A SWOT analyis for the Nintendo Wii

This assignment is looking at Nintendo’s Wii SWOT analysis. Wii came out as new innovation and connected the way people look at gaming. Nintendo has been keeping gaming alive since 1985 with the release of the original Nintendo (Famicom in Japan) and still keeps the true spirit of gaming alive today.

Wii emerged as a viable competitor for sony’s PlayStation and Xbox 360 the key to Wii’s success was its inclusion of revolutionary third party motion sensing technology by using it Nintendo followed “more with less” concept. The technology was so innovative that it made customers interact with latest games and expeience whole new wolrd of fun. The console was widely accepted by families of all demographic regions as it offered customization of characters. With the new technology customers felt so real that they could play golf by swinging the controller. The Wii was undoubtedly a hit that e sparked Nintendo’s revolutionary coming back in the video gaming industry. Satoru Iwata

The president of Ninetendo proudly launched Wii in 2006 and a s expected due to enterprenueral skills of Satoru Iwata and the brand name Wii proved to be a successful hit.

Company Overview

Nintendo is a Japanese based corporation whose original purpose was to produce handmade cards was established in 1989. The company failed many times but finally succeed in entertainment and software industry and changed its name to Nintendo Company Ltd. and started creating gaming system along with video games that were worldwide famous. The Donkey Kong was one of instant classic which was followed by Super Mario Brothers and it proved to be the most profitable game for the company. Both the games are globally recognized by major segment of people. After this Nintendo introduced an upgraded version and named it Super Nintendo which was very successful in Japan and America. After 5 years Nintendo 64 was launched which was again a hit and it made company to have more faith and confidence in there innovation so they also launched Nintendo Gamecube and Nintendo Wii both the game consoles were a super hit and enjoyed a glorious success. Today the most profitable is Ninentendo Wii that has increased the sales to a very high extend. Although the company is focused in video game industry but it is also the major owner of Seattle Marniers in Major League Baseball.

NINTENDO WII

The Wii is targeted to a different segment of customers. It is focused on action console so customer can actually get to participate in the game. This has made Wii a excellent choice for people who desire something different.

Wii came in 2006 it had several advanced and revolutionary features and was declared as best selling latest generation console system in the world due to its wireless motion sensitive remote control and built in Wi Fi capability. Wii knows how to entertain and uses a no frill approach.

MISSION

To encourage people around world tp play video games regardless of there age or gender or cultural background.

WHY??

Wii in my opinion is a truly unique console it has always attracted me how Nintendo was able to combine intuitive motion controls with backward compatibility. I am highly impressed with the amazing software features like virtual console and the best is cool Wii Channels that makes Wii simply awesome.

( http://www.brighthub.com/video-games/wii/articles/42453.aspx#ixzz1D0hEPnGp)

Wii Strategy

Despite of having large video game likes Mario for a long time Nintendo was not able to increase sales figures as shown below so Nintendo Wii focused on being different by using strategic positioning and devoting its resources uniquely to acquire “strong community” of users and “immersive wide range of games”.

Figure 1: Nintendo Unit Sales (except Wii), Games and Consoles, 2003-2008

Source: published in business week April 28th 2008.

The greatest strategic mistake done by Nintendo was to target the under 18 market segment which represented only 1/3 of the total market.

Figure 2:Nintendo Wii Unit Sales 2003-2008

Source: Published in business week April 28th 2008.

The launch of Wii helped Nintendo to enter new dimension of customers by tapping the “usual customers” zone establishing new standards for gaming console. According to analyst Wii strategy can be summarized as Disruptive strategy.

Figure 3: Strategic Dimension Of Wii

Source:

The strategy canvas of Wii is both diagonistic and an action framework for building the blue ocean strategy of Wii.

The BLUE OCEAN strategy

According to the blue ocean strategy there are three group of non customers that the company should have focus on:

1. “soon-to-be” noncustomers who are on the edge of the market.

2. “refusing” who consciously choose against the market.

3. “unexplored” noncustomers who are sitting in distant market.

The Wii offers first segment of customers value like motion sensitivity that attracts them (casual gamers) . the second segment of customers are unaffected by Wii and the third segment of customers seems to be readily attracted by Wii because of the affordable price for economy class people.

Nintendo Wii has used blue ocean strategy and aligned the whole system of a company’s activities in pursuit of differentiation and low cost.

SWOT

The SWOT analysis of Nintendo Wii provides information that is helpful in matching the firm’s resources and capabilities to the competitive video gaming environment. It is instrumental in Nintendo’s successful strategy formulation and creating the new horizon of blue ocean.

