Our purpose is to share the analysis of the Nintendo case, an institution that, more than a company, has become a world legend in the business of human entertainment in individual, group and family spheres, as a result of the application of intelligent research, development and market.
business-analysis-nintendo-isabelAfter careful analysis of the information available in the reference case and the bibliography consulted, we identified the arguments to be made, according to the guide in the book by ADMON ESTRATEGICA. 8th EDITION. CHARLES W. HILL. GARETH R. JONES. MC GRAW HILL. ANALYSIS OF THE NINTENDO CASE STUDY
HISTORY, DEVELOPMENT AND GROWTH OF THE NINTENDO COMPANY:
Nintendo, a Japanese guru in the field of console and cartridge video games, started as a manufacturer of playing cards, a business in which it remained for a century since 1870; Established in Kyoto, Japan, it was founded by the Yamauchi family, beginning to diversify into the video game business in the late 1970s.
The first step in achieving diversification was obtaining a Magnavox license for video game technology, something completely different from the initial product that was the object of your business for a century, which revolutionized your main line of business in a positive way. In 1977, the company introduced a home video game system based on that technology in Japan that ran a variation of the game called Pong, created by the Atari company.
In 1978, Nintendo began selling coin-operated video games; in 1980, a subsidiary was established in the United States, directed by Hiroshi Yamauchi's son-in-law, where coin-operated video games were also sold; Nintendo's first hit was Donkey Kong, designed in 1981 by Sigeru Miyamoto, an industrial arts graduate whose talent in drawing cartoons allowed him to give Nintendo the creation of Mario Bross, the company's iconic character and protagonist of the best-known video games, the which were based on stories and worlds imaginatively created by Miyamoto, a trait different from the games that existed until then, which were only interspatial fights and laser beams, while the Donkey Kong game consisted of the story of a pet ape that kidnaps his master's girlfriend,a carpenter named Mario, who to retrieve it must climb ramps, climb stairs, jump from elevators and other similar things, while the ape throws objects at him; Donkey Kong was a true sensation in the world of coin-operated gallery games and a shocking success from Nintendo. Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.who to recover it must climb ramps, climb stairs, jump from elevators and other similar things, while the ape throws objects at him; Donkey Kong was a true sensation in the world of coin-operated gallery games and a shocking success from Nintendo. Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.who to recover it must climb ramps, climb stairs, jump from elevators and other similar things, while the ape throws objects at him; Donkey Kong was a true sensation in the world of coin-operated gallery games and a shocking success from Nintendo. Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.while the ape throws objects at him; Donkey Kong was a true sensation in the world of coin-operated gallery games and a shocking success from Nintendo. Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.while the ape throws objects at him; Donkey Kong was a true sensation in the world of coin-operated gallery games and a shocking success from Nintendo. Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.Already counting on Mario in the Donkey Kong game, in 1985 Miyamoto devised an exclusive game for him, and gave him a brother named Luigi, who became the Super Mario Brothers, a game that bore that name and which, like Donkey Kong, was a resounding success, being a kind of sequence of this one, but now with Mario and Luigi as protagonists, whose main task is to find and recover Princess Hongo -who in the Donkey Kong game was Mario's girlfriend -.with the main task of finding and recovering Princess Hongo - who in the Donkey Kong game was Mario's girlfriend.with the main task of finding and recovering Princess Hongo - who in the Donkey Kong game was Mario's girlfriend.
The evolution that Nintendo had regarding the way of operating the games, was that in the early 1980s, by instructions from the head of the company Hiroshi Yamauchi, the engineers designed a machine that they called Family Computer, Famicom, which It was made up of the control, the console and the inserted cartridge format, containing two custom chips: an 8-bit central processing unit and an image processing unit; Thus, in just a few short years, Nintendo had created its own machine to play its own games.
Between 1985 and 1991, Miyamoto produced eight Mario games. Worldwide, between 60 and 70 million units were sold, prompting the development of Nintendo; In 1983, the Famicom was introduced to the Japanese market, whose cost was low, however this was a resource to sell the programs, with which they could earn money, being a profitable business strategy. With an extensive advertising campaign, he managed to sell 500,000 units of Famicom. In one year, the number reached a million and sales were still increasing rapidly.
After adapting Donkey Kong for the Famicom, Miyamoto also created other best-selling games, including another classic, The Legend of Zelda. Although Miyamoto freely took things from folklore, literature and popular culture, the main source of his ideas was his own experience and experiences that occurred basically in his childhood.
