Competitive Dynamics of Nintendo in the Global Gaming Industry

This report provides a comprehensive analysis of Nintendo's competitive dynamics within the global video game industry. It begins with an executive summary outlining the report's objective: to evaluate Nintendo's current business-level strategies and their effectiveness. The report identifies Nintendo's use of cost leadership, differentiation, and international strategies. It then analyzes the limitations of these strategies, including challenges related to third-party game development, the impact of cost leadership on brand value, and the rise of mobile and PC gaming. Based on these limitations, the report recommends several strategic adjustments for Nintendo, including a market focus strategy, market adaptation strategies, and international strategy adjustments. It also suggests market penetration and diversification strategies, like developing games for mobile devices, to enhance their market share and revenue. The report concludes with a summary of the findings and recommendations.

Running head: COMPETITIVE DYNAMICS
Competitive dynamics
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the current business level strategies being followed by
Nintendo in operating in the highly competitive global video game industry. It is identified that
the strategies being initiated by them were effective a few years ago but with the recent
transformation of this industry, these strategies are less effective. In view to this, a few
limitations are identified for the existing strategies of Nintendo. Based on these limitations, this
report recommended a few strategies that will further help them in regaining their lost market
share.

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Table of Contents
Introduction......................................................................................................................................3
Identification of the competitive strategies of Nintendo.................................................................3
Cost leadership strategy of Nintendo...............................................................................................3
Differentiation strategy of Nintendo................................................................................................4
International strategy of Nintendo...................................................................................................5
Identification of the limitations.......................................................................................................5
Recommended strategy of Nintendo...............................................................................................7
Initiation of the market focus strategy.........................................................................................7
Market adaptation strategy..........................................................................................................7
International strategy...................................................................................................................8
Market penetration strategy.........................................................................................................8
Diversification.............................................................................................................................8
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

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Introduction
Video games industry is witnessing a huge transformation in the existing gaming trends
with the verge of entering in the ninth generation faming technologies. Thus, considering the
competitive business scenario of the global video gaming industry, it is important for each of the
players operating in this sector to cope up with the change. Among all the leading players
operating in the global video gaming markets, Nintendo is one of the oldest names and is the
creator of some of the legendary games such as Mario and Pokemon (Hollensen 2013).
Moreover, they are one of the few Japanese brands, which created worldwide brand identity.
However, in the recent time, the level and intensity of the competition got increased and market
share of them is decreasing with brands such as PlayStation and Xbox gone ahead of Nintendo.
Furthermore, the emergence of the smartphones as the alternative for the gaming consoles is
adding to the challenges for Nintendo (McKay-Nesbitt and Yoon 2015).
Thus, it is important for them to review their competitive dynamics in the forms of their
current competitive strategies and what should be done in mitigating the challenges. This report
will discuss about the competitive strategies being initiated by Nintendo currently and the extent
to which they are effective enough. A few gap areas will be identified based on which, the
recommended steps will be stated.
Identification of the competitive strategies of Nintendo
According to the Porter generic strategies of competitive advantages, Nintendo is
following both cost leadership as well as differentiation strategies.
Cost leadership strategy of Nintendo

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It is identified that Nintendo is following cost leadership strategies in operating in the
global video gaming market. This is due to the reason that major two competitors of Nintendo
are Xbox and PlayStation and both these brands are offering higher end products to the
customers. Majority of the gaming consoles and accessories being offered by Xbox and
PlayStation are premium priced (Kaliappen and Hilman 2013). This led to the competitive
pricing by Nintendo and catering to the below level customers of the other two entities. This
helped in catering to huge customer segments much more than the other two. This strategy of
Nintendo is also in the line of increase in the number of gaming users and population in the
world. In initiating the cost leadership strategies, Nintendo introduced low cost products in the
market, which are not superior to the products of Xbox and PlayStation but having same level of
utilities (Ray Gehani 2013).
Differentiation strategy of Nintendo
In terms of differentiation strategy, Nintendo is also following different approaches. One
of the major approaches of them is differentiated product strategy. From the initial stage of their
operation, Nintendo strived to have differentiated product approach in the market such as
introduction of the Nintendo DS in 2004, which was having dual screen in handheld format. This
was an innovative gaming console at that point of time and helped in attracting more customers
(Chung, Lin and Hu 2013). In terms of game also, differentiated approach is evident with
products such as Pokémon and Mario Kart 8 are being developed in-house and are only
compatible with the Nintendo gaming devices. This also helped in attracting and retaining
customers due to the reason that popularity of these games helped more customers to opt for
Nintendo gaming consoles as the only alternative for playing these games (Liu and Zhang 2013).

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International strategy of Nintendo
Apart from the competitive strategies of Nintendo, there are number of business level
strategies being followed by them in enhancing their international business. It is identified that
Nintendo is following market development and product development strategies in their
international business (Kang and Montoya 2014). In terms of their market development
strategies, Nintendo is available in the majority of countries across the world and thus catering to
the larger customer sections. On the other hand, in terms of the product development strategies,
Nintendo is continuously improving their product portfolio such as offering Nintendo 3DS and
Wii U. This helped them in catering to the different needs and trends of the customers. Hence,
covering the extensive market areas along with different product portfolio is helping Nintendo to
generate more revenue from the market (Urde, Baumgarth and Merrilees 2013).
Identification of the limitations
Even though the existing strategies of Nintendo are helping in generating revenue but
from the case study, it is identified that market share of Nintendo is dwindling and getting
captured by Xbox and PlayStation. It is reported that currently, Nintendo is standing below the
two competitors with the market share of around 18 percent. Thus, there are must be limitations
in their current business level strategies, which is causing in reduction of the market shares
(Edvardsson et al. 2013). One of the major limitations identified is issue in third party game
developing process. It is identified that they are suffering from the lack of third party developers
for improving their games. This is mainly due to the reason that games of Nintendo are based on
closed platform and they are developed and can be played only on the Nintendo devices. This
restricted the third party developers from developing content for Nintendo devices. Even though

