue $or their (ompetitors) Changing the li(ensing poli(ies 'ould allo' the (ompany to (ompete 'ithin the market) Drior to the release o$ the NE9#6+ Nintendo made the de(ision to implement a hands9o$$ approa(h 'hen dealing 'ith third party developers+ allo'ing them to design and produ(e game titles never be$ore seen 'ithin the industry) Introdu(ed in C(tober &2,3+ the NE9#6 'as an instant su((ess+ beating out both the Hbo% Cne and Dlaystation ; systems throughout the holiday season) >arketing strategies+ su(h as bundling and (aptive deals+ played a vital role in the initial su((ess o$ the system) A sele(t library o$ (lassi( Nintendo titles+ dating ba(k to the NE6+ 'as

Nintendo: The Illusive Competitive Advantage

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bundled 'ith the release o$ the system) Nintendo imitated "alt isney7s strategy to open its7 vault and redistribute their most popular game titles+ adding value to the system) NE9 #6 sales soared as nostalgia allo'ed broader audien(e to (onne(t their emotions 'ith Nintendo (lassi(s) A bundle 'ith additional (ontrollers and one game e%(lusive to the NE9#6 'as an alternative option) E%(lusive titles 'ere produ(ed $or the (onsole to build system loyalty and a reputation o$ @uality game releases as seen by the !alo series 'ith the Hbo% 3B2) Nintendo used its ba(klog o$ game titles as an in(entive $or users to pur(hase the system) The most popular games su(h as 6uper >ario B;+ >ario ?art+ and <oldenEye 22= 'ere pa(kaged 'ith the release o$ the system at no additional (harge to enti(e (onsumer pur(hases) An e%tensive library o$ Nintendo7s (lassi( games 'ere $urther integrated into the so$t'are installed on the NE9#6 system+ allo'ing only NE9#6 (onsumers to have e%(lusive a((ess to various Nintendo titles) DC gamers+ 'ho (hose not to integrate to'ards the NE9#6 system+ did not have $ree a((ess to Nintendo (lassi(s) Instead+ the NE#6 Corporation de(ided to retail the (lassi( titles in bundles asso(iated 'ith the system in 'hi(h they 'ere released to) This e%(lusive o$$er is an e%tension o$ the NE9#67 (apabilities 'hi(h provide uni@ue in(entives $or their (ustomer base) "ith an e%tensive history+ Nintendo has undergone (onstant shi$ts 'ithin the video game industry) #pon entry into the market+ the (ompany o$$ered innovations not previously seen) Their $o(us on produ(t di$$erentiation (ontinued throughout the li$e (y(les o$ various systems+ but ultimately (on(eded to the in(reasingly (ompetitive market) "ith the adaptation o$ the NE9#6 system+ Nintendo looks to regain the (ompetitive advantage the (ompany previously held)

Nintendo: The Illusive Competitive Advantage

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"or$s Cited Chang+ R) 1&22=+ >ar(h &,4) "ii) In The designed world) Retrieved April =+ &2,;+ $rom http:MM''')(oursestu$$)(o)ukMENET,2,2Mdesigned9'orldM(tB&;)html 1Chang+ &22=4

Nintendo: The Illusive Competitive Advantage

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Cramblet+ <) 1&2,;+ *ebruary 54) "hy is the 'ii u a $ailure) In Forbes) Retrieved April =+ &2,;+ $rom http:MM''')$orbes)(omMsitesM@uoraM&2,;M2&M25M'hy9is9the9'ii9u9a9$ailureM 1Cramblet+ &2,;4 illon+ Roberto) The Golden Age of Video Games: The Birth of a Multi-billion Dollar Industry) Bo(a Raton+ *L: ? DetersMCRC+ &2,,) Drint) 1 illon+ &2,,4 unn+ J) 1&2,3+ C(tober ;4) *ull steam ahead: The history o$ valve) In Gamesradar) Retrieved April B+ &2,;+ $rom http:MM''')gamesradar)(omMhistory9o$9valveM 1 unn+ &2,34 Jones+ T) 1&2,3+ 6ept &24) The surprisingly long history of nintendo) Retrieved $rom http:MM''')todayi$oundout)(omMinde%)phpM&2,3M2.Msurprisingly9long9history9nintendoM 1Jones+ &2,34 Jordan+ 6) 1&2,,+ August ,=4) *ive o$ nintendoKs biggest mistakes) In up) Retrieved April B+ &2,;+ $rom http:MM'''),up)(omMdoMblogEntryNbIdO.2-B-2B 1Jordan+ &2,,4 ?ohler+ () 1&2,2+ C(tober ,-4) Nintendo entertainment system laun(hes) In !ired) Retrieved April B+ &2,;+ $rom http:MM''')'ired)(omM&2,2M,2M,2,-nintendo9nes9 laun(hesM 1?ohler+ &2,24 >a( onald+ ?) 1&2,3+ January ,,4) !o' su((ess$ul 'as the 'ii u laun(hN) In IG") Retrieved April =+ &2,;+ $rom http:MM''')ign)(omMarti(lesM&2,3M2,M,,Mho'9su((ess$ul9 'as9the9'ii9u9laun(h 1>a( onald+ &2,34

