Nintendo's Strategic Evolution: Market Analysis and Performance

This report provides an in-depth analysis of Nintendo's business strategy and market performance from its early days to its current position in the video game industry. It examines Nintendo's internal resources and capabilities, focusing on its strengths in producing both hardware and software, as well as its iconic franchises like Mario and Pokémon. The report also explores the external competitive landscape, including challenges from Sony's PlayStation and Microsoft's Xbox, and how Nintendo adapted by innovating with products like the DS and Wii. The impact of Satoru Iwata's leadership and strategic shifts towards new demographics and gaming experiences is highlighted, along with the company's response to the rise of smartphones and tablets. The analysis concludes with findings on Nintendo's current performance and recommendations for future strategies, emphasizing the importance of balancing hardware and software development while exploring new market opportunities.

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Executive summary
When Nintendo entered the market for video games, it started with its initial dedicated
console a video game in 1983 and did it with a tremendous support. Nintendo Entertainment
System which happened to be its family computer abroad was to serve as the first console
purposed with a transformative business model. Instead the company not only produced
hardware games for itself but also licensed and supported game developers externally to create
and distribute products for the hardware belonging to Nintendo. Such authorization was strategic
in helping Nintendo gain its share of the market, expanded the software platform network and
provided Nintendo with quality control. Thus, Nintendo became a standard video game on the
market, and it took many years to challenge its monopoly status.

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Table of Contents
Executive Summary
Body
Internal Analysis………………………………………………………………………………………………………………………………4
External Analysis………………………………………………………………………………………………………………………………5
Conclusion……………………………………………………………………………………………………………………………………………7
Findings of Nintendo’s Current performance/Recommendations………………………………………………………..7
References...................................................................................................................................................8
Appendices
Appendix 1: Components of a Business System
Product Offering/Value proposition
Resource Base/Stock of Assets
Activity System
Appendix 2: Drivers of Industry Development
PEST Analysis
Appendix 3: Porter’s Five Forces of Industry Rivalry
Incumbent Rivals-Rivalry among existing competitors
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of new entrants
Threat of substitutes and competitors

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Body
Internal analysis
Resource and capabilities
The success of Nintendo is one that has been humble as the company was established in
1889 as a manufacturer of playing cards and later became the most popular game company of all
the time. The company’s strengths lay in its strengths in producing both software and hardware
video game systems accompanied with their games. Its portfolio entailed multimillion franchises
spanning from the popular Mario to the famous Pokémon the company continues to inspire,
create and transforms the video industry. However, the Japanese company has not achieved that
much without immense challenges.
Capacity to Identify Strategic Capabilities
It is surprising how Nintendo Entertainment System managed to attain a lifetime sale of
more than 60.9 million units globally. However, it is the constant improvements of the hardware
and competitors applying the business model such as the one used by Nintendo that there was
fierce competition in the market for the video game industry. The company proved itself in the
market by commanding a series of winning streaks such as the self-published titles deemed to be
of high quality, for instance, the Mario Bros, The Legend of Zelda among others, and the
Japanese company did more regarding its hardware development and upgrades. It is due to the
high quality of Nintendo that the company has continued being relevant in the market.
External analysis
Nintendo’s Industry context
The entering of Sony in the game market through its PlayStation introduced a new system
encompassing the 3D graphics to its players focusing more on mature games. This led to a lethal

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competition. The company made more sales compared to another time as more than 100 million
units were sold. The PlayStation 2 which happened to be its successor become one of the most
video game platforms that were a success with a sales record of more than 150 million units sold.
In trying to challenge the hegemonic position established by Sony, Nintendo went on releasing
its GameCube, which according to many was technically better compared to the second
PlayStation though there was nothing new with its system. According to many, it had poor
performance making it sell less than 21 million units; this was discouraging since Microsoft’s
Xbox introduced in 2001 that targeted and served older consumers and had its internet provider
services to consoles exceeded its sales by millions. It is after playing Nintendo’s game that
competitors began winning.
Competitive Landscape
However, the self-acclaimed software launched on Nintendo’s platform ensured that the
company continued maintaining its fair share of dedicated fans thought it was not substantial to
sell hardware units. However, the only success story of Nintendo only remained in the portable
video devices. For instance, taking a look at the Game Boy of 1989 that was later improvement
of the color version in 1998 recorded a sales volume of more than 118 million units. It is
following turbulent times for Nintendo having a hard time to convince consumers that Game Boy
Advance brought life and joy to the company and made sales of more than 80 million units. At
least, Nintendo had the platform and means to continue however playing by the set rules by the
industry did no favor to the company. It was thus the responsibility of the newly appointed CEO,
Satoru Iwata to turn things around the table and he did it with an unprecedented technique. Iwata
was prudent in that he now changed focus to new demographics. For instance, in 2004, Nintendo
was tasked with releasing the DS, considered to be a new addition to the portfolio of portable

