Jay Conrod, Klimka Szwaykowska; Mar 7, 2007
The interactive entertainment industry has grown remarkably quickly in recent years.
Since 2001, the market has been dominated by three major players: Sony, Microsoft, and
Nintendo. Of these, Nintendo had the smallest market share, even though the company had
historically dominated the market. In 2004, faced with strong competition from larger and
wealthier rivals, Nintendo had to come up with an innovative strategy to maintain profitability.
At that time, the optimal strategy was differentiation into a neglected segment of the market:
casual gamers who wanted a simpler, more intuitive gaming experience.
Nintendo's status in 2004
Unlike its competitors, both of which are powerful players in consumer electronics and
business software, Nintendo is primarily a video game company. Nintendo has three main
products: consoles, handhelds, and software (games).
Typically, only one console product is sold at a time; production of one generation ceases
shortly after the next generation is released. Nintendo's console in 2004 was the GameCube,
which had been on the market for three years. The competitors' products (Sony's PlayStation 2
(PS2) and Microsoft's Xbox) were approximately the same age, but had several advantages over
the GameCube. Though they cost a little more ($150 for the Xbox and $130 for the PS2,
compared to $100 for the GameCube), they had more advanced networking and media-playback
features. By March 31, 2004, only 14.6 million GameCubes had been sold worldwide (Nintendo
2004 Annual Report).
Nintendo's position was stronger in the handheld gaming market. The handheld Game
Boy Advance (GBA) was introduced at roughly the same time as the GameCube, and sold 51.4
million units by March 2004.
Nintendo develops software for all of its gaming systems. Although software is expensive
to develop, it can be sold at a high margin. Nintendo has a wide variety of... [continues]
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