Yamauchi understood that Nintendo alone could not meet the growing demand for new games, so he started a licensing program. To become a Nintendo dealer, companies had to accept an unprecedented series of restrictions. Despite these restrictions, six companies agreed to become Nintendo dealers because millions of customers at the time were asking for games. Due to the license agreements, they saw their sales and profits increase. In 1985 there were 17 dealerships. By 1987 they were 50. At this point, 90% of the home video game systems sold in Japan were from Nintendo.
The Nintendo subsidiary in the United States, located in Seattle, was initially unsuccessful, and did not grow on par with the parent company located in Japan, so it was decided to install the coin-operated machine that contained the Donkey Kong game, in a tavern close to the company, which was successful as more and more people became interested in gambling and the machine's warehouse began to fill with coins, changing the market segment and differentiating the sales strategy. By the end of 1982, Nintendo of America had sold more than 60,000 copies of Donkey Kong and had committed sales of more than $ 100 million, so a new distribution channel for electronic stores was sought.
In this way, Nintendo became the most powerful video game company, with dominance and expansion in the Asian and American continent, positioning itself in the market above even the film industry.
Development:
Taking into account the data presented in the case, we will go on to detail the life cycle of some of the Nintendo products. Starting from the general description of stages of a life cycle that according to most authors includes 4 stages:
- Introduction: Which includes the novelty of the concept, the existence of few company competitors, the slow and slow growth of the company, as well as the weak image of the brand. Growth: That refers to the growth in sales, and the increase in both competitors and information about the company. Maturity: It implies a low growth of the company, since it has reached a climax in its development, maintains many competitors at this stage, and consolidates itself with a group of loyal customers. Decline: The decline of a company consists of the evident reduction of competitors, customers, sales and even negative growth.
We identify the Life Cycle of 2 Nintendo products, which are their games, as well as their consoles, machines and systems, which is reflected below:
In accordance with the gradual development that we have observed, Nintendo had from its foundation, initially as a playing card company, to becoming a producer and designer of coin-operated gallery games, to creating its own consoles and machines for its own video games, we can conclude that, in the aspect of the games created by its designer Miyamoto, the following Life Cycle is observed , which will be explained from the following four stages that make it up:
In this sense, we present the following graph regarding Nintendo games. Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 4 "Source: Own"
In the graph, horizontally we capture the years that were decisive for the development of Nintendo as a company, beginning with the year 1977 when they created their first game; We use the color blue to graph the first two stages of its life cycle, which are: introduction and growth, and the color orange to graph the last two stages, which are: maturity and decline ***, as opposed to sales.
- Introduction: Between the 1970s and 1980s, Nintendo did not have its own games, only in 1977 did it have a technology that ran a variation of the game called Pong, created by the Atari company; in 1980, Nintendo already had a game of its own called Radarscope, which was a disaster; detonating in a slow and slow growth of the company in its games, as well as a weak image of it. Growth: Not having success with Radarscope, Sigeru Miyamoto, by Yamauchi's instructions to devise a new game, created Donkey Kong in 1981, the first success of the company with which Nintendo pointed out its growth once launched to the market, thus creating four years later, in 1985, the game that also positioned him enormously:Super Mario Brothers; These games allowed a true growth of Nintendo, being novel because they consisted of unprecedented stories and characters. Maturity: From 1985 to 1991, Miyamoto produced eight Mario games, so Nintendo had reached a climax in its development, as between 60 and 70 million units of the games created by Miyamoto were sold in the world, thus consolidating a number Stratospheric loyal customers. After adapting Donkey Kong for Famicom, Miyamoto also created other bestselling games, including another classic, The Legend of Zelda. ***Slope: The information provided by the case does not allow us to identify or deduce in any way, at what point the decline of the company's products occurs.
