Nintendo Case Study

Several factors accounted for Nintendo’s success in the home video game business where other companies such as Atari had failed. These can be categorized into their approach to the open market, their established presence due to previous triumphs, their focus on technology, research & development, their powerful marketing strategy, and finally their overpowering licensing & distribution strategy. By 1985 the home video game market was in shambles. After the oversaturation of the market with dozens of consoles and hundreds of mostly low-quality games, it was assumed that the home video game industry was simply a “toy fad” and becoming obsolete. By this time the door was wide open for Nintendo. This allowed Nintendo to establish high royalty licensing agreements with game development companies after Nintendo established their initial victories with games such as Super Mario Brothers, The Legend of Zelda, and Metroid. Nintendo’s previous accomplishments in both Japan in the United States also paved the way for the Famicom / NES to be a hit. With their hit coin-op arcade game, Donkey Kong, and portable game system Game and Watch (considered a hit only in Japan) Nintendo was able to establish their worth to consumers. Nintendo also took a much contrasting approach to their technology, research and development values. Through maximizing performance of the dated 8-bit microprocessor and utilizing low-price subcontracted hardware, they were able to produce a video game system that was able to undercut the competition significantly. Current systems from Commodore, Casio, and Sharp ranged from $200-350 while the Famicom/NES as only $100. Also their game development investment greatly differed. While Atari games were usually limited to four to seven months (or six weeks, as was the case in large failure of Atari’s E.T. the Extra Terrestrial), Nintendo devoted twelve to eight months. Large development costs were devoted to Nintendo’s games and their developers when Atari