Strategic Management Report: Nintendo's Competitive Analysis

This report provides a comprehensive strategic analysis of Nintendo, examining its position in the electronic gaming industry. The analysis begins with a macro-environmental assessment, utilizing the PEST framework to evaluate political, economic, social, and technological factors impacting Nintendo's operations. The industry analysis employs Porter's Five Forces model to assess competitive rivalry, the threat of new entrants, supplier power, buyer power, and the threat of substitutes, determining the industry's attractiveness. A company analysis follows, using the VRIO framework to evaluate Nintendo's resources and capabilities, identifying core competencies and competitive advantages. Competitor analysis highlights key rivals like Electronic Arts and Activision Blizzard, comparing their strategies and financial performance. The report concludes with a strategy analysis, identifying Nintendo's cost leadership business-level strategy, and provides recommendations for product diversification and the infusion of AR/VR technologies to enhance its market position and sustain its competitive edge. The report is based on an assignment from a Strategic Management course.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the student
Name of the university
Author note

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Introduction
The concerned organization, Nintendo, was established in the year 1889 and is
headquartered in Kyoto, Japan. The development of electronic technology in 1970 through the
Beam Gun series developed the image of the venture while operating in the different markets.
The innovativeness of the organization in the field of electronic sports enabled the same in
gaining a competitive advantage over the existing market players. The concerned organization
aimed at improving the production and marketing related operations for enhancing the quality of
the operations. The research will be evaluating the different market situations while evaluating
the strategies for growth of the organization.
Macro environmental analysis
PEST assessment of Nintendo
Political The political factors play a major role in
identifying the market situations for an
organization as the rate of taxation and
government regulations often restrict the
potency of the ventures (Punt et al. 2016).
The political stability in the major markets of
the concerned organization enabled the same
in increasing the scope of expansion and
sustenance while operating in the different
markets. On the other hand, the growing rate
of taxation in the different markets like China
might affect the capabilities of the

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organization in making mass expansion
(Engert, Rauter and Baumgartner 2016).
Moreover, it has been noted that the excessive
government control in most of the primary
markets of the concerned organization might
challenge the evolution and developmental
process of the same. Therefore, the political
factors supports and challenges the growth
and expansion related objectives of the
concerned venture.
Economic The changes in the economic situation of the
developing economies and the increased rate
of disposable income among the different
communities permitted the growth and
expansion of the venture in the different
regions. Serra and Kunc (2015)
stated that the improved economic conditions
of the major markets of an organization
increases the scope of sustenanceand growth
for the business. In this relation, the increase
in the prospect of the potential customers
would enable the organization in improving
their sales volume in the different markets. It

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has been noted that the organization produces
propositions that would help in increasing the
experience- based entertainment of the
customers. Therefore, the growing economic
stability in the different prospective markets
and the potential customers of the concerned
venture creates an opportunity of growth and
expansion in the markets.
Social The changing preference of the customers
towards a realistic gaming experience and the
growing population of millennial holds a
growing prospect for the organization
(McIntyre and Srinivasan 2017). The
inclination of the customers towards an
advanced gaming experience and the
continuous innovations that are made by the
venture in the electronic gaming field added
to the competitive vantage point of the same
while operating in the prospective markets.
Wesley and Barczak (2016) stated that the
changing preferences of the customers and
adherence of the same by an organization
empowers the sustainable growth of the

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business while operating in the different
markets. In this relation, the concerned
venture developed the propositions in
accordance to the changing preferences of the
customers for improving the market scope.
Technological The technological innovations that are made
by the electronic gaming industry with the
infusion of AR (Augmented Reality) has
increased competition for the concerned
organization in the different prospective
markets (Hess et al. 2016). The different
changes that are undertaken by the
organization are aimed at analysing the needs
of the customers while improving the rate of
operations as per the needs of the venture. van
de Kaa, de Vries and van den Ende (2015)
stated that the technological innovations in
the organizational operations creates a
vantage point for the ventures. In this relation,
the concerned venture has taken the initiative
of improving their market situation while
operating in the different markets.

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Industry analysis
Porter’s five
Competitive rivalry
(High)
The growing competition in the markets are
based on the technological advancements in
the electronic gaming industry. The
competitors of the concerned organization are
Activision Blizzard, Electronic Arts (EA),
Zynga and CCP Games (Bereznoi 2015). The
increased rate of technological innovations
that are made by the electronic industry has
increased the rate of competition in the
prospective markets. Therefore, the
competitive rivalry that is being faced by the
organization is considerably high with the
infusion of technologies like AR and the
changing preferences of the customers
towards a more experience based gaming.
Threat of new entrants
(Low)
The threat of new entrants in the industry is
considerably low, as the industry requires
huge funding and capital expenditure from the
initial level of establishment Niesten et al.
(2017) stated that the technological infusions
in the electronic gaming industry requires

