Video game console and Nintendo Essay Example for Free

Video game console and Nintendo Essay In the world of video games, Nintendo has been a household name for nearly three decades. After all, it was one of the pioneers of home video game consoles with the Nintendo Entertainment System in the early 1980s. It continued as the market leader with its Super Nintendo and Nintendo 64 systems. But in the mid-1990s, all that began to change. Along came Sony with its Playstation and Playstation 2, and Microsoft introduced the xBox. Before long, Nintendo was reduced to a fraction of its former glory, running a distant third in a highly competitive market. What happened? In certain respects, Nintendo fell prey to the industry model that it had created. More advanced technology led to the creation of more powerful gaming consoles, which in turn paved the road for more sophisticated games with more realistic graphics. As each new generation of product hit the market, Nintendo found that it could not keep up with more technologically advanced rivals. While more than 120 million Sony PS2s became fixtures in homes, apartments, and dorm rooms around the world, Nintendo moved just slightly more than 20 million GameCubes. As the most recent generation of gaming platforms from the gaming industry’s â€Å"big three† came to market, many industry insiders figured Nintendo was destined to continue its downward path. Sony’s PS3 and Microsoft’s xBox 360 were so advanced that it looked like Nintendo was due for another drubbing. Oh what a difference a couple of years makes. For Nintendo, everything is now coming up Super Mario Bros. â€Å"flowers. † Last year, revenues and profits were up by 73 percent and 67 percent, respectively. In the last couple of years, during a time in which the Nikkei Stock Average fell nearly 25 percent, Nintendo’s stock price tripled. In fact, Nintendo’s stock price rose so high during 2007 that its market capitalization exceeded that of the Sony Corporation. On that measure alone, Nintendo became the second largest corporation in Japan, trailing only Toyota Motor Company. How did this struggling number three player go from product loser to product leader in such a short time? FROM PRODUCT LOSER TO PRODUCT LEADER Most people probably don’t know that Nintendo was founded way back in 1889. Obviously, Nintendo did not make video games back then. It began as a playing cards manufacturer. But it also found success in hotels, packaged foods, and toys. When it came time to revive itself as a veteran in the video game industry, Nintendo did something that it had done time and time again. It focused on customers to find true opportunities. For the video game industry, â€Å"the customer† typically means one of two groups: the 18 to 35-year old hard-core gamers and the children/teenagers. The industry earns most of its revenue and profits from these core consumers who spend a great deal of time and money enhancing their virtual skills. Over the years, as hardware became more sophisticated and games more realistic, these tech junkies were all the more pleased. In the process, Nintendo watched its revenues slide and its rivals strengthen. It realized that it could not compete against technologically superior products. So when it set out to develop the Wii console, it didn’t even try. Instead, it focused on something the others were ignoring. It set its sites on the masses. â€Å"Nintendo took a step back from the technology arms race and chose to focus on the fun of playing rather than cold tech specs,† said Reggie Fils-Aime, president and COO of Nintendo of America. â€Å"We took a more intuitive approach and developed something that could be fun for every member of the family. † 298 Part Three | Designing a Customer Driven Strategy and Mix placed on a separate scale. The light bulb went on as Sawano thought about the possibility of tracking a user’s shifting weight on a game pad as they shimmied and twisted their way through virtual worlds. That game pad is now called the Balance Board and lies at the heart (or rather the foot) of the Wii Fit’s portfolio of exercise applications. Users can do aerobic, strength training, balancing, and yoga exercises all in realistic virtual settings. â€Å"It is now possible to go beyond the fingertip controls of past games and now use your whole body,† Sawano told a crowd of game developers. The Wii Fit also facilitates exercise programs as it tracks and analyzes individual performance over time as well as keeping track of stats like weight and body-mass index. Perhaps the most promising part of the Wii Fit is not that it continues to broaden an ever-growing market segment. In addition, the Balance Board component has the potential to be integrated into a nearly limitless number of applications. Already, Nintendo has developed ski jump and slalom games. It’s only a matter of time before Nintendo develops a Balance Board version for just about every sport imaginable. Releasing hit after hit, Nintendo has vaulted to the top of the Wall Street Journal’s latest Asia 200 survey. Placing first in the â€Å"Innovative in Responding to Customer Needs† category, the company placed second overall, trailing only Toyota. For a company that hadn’t placed in the top 10 since 2002, the sudden turnaround is a telling demonstration of consumer confidence. For the Wii, this meant that Nintendo had to do more with less. The Wii boasts a humble combination of low-powered processors and a standard optical disc drive. Compared to the powerful, state-of-the-art chips and high definition lasers contained in the PS3 and xBox 360, the Wii’s graphics are out right scrawny. But at the core of the Wii’s broad appeal lies a revolutionary motion-sensing wireless technology that forces the once sedentary gamer to get up off the couch and get into the game. The Wii controller resembles a television remote. This feature was no accident as Wii designers correctly speculated that the familiarity of a TV remote would be more inviting than the more typical and complex video game controllers. The Wii’s basic software also allows users to custom design avatars from a seemingly infinite combination of characteristics. With this configuration, users play tennis, go bowling, and hit the links by swinging the controller like a racket, ball or golf club, all with characters resembling themselves. The Wii met with immediate and drastic success. Entering the market after the release of the xBox 360 and the PS3, Wii consoles flew off the shelves. Not only did the Wii’s contain an enticing combination of features, it also had a cost advantage. Microsoft and Sony had priced their offerings in the stratosphere. And even at $599 for the top and most popular PS3 model, Sony was still losing hundreds of dollars on each unit that it sold! Nintendo’s low-tech approach allowed it to earn a hefty profit and be the low-price leader at only $250. With such a favorable benefit-to-cost ratio, the Wii easily won the launch phase, outselling each of the two competing consoles by nearly two-to-one in the first few months . 