Below is the Life Cycle of the consoles, machines and systems produced by Nintendo: Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 4 "Source: Own"
- Identification of Strengths and weaknesses of the Nintendo Company:
| STRENGTHS | |
| one | Image, Fame and recognition of its leadership of differentiation in the market |
| two | Proper logistics. Subsidiary strategy |
| 3 | Low prices and superior quality |
| 4 | Ability to take advantage of opportunities and generate strategic alliances |
| 5 | Innovation capacity. |
| 6 | Ability to position in a new market segment through imaginative ideas for young people |
| 7 | Capacity for change and technological and psychological adaptation to the needs of new clients through new market differentiation strategies: Mario (Character and story) |
| 8 | Speed of sales leads it to position itself nationally in the US |
| WEAKNESSES | |
| one | Limited intentional product assortment due to internal quality and content restrictions |
| two | Few structural changes in subsidiaries |
| 3 | Few direct points of sale. Dependence on other distribution channels to sell their products. (Taverns, stores, shopping malls) |
| 4 | At some times sales are low due to lack of strategies to meet demand and low production of equipment |
| 5 | Technical limitations on some equipment and use of aggressive visual colors (red and black) |
| 6 | Excessive license restrictions for dealers |
| 7 | Slow to join the production of options for Smartphone. Conservatism |
| 8 | Intentional limitations of game production. Accused of monopoly |
- The nature of the external environment that surrounds the NINTENDO company
| OPPORTUNITIES | |
| one | Availability of Companies for alliances |
| two | Growing demand for leisure products |
| 3 | New talents to capture in the competition |
| 4 | Open to the online market |
| 5 | App growth as an innovation option |
| 6 | Technological development product of research and development to improve equipment |
| 7 | Customer preference for NINTENDO products |
| 8 | Growing innovations in the market |
| THREATS | |
| one | Aggressive competition in the market |
| two | Ability of the competition to copy their innovations |
| 3 | Changing market in tastes |
| 4 | Expensive technology |
| 5 | Variety of competitor offerings |
| 6 | Appearance of other attractive products on the market such as Smartphone |
| 7 | High demand for substitutes |
| 8 | Lawsuits, accusations and fines to Nintendo |
Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 7 “Source: Own”
- NINTENDO SWOT analysis:
| NINTENDO | OPPORTUNITIES | THREATS | |||||||||||||||||
| O1 | O2 | O3 | O4 | O5 | O6 | O7 | O8 | A1 | A2 | A3 | A4 | TO 5 | A6 | A7 | A8 | ||||
| CROSS IMPACT MATRIX | |||||||||||||||||||
| STRENGTHS | |||||||||||||||||||
| F1 | Image, fame and recognition of market differentiation leadership | 3 | 3 | 3 | two | one | 3 | 3 | 3 | twenty-one | two | 3 | two | 3 | two | two | 3 | two | 19 |
| F2 | Appropriate logistics, franchise strategy | 3 | 3 | one | 3 | one | 3 | 3 | 3 | twenty | 3 | two | 3 | two | 3 | two | one | two | 18 |
| F3 | Low prices and superior quality | 3 | 3 | one | two | one | 3 | 3 | 3 | 19 | 3 | two | 3 | two | 3 | two | 3 | two | twenty |
| F4 | Ability to take advantage of opportunities and generate strategic alliances | 3 | 3 | two | two | one | 3 | 3 | 3 | twenty | 3 | two | two | two | one | 3 | two | two | 17 |
| F5 | Innovation capacity. | 3 | 3 | 3 | two | one | 3 | 3 | 3 | twenty-one | 3 | 3 | two | two | 3 | one | two | two | 18 |
| F6 | Ability to position in a new market segment through imaginative ideas for young people | 3 | 3 | 3 | one | one | 3 | 3 | 3 | twenty | 3 | two | two | 3 | two | 3 | two | two | 19 |
| F7 | Capacity for change and technological and psychological adaptation to the needs of new clients through new market differentiation strategies: Mario (Character and story) | 3 | 3 | 3 | one | one | 3 | 3 | 3 | twenty | 3 | two | 3 | 3 | two | one | two | one | 17 |
| F8 | Speed of sales leads it to position itself nationally in the US | 3 | 3 | one | one | one | one | 3 | 3 | 16 | two | 3 | two | 3 | two | 3 | two | one | 18 |
