Nintendo came into existence in 1889 in Kyoto, Japan. The company is basically a manufacturer of games and toys. It started with producing handmade paying cards, and then ventured into toys and games after World War II. In 1970, it shifted from traditional toys to electronic entertainment products. The company began designing home video gaming consoles and arcade games for arcade centres, shopping malls, and taverns. When computer market emerged in 1983, most console manufacturers did not survive the business and withdrew from the market either through bankruptcy or by diverting their attention to their other product lines.
Despite this decline in home video gaming market, Nintendo still pursued the home video gaming console and made its own Nintendo Entertainment System (NES).
The company also changed the video games from the usual structure of violence to games that have themes of “good and evil, honour and disgrace, beauty and horror.” The company has experienced several challenges especially during the rise of the home computer market.
Nintendo was slow to tap the opportunity of home computer games until such time in 1995 that Sony introduced PlayStation console, then followed by Microsoft’s Xbox. Since Nintendo could not topple Sony and Microsoft within the market of core gamers, it decided to expand its target market to non-core gamers. It started to develop new uses for handheld console DS (e.g. DS is used in Japan to teach English through special character recognition software). Wii was also launched later in 2006, and became a hit due to its innovative feature of motion-sensing controller which is also a multifunctional device.
As the product is becoming popular, Nintendo cannot cope up with the demand of supply as the holiday moves in.
There is no doubt that home video and computer games are continuously popular in this era of technology. From 1970, the market shifted from traditional toys to electronic entertainment products. The rise of home computer market in 1983 contributed to the growth of home video and computer games. The manufacturers of these video and computer game hardware are not only targeting the traditional 9 to 35 years old males, but rather expanding to non-traditional age brackets of 40’s, 50’s and even senior citizens.
According to Satoru Iwata, president and CEO of Nintendo, games should be innovative, intuitive and inviting. In other words, in order for consumers to always be enthusiastic to play, the game should be easy to learn but difficult to master. This will maintain the interest of the gamers to play (Washington Post, June 21, 1987). This is the reason why Nintendo, Sony, Microsoft and other game console manufacturers are always in pursuit to innovate their products. With the continued enthusiasm of consumers to play video and computer games all over the world especially in America, Europe and Japan, the market for these products is huge with millions of units sold and billions of income generated annually. Also, the time of the year when sales is at its peak is during the holiday season.
Since Nintendo cannot compete with the faster processor and better graphics of the competitors (Sony and Microsoft), it decided to expand its target segments.
From the 2003 low market share of Nintendo at 16% against Sony and Microsoft, Nintendo rose to top by end of May 2007 in terms of sales of video game hardware. Wii also showed to be the leader compared to the top products of Sony (PS2) and Microsoft (Xbox 360). 2003 Market Share (“All platform” category)
Market Share (based on to-date sales of video game hardware as of May 2007; all platform category)
Market share comparison among the top product for each company (based on to-date sales of video game hardware as of May 2007)
Company| Top product| Market Share|
Nintendo| Wii| 43%|
Sony| PS2| 31%|
Microsoft| Xbox 360| 26%|
As Wii’s market share becoming strongest compared to PS2 and Xbox 360, competitors are responding by lowering their prices; emphasizing value added features of their consoles (e.g. better graphics), and launching of new games for casual gamers (e.g. “Scene It?” by Microsoft and “Echochrome” by Sony).
* Pricing War by competitors to shift consumers towards them
* Competitors reaction by developing more products towards casual gamers to counter
Give limited discounts earlier to encourage consumers to buy ahead of the holiday season
Recommendation is to follow alternative 2 to manage possible supply shortages. Ignoring the possible issue of stock-out during the holiday season will mean a huge loss to the company when consumers decide to shift to competitors because of the long wait before they can purchase Wii.