Nintendo: The Illusive Competitive Advantage

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>aku(h+ E) 1&2,3+ July 3,4) "ii system sales (ross ,22 million units) In Gamespot) Retrieved April =+ &2,;+ $rom http:MM''')gamespot)(omMarti(lesM'ii9system9sales9(ross9 ,229million9unitsM,,229B;,&&=,M 1>aku(h+ &2,34 >(*erran+ ) 1&2,3+ July ,B4) The history o$ the $ami(om) In "intendo #ife) Retrieved April B+ &2,;+ $rom http:MM''')nintendoli$e)(omMne'sM&2,3M2=M$eaturePthePhistoryPo$PtheP$ami(om 1>(*erran+ &2,34 >(*erran+ ) 1&2,3+ July ;4) Born slippy: the making o$ star $o%) In $urogamer) Retrieved April =+ &2,;+ $rom http:MM''')eurogamer)netMarti(lesM&2,392=92;9born9 slippy9the9making9o$9star9$o% 1>(*erran+ &2,34 >urphy+ ) 1&2,,+ *ebruary &24) Nintendo 'ii sales do'n 3,)5 per(ent $rom /anuary &2,2) In %& Mag) Retrieved April =+ &2,;+ $rom http:MM''')p(mag)(omMarti(le&M2+&-,=+&3-2BB5+22)asp 1>urphy+ &2,,4 Nintendo o$ ameri(aKs (orporate mission and philosophy 1&2,;4) In &orporate) Retrieved April B+ &2,;+ $rom http:MM''')nintendo)(omM(orpMmission)/sp 1Nintendo+ &2,;4 C%$ord+ N) 1&225+ e(ember ,;4) Trials and tribulations: Eideo gamesK many visits to (ourts) In up) Retrieved April B+ &2,;+ $rom http:MM'''),up)(omMdoM$eatureN pager)o$$setO,Q(IdO3,;B&2B 1C%$ord+ &2254

Nintendo: The Illusive Competitive Advantage

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Darish+ J) 1&2,&+ >ay &,4) The nintendo play station: A retrospe(tive) In up) Retrieved April B+ &2,;+ $rom http:MM'''),up)(omM$eaturesMnintendo9play9station9retrospe(tive 1Darish+ &2,&4 Dlat$orm Totals 1&2,;4) In VG &hart') Retrieved April =+ &2,;+ $rom http:MM''')vg(hartA)(omManalysisMplat$ormPtotalsM 1E< ChartA+ &2,;4 Dolsson+ ?) 1&2,;+ January &24) Chronology o$ nintendo video games) In Vidgame) Retrieved April B+ &2,;+ $rom http:MMvidgame)in$oMnintendoM 1Dolsson+ &2,;4 Rubin+ B) D) 1&2,&+ C(tober &.4) All your history: Nintendo part , R Leave lu(k to heaven) In Inside gaming daily) Retrieved April B+ &2,;+ $rom http:MM''')insidegamingdaily)(omM&2,&M,2M&.Mall9your9history9nintendo9part9,9leave9 lu(k9to9heavenM 1Rubin+ &2,&4 Ealve so$t'are 1n)d)4) In Val(e) Retrieved April B+ &2,;+ $rom http:MM''')valveso$t'are)(omM(ompanyM 1Ealve+ &2,;4 "erner+ N) 1&2,,+ *ebruary &;4) All 0our history: The video game (rash o$ ,.-3) In Insider gaming daily) Retrieved April B+ &2,;+ $rom http:MM''')insidegamingdaily)(omM&2,,M2&M&;Mall9your9history9the9video9game9(rash9 o$9,.-39(ontinueM 1"erner+ &2,,4

Nintendo: The Illusive Competitive Advantage

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