MBA 2013-2014 Strategic Management

AGENDA

•  Key business issues

•  Company overview

•  External analysis

•  Internal analysis

•  New strategy

Key Business Issues

•  A Blue Ocean was created by launching the Wii. - Target casual gamers (children, women, senior, families). - It changed the way people played.

•  They tried to sustain their increased market share by creating Wii U. -  Target both hardcore and casual gamers. -  However, it hasn’t achieved sales expectation.

•  Another challenge is that there is an increasing current trend in online and mobile gaming.

NOW WHAT?

INTERNAL OVERVIEW

Finance Overview

Nintendo’s History & Background

1889

1970

1980

1990

2000

2010

Hanahuda (1889)

Color TV Game 15 (1977)

NES (1983)

Game Boy (1989)

SNES (1990)

Nintendo 64 (1996)

Game Cube (2001)

Nintendo DS (2004)

Wii (2006)

Nintendo 3DS (2011)

Wii U (2012)

•  Historically the best known console manufacturer •  Longest running company in the market •  Long-time market leader of hand-held consoles

Fusajiro Yamauchi

Mission, Vision, Values and Behaviour

Expansion of the gaming audience, taking risks and encouraging employees to make creative decisions to challenge the notion of what a video game is capable of being.

MISSION

VISION

VALUES & BEHAVIOUR

• Equal commitment toward all employees treating them the same way as customers.

• Create teamwork atmosphere

• High quality through commitment and enthusiasm.

“Providing customers with a ‘world of fun’, which is both innovative and entertaining with creative elements that have never

been experienced.”

Source: Nintendo corporation, 2013

Business Model

COMPANY

• Strong R&D: Innovation • Strong game franchises • Strong Branding • Efficient manufacturing

CONTEXT

• Fast changing industry • Lifestyle change • Non-users emerging

CONSUMER

• High quality interactive games only available for Nintendo’s HW.

• Games and HW system at a much lower price than the competition

Historic Strategy

Customer value: High quality certified software Key Resources in technology and brand

1980-1994:

Focus on technology: CPU performance and loading time Cassette/CD as media

1994-2006:

VALUE INNOVATION: blue ocean + low cost Target non-users (casual gamers) with Nintendo DS & Wii

2006-2010:

Entertainment system instead of just a gaming system Target both, hardcore and casual gamers

2011-2013:

Developing games

that can only be used with

NINTENDO HW

EXTERNAL ANALYSIS

•  Total Market Value of $79 bn in 2012 •  4 Key Market Segments:

•  Video Game Consoles

•  Handheld Video Games

•  Mobile Games

•  PC Games

•  Consoles segment dominates the market.

Industry characteristics

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2012 2013 2014 2015

Video Game Revenue Forecast ($ billion)

Source: Gartner (Oct.13)

47.4%

22.6%

11.8%

18.3%

Market Structure (2012)

Source: Gartner (Oct.13)

•  Mobile games: the fastest-growing segment

•  3 Major Players : Sony , Microsoft, Nintendo

•  Short product life cycle

•  Rapid rise in consumers’ demand

78.8 93.3 101.6

111.1

Competition

49%

37%

27% 21%

32% 40%

31% 31% 33%

0%

10%

20%

30%

40%

50%

60%

2010 2011 2012

Market Shares

Competitive 6 Forces

BUYERS •  Retailer bargaining

power •  Consumers’ demand

and high expectations

ENTRY BARRIERS

•  High Barriers for new entrants in the hardware console market

COMPLEMENTS

•  DVD & blu-ray •  Online gaming

community •  Online marketplace •  Entertainment hub

(streaming, live action TV)

INDUSTRY RIVALRY

•  PlayStation 4 •  Xbox One

SUPPLIERS • Medium bargaining power • Game suppliers (in-house

mostly but powerful external third parties)

•  Raw materials SUBSTITUTES

•  PCs •  Smartphones •  Tablets

INTERNAL ANALYSIS

Competencies & Competitive Advantage

Innovation through

strong R&D Simplicity as disruptive innovation to target non-consumers by creating blue oceans.

