Wii U Analysis

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Nintendo’s Position in the Next Console Generation

Nintendo: Over the years

Nintendo Co, Ltd. is a large, multinational firm that is headquartered out of Kyoto in Japan. The company began over 120 years ago in 1889, but didn’t look or operate like they do now. In the beginning, Nintendo developed a popular Japanese card game, called Hanafuda. The demand for the game quickly increased, helping the company grow. The strategy of making playing cards continue all the way until the mid 1900s at which time they began to extend their brand, from owning a taxi company to operating a love hotel chain.  Needless to say, these ventures failed and soon after, in 1974, Nintendo went back to focusing on their core competencies of making engaging games. They finally entered into the electronic market, starting off making games for the video arcade game industry. [1]

In 1985, Nintendo began to compete within the video game console industry by producing it’s first console, the Nintendo Entertainment System, or NES. Over the next 20 years, Nintendo fiercely competed in an industry dominated by only a few key players, including Sega (Genesis), Sony (Playstation) and Microsoft (Xbox), with each company releasing newer generations of their consoles every 5-6 years at which time a new leader would emerge[2]. After leading the pack in most of the 1980s, Nintendo slowly lost traction until 2006 when they introduced their 7th generation, the Nintendo Wii.

At the time of the release, the Sony Playstation 3 and the Microsoft Xbox 360 were doing extremely well, both selling out at their launch. Despite Nintendo Wii’s inferior technological capabilities, such as graphics, the Wii quickly dominated the market due to the introduction of an innovative new controller that was wireless. The Wii’s relatively simple controls and games attracted a brand new target market – individuals who had never owned consoles before or who were not video gamers.. This allowed Nintendo to capture an even larger market share. Furthermore, Nintendo Wii had a backwards compatibility option, which allowed users of the old GameCube the ability to still play those games on the new console. This reduced the amount of sunk costs consumers would have if they purchased a new console and therefore increased their likelihood to buy the new generation. Nintendo soon regained its position as market leader.[3]

 Over the past few years, however, the situation has changed. The sales have declined tremendously. Just this past year, Nintendo has announced a loss for their fiscal year end in March at $838 million [4] which makes it the worst in the company’s history since it began making video games 30 years ago. Part of the reason for the sharp decline is the introduction of the new Playstation Move and Xbox Kinect, which used motion sensor technology to track the players’ moves.

 In order to combat their declining profits and reengage their consumers, Nintendo has announced the introduction of the next generation of Wii, titled Wii U.[5] The console is due to be released before the holiday season in 2012 and features a new controller with touchscreen capabilities. The new generation claims to have a higher graphic resolution, enhancing the gaming experience. Like the original Wii, the Wii U will also be fully backwards compatible with the Wii however not with the GameCube.

Analyzing the Wii U

The Nintendo Wii grew the video game market by capturing new audiences, such as women and older consumers. Can the Nintendo Wii U build off its predecessor’s success, and entice customers to purchase the latest iteration? Before answering this question, let’s first examine Nintendo’s a simple model of the Wii U. * Value of Wii U (V) is higher, as the system boasts high-resolution graphics, and an innovative touchscreen controller. * The price of Wii U (pl), while higher than the Wii, will likely be lower than other, more powerful next generation systems. * The disposal...
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