| 24 | 24 | 17 | 14 | 8 | 22 | 24 | 24 | 157 | 22 | 19 | 19 | twenty | 18 | 17 | 17 | 14 | 146 |
Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 8 "Source: Own"
| NINTENDO | OPPORTUNITIES | THREATS | |||||||||||||||||
| O1 | O2 | O3 | O4 | O5 | O6 | O7 | O8 | A1 | A2 | A3 | A4 | TO 5 | A6 | A7 | A8 | ||||
| CROSS IMPACT MATRIX | |||||||||||||||||||
| WEAKNESSES | |||||||||||||||||||
| D1 | Limited assortment of products due to internal quality and content restrictions | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | 3 | two | 3 | one | two | two | 3 | two | 18 |
| D2 | Few structural changes in franchises | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | two | 3 | 3 | two | 3 | two | 3 | 3 | twenty-one |
| D3 | Few direct points of sale. Dependence on other distribution channels to sell your products. (Taverns, stores, shopping malls) | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | one | two | 3 | two | two | 3 | 3 | 3 | 19 |
| D4 | At some times sales are low due to lack of strategies to meet demand and low production of equipment | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | 3 | two | 3 | one | two | two | two | 3 | 18 |
| D5 | Technical limitations on some equipment and use of aggressive visual colors (red and black) | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | 3 | one | two | 3 | two | 3 | one | 3 | 18 |
| D6 | Excessive license restrictions for dealers | 3 | 3 | one | one | two | 3 | 3 | one | 17 | two | two | 3 | 3 | two | one | two | 3 | 18 |
| D7 | Slow to join the production of smartphone options. Conservatism | 3 | 3 | 3 | one | 3 | 3 | 3 | 3 | 22 | 3 | 3 | two | two | one | two | 3 | 3 | 19 |
| D8 | Intentional limitations of game production. Accused of monopoly | 3 | 3 | 3 | one | 3 | 3 | 3 | 3 | 22 | 3 | 3 | two | two | 3 | one | 3 | 3 | twenty |
| 24 | 24 | 22 | 18 | 2. 3 | 24 | 24 | 22 | 181 | twenty | 18 | twenty-one | 16 | 17 | 16 | twenty | 2. 3 | 151 |
Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 9 “Source: Own”
Taking into account the elements identified in SWOT allows us to better understand the fundamentals of Nintendo's competitive advantage. We realize that the company has important tangible resources such as its impressive sales, its financing base, technology, infrastructure, research and development, positioning in the minds of customers and players and dominance of the leisure and entertainment market, the reputation, prestige and exclusivity of the brand, the attractiveness of the games and equipment etc. But it is very remarkable the possession of intangible resources of high value for its competitiveness, among which its highly motivated and ingenious human resources (programmers and developers) and its leadership vision of producing the most imaginative games in history stand out.the ability and experience to maximize the exploitation of resources.
An interesting element from a commercial point of view has been the association of the Company to the concept of “Blue Ocean” which aims to reinforce the exclusivity of the brand in a market without competition in terms of the generality of segments it came to cover.
By carefully analyzing the strengths, weaknesses, threats and opportunities identified in the team and contrasting their interaction, applying group weighting, through the Cross Impact Matrix, we identified that according to the information provided by the case from the years 1880 to 1991 from the Nintendo Company; and looking at the volume of impacts in each quadrant, the one with the greatest impacts is the third quadrant, which suggests that its predominant strategy would be Adaptive or D, O. In other words, to balance its strategic situation, it must rely on its opportunities to counteract its weaknesses. And in the same analysis we determined that the strength of the O1, O2, O6 and O7 should be used strategically to counter the D1, D2, D3, D4 and D5. The company's competitive position varied throughout its history until reaching world leadership, but specifically between 1983 in Nintendo Japan and 1988 in E: U some of its strategies weakened its competitive position and it was necessary to vary them to improve it.
