Nintendos Success free essay sample

You might laugh at a 12 year old when he claims his Pokemon game is serious business, yet you must admit that at Nintendo, games are serious business. Ever since 1975 when Nintendo made the significant key transition from a national playing card/small scale electronic toy company to an international video game company, its business has been blooming. From the earliest GameWatch in 1976 to the Gameboy in 1989, and the Nintendo DS in 2004, Nintendo generated one after another landmark product that won the hearts of millions of video game players all over the world (History of Nintendo. In 2006, the company introduced innovative Wii to the market, redefining the boundary of video games and opening a new channel for the company’s business. From a playing card company to a global video game producer that designs and manufactures the leading products in its sector, Nintendo has achieved success through strategic thinking. The combination of clear vision, solid purpose, efficient str ucture, creative leadership, and unique strategy paved the way for Nintendo to rise as one of the top three video game manufacturers. Nintendo creates values for its customers. For example, when a grade school child screams with joy upon receiving a Nintendo DS for Christmas or when the entire family sits in front of TV to play Wii baseball on a rainy Sunday, we have evidence that customers value Nintendo products. The company’s devotion to serve its customers is its strongest motivation to constantly renovate and design products that could fit better into the consumers’ life styles, hobbies, and budgets. Nintendo’s products are widely welcomed by consumers because the company knows consumers’ needs and wants and mobilizes its capital, human, and technological resource to make different dreams come true. The design of Wii perfectly exemplifies Nintendo’s consideration for its customers. The multi-part device is elegant, compact, lightweight, and energy efficient. Gamers can purchase different parts, such as the console, the remote, the nunchuk, or the balance board, according to individual needs. Wii is especially outstanding in is its design concept of family fun. This game theme contradicts the traditional parents’ view of video games, yet it is so urgently needed by the families that have little quality time to spend together nowadays. Wii brings families together to play sports, raise Pokemon, or even sing. The unique set up of the device invites multiple players and creates an atmosphere of bonding. On the other end of the market, Nintendo creates values for its business partners. The company’s extended branches of developers and transatlantic joint ventures are at the core of its value creation through partnership. The company parcels out the design and development of new product and new versions of existing products to multiple levels of developers around the globe. These developers are composed of smaller software design companies or individuals who do not have enough resource to stand strong alone in the vast industry. The partnership with Nintendo, the well-known video game producer, not only provides the developers with monetary support—crucial for the survival of small businesses—but also allows the developers opportunities to improve by accessing a wider range technology and resources. For example, iQue, Limited, is a Chinese joint venture with Nintendo. iQue manufactures and distributes official Nintendo consoles and games for the mainland Chinese market under the iQue brand. With the support of Nintendo, Wei Yen, iQue’s founder, has also able to design and produce the company’s own first product, iQue (Nintendo. 2008 Annual Report. ) Nintendo’s effectiveness in continuously creating value for its customers and business partners is based on its delicately structured business model. The company is now a multinational corporation with multiple principal offices and distribution centers in North America, Oceania, Europe, Africa, and its home Asia (Nintendo. 2008 Annual Report. While the Japanese headquarter serves as the control center of the company, monitoring sales, planning budgets, analyzing the market trend, and evaluating the overall performance, Nintendo distributes the job of product design and manufacture into many smaller that specialize in software design, computer programming, or CPU manufacturing. Instead of trying to perform every step in the production process alone, Nintendo wisely chooses to build solid and long lasting partnerships that will allow the firm to reduce the cost of building design studios or manufacturing plants but still produce the high quality products. For instance, its famous developer Monolith Soft, that also worked with Nintendo’s rival, Sony, to develop PlayStation 2, delivers top selling games for Nintendo DS and Wii (Nintendo. 2008 Annual Report. ) The keys in its successful partnership are trust, degrees of freedom, and quality control. The company strictly controls the licensing process before it works with the development studios; yet once it builds the partnership, Nintendo encourages creativity from its developers and allows much freedom for the studios to design software that reveals their own concepts and ideologies. The company follows the same rule for the manufacturers. Nintendo takes great amount of effort to research top manufacturers. IBM and ATI, two of the best from the business, produce cutting-edge CPUs of Wii (Nintendo. 