STRENGTH

According to Datamonitor’s company profile on Nintendo, published on September 17, 2007, Nintendo has following main strengths-

A strong brand name-

Nintendo’s strong brand is due to its 25 glorious years in the video gaming industry. They are not only the leaders in handheld console market buy also in gaming industry. First successful hit was the Gameboy in 1989. The Nintendo Wii is the most upgraded console consisting of motion sensors that makes the game more interactive. Major market segment covered by Wii is of college students being a part of that segment I realized that I will prefer playing Mario for several hours than using any technically advanced console.

2)High Returns-

Nintendo always believes in innovative ideas and for higher profit they also have invested there resources in company like the Seattle Mariners and the Atlanta Hawks.

Which gives Nintendo a high return on their assets making them more profitable.

3)High employee efficiency-

Acoording to the figures recorded by Datamonitor company the revenue generated by Nintendo was about $206,960 per employee which proved Nintendo’s high employee efficiency as compared to other companies of same industry. 

4)Debt free status-

The greatest benefit to Nintendo was efficient use of there financial resources and despite of investing huge amount of data Nintendo was able to stay Debt Free. Nintendo always enjoyed financial flexibility as the Debt to equity ratio was zero recorded by Datamonitor Company.

5)New games-

Wii with many games like Wii Fit offers a bit more to the customers. The gameplay is different but highly attractive. Game producers are also inventing new things like Guitar Hero and others for Wii.( According to Edge magazine, in 2009)

According to the Strategy Canvas of Wii following strengths have been evaluated:

6)Unique Sense of Marketing

Nintendo uses a marketing strategy to make consumers want what they cannot have. This is seen currently because Nintendo Wii is not producing enough of the product to meet the demand from customers. Last holiday season Wii’s were hard to find. NY Times reported that in San Francisco, New York, Boston and Austin, TX, stores turned up several with PlayStation 3’s in stock, while the Wii was sold out (New York Times). John Weeks, a worker at a Target Store in Boston, said “The last time they were here, we had 40 and they sold out in 15 minutes” (New York Times).

Interactivity

Another strength that Nintendo has is their unique player interaction. The Wi

introduced motion sensing gaming in 2005. It was the first video game to use the new technology and get people up and moving. This makes them truly ahead of the game in family entertainment.

8)Product Innovation

Mario cart, for example, is one of the most popular Wii games. The game that gave Nintendo its start was innovated and updated to become, again, one of the most popular games played. This shows the longevity of the company and the constancy of the brand.

WEAKNESS

The Nintendo Wii is a strong competitor in the gaming market, but it does have some

weaknesses. A few of the Nintendo Wii’s biggest weaknesses are; the fact that they do not own the motion sensing technology, graphics, and limited online game play. These weaknesses are determined mostly by comparisons with the capabilities of Xbox 360 and PS3. ( refer to appendix)

Do not own motion sensing technology

A large weakness of the Nintendo Wii is that it does not own its motion sensing technology (Zimbio). They were the first to use this unique idea, but since they do not own the technology, problems are probable. There is room for competitors to use the same technology and take away one of Wii‟s strengths; their uniqueness.

More demand less production-

As Nintendo GameCube and Nintendo 64 were not that much successful therefore Nintendo was cautious while manufacturing Wii so it produced too few Wii’s but the current demand was very much high.

Graphics

Compared to the Xbox 360 and PS3 the Wii does not have the graphic quality that the others do. This may be viewed as a weakness to some of the more extreme gamers, yet some of the novice gamers may not mind as much. Many blogs and interviews say that younger people are disappointed with the graphics such as the article Head of Factor 5 Calls Early Wii Graphics “Disappointing” by Box News Channel stated. The fact that the Wii does not have the graphics that the Xbox and the PS3 have makes it cheaper, but many hardcore gamers will be turned off by this fact; making it a weakness.Hardcore gamer customers expected the graphics to be a enchanced one but in order to keep the prices affordable Wii used a 64MB GDDR3 graphics card. It made Wii cheaper as compared to Sony’s Playstation with initial price of $250 only. This desire to keep the product affordable proved to be a double edged sword for Wii.

4.Dependence on contract manufactures

Nintendo has tried to establish good relations with companies to produce the main parts of their Wii consoles as well as assembling all the parts until finished products are formed. The biggest problem was the new Wii console that was in very high demand that the manufactures were not able to supply parts timely . this shortage affected company’s overall profit as there was lack of finished goods to be sold.

