Nintendo�S Innovation Strategies: a Sustainable Competitive Advantage?

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Introduction ………………………….……………………………………….……3 Industry analysis ……………………………..………………….……...…......4 Competitors strategy ……………………….…………………………………….
Microsoft – A differentiator………………………….…......7
Sony – A differentiator ……………………….…………………9

Analysis of competition………………………………………………………11 Nintendo’s strategy …………………………………..……………………….14 SWOT ………………………….…………………………………………………….17 Recommendations …………….………………………………………………18 References ……………………………..………………………………………….20  Introduction

The first video game was created in the 1960's. Half a century later, the industry of video games represents a 42 billion Pound industry. The recent significant increase in this industry is due to the growth of broadband, the adoption of more robust wireless networks and phones, and the consolidation of game developers and publishers. This global turnover is divided in two parts: the software component is worth (32 billion pound) and the hardware component is worth (10 billion pound). Some recent analysis shows that there is about 300 millions of players in the world. It is quite difficult to find the exact number because a game or a console can be used by more than one player. The Video Game Hardware market is dominated by three main competitors: Nintendo (49%), Microsoft (30%) and Sony (21%). While the video game software market is dominated by four companies: Nintendo (19%), Activision (12%), Electronics Arts (11%) and Konami (5%). These figures indicate that Nintendo is the leader on the video games market, on hardware and software. Nintendo Company was created in 1889 by Fusajiro Yamaushi as a playing cards creator. The company has now expanded well beyond card making. Today it has several divisions including Video games, consoles, manga. Nowadays Nintendo is led by Satoru Twata and headquarter is in Tokyo. The organization employs 4200 peoples, has a turnover of 10 billion of £ and a result of 1,5 billion of £.

This report analyses Nintendo's global situation, its competitor's strategy and finally Nintendo strategy.

Industry analysis
The Porter’s Five Forces model is a tool that companies use to analyze competitive forces in the industry environment in order to identify opportunities and threats. This model focuses on five forces that shape competition within an industry. These forces are: risk of entry by potential competitors, rivalry among established firms, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitutes (Theory of strategic management with cases, Jones Hill, international edition, p.42). For Porter, a strong competitive force can be viewed as a threat as it reduces profits while a weak competitive force results in an opportunity which allows a company to earn superior profits.

Porter’s Five forces for Video Games industry :

Potential new entrants (high):
For the potential entrants, there are Electronic arts, mobile phone manufacturers such as Apple and computer manufacturers Electronic Arts creates software for PC’s and console gaming and EA is one of the major player in software industry. For instance, over the past three years the average company in the industry has seen an 8% increase in their stock price, whereas EA has increased by 123%. The following example shows the strength of position that EA holds and can compete with Nintendo which develop a part of its software, but also uses independent. (the video game industry, an industry analysis, from a VC perspective / center for digital strategies, 11 march 2005) For mobile phone, the threat comes from Apple and the multiplication of applications and video games on phones. Moreover, a major part of this software is free unlike Nintendo’s products. (Analyzing Apple's Threat to Sony, Nintendo by Brian Caulfield, 29/09/2009) The console market has a strong threat of new entry. Indeed, there is very little patentable technology in game consoles, and most consoles have similar features (Competitive Strategy in Game...
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