Case Analysis: Nintendo

This case analysis examines the gaming industry, level of competition, and factors that contributed to the growth and fall of Nintendo. It discusses the dominance of Sony and Microsoft in the gaming console market and the impact of mobile gaming as a substitute. The analysis also includes a VRIO analysis of Nintendo's resources and capabilities.

Gaming industry case study: Nintendo
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Running head: CASE ANALYSIS: NINTENDO

CASE ANALYSIS: NINTENDO
Contents
Abstract............................................................................................................................................2
Analysis...........................................................................................................................................2
References........................................................................................................................................5
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CASE ANALYSIS: NINTENDO
Abstract
Nintendo is a game developer company which specializes in gaming console. The company was
market leader in gaming console industry during 1980s and 1990’s but with entry of Sony and
Microsoft in gaming console sector, Nintendo lost its competitive advantage and market share
due to lack of technological advancements in the products offered. The current report helps in
analyzing gaming industry, level of competition in industry and factors that contributed to
growth and fall of Nintendo.
Analysis
As stated by M2 Presswire (2018) gaming industry is one of the most booming businesses in the
world which generated revenues of over $120 billion in 2017 and is expected to generate
revenues of over $180 billion by 2021 in which every participant of the industry would have a
fair share of market. The market has been dominated by investments made by video game
publishers such as Tencent and Activision Blizzard as well as by hardware incumbents such as
Sony, Microsoft and Nintendo. The introduction of new platforms have contributed to dramatic
change in the landscape of global gaming industry. In gaming industry, PC’s and gaming
consoles have traditionally led the market but rapid increase in number of mobile devices around
the world have made prime acceleration in to growth of the gaming industry.
Nintendo is a Japanese company which dominated gaming industry in 1980-1990’s. The
company entered gaming console market in 1981 and since then it has went on to sell more than
639 million units of gaming console globally. As stated in Global gaming expo. (2016) Nintendo
enjoyed a near monopoly position for over a decade due to lack of competition from other
competitors as high entry barriers in market was high. But after the entry of Sony and Microsoft
in gaming console market, Nintendo started to lose its market share. However after launch of
Nintendo Wii, the company has been able to regain its market share. Currently gaming console
industry is an oligopoly market which is dominated by players like Sony and Microsoft and is
also ushered with small firms. As stated by Filipe, Santos & Alves (2016) the gaming industry in
coming five years will be accompanied by new and exciting technology such as virtual reality
and the success of major players will be dependent on their ability to utilize the power of
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CASE ANALYSIS: NINTENDO
disruptive innovation. Also gaming industry in coming five years will be dominated by mobile
games.
Sony and Microsoft are direct competitors of Nintendo and together they form an oligopoly in
gaming console industry. Nintendo enjoyed a near monopoly in industry until entry of Sony in
1994. Sony gained significant amount of market share through their play station gaming consoles
in a short time owing to unique gaming experiences offered to customers. Also due to tie-ups
with game developers Sony slowly became market leader in gaming console industry by
replacing Nintendo. Further, Microsoft entered gaming market in 2001 with Xbox and since its
introduction, it has provided stiff competition to both Sony and Nintendo through its exclusive
games, competitive pricing and high resolution. After entering market, Microsoft has taken
second position in industry by overtaking Nintendo in overall sales and revenues.
As opined by Carpenter, Daidj & Moreno (2014) though level of competition in gaming console
industry is high because of stiff competition between Sony, Microsoft and Nintendo, but level of
competition from substitutes is even more higher. Like mobile gaming has emerged as biggest
substitute, which has capability of displacing gaming console industry due to rapid rate of
technological advances and rapid increase in use of mobile devices for purpose of gaming.
The VRIO analysis of Nintendo:
Resources Valuable Rare Imitable Organized Competitive
Advantage
Advanced
computer
graphics
No No Yes No Competitive
disadvantage
Interactive
games
Yes Yes Yes Yes Potential
source of
competitive
advantage
Joysticks Yes No No No Competitive
parity
Memorable Yes Yes No Yes Sustained
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CASE ANALYSIS: NINTENDO
characters competitive
advantage
Rich
Character
Intellectual
property
Yes No Yes Yes Competitive
Parity
As stated by Chattopadhyay, Bhattacharya & Bhattacharya (2018) one of the main resources and
capability which helped Nintendo in creating and maintaining competitive advantage in 1990s
was its ability to incorporate knowledge and expertise from its alliances which was evident from
partnership of Nintendo with Magnavox and Sharp. These helped in improving quality of their
gaming consoles. Another resource and capability which helped Nintendo was use of technology
and utilization of cost leadership strategy which helped them to gain competitive advantage. Due
to these capabilities consoles of Nintendo were easy to use, powerful as well as were low priced
than competitors. The other resource and capability which helped Nintendo was design of their
products and their innovation focus which allowed them to implement blue ocean strategy to
gain competitive advantage.
As stated by Simon (2018) one of the main reasons which made Nintendo lose its competitive
advantage to Sony and Microsoft was its inability to keep up with competition offered by
Microsoft and Sony. Though Nintendo was an innovative company, they failed to recognize need
for technological advancements in their gaming consoles which was evident from the fact that
while Sony and Microsoft used conventional CD’s and DVD’s for enabling gamers to store more
data, Nintendo still continued with their conventional console which offered lesser space.
Moreover, quality of graphics offered by Nintendo was also considered to be much inferior to
graphics quality offered by Sony and Microsoft, which led to increased demand of play stations
and Xbox and this gradually resulted in Nintendo losing its competitive advantage in market.
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CASE ANALYSIS: NINTENDO
References
Carpenter, M., Daidj, N., & Moreno, C. (2014). Game console manufacturers: The end of
sustainable competitive advantage? Communications & Strategies, (94), 39-60,152-154.
Retrieved from https://search.proquest.com/docview/1545556990?accountid=30552
Chattopadhyay, S., Bhattacharya, S., & Bhattacharya, A. (2018). Rethinking the business
strategy in the gaming industry. FIIB Business Review, 7(3), 176-183.
doi:http://dx.doi.org/10.1177/2319714518799423
Filipe, C. S., Santos, M., & Alves, J. (2016). Network-based innovation: The case for mobile
gaming and digital music. European Business Review, 28(2), 155-175.
doi:http://dx.doi.org/10.1108/EBR-07-2015-0072
Global gaming expo. (2016). Netwise Data: Boca Raton. Business Premium Collection.
Retrieved from https://search.proquest.com/docview/2007726693?accountid=30552
M2 Presswire (2018). Mobile gaming market and mobile analytics industry share 2018:
Globally research on industry insight, competitive situations, user demand, outlook &
forecast 2025. M2 Presswire Retrieved from
https://search.proquest.com/docview/2025655923?accountid=30552
Simon, J. P. (2018). Triggering emergence of digital ecosystems: The role of mobile and video
games in emerging economies. Digital Policy, Regulation and Governance, 20(5), 449-
478. doi:http://dx.doi.org/10.1108/DPRG-03-2018-0008
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