Nintendo Case – Zineb Mouline – MBA Japan 2019

1. Shortly discuss the evolution of the video game industry, particularly in terms of
competition and technology

In the early 1970s, the emergence of arcade machines in shopping malls and gaming

venues around the world marked the onset of the gaming industry, thanks to large

players such as Atari and Namco. The introduction of PCs in the 1980s set the stage

for the era of Home consoles, following the large improvements in displays,

processing power and memory to update game elements in real time. At that time,

various Japanese companies took up the gaming industry. With the introduction of

Sony’s PS in mid-1990s, the Japanese giant allowed to capture new players with

higher disposable income, thereby growing the gaming industry’s audience base from

teenager-focused to mainstream market. Sony later launched its PS2 in 2000, and

Microsoft joined the arena one year later with Xbox. As the industry continued to

experience significant changes driven by the technology convergence of the early 2000s

(including broadband internet, HD videos, and hard-drive storage capacity), new

opportunities started to arise, namely in online entertainment and video streaming,

thus driving the industry players into a relentless pursuit of higher computing power and

graphical interfaces. Interestingly, at that point in time, Nintendo decided to adopt a

singular vision, out of the realization that, due the games’ increasingly steep learning

curve and complexity, occasional or non-gamers were left out. Nintendo’s decision to

develop simpler games for a novice mainstream audience led to the roll out of the DS

handheld gaming devices, with quick set up and play, as well as a wireless gaming

network. In the video game console segment however, having lost ground to the Sony

PS2, and armed with the unorthodox will to serve casual and non-gamers, Nintendo

introduced a new paradigm by rolling out its new console the Wii, thereby changing

the game.

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 Nintendo Case – Zineb Mouline – MBA Japan 2019

2. Analyze Nintendo disruptive strategy in details. What are the main features of this
strategy that have made the Wii such an overwhelming success? How is it disruptive?

Nintendo’s strategy aimed at marketing its console as “a machine that puts smiles on

surrounding people’s faces”, thereby reaching out to people who would not usually

describe themselves as gamers, which represented an untapped majority of the market.

This association set it apart from its competitors, solely dedicated to their initial

customer base: the savvy gamers. Along with its simple design and ease of use, the

Wii technology provided remarkable new features including the mimetic Motion

control interface, which translates the movement of the wand into on-screen action,

allowing real-life games simulations. Less expensive, casual and family-friendly, the

Wii focused on putting the player at the heart of the experience, by transforming the

space between him/her and the screen into a playground. Nintendo’s blue ocean

strategy in this regard didn’t stem solely from its motion-sensitive technology (which

already existed), nor did it derive from any inherently social features that competitors

didn’t have, it is rather how the game was thought-out that made a difference. The

emphasis on the social and health aspects of group activities taking place in the living

room, exercising the whole body, standing up more often than sitting on the couch,

waving arms instead of using small joypads, contrasted dramatically with the rather

stationary and -more often than not- solitary traditional gaming. Since its inception as

playing cards company in the 1890s, the company’s brand association with family fun

and playful social interactions helped Nintendo retro-invent and reproduce the

simplicity of early games. The strategy also aimed at developing early first-party titles

that showcased the hardware, focusing on characters rather than special effects to

reinforce the nostalgic advantage while cutting costs, allowing backward compatibility

with previous games and accessories, and later, in a strategic move, loosening control

over content and allowing independent developers to use the WiiWare distribution

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channel. From a resource-based view point, Nintendo benefitted from its experience in

pressure-sensor accessories (Power Glove & Pad) and handheld devices (DS), its

software catalogue of beloved historical franchises, its agility to develop the consoles

by software engineers to match these games, among other cumulative effects,

translated into a path dependency, which lead Nintendo to successfully Deploy,

Innovate & Propagate its new technology in untapped markets, thus disrupting the

gaming game.

3. Assess the key competition faced by Nintendo’s Wii. What are the strategies and options
available to competitors to meet Nintendo’s Challenges?

Nintendo’s main competitors were the PS3 and Xbox 360. While the red ocean trap led

these competitors into wooing existing customers and investing heavily in value-added

offerings with increasingly complex gameplay and high quality graphics, Nintendo

was more on a blue ocean expedition. Although there is strategic merit for both, each

strategy carries its own set of risks: complex and time-consuming games could cause

players to drop out, while overly simplistic & easy-to-play games might cause boredom.

This represent a threat to Nintendo’s industry dominance if it doesn’t seek new

opportunities to innovate and expand its products life cycle. As the industry has seen a shift

towards games with multiplayer setup around physical spaces rather than digital, with a focus

around family values and health care, new entrants could join the battlefield by replicating

the technology and offering similar products at lower price. However, with rapid industry

convergence, and the rise of casual gaming on smartphones, tablets, and social networks, the

distinction between video game consoles and personal mobile phones tend to disappear,

particularly with motion-sensors being incorporated in Apple TV devices and smart phones.

Hence, Nintendo’s competitive advantage will dissipate overtime and become commoditized.

Options for competitors could be either seeking yet another disruption in the way the

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technology is used (for example using AI or Virtual reality), or by effectively using Data

analytics generated by the gaming activity, in a way that wasn’t explored before, and create

new value.