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Nintendo’s Strategy in 2009
The Ongoing Battle with Microsoft and Sony
Group 7 Jeremy Abbaterusso 100217118
Strategic Management 1 BUSI 4701
April 1st, 2011
Word Count: 1246
These substitutes are near in cost and provide no switching costs aside from their price. and Nintendo would “battle for market supremacy” (pg. IBM etc. Each supplier would provide a small piece of the complete product and as such bargaining power would be low (pg. Combined with the presence of a large number of near substitutes vying for entertainment expenditures there is a threat from substitute products. for chip manufacturing. Substitute Products (Medium) Direct substitutes for the console video game industry are personal computers. This battle would weaken differentiation by competitors developing products that were technologically superior and more powerful than the offering of rivals (pg. arcade machines. 282). Sony.The Attractiveness of the Console Video Game Industry (Porter 5 Forces) Suppliers (Medium to Low) Suppliers include Foxconn Precision Components. From the sheer number of retailers that carry the product along with the global presence of the major competitors in the industry there is no single retailer in a position to exert any significant level of power. . Rivalry among Competing Sellers (High) Rivalry within the video game console industry would be high. Also the creation of an assortment of games and accessories would bring down the threat of new entrants even further as this would be a huge obstacle to overcome. 275). Buyers (Low) Buyers consisted of various retailers that carry the product and would vary in bargaining strength depending on their size. 279). 281). distribution channels. This benchmarking lead to price wars by competitors squeezing profit margins and limiting market share gains (pg. technological complexities and other critical factors within the game console industry would be barriers for new entrants. and handheld game devices which vie for consumer spending (pg. product assembly. Threat of New Entrants (Low) Large capital investments. Microsoft. and content providers. video game creators. 283).
280). Differentiating the User Interface and Remote Value There is a high value in Nintendo’s ability to differentiate its product offering in comparison to Microsoft and Sony as it allows Nintendo to appeal to a new market segment which included people who did not generally play video games (pg. This value is best shown with Nintendo’s dominance in unit sales for 2009 (exhibit 4. Games. This accompanied by the high risk technological complexities and the increased intensity of competition the industry would be considerably unappealing.) a) Distinctive Resources/Capabilities Leverage by Nintendo: 1.3 million in 2008 (pg. 4. 2. Rarity The user interface and remote was rare as Nintendo was the first to bring together a Bluetoothactivated wireless controller which provided gamers with a wide range of motion capabilities (pg. 287). 3. Advancement in Technology Price and Strategy Research and Development Quality and Innovation of Gaming Accessories (ex. 5. “to physically interact with the virtual world. 281). 283) and with the overall assessment of the five forces the video game console industry would not be attractive. and 6). Pg. remotes. significantly changing the experience of video gaming (pg.” Imitability Patent protection would protect this technology from being duplicated.6 million from $617.Conclusion With the recession making 2009 sales decline to $382. but the remote capability and interface could be substituted by competitors. In fact. Success in the Game Console Manufacturing Industry The 3 – 4 critical success factors are: 1. (Temporary Competitive Advantage) . 280). Microsoft and Sony had announced intentions to create a variety of ways for their consumers to interact with games on their systems (pg. etc. This new ability harnessed by Nintendo allowed users.
280). 283). 284). 284). innovation.it is a toy company. It is not interested in bleeding edge electronics and graphics (pg. and interactive games like Duck Hunt and Track and Field (pg. 287). Also.” Imitability This marketing strategy could be duplicated by Sony or Microsoft. technology and functionality (pg.2. Marketing Strategy Innovation Value (Temporary Competitive Advantage) This is of high value as it would allow Nintendo to appeal to a larger market and create an infinite possibility for profitable growth (pg. Its overall rarity would be explained by Brian O’Rourke as he states. 281) Nintendo was able to cut down drastically on costs and have a profit margin of an estimated $50US per unit where Sony took a loss of around $250US per unit sold (pg. . Rarity This was rare as Nintendo was attempting to target new customers rather than fighting with competitors for old ones (pg. “Microsoft and Sony spend a lot of time developing cutting edge technology. Organization for both Resources Nintendo was able to leverage these capabilities by bringing together the company’s research. 281) while focusing on differentiating. since this new segment did not require technological complexities and hyper realistic graphics (pg. This is possible by the competing firms leveraging into new ways for its consumers to interact with its consoles as both companies have shown intentions to pursue the casual gamer market (pg. Nintendo is not a technology company . 281). The organization was also able to leverage its success within the DS.
opportunity to download new video game content. and the ability to play multiplayer games over broadband (pg. 283). this was one of Microsoft’s biggest differentiating factors to its competitor’s (pg. (Temporary Competitive Advantage) Microsoft Building a Successful Community with Xbox Live (Temporary Competitive Advantage) Value This was valuable as Xbox utilized various PC features. (pg. . The value to the consumer was the online voice chat. Rarity A focus in technological development is fairly unique although it is a capability pursued by two of the three main competitors in the industry: Sony and Microsoft. 275). As this allows Sony to secure consumer interest and market share by being able to provide a more realistic gaming experience (pg. Although it had been tried before this would still be considered rare as currently within the marketplace no other competitor had the capability. 286). In fact. These features included a broadband connection and memory storage which connected Xbox players all over the world (pg. and so is not very rare.b) Resources and Capabilities Leveraged by the Competition: Sony Technology and Innovation Value There is great value in developing faster and more advanced consoles. 275) Imitability The development of technology would be made easier by the experience that Sony had in the research and development of earlier models. Rarity Neither Sony nor Nintendo had an established online gaming community. 285). This would create time compression diseconomies as competitors attempt to develop similar advancements.
This strategy moved Nintendo into a larger and more diverse market while giving them a large increase in sales and in profit margins. 283). The advantage Xbox had was the ability to leverage advances in both technology and social trends (pg. thus changing Nintendo’s direction to an undetected marketplace. 281). This change was more compelling to consumers who had never considered buying video game consoles before (pg. Even the name Wii was created to emphasize that this console “was for everyone. Nintendo was able to simplify its consoles design and focus less on hyper realistic graphics saving money and also attracting individuals who didn’t ordinarily play video games (pg.” which went into a completely different direction then current industry rivals (pg. Is This a Blue Ocean Strategy Yes this is a blue ocean strategy as Nintendo was able to give players the ability to physically interact with a virtual world.Imitability The idea was imitable as it could be substituted. Xbox themselves substituted Dream casts online initiatives with Xbox Live. 280). 281). . However it would not be able to be duplicated do to patent and copy right laws. In fact.
BLUE OCEAN: 10/10 This section was extremely well explained. path dependence and first mover advantages. There is a possible rarity argument though. clear and supported. For example. Well Done. The analysis is clear. VRIO: 30/35 For the most part the analysis is well done. succinct and supported. I’m not sure if it is a clarity issue or requires further explanation as the features you have mentioned for the Xbox are for the most part offered by the Playstation 3. For Nintendo’s inimitability consider issues like time compression.” Change to “were” as the plural version should be used after the compound subject. “The user interface and remote was rare as Nintendo was the first to bring together a Bluetooth-activated wireless controller which provided gamers with a wide range of motion capabilities (pg.Marking Scheme 5 FORCES: 28/30 Overall this section is extremely well done. Overall an outstanding job! TOTAL: 91/100 . organized. MECHANICS: 23/25 There is minimal writing issues present. 280).
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