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Nintendo’s Disruptive Strategy : Implications for

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the Video Game Industry

PRESENTED BY SYNDICATE VI & VII
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THEM?
KNOW ABOUT

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Nintento Co. Ltd : The 7th World’s

Most Innovative Companies
Business Week, 2008
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Nintendo Products

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 1889 1907 1951
1 2 3
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Manufacturing Began Producing Nintendo Playing

and Selling Western Playing Card Company
Japanese Playing Cards Ltd used
Cards
 1998 2001 2002
4 5 6
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Pokemon was Nintendo GameCube was

introduced GameCube was launched in the
overseas and launched in Japan European and
Became a smash and US Australian
hit market
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OUR RESEARCH

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reference

EXTERNAL AND INTERNAL ANALYSIS

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OF NINTENDO PRIOR TO THE
LAUNCHING OF Wii
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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ECONOMIC CULTURAL GLOBAL
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POLITICAL/ DEMO
ECONOMIC PHYSICAL
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
ECONOMIC

-
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Production Possibility Frontliner

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Supply and Demand
- Opportunity Cost
- Production Cost and Nature of Competition for
Nintendo
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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ECONOMIC CULTURAL GLOBAL
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POLITICAL/ DEMO
ECONOMIC PHYSICAL
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
SOCIALCULTURAL
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The sociocultural factors impact on the video game

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industry from population demographics, income
distribution, lifestyle changes, social mobility,
attributes to work, level of education, consumerism,
and consumer behaviour namely.
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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POLITICAL/ DEMO
ECONOMIC PHYSICAL
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
GLOBAL
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Global economical downturn influence too many

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areas, Japan, North American and Europe, which
dominate Video gaming market. For example,
Japan’s real GDP growth rate dropped from -0.7% in
2008 to -6.4% in 2009. Combination of
unemployment and low wage of weight, customer
purchases necessary goods instead of toy and video
game
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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ECONOMIC CULTURAL GLOBAL
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POLITICAL/ DEMO
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
TECHNOLOGICAL
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The speed of technological innovation always

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restricts gaming industry developing. Nintendo has
attributed the success of the Wii to idea of blue
ocean strategy that reflects from “price, movie
playing, graphics, physics, fun, game library, and
magic wand”
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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POLITICAL/ DEMO
ECONOMIC PHYSICAL
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
POLITICAL/LEGAL
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Political environment consists of laws, government

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agencies, and pressure groups that influence and
limit various organizations and individual
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
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SOCIAL TECHNO

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POLITICAL/ DEMO
ECONOMIC PHYSICAL
LEGAL GRAPHIC
 EXTERNAL ANALYSIS
GENERAL ENVIRONMENT
DEMOGRAPHIC
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Political environment consists of laws, government

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agencies, and pressure groups that influence and
limit various organizations and individual
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
I
INDUSTRY ENVIRONMENT
THREAT OF NEW ENTRANTS
- Economies of Scale
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- Product Differentiation

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- Capital Requirements
- Access to Distribution Channels
- Switching Cost
- Government Policies
- Summary of Entry Threats
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
II
INDUSTRY ENVIRONMENT
BARGAINING POWER OF SUPPLIERS
- Supplier Overview
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- Supplier Size

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- Supplier Concentration
- Supplier Subtitute
- Importance of Supplier Input
- Threat of Fordward Integration
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
III
INDUSTRY ENVIRONMENT
BARGAINING POWER OF BUYERS
- Buyer Overview
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- Buyer Size

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- Availaibility of Full Information
- Threat of Backward Integration
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
IV
INDUSTRY ENVIRONMENT
THREAT OF SUBTITUTE PRODUCTS
Recognizing a substitute product requires identifying
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products that perform the same function as the

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product of the industry. When an industry has a low
threat of substitute products the result is that the
industry appears to be more attractive which in turn
increases profit potential. A high threat of
substitute products has the opposite affect; the
industry becomes less attractive and decreases
profit potential.
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
V
INDUSTRY ENVIRONMENT
INTENSITY OF RIVALRY AMONG COMPETITORS
After taking all of the preceding factors into
reference

consideration, we can conclude the video game

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system industry has reduced rivalry which increase
the potential for profits. The biggest factors that
lead us to conclude this is there are only three main
competitors in this industry. Further, product
differentiation leads to high switching costs
associated with the changing consoles.
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT

I
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III V II

IV
 EXTERNAL ANALYSIS
INDUSTRY ENVIRONMENT
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 EXTERNAL ANALYSIS
COMPETITOR ANALYSIS
SONY MICROSOFT
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 INTERNAL ANALYSIS
RESOURCES

- TANGIBLE :
Tangible assets include both include both fixed assets,
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such as machinery, buildings and land, and current
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assets, such as inventory

- INTANGIBLE :
Intangible assets which include in Nintendo’s financial
statement such as internal use computer software.
According to Nintendo’s annual report in 2008, amount
of Nintendo’s intangible assets is $20,098,000.00
 INTERNAL ANALYSIS
CAPABILITIES