- Type of corporate strategies applied by the Company
| Years | Business lines | Product | Alliances | Strategies | Strategy impact | |
| Japan
Corporate |
||||||
| 1870 | Playing cards in Japan | |||||
| 1970 | Video game | Lic. Magnavox | Diversification | First sales | ||
| 1977 | Video games for the home
Technology variation of Atari Pong |
Game variation
of the Pong Atari |
of | Innovation | Sales | |
| 1978 | Coin Operated Video Game | New production | Sales | |||
| 1980 | Famicom (machine with superior capacity Custom Chip. Half price
competition) |
Hire
Ricoh |
Technological innovation | Sales growth | ||
| Chip production for your machines, more sophisticated games and machine backup | Value added | Initial market positioning | ||||
| Excellent imaginative games with history | Mario | Recruitment of special people for the cartoon industry,
Encouragement to innovation |
| Challenges and
abilities |
|||||
| New game based on cartoons and stories
deep, |
Donkey kong | Diversification | Sales growth. Image | ||
| nineteen eighty one | Different games and
imaginative |
Donkey kong | Strategy
segment |
Niche acceptance youth 12-14 years |
|
| 1985 | Games creation | Mario,
Super Mario brothers |
Innovation | Great Sales Increase | |
| 1991 | Creation of new
games |
8 sets of
Mario Mario adapted for Famicom and Zelda |
Global leadership strategies, Innovation | Super sales and revenue success | |
| Nintendo in Japan | |||||
| 1983 | Introduction of
Famicom in the market. (cheapest price from competitors) |
Ask Retailers to Give Up Profit to Make Money from Campaign Program Sales
advertising about Famicom |
Due
1) Sales of 500 billion sales and high consumer demand 2) Given the great demand of consumers, the production was insufficient |
||
| Dealer licensing program | Accepted but not very conveniently | ||||
| Content and quality control measures for dealers and programmers | Accepted but not very conveniently | ||||
| Cartridge production | Cartridges | Outsource cartridge manufacturing with other companies | Production increase Price reduction |
| 1987 | Production, distribution and Marketing | Cartridges, games, equipment | Leadership |
Nintendo leadership in Japanese market |
|
| Nintendo in E: U: NOA | |||||
| 1980 | Creation of NOA. Video game sales
coin operated |
Second Radarscope video games | Replicate product of subsidiary Japan Second quality | They can't sell
They almost broke |
|
| Japanese game sale on coin operated video game machines | Donkey kong | Positioning change
(places the machine in Tabernas) |
Great sales success | ||
| 1982 | Transfer from NOA to Seattle in partnership with
Bill gates |
Expansion from Japan to E: U | Great sales success | ||
| 1984 | Video games with
coins |
||||
| Video game machine sale with
Famicom |
Famicom | New channel
distribution |
Little market response. Not initially sold | ||
| Famicom redesign for the US
(Less appearance of toys and more electronic device) |
Entertainment system Nintendo NES |
New distribution channel for electronic stores | Start marketing efforts | ||
| Security chip production | Licenses to dealers |
Initial acceptance of dealers |
|||
| Imposes security systems on the US version of Famicom | Chip
security |
Security restrictions | Retail skepticism and reluctance |
| NES Distribution | Supermario brothers game | New Sales Strategies: Supplying Storefronts and Windows to Credit and Consignment Retailers | Becomes sales leader in Japan | ||
| Nintendo Specialty Sellers in Japan
to make exhibitions |
18 h daily of exhibitions | ||||
| Dec 1985 | Change of public segment for the youth goal 12-14 years | The strategy worked and 500 to 60 0 stores
of the US exhibit Nintendo increase sales NOA becomes national distributor in the US |
|||
| 1986 | Sale of a million
NES |
||||
| 1987 | NES entertainment system for sale | NES | Doubles sales | In 86 million NES in 87 it
sales double and 88 triple |
|
| 1988 | Games supply | Licenses | Licenses up to 5 games per year. Maintains license restriction and
exclusive rights |
31 programming companies become dealers | |
| Nintendo cannot respond to production and sales, several companies reverse engineer to copy the Nintendo code,
Nintendo files suit and wins |
|||||
| 1990 | Nintendo dominates the video game industry and is the most profitable leading company in Japan | ||||
| 1991 | Nintendo maintains control of
games |
More than 100 dealerships distribute Nintendo, more than 400 titles available for the NES
1991 monopoly of the Nintendo in mixed market, (toy stores, wholesalers and department stores Nintendo is sued by anti-competitive behavior |
|||
| Nintendo Withdraws the exclusivity requirement and allows freedom to
developers |
Pressures of Congress, Dept. of Justice and Lawsuits determine change of Nintendo policies Becomes Global Market Leader |
||||
Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 14 “Source: Own”
According to Miyamoto, one of Nintendo's leading actors and creative leaders: Identifies Nintendo's Mission as: "Taking advantage and improving cheaper technology to create reasonable and affordable entertainment" AND the Goals:
- Continue to produce entertainment lines that have a very good value, due to their simplicity, attractiveness and easy learning. Expand into the US market (at that time) Diversify your products to reach new market segments. Become a market leader in the United States.