2008 Annual Report. ) To ensure the integrity of the products, Nintendo not only controls the quality, but also instills its own values and regulations into the production process. As a result, the products designed and produced by different partners carry the essence and spirit of Nintendo’s corporate culture. Nevertheless, Nintendo was not always as successful as it is today. Founded in 1889 by Fusajiro Yamauchi, Nintendo started as a small Japanese playing card business based in Kyoto. The company produced and marketed a playing card game called Hanafuda. In 1956, a visit to the U. S. Playing Card Company reminded Hiroshi Yamauchi, the grandson of Fusajiro Yamauchi, about the limitation of the playing card business. The insight led to Nintendo’s disastrous venture into a taxi company and even a â€Å"love hotel† chain, a TV network and a food company. The fragmentation of its capital in new business venture along with the decrease in sale of playing cards caused the downfall of the company. Fortunately, the turning point came in the 1970s when Hiroshi Yamauchi wisely re-determined the direction of the company and successfully transformed it into an electronics/technology company (Nintendo. Company History. ) In 1970, Nintendo’s stock listing moved to the first section of the Osaka Securities Exchange. In 1980, Nintendo entered the North American market and established its first oversea subsidiary, Nintendo of America Inc. trading on pink sheets with the ticker symbol NTDOY (Nintendo Database. ) Since its enterance of the electronic era in 1975, Nintendo’s development speeded immensely as a result of the popular game console Gameboy series. As the company gathers more and more capital from its booming sales, it expands into global market with approximately 20 major offices and distribution centers in five continents. The structure of the company greatly changed from a small firm that designs, produces, and markets its own products to a complex corporation that operates on different levels and divisions with centralized power. Nintendo owns and works with more than a hundred internal and outside first, second, and third party design studios in product development. Internally, its Research and Development is composed of three branches: Nintendo Technology Development, Nintendo Integrated Research and Development, and Nintendo Technology and Engineering. The company’s Sales and Market Research Department is empowered by professional market researchers such as HFI Inc, NES Merchandising Inc, NHR Inc. , as well as its own Nintendo Research, Inc. (Nintendo. 2008 Annual Report. With such a powerful and complete engine that generates new market trends, sales, and technologies, the company is able to gather sufficient amount of information that is crucial in the decision-making process. To lead this organization that has great complexity and various areas of specialty, Nintendo’s leadership team is composed of competent leaders whose intelligence and personalities have left legacies of sound practice and good stewardships for the company. The legendary CEO, Hiroshi Yamauchi, took the position in 1949 and remained the head of the company for more than half a century. He took Nintendo through major transitions in the 70s and established the company as the top three video game producers around the globe. In 2002, the former CEO broke the historical inheritance of the company and passed the torch to Satoru Iwata, Nintendo’s first CEO outside the Yamauchi family. Two other major officials, Masaharu Matsumoto, the Managing Director in the General Manager and Finance and Information Systems Division, and Eiichi Suzuki, the Managing Director; in the General Manager and General Affairs Division serve as the left and right hands of the CEO, aiding him in human resource management and product distribution. Under this leadership team, Nintendo merged all software designers under the EAD (Entertainment Analysis Development) division and renovated internal development divisions into five groups: Nintendo EAD, Nintendo EAD Tokyo, Nintendo Integrated Research Development, Nintendo Software Production Development, and Nintendo Technology Development (Nintendo. 2008 Annual Report. Working as a software designer for Nintendo for years before taking the challenging CEO position, Iwata has the insight of venturing into new avenue in video the game industry and greatly contributed to the design concept of Wii—Nintendo’s landmark product in the present market (Nintendo Database. ) The invention of Wii is the best example of Nintendo’s business strategy. This innovative game console is a major breakthrough of this sector because it turns over the traditional assumptions about video games as sedentary and visual and seamlessly connects physical activities and inter-personal bonding in one game. While the traditional video games try to appeal to visual elements by enhancing the pixels and 3D motion quality, Wii focus on move the gamers from emotional level. Nintendo focuses on the consumer’s feeling rather than its product. Wii does not equal to video games; Wii aims at the fun consumers enjoy while they play (Kjerulf. ) Thus by setting Wii apart from the traditional consoles, Nintendo is competing on completely different terms than Sony and Microsoft. Wii doesn’t intend to be a best-of-breed videogame console: Wii is cheap, has no Hard Disk, no DVD, no Dolby 5. , weak connectivity, comparatively low processor speed, but blows minds away with its innovative motion control nunchuk. The nunchuk integrates the movements of a player directly into the video game. With this feature Nintendo opens up the game console world to a completely new public of untapped non-gamers (Kjerulf. ) Such strategy of making competition irrelevant, in Wii’s case deviating attent ion from the core group of consumers to attract non-core video game players and possibly a lot more first-timers, is referred as Blue-Ocean Strategy by W. Chan Kim and Renee Mauborgne in their book Blue Ocean Strategy (Nintendo’s Blue Ocean Strategy. ) While Microsofts Xbox and Sonys PS3 are fighting each other fiercly in a red ocean, the existing market, Nintendos Wii is calmly sailing in the blue ocean it created for itself. As for year 2008, Nintendo outcompetes its rivals Sony (PS3) and Microsoft (Xbox) Nintendos unit sales of 720,000 Wiis are followed in descending order by Nintendos DS platform with 698,000 