Nintendo Strategic Management: Industry Analysis & Future Strategy

This report provides a comprehensive strategic analysis of Nintendo, a multinational corporation in the consumer electronics and video game industry. It begins with an external analysis, examining the video game industry's characteristics, including high penetration in developed markets and increasing target audience breadth. Porter's Five Forces analysis assesses supplier power, buyer power, threat of entry, threat of substitutes (mobile and PC gaming), and competitive rivalry among key players like Microsoft and Sony. The report identifies opportunities such as new customer segments and growing infrastructure, as well as threats including competition and substitute products. A PESTLE analysis explores political, economic, social, technological, legal, and environmental factors impacting Nintendo. The internal analysis delves into Nintendo's tangible and intangible assets, capabilities, core competencies (portability, marketing strategy, Disney tie-up), and value chain activities. Finally, a SWOT analysis synthesizes the internal strengths and weaknesses with external opportunities and threats, leading to insights into Nintendo's current and future strategies. Desklib provides students access to this and other solved assignments to enhance their learning.

Running head: STRATEGIC MANAGEMENT
STRATEGIC ANALYSIS
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Table of Contents
External analysis:.................................................................................................................3
Industry analysis:.............................................................................................................3
Porter's five forces theory:...............................................................................................3
Competitive rivalry:.........................................................................................................5
Opportunities and threats:................................................................................................6
General environment analysis:............................................................................................6
Internal analysis:..................................................................................................................8
Business resources:..........................................................................................................8
Tangible assets:............................................................................................................8
Intangible assets:..........................................................................................................8
Capabilities of Nintendo:.................................................................................................9
Core competencies and advantage:..................................................................................9
Value chain analysis:.....................................................................................................10
Marketing and Sales......................................................................................................11
SWOT analysis:.............................................................................................................13
Current and future strategy:...........................................................................................15

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External analysis:
Industry analysis:
Nintendo is a Japan based multinational company that deals with the consumer electronics and
video games. The organization was founded on 1889 by Fusajiro Yamauchi. Headquarter of
Nintendo lies in Kyoto, Japan. Nintendo has been a global leader in the video game industry
(Pikachu 2018).
The video game industry has been growing since 2000. Companies like Sony,
PlayStation, Microsoft and recently Xbox 360 have been the tough competition for Nintendo.
The industry is characterised by high penetration power in the developed market nut at the same
time the industry is low emerging (Feijoo et al. 2012). As the customer’s are getting accustomed
with gaming the target audience for the organizations in this industry is getting broader, which
will play a big role in the growth of the organization. The console makers sale their products
with an implicit loss but then the revenue is mainly recovered from the accessories, games etc.
The organizations in this industry are focusing in bringing better technology or games each year
which increases the competition so much. The technology is advancing and so does the change in
the gaming techniques. Earlier people used to play with the wired joystick now people are using
the VR technology for playing games (Madary and Matzinger 2016). The console makers are
bringing new technology each day.
Porter's five forces theory:
Porter’s five forces will analyse the 5 key forces that will have an impact in the
operations of the company (Dobbs 2014).

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Power of Supplier (Medium):
The supplier power in the console industry is considered to be low to medium. Nintendo
along with PlayStation and Microsoft forms the ‘big three’ (Le 2018). These companies
generally earn revenue from the software and hardware sales, this is why the supplier plays and
integral role in their organization. Supplying companies strive to supply to these companies due
to the assured profit that they will earn. This is why the supplier does not possess a huge power
in this industry.
Power of buyers (Medium):
Due to the presence of very few organizations in the market the buyer does not have
much power. There are only three choices- PlayStation, Microsoft and Nintendo and this makes
the choices of the customer limited. These are well known and reputed brands and this makes the
buyers power to go down.
Threat of entry (Low):
Threat of entry in the gaming consoles industry is low due to several factors. Microsoft,
Nintendo and PlayStation have been in the business for quite some time and this has helped them
to build brand reputation in the market. This reduces the chances of the new entrants to come and
grab a huge market share immediately. Entry in the console industry requires a lot of capital and
investment because of the high manufacturing cost and the research and development of

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advanced technologies, marketing and advertising which makes the entry of the new entrants
tough Carnabuci, Operti and Kovacs 2015).
Threat of substitutes (Medium):
Games can be either developed internally or by the third party developers. This is why
companies like Nintendo and Microsoft the leading development studios in order to manufacture
exclusive games. There are other substitutes for entertainment for the consumer like movies, TV
series etc. The biggest substitutes are the mobile gaming and the PC games (Rogers and Clarkson
2017).
Threat of rivalries (High):
Due to the presence of few competitors the industry is growing rapidly and constantly,
which makes the gaming console industry very competitive. Nintendo, Microsoft and Sony are
continuously trying to outsell each other and increase the company’s market share. These
companies also compete for the same consumers and the same customers, which makes the
threat of rivalry high.
Competitive rivalry:
The gaming console sector does not have many competitors. The top three rival
companies are Microsoft, Nintendo and Sony. The Xbox one, Xbox 360 is some of the key
products of Microsoft that helped the organization to create their own market share. Similarly
PlayStation 1, 2 and 3 are some of the key products of Sony.