9 Chapter CXXXX 43550 Page 298 08/15/08 MD SECURING THE FUTURE Although the success of the Wii has largely been attributed to attracting non-traditional gamers, hardcore gamers have hardly been absent. In fact, many of the industry faithful saw the Wii as a relatively cheap second gaming platform—as a nice diversion from more graphic-intensive games. The Wii also has the nostalgic advantage of appealing to the gaming elite with characters they grew up with, such as those from the Mario and Zelda franchises. But developers and executives at Nintendo are not content to sit back and risk having hardcore gamers lose interest. Part of Nintendo’s future strategy includes games focused on more serious gamers. CEO Satoru Iwata shocked the industry last year when he announced that Nintendo would soon add games from two Sony allies: Capcom’s Monster Hunter series and Square Enix’s Final Fantasy Crystal Chronicles. The release of these titles will do more than appeal to traditional gamers. It will elevate the Wii’s image from that of a machine with little firepower to one that will run the industry’s most advanced games. Said one game industry analyst at a tradeshow sneak preview, â€Å"It’s symbolic. I didn’t think the Wii could handle this type of game. Everyone in the room today saw that it can. † As Nintendo has successfully attracted an untapped audience of gamers over the past few years, it has done more than revive its business. It has transformed a market. The competitors that once trounced Nintendo now find that they must play catch-up. Both Sony and Microsoft are now developing easierto-play games that depart from their usual fast-action fare. Game publishers, including powerhouses such as Electronic Arts Inc. , have started putting more resources into developing games for the Wii. And even small, independent shops are getting into the action as Nintendo’s download channel reduces barriers to entry. All this is causing an already huge $30 billion industry to swell. NOT JUST A FAD Although the Wii was an instant smash hit, many analysts wondered whether or not its appeal would hold up. That speculation began to subside when retailers were still having trouble keeping the Wii in stock more than a year after it was introduced. In its first 18 months, Nintendo moved more than 24 million Wiis. Even though the xBox 360 had been on the market a full year longer, it had sold only 19 million units. And Sony, once the undisputed industry champ, placed only 12 million PS3s. Nintendo’s willingness to reinvent what a video gaming system can mean continues to drive Wii sales. For example, the Wii can scan weather, news, and Web sites through a wireless Internet connection. Through the Wii Shop Channel, an iTunesstyle store, customers can download classic Nintendo games as well as games from independent developers. But in its pursuit to break gaming boundaries, Nintendo has also relentlessly pursued new applications for the basic motionsensing technology. A plastic rifle contraption allows users to realistically play shooting gallery games. Snapping the Wii controller into a steering wheel has made driving games all the more electrifying. And tiny in-controller speakers add touches like the sound of an arrow being shot while the TV makes the â€Å"thwack† of that arrow hitting its target. But perhaps one of the greatest strokes of creative genius in Nintendo’s continuing stream of new applications is the Wii Fit, an add-on device targeted directly at women wanting to lose weight or keep in shape. The idea for the Wii Fit came to Takao Sawano, general manager of development for Nintendo, as he watched sumo wrestlers being weighed in for a television match. The tubby athletes were so heavy that they had to have each foot Company Cases Chapter 9 | New-Product Development and Product Life-Cycle Strategies 21 299 Chapter 3. In which stage of the product life-cycle is the Wii? Based on that stage, is Nintendo employing good marketing mix strategies? Simon Jeffery, president and COO of Sega of America, summarizes why Nintendo has been successful and why the rest of the industry must keep up. The fundamental interface in games has always been a controller, and Nintendo is bringing opportunities to developers to think about how interactions use motion. That has opened doors of creativity throughout the video game business. Nintendo’s success is about creative leadership and the willingness to do things differently. As long as Nintendo can stay focused on these elements that have returned it to its throne, it will reign for a long time to come. 4. Develop a strategy for the Wii’s next product life-cycle phase. 5. Discuss the potential threats to Nintendo’s future success. What will help Nintendo avoid a premature decline for the Wii? Sources: Robert Levine, â€Å"Fast 50 2008: Nintendo,† Fast Company, February 19, 2008, accessed online at www. fastcompany. com; Yukari Iwatani Kane, â€Å"Nintendo Captures Top Spot in Japan For Innovation,† Wall Street Journal, June 27, 2008, accessed online at www. wsj. com; Yukari Iwatani Kane, â€Å"Nintendo is Ahead of the Game, But Sustaining May Be Hard,† Wall Street Journal, April 15, 2008, p.C3; Yukari Iwatani Kane, â€Å"Wii Sales Help Nintendo Net Rise 48 Percent,† Wall Street Journal, April 25, 2008, p. B8; Kenji Hall, â€Å"Nintendo: Calling All Players,† BusinessWeek, October 10, 2007, accessed online at www. businessweek. com; Brian Caulfield, â€Å"Nintendo’s Sumo-Inspired Hit,† Forbes, February 21, 2008, accessed online at www. forbes. com. Questions for Discussion 1. Was Nintendo just lucky, or does the Wii’s success have strategic merit? 2. Has Nintendo put the â€Å"fad† question to rest? State a case as to why the Wii is or is not here to stay. 9 Chapter CXXXX 43550 Page 299 08/15/08 MD.