- Ability to predict future of video gaming

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- Give it capabilities in innovative technology and game

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concepts
- Effective brand
- Reach economies of scale and produce cost lower
than competitor
 INTERNAL ANALYSIS
CORE COMPETENCIES
CRITERIA

Costly to Non-
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Core Competencies Valuable Rare substitutabl

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Imitate
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e

Focus on
Characterization of v v v v
each game (Game
Branding)

Friendly Family Set v v v v

up / Parental Control
 INTERNAL ANALYSIS
CORE COMPETENCIES
VALUE CHAIN ANALYSIS : PRIMARY ACTIVITIES
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 INTERNAL ANALYSIS
CORE COMPETENCIES
VALUE CHAIN ANALYSIS : SUPPORT ACTIVITIES
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EXPLORE AND ANALYZE THE

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CUSTOMER ALONG WITH THE
SEGMENTATION AND POSITIONING
 SEGMENTATION

The following are Gamers Segmentation (U.S. Gamer Segmentation

Study, Boston Research):

Core Gamers
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As a form of entertainment, I prefer gaming over watching TV.
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I want to spend more time for gaming.
As a form of entertainment, I prefer gaming over going to the movies.

Status Gamers
I am proud of gaming skills.
I enjoy being the first to try a new game.
I discuss my gaming experiences with other people at school or work.
 SEGMENTATION
Social Gamers
Gaming is a social experience.
Gaming provides links to people I care about.
Gaming is a great group activity
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Active Gamers
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I like games where movements are reflected in the game.
I like games that get me out of my chair.
I use gaming as an physical release.

Casual Gamers
I use gaming as an emotional release.
Gaming allows me to play different roles.
I prefer going out to dinner than gaming.
I don’t need to be the first to try a new game
 SEGMENTATION
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Table of Ownership Type of Console Game
 SEGMENTATION
Segment Description
Gender: All genders
Demographic Age: 7 - 60 years
Family Status: All Family Status
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Benefit Sought: Integrate health and entertainment, Family

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friendly, Low Price, High Service Quality

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Behavioral
User Status : First Time User, Ex-User
Loyalty: None and medium

Lifestyle : Someone who wants to play together with friend,

low and medium income.
Psychographic Personality : Play simple game, Play game just just for fun,
and Casual gamers

Table of Segmentation of Nintendo Console Game

 POSITIONING

Nintendo positioned the wii as a machine that puts a smile

on surrounding people’s faces, encouraging communication
among family members as each of them found something
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personally relevant and were motivated to turn on the

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console everyday in order to enjoy “the new life with wii”.
Wii also as a best selling console of the 7th generation thus
far, female users out number overall male users and wii has
particularly high levels of appeal to boys 6-11 and women
above 35
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COMPARISON OF ATTRIBUTES AND

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BENEFITS AMONG PS2, PS3, XBox
 THE COMPARISON
Items PS 2 PS 3 Xbox

Advanced Online Gaming Advanced Online Gaming

Offline Game Mode Experience (Multimedia Experience (Multimedia
Support) Support)
Non Family Friendly Non Family Friendly Non Family Friendly
Attributes
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256 MB GDDR 3 RAM,

HDD 120 GB, HDMI 720,

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CD/DVD-ROM slot HDMI, USB, 22.4 GBPS
21.6 GBPS Bandwith,
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(Multimedia Support) Bandwith, set price above

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NVIDIA RSX
competitors,

Allowing subscriber to
Attracting Older Teenager Able to watch movies in play online with other
and Young Adult addition to play games subscriber around the
world

Benefits More Sophisticated and Reaching the market

Allow User to Chat Online
violent games earlier than its rival

Can play CD and DVD,

Allow User to View High Increased flexibility and
first DVD Player for most
Quality Animation margin profitability
of buyers
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 THE NEW REVEALED SEGMENT BY Wii
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AND THE ATTRIBUTES AND BENEFITS
REQUIRED BY THIS SEGMENT
 NEW REVEALED SEGMENT
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OLD MALE WOMEN

CHILDREN
 ATTRIBUTES AND BENEFIT REQUIRED
BY THE NEW SEGMENT
NO ATTRIBUTES BENEFIT
1 Family Friendly Set-up The Nintendo Wii provides features is easily
played by the family, expected to create
familiarity in play
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2 Parental Control It makes Parents can control and give feedback
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whether there is negative content/ unapproriate
content for children

3 Ease to Play Anyone can learn how to play easily

4 Fun The features that provided by Nintendo Wii can
make different sensation for players because they
are using remote (Wii remote) rather than joystick

5 Togetherness The features provided a game that can play by

two people, so its expected to create
togetherness.