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huge capital investments that might affect the
capabilities of an organization while operating
in the different markets. On the other hand, it
has been noted that the electronic gaming
industry include reputed players with loyal
customer base. Hankammer and Steiner
(2015) opined that the loyalty of the
customers towards the established brands
curbs the growth and expansion of the
entrants in the market. However, there are
chances of mergers through which foreign
companies might enter the primary market of
the industry, which is significantly lower by
scope. Therefore, the threat of new entrants is
lower in the electronic gaming industry.
Bargaining power of suppliers
(High)
The bargaining power of the suppliers is high
as compared to the other industries due to the
lower availability of the same in the markets.
Dodgson (2018) opined that the lower
availability of the suppliers in the market
empowers the bargaining power of the same
while increasing the cost of the supplies and
other equipment. It has been noted that the

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organizations develop continuous operations
through the supplies that are made by the
suppliers. In this relation, the companies take
the initiative of improving their relation with
the suppliers. The electronic gaming industry
thereby developed the rate of operations
through establishment of quality relations
with the suppliers. It empowered the
bargaining power of the suppliers for the
electronic gaming industry.
Bargaining power of customers
(High)
The bargaining power of the customers are
high due to the presence of wider range of
alternatives in the market. Bereznoi (2015)
opined that the competitors in the market
influence the buyer’s buying power while
intensifying the competition through
modification in the propositions and pricing
strategies. In this relation, the existing players
in the electronic gaming market influence the
bargaining power of the customers through
proposition of different alternatives.
Therefore, it might be stated that the
increased bargaining power of the customers

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are based on the presence of large number of
competitors in the electronic gaming markets.
Threat of substitutes
(Moderate)
The threat of substitutes in the electronic
gaming markets are moderate as there are
companies that provide alternative
propositions at a lower price for drawing the
attention of the customers. However, it has
been noted that the loyal customer base of the
companies are not affected by the threat of the
substitute propositions. On the other hand, it
has been noted that the growing rate of
technological innovations in the electronic
gaming industry has restricted the growth of
the substitute products. Therefore, it might be
stated that there are moderate chances of
threat from the substitute products in the
electronic gaming industry as per the needs of
the venture.
Company analysis
VRIO analysis
Resource
and
Valuable Rare Inimitable Organized Result

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capabilities
Brand value Yes Yes Yes Yes Strong
competitive
edge
Customer
loyalty
Yes Yes No Yes Strong
Sustainable
edge
R&D Yes Yes No Yes Strong
Sustainable
edge
Capital
resources
Yes Yes No Yes Strong
Sustainable
edge
Skilled
Human
resources
Yes Yes Yes Yes Strong
competitive
edge
Management
approach
Yes No No Yes Moderate
Sustainable
edge
Business
model
Yes No No Yes Moderate
Sustainable

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edge
Competitor analysis
The major competitors of the concerned organization, Nintendo, are specifically
Electronic Arts and Activision Blizzard. However, the changes in the organizational situations
are based on the technological innovations and the level of AR and VR that is used by the
businesses in the propositions. It has been noted that the revenue of Electronic Arts and
Activision Blizzard are US$ 5 Billion and US $1.40 billion respectively whereas the net sales of
Nintendo was of US$ 10.91 billion as computed in the fiscal year 2019 (Nintendo 2018). The
sales and revenue figures significantly develops an understanding of the complex and
competitive organizational situation in the markets. It has been noted that most of the
propositions that are made by the organizations are simply based on the motif of providing the
customers with realistic gaming experience. However, the proficient use of technologies like AR
and VR brought about differences in the organizational positions of the same. The lack of diverse
range of propositions by the concerned o0rganization affected the capability of the same in
gaining a competitive vantage point over the existing players. The companies developed
competitive pricing strategies and adjusted the price of the propositions as per the market
demand and the quotes made by the competitors in the market. Therefore, the competitors of
Nintendo fuelled the competition in the primary markets.

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Strategy analysis and recommendations
Strategy analysis: Business level strategy
The business level strategy that is being followed by the concerned organization,
Nintendo, is cost leadership. In this relation, the concerned venture took the initiative of
developing the propositions at a lower cost for proposing greater value to the customers at a
lower price. The lower cost of the proposition enabled the organization in drawing the attention
of most of the customers towards their valued propositions. The different modifications in the
operational management related systems are based on the mission of drawing and retaining the
loyalty of the customers through the proposition of lower priced propositions, leading to attempts
of maintaining the cost leadership in the markets.
Recommendations
 Undertaking product diversification strategy: The product diversification strategy would
enable the organization in introducing new range of propositions to suit the changing
demand of the customers while attending to the needs of the price sensitive customers.
Product diversification would enable the venture in retaining the loyalty of the customers
while expanding in the new markets.
 Infusion of updated AR and VR technologies: The infusion of updated AR and VR
technologies in the organizational propositions would allow the venture in improving the
sustainable edge of the same. The continuous developments in the technological aspects
would be guaranteed through the empowerment of the R&D department of the venture.
In this relation, the continuous innovations in the organizational processes would
contribute to the growth of the organization while surviving the market competition.

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Conclusion
Therefore, from the above analysis it might be noted that the concerned venture holds a
competitive edge over the existing market players. The business level strategy that is being
considered by the venture is to gain cost leadership in the primary markets, while targeting the
price sensitive customers. However, the absence of product diversification related strategy
affected the capability of the organization in sustaining the market position. Therefore, the report
aimed at developing an idea on the different strategies that might be considered by the business
after assessing the macro environment and the competition in the markets.

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References
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