Considering Porter's 5 Forces approach, we can identify that Nintendo at all times:
- It was threatened by new competitors who were also developing interesting strategies, since video games had an incredible boom as part of the entertainment and leisure industry, but they knew how to overcome these threats with the quality, design, ease, accessibility, and price of their lines of business, which implemented original tactics that evidenced a balance of power in the face of the bargaining power of suppliers, (game developers, designers, producers of chips and cartridges, etc.) that made it more frequently remain on the cusp of sales than in gray times when sales were down or demand was higher than supply That market rivalry and competitionHe managed it very well through alliances with strong companies and their subsidiaries in several countries, as well as purchasing strategies for everything their suppliers could produce, advertising campaigns and the free placement of windows and windows in stores. and the assurance of credits and consignment That the negotiating power of the clients could handle it with a relation cost-benefit-quality- differentiation- low prices AND the threat of new products / services, typical of this branch could be managed strategically with a quick responsiveness even bringing E.U a force of expert Japanese salesmen from Nintendo who spent 18-hour days in business management
The business lines developed by the Company were detailed chronologically in our summary table and relate to the design, production and sale of video game machines, entertainment games, NES, cartridges, security chips, and licenses to dealers; applied through a Corporate and two subsidiaries: One in Japan and one in the US
Both these and the businesses are interrelated to generate excellent equipment and game sales and profits for the company, through a creative, productive and commercial synergy that allows it to identify, personalize and adapt tangible differentiation strategies in terms of characteristics. technical and quality of its equipment and games to the demands of the market; as well as intangible differentiation by positioning itself for its image, values and liking of its games in the minds of main clients.
They manage alternative and dynamic strategies with added value according to the market situation, customer demand, rivalry of competitors: among them, related diversificationthat leads her to the aforementioned differentiation strategy mentioned by Porter; offering the market something different from the competition, not only in its technical conditions and prices, but also in content and scope. They stand out for developing economies of scale, enhancing valuable human resources with technical and artistic skills, stimulating innovation, (Miyamoto) that produce in their human capital the taste and experience in what they do and the attractiveness to recruit personnel from other companies like Jobs and others; in addition to the business structure, systems and processes.
Something very interesting about their policies and practices is that they not only aim to recruit engineering personnel, cartoonists and developers, but the best ones. They not only aim to produce games, but also the most imaginative and excellent games with added value in their stories. And they cultivate in their staff the challenge and enthusiasm for the work they do.
They implement vertical integration, understood as the grouping under the same direction of several consecutive but technologically separable phases of the value chain / several vertically related activities (different but related business lines), that is, they carry out activities related to the complete production cycle, and that are within the value chain, through the replication of corporate policies and strategies in its subsidiaries in Japan and the United States, while practicing geographic expansion together with economies of scale.
They practice the so-called experience effect, the implementation of which allowed them to develop two fundamental competitive advantages: leadership in cost-best value and seek a sustained competitive advantage through the exclusive differentiation of their games that the public recognizes and is one of the fundamental causes of its demand, expansion and millionaire sales
Throughout the years referred to in the case, they are characterized by strategic multiplicity, implementing the well-known generic strategies of Michel Porter, which allowed them to achieve global leadership in costs, the aforementioned differentiation and the focus or concentration generating demand in a new market niche when they decide to serve the 12-14 year old youth segment
Not everything is perfect; As a company of human beings, throughout its famous development, although they make slow errors in some cases, excess restrictions and licenses in others, which caused demand exceeding their production and sales capacity, the most important thing is that they demonstrated ability to quickly correct them and recover from some responses of skepticism and lack of attention by the public of some periods, implementing strategies and tactics of innovation, control, exclusivity, segment change, positioning, licenses, credit and consignment, advertising campaigns.
The reason for these changes in strategy was the uneven response of the retail and dealer markets at different times, customer demand, technological development as a result of research and development, and increased rivalry in the industry. But it is evident that in general, its changes in strategy produced positive impacts on demand, sales, income and market positioning.
Its business portfolio expanded over time to respond to market expansion and opportunities and actively increased its internal development, acquired new businesses, expanded its distribution channels through taverns, toy stores, electronic stores, wholesalers, retailers. It made strategic alliances and at some point used Outsourcing to produce and distribute, which generated significant cost reduction and expanded territorially and technologically globally, reaching "Nintendomania".
A very interesting and meritorious strategic action of the company, caused by ensuring its sales, accessing complementary resources and capabilities and neutralizing competitors; maintaining its exclusivity: it was supplying retail stores with shop windows and windows and appropriations on consignment generating a very positive response from retailers and the significant increase in sales in the market Nintendo operates in a main business: that of entertainment and leisure, but what It deals through different lines of business and related subsidiaries.