6 Low Cost The low cost of Wii gives the non-player desires to
buy
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 THE COMPARISON OF ATTRIBUTES
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AND BENEFITS AND THE STRATEGY
CANVAS VISUALIZATION
 THE COMPARISON OF ATTRIBUTES AND
BENEFIT (PS3, XBOX, NINTENDO Wii)
Information Nintendo Wii
Innovative product with
motion sensor features
Family Friendly
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Attribute 4 Wiimote Controller
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bluetooth, 1 sensor bar port,
SD Memory Slot, Storage
512 MB
Ease to play
Wii Fit aimed to integrate
health and entertainment as
a way to help get families to
exercise together
Market Segment for Casual
Benefit Gamers
New gaming experience
because of the motion sensor
console
Casual gamers can play it
easily
PS3
High Graphic Quality with
dolby True HD and DTS HD
Master audio bit streaming
Non Family Friendly
256 MB GDDR 3 RAM,
HDMI, USB, 22.4 GBPS
Bandwith, set price above
competitors,
Satisfying for heavy gamers
Able to watch movies in
addition to play games
Market Segment for Heavy
Gamers
Allow User to View High
Graphic Quality
Heavy gamers get the real
gaming atmosphere
Xbox 360
Better Online Gaming
Experience, especially for
shooters
Non Family Friendly
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HDD 120 GB, HDMI 720,
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21.6 GBPS Bandwith,
NVIDIA RSX
Satisfying heavy gamers
Allowing subscriber to play
online with other subscriber
around the world
Market Segment for Heavy
Gamers
High Graphic Quality with
relatively lower price than
PS3
Heavy gamers get the real
gaming atmosphere
 THE STRATEGY CANVAS VISUALIZATION
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Table of Strategy Canvas of Nintendo Wii
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 THE ATTRIBUTES AND BENEFITS TO
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BE : REDUCED, ELIMINATED, RAISED,

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AND CREATED. HOW Wii WAS ABLE
TO SUCCESFULLY IMPLEMENT THE
BLUE OCEAN STRATEGY THROUGH
VALUE INNOVATION
 ATTRIBUTES AND BENEFITS TO BE : REDUCED,
ELIMINATED, RAISED, CREATED
Which of the factors that the industry takes for granted
should be eliminated?
State of the art chip development, new proprietary,
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high-end console performance and graphics, Narrow
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Market of “hardcore”, console subsidies.

Which factors should be reduced well below the the

industry’s standard?
Console production price & technology development
costs.
 ATTRIBUTES AND BENEFITS TO BE : REDUCED,
ELIMINATED, RAISED, CREATED
Which factors should be raised well above the industry’s
standard?
Game developers, retail distribution, royalities from
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game developers.
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Which factors should be created that the industry has
never offered?
Off-the-shelf hardware component manufacturers,
motion control technology, motion controlled games,
fun factor and group family experience, large market of
casual gamers and families, profit on console sales
 ATTRIBUTES AND BENEFITS TO BE : REDUCED,
ELIMINATED, RAISED, CREATED
REDUCED
Development
Production
Cost
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ELIMINATED CREATED
Console Subsidies Motion Console
Chip Dev New Market
New proprietary Fun and
Tech Adventurous

RAISED
Fun Factor
Use off-the-shelf
component
Retail store
Involvment
 HOW Wii WAS ABLE TO SUCCESFULLY IMPLEMENT THE
BLUE OCEAN STRATEGY THROUGH VALUE INNOVATION
The Wii was an immediate success with casual gamers
and outsold its rivals focused on traditional market of
“hardcore”. Nintendo shifted its focus to providing a
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new form of player interaction targeted at a wider
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demographic than the traditional avid game audience.
With the Wii Nintendo brought to market a console that
technologically underperformed rival console, but
boosted the fun factor with new motion technology.
Players could control the game through a controller
simply through physical movement
 01 02 03
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Radhitya A, MBA (cand) Wahyu Rum, MBA (cand) Sebastian D, MBA (cand)
Graduated from Business Graduated from Business Graduated from
Administration, Brawijaya Administration, Telkom Chemichal Engineering,
University University Lampung University
 04 05 06
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Radhian R, MBA (cand) Novaya S, MBA (cand) Ryan F, MBA (cand)
Graduated from Civil Graduated from MBTI, Graduated from
Engineering, Parahyangan Telkom University Mathematics, Bogor
University Agricultural University
 Nintendo Case
Joshi, H, Tang, S. (2009). Nintendo’s
Disruptive Strategy Implications for
the Video Game Industry. The
University of Hong Kong. Hong
Kong: The Asia Case Research
Center.
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Blue Ocean Shift Book
Chan, K W, Mauborgne, R. (2007).
Blue Ocean Shift. Hachette Books.
USA: Hachette Book Group
Blue Ocean Strategy Book
Chan, K W, Mauborgne, R. (2005).
Blue Ocean Strategy. Harvard
Business School Publishing
Corporation. USA: Harvard
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Business School Press
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Strategic Management Book
Hitt M A, Ireland R D, Hoskisson
R E. (2011). Strategic Management
Competitiveness and
Globalizations 9th Edition. Cengage
Learning. USA: Cengage Learning
ありがとうございました
谢谢

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Grazie
Danke
Terimakasih
Thank You