Nintendo SWOT Analysis Nintendo Co. Ltd Research Proposal

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Nintendo SWOT Analysis

Nintendo Co. Ltd. was founded in 1889 in Kyoto, Japan. The software manufacturer is very influential in its industry, being Japan's third most valuable company with a market value of $85bn and being ranked eighth largest software company in the world in 2007 (Wikipedia (a), Accessed Feb 2009). By October 2008, the company had sold more than 470 million hardware units and 2.7 billion software units worldwide. At the end of 2008 FY, net sales reached $16,724 million, showing a 73% increase compared to the prior year, whereas net income reached $4,872 million over the same period of time (Annual Report, 2008).

Nintendo, the parent company, has a relatively small number of employees (3,768 in 2008). However, the company sells a large number of products via franchising.

Nintendo's top competitors as indicated by Hoover's are Microsoft, Sega and Sony. Microsoft is probably the largest software manufacturer worldwide, widely known for its Windows operating system and Office application. Sega, formerly the world's #3 console seller behind Sony and Nintendo was bought by Japan's largest pachinko and slot machine maker, Sammy Corporation and restructured its business to develop software for PCs, wireless devices and game platforms. Finally, Sony, despite having a winning product in terms of games, Playstation, most of the attention is drawn by its high-profit consumer goods.

The Product

Wii is a probably the most famous video game console developed by Nintendo so far.

SWOT Analysis

Strengths

The consoles. Technology-wise, the Wiimote and Nunchuk have been a huge success factor after many years of experience with joypads. It is much easier to use the Wiimote once this is attached to your wrist. Its sensitivity is obvious even in the case of the simple mini-games in Wii Play, and this is just the beginning of this generation as it is pretty clear that developers haven't even scratched the surface for this technology yet. Also, the he Wiimote'n'Nunchuk be very revigorating, stimulating individuals to rediscover their passion for long forgotten games, such as Wii Madden.

First party games. Nintendo's development teams are the games industry leaders in terms of creativity and innovation. One example to support this argument is Nintendo's dynamism with DS, which had one new genre invented (brain training) and another reinvigorated (virtual pets). With a new IP, new ideas focused on the strengths of the device (in DS' case, its style and dual-screen) and keeping the same teams making the games, Wii will never be short of innovation.

Third party games. The third party support is impressive: EA liked the platform so much, they bought a company; Ubisoft are making large amounts of Wii games, and Sega is on board in the software area. The company is making use of the controllers - see Ubisoft's Rayman Raving Rabbids or Elebits. Additionally, cheap development costs and innovative controls are helping a lot, and the strong sales of the console itself are a good reason for publishers to support Wii.

Its simplicity. Wii is probably the most accessible games console for the non-gamers category, including here those individuals with no well-developed joypad skills. it's also probably the best party console of all, being extremely easy to gather a few friends and play together.

Online and multiplayer. Wii IS online has a very good Web browser, and the System Update feature works smoothly, and so does the instant messaging. The weather and news channels, although not very well developed, have a very good potential.

Weaknesses

The consoles. The company doesn't own motion sensing, but this can be done just as easily on a PS3 or Xbox 360. And while Wiimote'n'Nunchuk is one of the console's strengths, it shouldn't be seen as competition-trumping killer features as often as it is.

First party games. In this area, Wii created so far Zelda, Wario, and brain training, Mario, and Pokemon. If Nintendo gets carried away by the DS' barnstorming success and continues with minor Wiimote changes for its greatest hits it will be missing on a lot of opportunities. Consequently, the game designers need more brand new ideas and innovations, just like DS.

Third party games. There are a lot of movie and kiddy games being developed. Nintendo needs to make sure Wii has a balanced library of games to move forward, after having spent so long trying to build its reputation for making consoles for kids. Also, it needs to focus on its leadership for the really big games, such as the Grand Theft Autos for example, which are leading on PS3 and 360.

Its simplicity. Wii's very simplicity could become its own enemy in some households, especially those with another console, such as a PS3 or 360. The latter are used for proper gaming, whereas Wii might end up full of dust in the corner waiting for the next post-pub session.

Online and multiplayer. Playing games online is quite limited and the overriding tracking scores community is not tracking the highest achievements.

Opportunities

Improve the seventh generation console characteristics, which are only in the beginning of their life cycle.

Increase game variation for all age segments, while focusing on big games, such as Grand Theft Autos.

Threats

Fluctuation in foreign exchange rates - Japanese yen appreciation against the U.S. dollar or Euro would have a negative impact on Nintendo's profitability because (a) the company distributes its products globally with overseas sales for more than 80% of total and also because (b) the company keeps a substantial amount of assets denominated in foreign currencies without exchange contracts and so any fluctuation in foreign exchange rates impacts the earnings.

Fluctuation of and competition in the market - the emergence of new competitors as a consequence of technological innovation and the shift in consumers' preferances for video games could have a negative impact on the company.

Development of new products - Despite Nintendo's power to innovate, in the software development industry there is no certainty that the products will be accepted by the customers as their preferences are extremely volatile. Additionally, the development of hardware is complex and time consuming and because the technological advancements are very fast, Nintendo may be unable at a certain point in time to acquire the necessary technology to generate a successful product in the gaming segment of the entertainment field.

Product valuation and adequate inventory procurement. The fast pace of technological development, characterized by products with a short life cycle coupled with ever changing consumer preferences requires a good inventory system, through which the company manages to avoid excess inventory of obsolete products.

Marketing Strategy

Marketing Mix

Product. Wii's size is a competitive advantage as all competing products are larger and harder to fit in a room. As discussed in the Product section, Wii is definitely thinner and lighter than GCN, N64, North American SNES and NES, but also shorter than most of those.

The two main competing products are Microsoft's Xbox 360 and Sony's Playstation 3. Xbox is using a Power PC technology by IBM for its processor just like Wii. However, 360 processor is by far more powerful than the one used by Wii. Sony also had a strong processor with a massive sever cores line up. In Sony's case the processor's high quality came with too high prices that were heavily criticized and had to be cut especially in markets like Japan with sophisticated customers and a large variety of competitive products.

Just like in the case of horsepower, Wii can't deliver at the same level as the competition in terms of graphics. Sony, just like Microsoft invested a lot of resources to improve graphics and push them to a high definition era. Microsoft adopted a "media hub" approach, stimulating consumers to use their 360 for more than games, such as watching movie trailers and DVDs and also share content with your "Media Center" PC, such as videos and photos. Additionally, there is a heavy emphasis on connecting their consoles to the Internet for additional services. Sony's graphics on HDTV look fantastic, but can be improved for the classic 21"TV.

Wii is user friendly and doesn't require special gaming skills to play. Thus, people interested in playing games for a short period of time will chose Wii over the competing products because of its pick-up-and-play characteristic, whereas those interested in more than that will chose 360 or PS3. Also, unlike the competing products, Wii offers players a new way to play games through its high and original interactivity feature.

Price. Both Microsoft's Xbox 360 and Sony's Playstation are more expensive than Wii, as both these products are superior in terms of horsepower and graphics. But this simplicity characterizing Wii is what makes the product both more user friendly and cheaper than the competing ones. Moreover, since Nintendo was among the pioneers to launch this kind of products, it also managed to reach a certain maturity in the product life cycle and therefore the ability to reap benefits from economies of scale and learning processes.

With the smallest price tag and with fun games, Nintendo's… [END OF PREVIEW]

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