Responding to the Wii Group Case Writeup
BUSMHR 4490
In the Harvard Business Review case Responding to the Wii, Kazuo Hirai was faced with an interesting dilemma. Hirai, the chief executive of Sony Computer Entertainment Inc. faced pressure due to Sony’s Playstation 3 video game console losing market share to the Nintendo Wii. Hirai faced a major business decision in deciding how Sony should respond to the cheaper, more interactive, family oriented Nintendo Wii.
The Video Game Industry at a Glance
From an industry analysis standpoint, the videogame console industry in 2008 was not very attractive. The industry was, and still is, structured as an oligopoly in
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This is especially prevalent within the companies that own the majority of the market share. While continuous improvement is necessary on current products, it is also crucial to be bold and thinking outside of the box.
As mentioned, the common theme across the video game industry has been creating an innovative product and then simply improving the system over time. While that has been proven to work in instances in the past, there is a lot to learn from the creation of Nintendo’s Wii. Nintendo, like the rest of the company’s used the same ideology of continuing improvements to an already developed product until they took a bold move of introducing a whole new game console. When Nintendo introduced the Wii, they took a risk because it was not similar to their previous game consoles. They saw an opportunity to bring something new to the video game industry that could create value to not only the originally targeted market, but also a much larger market.
The Nintendo Wii is a prime example of how a company can serve their already targeted market and also see the opportunity to expand into additional segments. Much of Wii’s success was due to the fact that it appealed to a large audience. Nintendo gained a market advantage as ‘first movers’ in this new era of technological and conceptual change in the video game industry. The now enabled users to be more active and engaged which revolutionized the way consumers thought about gaming systems.
The structural
With innovation on his mind,Yamauchi branched out into a number of other, less lucrative endeavors, including an instant-rice company and a pay-by-the-hour “love hotel.” These disappointments led Yamauchi to the conclusion that Nintendo’s greatest asset was the meticulous distribution system that it had built over decades of selling playing cards. With such an intricate and expansive pipeline already in place, he narrowed his entrepreneurial scope to products that could be sold in toy and department stores and settled upon a new category called
However, as the Wii’s target market is slightly different from that of either the Xbox 360 or the PS3, it is of less concern in the short-term. Nintendo’s dominance of female console gamers, however, is of serious concern. In 2008, the Wii outsold the PS3 and Xbox combined, indicating Nintendo’s strength in the market, as well as the growing eminence of female gamers as a target for game and console developers.
However, the extent to which the hardcore gaming demographic dictates the structural aspects of the gaming industry as a whole is remarkable. Companies are still willing to cater to this audience because it is a profitable enterprise, as it is only the most devoted of fans who will line up days before a system release while generating free publicity on the internet and through word of mouth in the months prior. Thus, and perhaps unexpectedly, an important factor in the Wii's meteoric rise was Nintendo's ability, through the strength of its brand and residual nostalgia effects, to co-opt this hardcore gaming culture with a console that at best, only occasionally acceded to its wishes, while at worst, marginalized them completely. What Nintendo realized, and ultimately capitalized on, was that the hegemonic structure influencing the industry was inherently weak, in that it was essentially a small minority overwhelming the relatively silent masses. Although there are doubts to the sustainability of such an endeavor, the signs are present that the Wii has already altered the video game
Even though the Nintendo Gamecube was not selling like the extremely popular Play Station 2, and the questionable design, the console was still popular. Many companies praised Nintendo for what they were trying to do saying that Nintendo was trying something abstract and unique (Kennley, D).
The Nintendo brand has changed over the years, starting out as a simple card company that has expanded into the massive electronic giant we know today. They have had their ups and downs through their time as a gaming company but they always have the gamer’s interest in mind. As the late CEO of Nintendo, Satoru Iwata said, "On my business card, I am a corporate president. In my mind, I am a game developer. But in my heart, I am a gamer" (Yu, E., & Chan, W.
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.
Both Sony and Microsoft focused their efforts on hard-core gamers and offering processing power and cutting-edge features to attract them. On the other hand, Nintendo has been trying to attract new customers that traditionally are non-gamers. The
The fifth and final force is that of the intensity of rivalry. This is the strongest force in the video game industry. Nintendo was very strategic in targeting an audience that Microsoft and Sony neglected. While Microsoft and Sony focused on the typical gamers, males ages 18-34, Nintendo focused on a broader audience “everyone” when creating their Wii. In the video game industry rivalry Microsoft and Sony are battling for the same market, while Nintendo has much of its audience all to itself. This is why
Nintendo’s strategy for pricing of consoles and games was to lock-in the network effects consoles offered by pricing them at- or below- cost and reaping profits by pricing video games at significant margin. Nintendo took these actions because it knew that if consumers used the NES/ Famicom console, they would be a captive audience for its higher-margin video games which were necessarily more perishable from a consumer taste perspective. This affected the value created by
Several years had passed and a Japanese company by the name of Nintendo decided it wanted to enter the market. Nintendo’s Family Computer, or Famicom, was doing well in Japan and Nintendo wanted to try and find success in North America. This proved to be difficult because America was still wary on the idea of game consoles after the crash. To try and avoid the skepticism that came with items labeled as a game console, Nintendo rebranded the Famicom as the Nintendo Entertainment System and marketed it as a toy. Believe it or not, this actually worked and Nintendo became a household name. In order to keep their success going Nintendo took steps to avoid another market crash. Nintendo would put developers under a contract that kept them on their console and would keep them from developing games for developers. Developers also had a limited amount of games they could release in a year as
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).
The substitutes for the Nintendo Company are Sony and Microsoft 2. These two giant video game companies supply products that are substitutes for the products that the Nintendo Company makes. For example a competing item for the Nintendo Wii is the PS Move (Sony) and the Kinect by Microsoft. Although both competitors make a product that is easily substitutable, Nintendo’s Wii takes up a lot of the market share because it is more user-friendly. Nintendo’s portable hand held system the 3DS id rivaled only by Sony’s PS Vita. However Sony’s product is not as popular as Nintendo’s and that is apparent in sales numbers7. Finally for the Nintendo Wii U the main competitors are Sony’s PS4 and Microsoft’s Xbox One. Both these products are highly in demand as they are very new to the market and are top quality products. Their demand is very great because they are the new must have items in video gaming.
There is sometimes the need for a decision that reflects the bigger picture. In some cases Nintendo has found that team members may have some idea about the situation but they may not see the problem as their supervisor does, from a strategic view. Supervisors at Nintendo need not always let the current movement toward teams cause them to devote staff time to meetings that are unnecessary or cause them to abdicate their leadership role. After all, being decisive is as much a characteristic of a good leader as are cooperation and a sense of teamwork (Anonymous 1996).
The main obstacle facing a start-up video game console company from entering the industry is saturation of the market from the larger video game console makers or the “big three” Nintendo, Microsoft, and Sony. The big three tend to release new game consoles around the same time frame and compete head to head for sales. During the time frame it is impossible for a new entry to jump into the fray. 2010 was a banner year for video console sales Sony’s PS3 sold 14 million units followed by Microsoft’s Xbox 360 13 million and surprisingly Nintendo’s Wii led the big three selling 17 million units. After the 2010 release of all three consoles sales started to decline for each company. Nintendo took the largest sales loss at 72% in 2013 only 747,000 were sold compared
Because so many different groups of people are purchasing Nintendo Wiis, it is obvious that there are a variety of engaging games that these different people find