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Nintendo is having different product but with limited access to the games, they are trailing
behind Xbox and PlayStation.
Another major limitation being identified is ineffectiveness in their competitive
strategies. This is due to the reason that Nintendo is following cost leadership strategy, which is
further diluting their brand value. In the current state of affairs of video gaming market, there are
number of alternatives offering cheaper products, which are posing challenges for Nintendo
(Rashidirad, Soltani and Syed 2013). In the case of PlayStation and Xbox, premium pricing is
helping in creating distinctive positioning in the market. However, in the case of Nintendo, they
are competing with the cheaper brands in the market and thus their branding and identity is
getting diluted. Hence, the initiation of the cost leadership strategy is not getting desired outcome
for them in the long term. It should also be noted that due to the premium pricing of Xbox and
PlayStation, product quality is also much better compared to what Nintendo is offering and this
is also taking away customers from them (Marchand and Hennig-Thurau 2013).
In the case study, it is stated that mobile and PC gaming is also posing threat to gaming
consoles and with the increase in the popularity of these mediums; traditional gaming consoles
are taking the toll. However, this phenomenon is also affecting Nintendo more over PlayStation
and Xbox due to the reason that premium pricing is helping them in offering more holistic
gaming experiences, which cannot be served by the mobile devices (Wesley and Barczak 2016).
However, the gaming quality of Nintendo is comparable with the latest high end mobile games.
Thus, the threat is more for Nintendo. It is also identified that the current market development
strategy of Nintendo is also having a number of limitations. This is due to the reason the current
market development strategy of Nintendo and involves exporting of their products from Japan to
different countries across the world (O’Hagan and Mangiron 2013). This is causing added cost in

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the forms of tariffs and taxes. Thus, their international business strategy is contradicting with that
of the cost leadership strategy.
Recommended strategy of Nintendo
Initiation of the market focus strategy
It is recommended that Nintendo should initiate market focus strategy in order to regain
their market share. This is due to the reason that their current approach of cost leadership
strategy is not effective. With the help of the market focus strategy, Nintendo will be able to
target a specific customer segment and offer their products accordingly. Moreover, the research
and development process should also be initiated based on the requirements and trends of the
target segments. For instance, if the targeted customers are having the preferences for affordable
gaming products then cost leadership should be followed and vice versa. The more effective will
be the market focus strategy, the more will be the satisfaction rate of the customers and positive
word of mouth will ensure increase in market share for Nintendo.
Market adaptation strategy
Currently, Nintendo is following product standardization strategy in doing their business
in the global market. Even though this strategy is being followed by all the major players in this
industry but it is recommended that Nintendo should have market adaptation strategy in offering
products according to different target regions. For instance, the cultural and social backgrounds
in the Asian regions are different to that of the American region and thus it is recommended that
design and content of the games should be in line to these differences in different countries. This
will help in catering to different customer segments effectively. On the other hand, initiation of
the market adaptation strategy will help Nintendo in generating differentiation approach as not

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other competitors are following this. In the previous section, it was identified that the local and
cheaper competitors are posing challenges for Nintendo and with the help of market adaptive
products; these challenges can be properly mitigated.
International strategy
The entry strategy of Nintendo in doing business in the foreign countries should be
changed and it is recommended that they should have manufacturing units in some of their
profitable market regions. This will ensure that products can be offered in more competitive
pricing and will also complement above stated market adaptation strategy. This is due to the
reason that with the help of different manufacturing units in different countries, Nintendo will be
able to cater to the different trends in the global markets. In this case, acquisitions and mergers
can also be effective for Nintendo due to the reason that if they can acquire any local gaming
company, then it will help Nintendo to serve the particular market effectively along with meeting
the specific trends.
Market penetration strategy
One of the major challenges being faced by Nintendo is transformation of the gaming
market to ninth generation. Thus, it is recommended that they should develop their existing
products in compatible with the ninth generation technologies. This will help in further
penetrating in the existing customer base of Nintendo. Existing customers of Nintendo who are
using their older products will opt for Xbox or PlayStation if Nintendo cannot came up with
ninth generation products. Therefore, with the help of the of the market penetration strategy, they
will be able to further penetrate in the market and increase the market share.
Diversification

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Diversification can also be an effective strategy for Nintendo due to the reason that they
can increase their existing customer base and business revenue. It is recommended that Nintendo
should develop games for the mobile devices. It will help in catering to huge market present in
the forms of smartphone users. Moreover, the dependency only on the gaming consoles will get
reduced for them and Nintendo can enhance their branding in entirely new market segment. This
should be noted that smartphone gaming market is more mainstream compared to the niche
market of video gaming consoles. Thus, Nintendo will face more customer base and
opportunities for more business revenue.
Conclusion
This report concludes that Nintendo is not having effective business level strategies as of
now and their existing strategies are not effective in the current business scenario. In this report,
the existing business level strategies of Nintendo are being evaluated and based on that, a few
limitations are being identified. It is identified that Nintendo is facing reduction in the existing
market share and increased competition in the forms of improved products of PlayStation and
Xbox. Based on these limitations, a few recommended steps are being discussed, which will help
Nintendo in increasing the market share in the global market. The recommendations stated in this
report ranges from corporate level strategies to market development strategies. Moreover, it is
also expected that effective implementation of the discussed strategies will help Nintendo in
regaining the lost market share from their competitors.

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