Seeking to broaden the analysis, we consulted additional sources from Hill and Porter's approaches to corporate strategy:
Within the company's strategy, there are three subtypes. A growth strategy aims to expand a company's sales, profits, and market share. Typical growth strategies include: a concentration strategy, market penetration through efficient service of a limited product , a vertical integration strategy, the company takes additional responsibility - that is, begins to supply the product or the product distribution- and a diversification strategy, concentric diversificationadds different products in the mix that relate to the company's existing products, and cluster diversification adds products in the mix that are not related to the company's existing products. A stability strategy is used when a company is satisfied with its current situation and seeks to maintain that situation "as is", according to Reference for Business.
(….) Other strategies that are related to the corporate strategy are the business unit level and the functional level. With a business unit level strategy, the focus is less on the production of goods and more on gaining a competitive advantage from products that have already been produced under the company's strategy, according to Quick MBA.. A functional-level strategy refers to the efficient operation of individual business departments, says Quick MBA.
From which the authors deduce that Nintendo applied the vertical integration strategy together with the concentric diversification strategy
… Another example is Nintendo in its origins in the business of video game consoles. The company achieved an average 90% growth between 1984 and 1992. On the vendor side, this company purchases a large part of the games for its game consoles from external software developers. What's more, it usually guarantees the best video game developers that it will buy them a set number of games per year. However, it also maintains internal software development capabilities, and in fact some of the most successful games (like Donkey Kong or Super Mario Bross.) Are the result of internal development. Nintendo explicitly cares about maintaining a balance between external and internal software development so as not to get caught by its suppliers.
(…) At the same time, Nintendo has taken care to maintain a balance of power with its buyers. Indeed, after the complicated start of its sales of video game consoles in the 80s, once these became popular, it decided to keep its sales symmetrically distributed among various companies. This led him to reject purchase offers for much or even all of his annual production from chains such as Wal-Mart or Toys' R us. It also prohibited its products from being sold at prices, thus preventing a company from achieving a dominant position through higher turnover.
(…..) Nintendo manages to save costs by reducing production costs and costs due to technological interdependence. At the same time, it allows the appearance of economies of scope for a better use of its resources (facilities, warehouses), which can be shared. And all of this has, over the last few years, given it an increase in market power (creating barriers to entry for companies for non-integrated companies, such as Sony or Microsoft, which are currently unable to react to time to the strategic decisions of its competitor).And although it is true that the vertically integrating strategy has a number of drawbacks for Nintendo, due to its decision to maintain a balance between the external and the internal, as we have already commented,it does not increase your risk (due to fixed costs that produce leverage and investments that make it difficult to exit if necessary), keep your flexibility and continue to take advantage of part of the experience (the one that interests you) and certain competitive advantages of your clients and, especially, from its suppliers and some derived from specialization and even innovations.
This allows the authors to corroborate according to the previous approaches, that Nintendo implemented growth strategies to expand sales, profits and market share through market penetration strategies by concentric diversification, and for many years applied stability strategies. and balance between its software production and distribution strategies, control of its technology and production, keeping its distributors and developers at bay, so that they do not exceed them, either technically or in sales, until they decide to expand said strategies of focus in the segment youth.
And the authors believe that the company very intelligently adhered to Porter's 5 forces approach and generic strategies.
When analyzing the Value Chain in Nintendo, although we do not have sufficient information in the case, we consider that the approach of the figures that we place below is met:
Jover, I. Romano, A. Rubio, O. Analysis of the Nintendo Case: 17 “Source: Own”
And from his analysis we infer:
In relation to support activities:
Infrastructure:
Taking as an evaluative reference the impact of Nintendo's strategies that led him to position his Nintendomania and become a global sales leader, we deduce that he developed sound strategies to secure and expand his infrastructure through a good investment of his income and initial credit to ensure the financing of its production, commercial and research and development processes; which went through phases of strategic planning and proper relationship with investors Human Resources Management:
It was characterized by the recruitment of stellar personnel, recruitment of talents from other competing companies and stimulation of creativity. Training actions are not mentioned, nor is the remuneration required. Technology development:
Advanced company that went on to create a Research and Development Department to generate imaginative products and ensure quality and content and conduct market research
There is no information to evaluate the rest of the components of the value chain such as Purchases
In relation to the primary activities: internal logistics, operations, external logistics, marketing and sales and after-sales services, there is no specific information in the case for an objective evaluation. Despite this circumstance, we believe that what brought true value to Nintendo were its spectacular games
- The nature of the company's business strategy:
We consider that the business strategy coincides with the corporate strategy, since the different lines of business are closely related: (Consoles, games, cartridges, chips, NES, licenses) and that strategy is based on the functional competencies of the company.