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games. This hardware had terrific features such as two screens with one serving as a touch screen
leading to the introduction of a new mode of playing.
In comparison to the introduction of an iPhone which had a touchscreen on a large scale
in the market of smartphones in 2007, Nintendo was also to use the touchscreen strategy in its
gaming components (Mochizuki, 2017). Though he was not present during the launch of
Nintendo DS, remarkably it was Iwata’s first colossal release. Iwata had visited a neurologist by
the name Ryuta Kawashima, and Iwata thought such visits and reading books on training the
brain, he could develop the foundations of a game that could appeal to both gamers and non-
gamers, and his guess was right. With the exhibiting brain age, brain training in the US had been
taking root as an industry of its own and was strategic in introducing adults to the gaming
behavior.
Nintendo was also keen on capturing new markets that had been ignored such as the
underestimated girl demographic, and this led to the development of successful titles such as the
Nintendogs and Super Princess Peach. Iwata was innovative enough and wanted to prove how he
could transform the market in which Nintendo struggled such as the home console market.
Nintendo also was not after making the game better based on upgrading versions but instead was
after changing the way individuals played. Thus, there was the release of Nintendo in late 2006,
and the system focused on motion controls as opposed to the traditional button-based gameplay.
Such a game was not only social but also intuitive. As such there was a bridge for the gap
between the gamers and non-gamers making the Wii a must have for most families (Plow &
Finlayson, 2011).
Nintendo revolutionized the industry and had altered the rules that governed the market.
Though most hardware remained relatively expensive and was adopted during the late stages of

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the product life cycle, the Wii was sold at a reasonable price appealing to many people since its
inception. Though the gamers were looking for new experiences with their gaming options, the
Wii remained superior to the products from competitors, and by mid-2007, Nintendo had sold
more units compared to both Sony and Microsoft combined with regards to the consoles. It is
due to such products by Nintendo that led to Microsoft and PlayStation launching products
though they never got a chance to get off the ground.
Conclusion
Findings of Nintendo’s current performance and recommendations
However, there came the smartphones and tablets and slowly penetrated the market
affecting the Nintendo’s safe card. The big question was why people should purchase expensive
software when smartphones could allow one to play such games as they are cheap to acquire.
Nintendo went further manufacturing a successor to the DS, offering something the smartphones
were unable to have, the stereoscopic 3D. The Nintendo 3DS was an upgrade of the DS only that
it came with the addition of glasses that were 3D. However, despite such commendable features,
the product still sold poorly even after its launch. This made Iwata take personal responsibility
by having his salary reduced by 50% and also gave the game for free to the early adopters. It is
after the substantial price drops and a constant stream of high-quality games that were
implemented later in its lifecycle, that the 3DS began to trend in the market and as of 2016 it had
been sold for more than 50 million times (Nintendo, 2015). The same argument could be used for
the successor of Wii where Nintendo had led the curve with the Wii but got stuck somewhere in
the middle. This is because it failed to appeal to its fans and casual gamers. The Wii U was
confusing as it adopted the trend used by tablets, a system that had been introduced to the market
by Apple and Google. The Wii U came with a tablet-like controller and Nintendo faced