Efficient manufacturing

and distribution

Developing exclusive and simple games

Economies of scale enables them to sell the base console at a higher profit than competitors and with a fast time-to-market.

Strong Unique Selling Proposition (USP) – Nintendo games can only be played with Nintendo’s consoles.

Core competencies Competitive Advantage

SWOT ANALYSIS

OPPORTUNITIES •  Increased market demand for

education and medical devices due to lifestyle change (concern for fitness & health)

•  Online purchasing/e-marketing

THREATS •  Increase of Smartphone and

tablet games •  Increase in online gaming •  Competitors also targeting

casual gamers

STRENGTHS •  Innovative mindset •  In-house talent •  Strong brand name •  Expertise in video games

development

•  Refining their products to take advantage of lifestyle change(ex. medical and education products)

•  Align new console launch with new blockbuster game launch

•  Use in-house talent and strong brand name to develop online and mobile device applications

WEAKNESSES •  Technological

disadvantage (power of console)

•  Lack of new blockbusters •  Third party relationships

•  Build third party relationships to develop exclusive games for the Nintendo experience

•  Enhance the console’s ability to purchase games online

•  Create strong online gaming community

•  Utilise open innovation to keep technological advantage and develop new innovations

•  Improve relationships with third parties

NEW STRATEGY?

Strategic Options

1.  Develop a console for online gaming and develop online gaming for target audience.

2.  Build partnerships with third party developers

3.  Develop new games for smartphones/tablets

SHORT TERM – address threats from competition

LONG TERM – develop differentiated products

4.  Build on success of Wii fit and Brain Train to create innovative games for a new target audience – educators and medical professionals

Value Chain Model

Develop new competence: Build third party relationships to develop exclusive games

Short Term: Develop a console that suits online gaming for target audience (children, women, seniors, families).

Value Chain Model

Build on existing competence: Foster internal talent, recruit new talent

Short Term: Develop a console that suits online gaming for target audience (children, women, seniors, families).

Value Chain Model

Develop new competence: Use open innovation to develop online gaming

Short Term: Develop a console that suits online gaming for target audience (children, women, seniors, families).

Value Chain Model

Develop new competence: Create links with health and education professionals, and incorporate specialists into current product development structure

Long Term: diversify to interactive learning and health content

Value Chain Model

Build on existing competence: Utilise strong R&D, internal talent and open innovation to adapt consoles and products

Long Term: diversify to interactive learning and health content

Value Chain Model

Build on existing competence: Build on current distribution network to develop medical distribution network

Long Term: diversify to interactive learning and health content

Value Chain Model

Build on existing competence: Refocus marketing campaign to educate new target group

Long Term: diversify to interactive learning and health content

Our Recommendation

SHORT TERM – address threats from competition

•  Develop a console that suits online gaming and develop online gaming for target audience (kids, families, women, seniors)

•  Build partnerships with third party developers

LONG TERM – diversify to interactive learning and health content

•  Build on success of Wii fit and Brain Train to create innovative games for a new use (physiotherapy , interactive learning)

Performance Measures

DEVELOP A CONSOLE FOR ONLINE GAMING AND DEVELOP ONLINE GAMING FOR TARGET AUDIENCE

•  Console designing team assembled within 1 month. •  Console designed within 6 months. •  Team assembled to build partnerships with third party

developers within 1 month. •  Market share increased to 41% 1 year following product

release

DIVERSIFY TO INTERACTIVE LEARNING AND HEALTH CONTENT

•  Team assembled to liaise with medical and education professionals within 3 months

•  Developer team assembled to create new games within 6 months •  New games developed in 3 years •  Reach 30 million new users within 3 years following product release

Conclusion

To recapture market leader position Nintendo should:

Build on its existing target audience and its core competences to create a

new blue ocean strategy to move gaming into

interactive learning and health content.

THANK YOU