units; Sonys PSP with 297,000 units; Microsofts Xbox 360 with 262,000; and Sonys PS3 with 257,000 (Emigh. Although Nintendo clearly understands the 80-20 rules in business, it dares to explore new possibilities of money-making by shifting the design concept and marketing strategy. While the main group of consumers, that is the 80% of revenue source and 20% of all its consumers, still consists of children, teenagers, and young adults who have always been active buyers in video game market, Nintendo challenges this rule b y designing and marketing Wii. The result is clear to all now: Nintendo not only successfully expands its revenue sources but also broadens the avenue for future development. In the years to come, the success story of Wii will continuously serves as an inspiration to Nintendo—a company that encourages creativity and innovation, welcomes changes and fresh blood, and focuses on people rather than tools or technologies. Innovation is big in Nintendo. In the next five to ten years, the company will consistently seek new angles and technologies in video game development including online gaming, while keeping expanding the existing trade marks such as Gameboy, Nintendo DS, and Wii (Gogia. With the mission to be â€Å"strongly committed to producing and marketing the best products and support services available,† Nintendo believes it is essential to provide products of the highest quality and to treat every customer with attention, consideration and respect (Nintendo. 2008 Annual Report. ) It will continuously put people first by listening closely to its customers and by constantly improving its products and services. The guiding concept of â€Å"focus on people† in the mission statement is not only revealed by its promise to all its customers to provide the best possible products and customer services, it is also revealed by its goals and visions toward its employees. As stated in their mission statement for the employees, Nintendo feels â€Å"an equal commitment toward its employees† and believes â€Å"in treating our employees with the same consideration and respect that it, as a company, shows its customers† (Nintendo. 008 Annual Report. ) The company aims to maintain an atmosphere in which talented individuals can work together as a team. Because commitment and enthusiasm are crucial to the high quality of its products, Nintendo holds high expectations for its employees to devote to the company and work with passion. Nevertheless, employees enjoy freedom of creativity and individuality, have large room for personal development, and are encouraged to propose innovative ide as. Besides the positive environment it creates for its employees, Nintendo spends efforts in building its unique corporation culture which gradually distinguishes itself from other companies in the industry. For example, outside the world of video games, Nintendo owns Seattle Mariners, an American professional baseball team based in Seattle, Washington (Nintendo. 2008 Annual Report. ) As baseball is the national sports in Japan, Nintendo’s ownership of a major U. S. baseball league shows people its love for the sport and builds up a human-like characteristic of the company that makes it closer to its consumers and employees. The company also strives to be a good corporate citizen of the community. Not only it concerns with its own profit, but also it cares about its customers and the environment. It protects the environment by designing energy-efficient game tools, such as Wii, while it helps its customers live a healthier life by introducing physical motions. The demanding yet encouraging atmosphere and the vivid and deeply implanted corporate culture become the reasons that Nintendo ranks high in its employees’ heart and in the community’s mind. As a result of continuing executing its strategy of expanding the gaming audience by offering a variety of products which satisfy both novice as well as skilled gamers over the past years, Nintendo has achieved record results in both net sales and income. Net sales were 1,672. 4 billion yen (US$16,724 million) increased by 73. 0 percent from the previous fiscal year, operating income was 487. 2 billion yen (US$4,872 million) increased by 115. 6 percent from the previous fiscal year, ordinary income was 440. 8 billion yen (US$4,408 million) increased by 52. percent from the previous fiscal year, and net income was 257. 3 billion yen (US$2,573 million) increased by 47. 7 percent from the previous fiscal year (Nintendo. Annual Financial Report. ) In FY 2008, the total revenue for FY 2008 is $1,672,423 (Nintendo Co. Ltd. Financial Times. ) An investor should definitely consider Nintendo as a profitable bet, because its clear focus and intuitive vision promise its bright future. In fact, the general market trend of video game industry is positive in the next decade. Even in a tough economy, the US market for video game hardware, software, and accessories soared 57% from March 2007, reaching a total sale of $1. 7 billion milestone in March 2008 (Emigh. ) Driven by expansion of software sales, a growing installed base of the new generation of console hardware as well as favorable handheld hardware sales over the past year, the market is projected to continuously grow. What makes the video game sector remain viable in a downward economy might be caused by â€Å"a shift in preferences for expenditures of consumer dollars as attributed by Groups David Riley. However, what makes Nintendo stand out among its competitors in today’s market is its solid concept of focusing on people, in other words, to think outside-in of what products and service consumers want and its intuitive way of thinking outside the box, as trite as it might sounds. These two factors along with its strong partnership with affiliated companies, its efficient business model, its organized structure, and its charismatic leadership and corporate culture ensure the company a promising outlook.