5.Limited Online game play

The Wii also does not compare to the Xbox 360 or PS3 in its level of online game play. Xbox has Xbox Live that allows for online multiplayer gaming as well as communication with opponents through a wireless headset. PS3 also has a way for players to connect through the internet and compete in tournaments in various games. Unlike the Xbox and PS3 the Wii does not have a consistent online network, and there is no verbal communication between online opponents.

Opportunities

The external environment evaluation by perceptual map as shown below provides the Nintendo Wii with opportunities they can take advantage of. Key environmental opportunities are the willingness of consumers to have multiple gaming systems, the wide range of customers they can target, teen spending, and the interest of consumers to be fit.

Willingness of consumers to have multiple gaming systems

In the past, people would chose one gaming system and use it solely. Recently, however, consumers are becoming willing to have multiple gaming systems for different purposes. This is because the video game industry is becoming more diverse. According to the report of the Games Segmentation 2008 from sales tracking and research firm, The NPD Group, Playstation3 gamers are especially likely to see Wii as their next gaming interest (shacknews.com).Therefore, Wii doesn‟t necessarily have to replace other systems to be successful.

Wide range of customers

The wide range of people likely to play Wii can help with sales. Young children influence their parents, while the games are made so that parents and grandparents can enjoy playing as well. People already into gaming may see the Wii as unique, while those who are not big gamers see that the Wii is so easy, they would like to start. The Wii is expanding globally, taking advantage of the opportunity totarget people around the world who have or have not experienced gaming. Hard-core gamers also can use Wii. As gamers, they are curious about the variety of games on the market and are interested in the new technology. “At the end of the day, Wii is a terrific secondary system for hard-core gamers,” Mr. Gerstmann of Game- Spot said (New York Times).

Teen Purchasing Power

Teens are earning more money now than ever before. They spend most of their earnings on entertainment and technology, so that means Wii has an opportunity to be part of what they spend their money on.

Fitness

Wii takes full advantage of health conscious people by providing them active games that increases there heart rate and oxygen intake (Women’s health) it gives people a relaxed fitness opportunity.

Indian Console Market-

Now Nintendo is planning to enter the Indian console market which can prove a good opportunity as the revenues expected from Indian market are $120 million because of the good brand image it also helped in expanding the number of broad band users as Wii systems are Internet accessible with the updation ability of

(Refer to appendix )

Threats

Outside factors can threaten any product. The Threats can be evaluated using the comparative Swot of Nintendo wii with its competitors (refer to appendix). The Wii is threatened by the current economic problems, new competitors, as well as technical problems resulting in a bad reputation.

Economic Problems

Our economy is going through a rough time right now. A recession is a threat to Wii because people are not going to be spending as much money on luxury, shopping, and/or entertainment items. This recession could very well lower sales not only for the Wii but for the entire gaming industry. According to GfK Roper Consulting‟s Holiday Shopping study, consumers will be cutting back and looking for practical gifts this Christmas (giftsanddec.com). Video games were ranked 8th last year on

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the gift spending list, but this year they are not even in the top ten (giftsanddec.com). The video game market has not had as high of increase in sales that they usually experience during this season. This shows that the recession is truly threatening the success of the Wii.

New Competitors

At this point in time the Wii does not compete with any other product providing the same type of system. It is very possible that companies such as Sony, Xbox, or other competitors could attempt to create a gaming station similar to the Wii, but they might have better graphics and more capabilities using the motion sensing technology. The possibility of new competition could also be a threat for the Wii.

Technical Problems=Bad Reputation

The Nintendo Wii products had a few problems when first released. They are not known for durability, and have had problems as users played them a lot (BaBoom). The controllers, for example, could have had a better design. Although the cases are few in numbers, many people heard about the problems of the controllers flying into the TV, for example. This can lead to recalls and lawsuits (BaBoom). Although these problems are mostly from the early stages of Wii, people will always remember. Therefore, technical problems can lead to a bad reputation which threatens sales.

.Eliminated Movie Playing.

The Wii removed movie playing feature of PS3 and Xbox it plays nothing. Wii focused only on games as playing movie requies high resolution that adds cost to the product but this added cost doesnot align with customers perceived value.

Conclusion

In the gaming industry Nintendo has established a good brand name Wii product enjoyed a great success due to economic and other features and with new games it was one of the most demanding console which has unique console with sensors that makes it most enjoyable and lively. Wii has paved a totally new path for more interactive future of gaming industry, the innovative Wii is one of the unique resources that Nintendo possess with the help of which it was able to give powerful competition to the other companies. Nintendo is constantly trying to do “more with less”. The Swot analysis of Nintendo Wii shows its standing in the market along with it also reveals various opportunities that Wii can took advantage of.