In 2004, Nintendo had a number of strategies available to change the company position in the market. It had become more than clear that following the same tactic would not allow them to overlap its competitors. In order to growth further, Nintendo could integrate the opportunity to reduce costs and expand into other markets at the same time. Secondly, and maybe most promising, they could explore different consumers segments, which would enable Nintendo to reach market opportunities that had been ignored by Sony and Microsoft so far.
After analyzing its core competences, the costs, benefits and risks involved, Nintendo developed a strategy based on internalizing ...view middle of the document...
This is especially true for the extraction and processing of raw materials and production as the company completely outsources those areas. When it comes to quality control, rigorous testing procedures and the overseeing of partners’ operations ensures the highest quality standards are met.
Simplicity can be a powerful tool when it comes to satisfy non-consumers providing innovation that can outsell its competition. Nintendo is no longer competing with the other gaming consoles and handhelds companies. The appearance of smart-phones and tablets open the door to another market segment that is growing every year.
In order to conclude whether Nintendo decision to enter in this new market segment is in its best interest, we carried out Michael Porter three essential tests:
The attractiveness test invites to ask whether the smart consumers segment is capable of being attractive. In the past 10 years, the game market stalled although its high profit margins. To respond to the losing market growth, Nintendo could explore this new trend of playing games in smart-phones and tablets. There is no doubt that one of the other strengths is on its games. But once more, if they can only be played in Nintendo hardware, unless those characters are constantly update in new games, the company fans will fade. Since the market growth and size of mobile gaming platform industry are increasing, Nintendo can take advantage of its well known games and diversify them into smart phones and tablets platforms, allowing their existing audience to play these games in other devices as well as capture new potential consumers.
(Analyses of market growth and market size (divided between consoles and tablets)
By widening its product scope, Nintendo would not only grab this opportunity before any of their direct competitors, but also take advantage of this new huge potential unexplored market that is growing year after year.
The cost of entry test requires that future profits are not going to be absorbed by the cost of gaining positioning in the market. In high-developed hardware technological industries, entry barriers are usually very high, mainly due to the initial investment necessary, the need to have great knowledge and experience regarding how the manufacturing process works and also because of patent and other proprietary rights. In this case, Nintendo has a big advantage since they are already in a highly-intense tech industry and has already significant internal resources and capabilities that could reduce some of these costs. First of all, the company’s strong relationship with its suppliers (who some of them also work for the tablet industry) means that the company already has the know-how for production process characteristics and the connections to start working on a product. Also, another important feature of Nintendo is its historical brand awareness, which helps selling new greatly innovative products in a way new...