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challenges in explaining how Wii U was different from the Wii. It is due to failure on the side of
the consumers to identify some of the upgrades in the Wii U and the compatibility of Wii
controllers with Wii U that led to poor sales of the later as it only managed to sell less than 13
million units compared to the more than 100 million units of Wiis. This made investors
pressurize Iwata to lay off some of the employees, and he declined to do so as he was of the
argument if that happened, employees will not be created in the production of impressive
software.
However, at least he gave in to the demand of having some of the games being launched
on smartphones. Iwata was keen enough not to separate the hardware and software as he argued
that separation could lead to the termination of Nintendo. Its business strategy had been designed
in a manner that it made software deemed exclusive and it is such software that lured people to
purchase its software (Hurse, 2010). Iwata soon made a declaration that the era when people
played games on gaming systems was over and Nintendo was to form strategic partnerships to
have its applications and games published on smartphones.

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References
Bloomberg, 2018. Company Overview of Nintendo Co., Ltd.. [Online]
Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapId=875940
[Accessed 21 September 2018].
Hurse, T., 2010. What Can We Learn from Nintendo. [Online]
Available at: https://hbr.org/2010/08/what-can-we-learn-from-ninten
[Accessed 21 September 2018].
Mochizuki, T., 2017. Nintendo Battles Apple for Parts as Switch Demand Rises. [Online]
Available at: https://www.wsj.com/articles/nintendo-battles-apple-for-parts-as-switch-demand-
rises-1496136603
[Accessed 22 September 2018].
Nintendo, 2015. Annual Report 2015. [Online]
Available at: https://www.nintendo.co.jp/ir/pdf/2015/annual1503e.pdf
[Accessed 21 September 2018].
Plow, M. & Finlayson, M., 2011. Potential Benefits of Nintendo Wii Fit Among People with
Multiple Sclerosis. International Journal of Ms Care, 13(1), pp. 21-30.

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Appendix 1: Components of a Business System
Product Offering/Value proposition
- The company’s strengths lay in its strengths in producing both software and hardware video
game systems accompanied with their games.
-Its portfolio entailed multimillion franchises spanning from the popular Mario to the famous
Pokémon the company continues to inspire, create and transforms the video industry.
- It is surprising how Nintendo Entertainment System managed to attain a lifetime sale of more
than 60.9 million units globally.
Resource Base/Stock of Assets
-The company made more sales compared to another time as more than 100 million units were
sold. The PlayStation 2 which happened to be its successor become one of the most video game
platforms that were a success with a sales record of more than 150 million units sold.
Appendix 2: Drivers of Industry Development
PEST Analysis
Political/Regulatory drivers
-Iwata soon made a declaration that the era when people played games on gaming systems was
over and Nintendo was to form strategic partnerships to have its applications and games
published on smartphones.
Economic drivers
-Though most hardware remained relatively expensive and was adopted during the late stages of
the product life cycle, the Wii was sold at a reasonable price appealing to many people since its
inception.

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Social-cultural drivers
-With the exhibiting brain age, brain training in the US had been taking root as an industry of its
own and was strategic in introducing adults to the gaming behavior.
Technological drivers
- In comparison to the introduction of an iPhone which had a touchscreen on a large scale in the
market of smartphones in 2007, Nintendo was also to use the touchscreen strategy in its gaming
components.
Appendix 3: Porter’s Five Forces of Industry Rivalry
Incumbent Rivals-Rivalry among existing competitors
-Poor performance making it sell less than 21 million units; this was discouraging since
Microsoft’s Xbox introduced in 2001 that targeted and served older consumers and had its
internet provider services to consoles exceeded its sales by millions.
-Though the gamers were looking for new experiences with their gaming options, the Wii
remained superior to the products from competitors, and by mid-2007, Nintendo had sold more
units compared to both Sony and Microsoft combined with regards to the consoles.
Threat of new entrants
-In trying to challenge the hegemonic position established by Sony, Nintendo went on releasing
its GameCube, which according to many was technically better compared to the second
PlayStation though there was nothing new with its system.
Threat of substitutes and competitors
-However, there came the smartphones and tablets and slowly penetrated the market affecting the
Nintendo’s safe card.
- Microsoft’s Xbox introduced in 2001 that targeted and served older consumers and had its
internet provider services to consoles exceeded its sales by millions.

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