Although the case does not openly delve into them, we understand that although they present weaknesses and threats detailed above, the solidity of the company and precisely its priority strategy allows it, with its strengths, to take advantage of opportunities to counter weaknesses and minimize threats.
To ensure their production strategy, they created an adequate infrastructure and sought specialized and motivated personnel; To implement the marketing strategy, they positioned their products in the right target market, they varied the segments dynamically and generated constant advertising campaigns, in addition to always seeking the highest quality at the lowest cost and best price, which adds added value; They even created a Research and Development Group in 1980 to produce imaginative games; its partners and the companies with which it created alliances were powerful and highly recognized in their respective fields.
The ability of the company to navigate with various differentiation strategies, low cost-value and segmentation approach is very remarkable and we consider that such wide sagacity and comprehensiveness is the basis of its global leadership not only in costs but in image and preference of the public.
- Analysis of the structure and control systems
The case does not delve into structural details of the company, beyond identifying a Corporate and two subsidiaries
However, although it is not very explicit in terms of control systems, it is implicit in the information that Nintendo was characterized by establishing iron control systems with its developers to ensure quality, not address issues of violence, or sex, control of production quantities, even when demand increased significantly; refusing for many years to access the internet and the production of business lines associated with the development of Smartphone telephones; as well as ensuring exclusivity through the licensing program, which led them to be sued by the market and the government for anti-competitive conduct.
There is no evidence in the information on the case on administrator compensation or incentives for cooperation between divisions
- Recommendations:
Based on the SWOT analysis carried out and with the support of the Cross Impact Matrix, it would be convenient to recommend an Action Plan for the implementation of business improvement strategies at Nintendo
However, taking into account that the information available in the case is not detailed enough to address some of the elements required in this tool, as well as that the stage described remains in the last century, year 1992, and the design of a action plan requires more information, we proceed to make recommendations:
ACTION PLAN
For improvement, change, taking advantage of opportunities Predominant strategy: ------------- General objective: ------------–
By interpreting our SWOT Analysis in detail, we make the recommendations seeking that the strategies that result should increase the organization's competitiveness, reinforcing the search for a favorable and sustainable position, in relation to other market competitors.
Actions must specify the strategies resulting from SWOT where the impacts point to a predominantly defensive or Mini-Maxi strategy as the basis of our analysis; where the company must take advantage of the multiple opportunities to counteract the weaknesses. Of course you can also build on your strengths. We recommend the following actions:
- Take advantage of the availability of companies achieved by making alliances, to expand the assortment of equipment and games. Take advantage of the wide demand for their products to eliminate production restrictions and licenses Take advantage of the wide demand for their products to make structural changes in the subsidiaries according to the characteristics national and local 4.Take advantage of its good image and strengths to create franchises Take advantage of the availability of talents in the market to attract new developers and continue to strengthen its professional human capital Take advantage of the public's preference for Nintendo products to create direct points of sale and expand distribution channels Take advantage of the preference of the public towards Nintendo products to increase guarantees to customers Take advantage of technological development and environmental research to generate strategies to increase production and innovations Take advantage of technological development and research to continue improving the technical characteristics of products and solve content problems and colors 10.Take advantage of technological development and research to continue improving the quality of software and hardware Take advantage of the strength of the internet to generate presence, advertising and closeness to customers in the online market Take advantage of the development of Smartphones to add this modality to their own video games the growth of APPS to join these technological options with their own varieties Maintain exclusivity without imposing exaggerated restrictions on dealers, wholesalers and retailers for the sale and distribution of their articles Improve attractive advertising and marketing strategies by reinforcing exhibition events with music and striking images and testing your products and other avenues 16.Expand to other countries by customizing new Nintendo characters according to the culture of those countries Conduct frequent surveys on it to measure customer satisfaction and preference Conduct sales campaigns and competitions giving prizes to outstanding customers and dealers Perform motivational actions and give prizes and recognitions to "Star Developers" Allocate budgets to continue improving technology and infrastructure. Attack new segments or adult market niches to continue developing their Nintendomania worldwide. To have a legal body of Nintendo's own, to face lawsuits and / or legal conflicts in those that the company may interfere with, in order to avoid consequences that may affect it financially and in advertising.
Conclusion:
The team's work around the solution and analysis of this case has been a very interesting experience, through the content of Hill's book and the respective indicated rubric, whose experience will enhance the application of the skills acquired to analyze the second case .
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