Nintendo Case Study

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In May of 2008 Microsoft had a slight edge over both Sony and Nintendo as its Xbox 360 was released several months earlier than the PS3 and Wii, reaching 10 million in US sales. However, when figures were released in June of 2008, the Wii had become the new leading game console of sales in the US, with a total of 10.9 million sales, whereas the Xbox 360 had only 10.4 million and the PS3 only 4.8 million. Nintendo’s release of the Wii was huge, and as stated by Farhoomand, Joshi, & Tsang, “selling 600,000 units in just the first eight days, generating $190M in sales” for the company (Farhoomand, Joshi, & Tsang,2009, p.10). The worldwide sales of the Wii had also surpassed both the Xbox and PS3. Figure 1 provides an overview of the sales figures for the Wii, PS3 and Xbox 360 in the US from 2006 to 2008. Figure 2 provides an overview of the sales figures for the Wii, PS3 and Xbox 360 worldwide from 2006 to 2008.

Problem Identification

While Nintendo successfully developed both home consoles and portable consoles, they operated in a highly competitive market and had not made the same technological advances as their main competitors. The main competitors of Nintendo were, and continue to be, Sony and Microsoft; both of these companies have focused on developing the internal hardware of their gaming consoles (making it faster) and enhancing the graphic displays (making them realistic). These developments were appealing to the current hardcore gamers market, which was being dominated by Sony’s PlayStation and Microsoft’s Xbox.

The target audience for gaming consoles was originally very narrow (confined mostly to teenagers) and the technological advancements by Sony and Microsoft had succeeded in only expanding to young adults. Nintendo’s technology did not follow the trend of a faster operating system or enhanced graphics, and therefore another problem identified is that Nintendo needed a new strategy to break into other markets. Nintendo had to create hype to keep the audience interested and investigate how the best way to move their products into new, larger scale markets. One way Nintendo tends to create hype for their product is to only make a limited number of the gaming consoles. Limited availability tends to cause a stir amongst the market and created a high demand since every consumer wants to own the latest system.

Additionally, competitors were introducing multitasking consoles and there was a demand for systems that were for more than just gaming (such as the ability to play DVDs and Blu-Ray). The Sony PlayStation 3 was the first console to offer Blu-Ray playing capability and the next generation PlayStation 4 has also has this technology. Microsoft’s Xbox 360 and Nintendo’s Wii did not have this capability, however Microsoft has made it a feature of its newest system Xbox One while Nintendo still has yet to off a DVD or Blu-Ray feature on any of its systems (including the newest system ‘Switch’ which is due for release March 3rd 2017).

Nintendo had to find its place in the current hardcore gamers market or chose an entirely different approach than its competitors and break open a new market segment; Nintendo chose to do the later. The complexity of games and the equipment being used by both Sony and Microsoft was not appealing to generalized users and this was an untapped market recognized by Nintendo. The rest of the industry ignored non-gamers and novices, but Nintendo took advantage of this information and focused on a strategic plan to design consoles that would be both innovative and appeal to the non-gamers market.

Analysis of Facts

Nintendo has a long history of developing both home-based gaming consoles and portable consoles.

The following is a list of the most notable consoles developed by Nintendo (Nintendo, n.d.):

Home Consoles:

- Nintendo Entertainment System (NES) - 1985

- Super Nintendo Entertainment System (SNES) - 1991

- Nintendo 64 (N64) - 1996

- GameCube - 2001

- Wii - 2006

- Wii U – 2012 (did not make a large impact on the market)

- NES Classic Mini (A modernized version of the original) - 2016

- Nintendo Switch *set for release March 3rd 2017*

Portable Consoles

- Game Boy - 1989

- Game Boy Pocket - 1996

- Game Boy Advance – 2001

- Game Boy Advance SP - 2003

- Nintendo DS - 2006

- Nintendo 3DS - 2011

Nintendo, Sony, and Microsoft follow a cycle when releasing their new gaming consoles. The companies compete with each other to put their system out faster, usually around Christmas season. The cycle involves releasing a large system, which is then followed by a shiny new ‘slim’ version 6-12 months later. These versions released within a year later are usually smaller and sleeker versions of the console, with additional features, but no major changes. Every five to six years the industry will see a complete redesign of gaming consoles as technologies change and competition increases.

In 2006, Nintendo released its Wii console a few months after the release of Sony’s PlayStation 3 and Microsoft’s Xbox 360. The Wii was a disruptive innovation, it surpassed both the Sony consoles and Microsoft consoles even though it was a more simplistic technology than its competition. The Wii was not considered to be a comparative system to either the Xbox 360 or PlayStation 3. The capabilities Nintendo has designed for graphics, realistic play, and processor speed were not as impressive as that of Microsoft or Sony. While it was anticipated that the Wii would underperform in sales because of this, it was the appeal of a family friendly and non-gamer system that allowed Nintendo to gain control of the video gaming industry once more.

The target market for Nintendo’s Wii was casual gamers, but ended up extending to non-gamers of various age groups and families. One reason the general public was so receptive to Nintendo’s Wii was its innovative gaming controller. Unlike the options that were currently being used by Microsoft and Sony, Nintendo simplified how the user interacted with games and changed the experience.

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