Nintendo And Its Impact On Innovation

Nintendo has dominated the console market with their first handheld gaming device called Gameboy, having sold over 150 million units, and continuing to create more handheld ones. Games have also become easily accessible on smart phones, following the trend of portability. According to research conducted by the Entertainment Software Association (ESA), 43% of gamers play games on their smartphones, and 25% play on a wireless device. Video game consoles have drastically improved since the 1970s, having become lighter, faster, and more interactive. All of these improvements were made possible by the advancements in hardware.

Nintendo take the actions it did? How did these affect the value created by the industry?

Shopping, for example, has now become as simple as going online and selecting what you need from a list, and the company delivers your purchases to your front door. We are now able to go on virtual tours through existing buildings as well as those that are yet to be built. The most common and accessible of these interactive replacements is the Nintendo Wii. The Wii is a gaming console that has reached the point where is has wireless operation and reacts to and with human motion. Its games range from common play station gaming like world of warcrafts and tactical gaming, to fitness and sport orientated games and programs with which you can play virtual matches or have simple workouts.

After seeing how the Nintendo Gamecube was doing many 3rd party developers did not want to work with Nintendo. Developers wanted to make mature games for the Play Station 2 and the soon to be released Xbox. Another reason developers shied away from developing on the Gamecube was for the lack of power and storage space with the discs (Thomas, L). Sony was using standard sized discs which meant that bigger games would be able to be played and developed, because of all the storage. Nintendo decided to try using smaller discs that had minimal storage and games would not be as big. This turned developers away and as of 2017 this decision Nintendo made back in 2001 still affects Nintendo.

In 1889, Fusajiro Yamauchi founded a small company in a building in the heart of Kyoto, Japan.(Nintendo History. n.d.) The company's purpose was to create a form of Japanese playing card called Hanafuda. He called this company Nintendo. Over the next century Nintendo grew and expanded, changing its products and services, and attempting new things as the times changed. Then, during the 1970s Nintendo fixed its eyes on a new market, video games. Nintendo showcases how a small card company can become a gaming powerhouse and a legend for companies and gamers alike.

As sales of Nintendo’s Wii and DS dominate the PlayStation 3 and Xbox 360, and PlayStation Portable, respectively, the pressure continues to mount on Sony and Microsoft to move to the next level in the ongoing console wars. Sales of the Wii in 2008

Nintendo started as a small Japanese business by Fusajiro Yamauchi near the end of 1889 as Nintendo Koppai. Based in Kyoto, Japan, the business produced and marketed a playing card game called Hanafuda. In 1956, Nintendo’s president Hiroshi Yamauchi began to realize the limitation of playing cards business because it was viewed as a mere tool of gambling. In order to overcome the limitation, Nintendo struck a deal with Disney in 1959 which allowed them to put Disney characters on their playing cards. This opens up new markets where both children and homemakers started purchasing playing cards.5 Due to this success; Nintendo went public in 1962 and became a listed company in Osaka Stock Exchange. Soon after, Nintendo started to venture in

Sony, Microsoft and Nintendo have been competing for a decade with Sony dominating the market throughout most of the years because of their superior technological products. The video games industry faces an entirely new rivalry situation. In 2008, Sony lost its strong position on the market, because of Nintendo’s success with their dynamic Wii over Sony’s high-tech PlayStation 3 and Windows’ Xbox 360. Although the Wii was technologically much less advanced than PS3 and Xbox 360, the Wii's cheaper price, ease of use, innovative motion-sensitive controller, and simple but fun games, made the console a hit all demographics from 9 to 65 years old, male and female. All these factors resulted in Nintendo’s Wii dominating sales and surpassing Sony’s by an impressive ratio of 2:1.

Microsoft introduced the new console (Xbox 360) one year before Sony, the industry leader, unleashed the PS3. Microsoft with the first mover advantage built a large customer base and has the largest library of games. The PS3 console has the best raw power and blue-ray capabilities. Nintendo, although with the less advanced console (Nintendo Wii), has successfully distinguished itself from their competitors with an innovative controller whith motion-sensor capabilities.

The latest product launched by Nintendo has been the Game Cube, a video game console which will undoubtedly prove to be yet another bestseller.

It is notable (From Exhibit 2b in the Responding to Wii case – Harvard Business Review) that Nintendo has been successful in keeping positive operating profits despite being a weak competitor during the previous 2 generations. Nintendo has shown prudence in waiting out 2 battles and coming up with a unique offering which has changed the way the market perceives gaming. Sony should concede defeat this generation of gaming, while maintaining balance through strong service to existing market.

Nintendo appears to have implemented a market-penetration pricing strategy. The Wii at a cost of $250 is 50% less than the 20-gigabyte PS3 (smaller hard drive machine). At this lower price, it is easier for the product to penetrate the market due to affordability in most segments. This aligns with the assumed company’s aim of maximising market share in the current and new segments. To achieve this, Nintendo ensured that the Wii was less costly to manufacture. Moreover, a higher sales volume may lead to lower unit costs and higher long run profits. Conversely, Sony is believed to have a market-skimming pricing strategy. The company invested $2 billion in technology, so this strategy aims at recovering the maximum amount of revenue to cover the high costs incurred in the early stages of the product life cycle. Additionally, Sony has a strong brand due to the success of their previous machines (PS2 and playstation) and the high price assists in communicating the image of a superior product with quality.

The role of technology is vital in this industry as it focuses on technological efforts for competitive advantage. Every new development uses new technology. Though there are restricted innovations in the gaming industry, the speed of technological transfer is very high. Nintendo’s role from playing cards to toys to video games and then with each console introduced, included many technological changes. Technological up gradation increased hardware costs and discouraged innovation. The online capability of Nintendo Wii was a major change in the technology of the video game industry though they were not able to do as well as their competitors (Sony, Microsoft).

Nintendo however is not present in this new market and therefore it is very important to take in consideration to enter this new area because at the moment the company does not have products that satisfy those new needs resulting in the loose of sales and consequently revenues.

Way back then, Sony entered the market originally as a supplier of components for Nintendo Entertainment System (NES) home console. However, when Nintendo failed to introduce new technologies that would improve the gaming experience, Sony grabbed the chance to seize the opportunity. Sony