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Opportunities and threats:
This paragraph will explain the opportunities and the threats that the organization can
have and face in the market:
Opportunities:
 New segments: The gaming industry is growing and there are new segment of customer
who can help the organization to gain more profit (Chung and Klappert 2014).
 Growing infrastructure: Expansion and growth in the infrastructure for example
internet connection, bandwidth in the remote places helped in increasing the users of the
games and this can prove to be a huge opportunity for Nintendo to market their products
in those remote places.
Threats:
 Competition: The main competition for Nintendo is Microsoft and Sony.
 Substitute products: The industry possesses high threats of the substitute products like
mobile gaming, computer gaming etc, which will also affect the revenue of Nintendo.
General environment analysis:
The general environmental analysis can be done using the PESTLE analysis.
Political factors:
 Political stability in the market is one of the essential factors that affect the operation of
Nintendo.
Economical factors:

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 The organization is exposed to the exchange rate fluctuation of more than 70% in imports
of goods globally.
Social factors:
 The increased rate of smartphone usage globally has also increased the penetration of the
digital gaming in the market.
 The increased rate in the disposable income in the emerging countries has influenced
them to the gaming market.
Technological factors:
 AR gaming is becoming the new trend in the gaming industry which will also influence
to bring AR games in the market. Nintendo is one of the companies who have mover
advantage.
 Investment in the research and development will lead towards technological innovation.
Legal factors:
 The rise in the counterfeit products trade in the global with very limited legal options, the
revenue of Nintendo is highly affected.
 `The improvement in the product regulations and patent protection in the developed
country will help in establishing the companies.
Environmental factors:
 Focus on manufacturing environment friendly products.

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Internal analysis:
Business resources:
Tangible assets:
Nintendo being in the industry for 129 years have acquired a number of assets that made
them one of the leaders in the global electronic and gaming industries. The organization
currently has total assets worth of 1.634 trillion Yen. Nintendo employs 5501 employees in their
organization. The headquarter lies in Kyoto, Japan. Nintendo operates is business worldwide,
which have helped them to earn a huge brand awareness (Kodama 2018).
Intangible assets:
The organization is based on Japan and most of the products are manufactured in Japan.
Japan being a technology advanced country helps Nintendo by providing skilled and experienced
employee (Belo et al. 2017). This has also helped them in the research and development process
of the organization.

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Capabilities of Nintendo:
 Nintendo is supporting their each and every console release with excellent games.
 The marketing of the Nintendo products have been accurate and it targeted the right
customer, which has seen a significant growth in the revenue of the organization.
 The Nintendo products are very portable compared to PlayStation and Xbox. The
portability feature of the Nintendo’s product has influenced the customer to purchase
their products.
 The Nintendo products are made up of premium quality and are durable.
Core competencies and advantage:
Competencies are the abilities that the organization do differently from others and are successful
and efficient in doing that. Some of the core competencies of Nintendo and what advantage they
have are listed below:
 Portability- Nintendo has been creating portable devices, which have helped the
customers to carry the product and use it whenever they want. This has helped them in
capturing the market and influenced the customer to use their product instead of Xbox
and PlayStation.
 Good marketing strategy- Nintendo has been brilliant with their marketing strategy and
this has helped them to increase their brand awareness. This has also increased their sales
and thus helped in the expansion of the business (Lee, Lin and Yu 2017).
 Tie-up with Disney: Nintendo has become more successful after they entered into a tie-up
with Disney and this helped the organization to increase the appeal of their product
among the biggest customer segment that is kids.

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Value chain analysis:

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Primary activities
Inbound logistics
Getting the raw materials should be done
effectively and efficiently to receive more raw
materials for increasing the productivity.
The raw materials should be kept in a
place, which will not harm the environment
and this will increase the trust and interests of
the customer.
Nintendo should ensure that they have
adequate storage space for raw materials so
that shortage of raw materials never occurs.
Operations
Research and development needs to be
carried out continuously to bring new and better
technology.
Outbound logistics
Distribution of the raw final products via
online store or retails shops to the customers.
Marketing will be done by using the

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Marketing and Sales
following channels:
Television advertisement
Social media advertisement
Display in malls
Billboards
Services
Free delivery
Customer service
Repair