The study will then highlight the relationship between Nintendo ” s products, and aim to explain possible reasons behind WI U ;s bad launching, and provide marketing actions to be taken. Finally, a conclusion of the study will be provided, by discussing how consumer behavior can help us better understand issues within home video game companies, such as integration between platforms and exclusive contracting. Nintendo: Innovators in an Oligopoly “The next generation is a place, where the best idea, not the biggest budget will win” – Saturn Twat, President and CEO of Nintendo Co.
Ltd 1. 0 Introduction When Nintendo Co. ,Ltd first saw the light of day at the end of the 19th century’ s Japan, the company quickly grew to be a major player and innovator within the gaming industry. Today, over a century later, Nintendo is still doubtless one of the most important and relevant companies within gaming and technology worldwide, and also listed as one of Japan s most valuable companies. The success began in 1889, when Nintendo-founder Fusilier Yamaha, commenced the production and distribution of handmade wooden game cards called “Handful”.
This brought back the popularity of gaming cards in Japan, and allowed Nintendo to establish a solid company name associated with quality gaming. In the 1970 ‘ s, after some successful decades of selling name cards (combined with a few other failed ventures outside the gaming industry), the game card industry stagnated. Nintendo needed a radical change of focus. This lead in to the 1970 ‘s aiming towards a more technological type of gaming, and the beginning of the actual Nintendo brand that people know of today. 1. 1 Present situation Nintendo today is a flexible company, and highly considerate in terms of technology and consumers.
Technology is in constant change, and with it goes consumer behavior. Innovation and technology play the most critical role on the demand side, making people constantly discover new needs along tit the technological evolution. The home video game console market is a highly suitable platform considering the research on “two-sided markets”. As a vertical market, ruled by a very small number of oligopolies firms, it serves an eminent opportunity to examine issues related to both vertical contracting and bilateral oligopoly.
Additionally, the development of new empirical tools has made data collection from the video game market much easier and more profound, leading to better understanding of consumer demand, smarter product investment and larger degree of appropriate goods pricing. 2. 0 Soot analysis . 1 Strengths 2. 1. 1 Unique features The unique features gave WI U a strategic advantage against its competitors. The primary controller featured an embedded touchstones, supplementing the main gamely on television, allowing the player to switch the game from television to the main controller.
WI IS also came with a video camera with support for high-definition graphics. Moreover, it is compatible with all its predecessor remotes. 2. 1. 2 High brand awareness Nintendo has Very high brand recognition as a result Of their great worldwide successes that have been achieved in the past. Also, high customer connection, brand recall and positive attributes have been achieved due to unforgettable first party game icons such as Super Mario Brows, or Zelda. Both WI, and ultimately WI IS have benefited of Nineteen’s brand awareness. 2. 1. International presence The company had positioned itself through international presence and multiple channels of distribution. The channels of distribution used were retailers, specialty stores and online stores. Their multinational presence provided WI U with the scope of increasing its revenues and reducing its business risks. Thus, having a diversified geographic presence is an advantageous strategy for Nintendo. (Markets_nine) 2. 1. 4 Backwards compatibility unlike its competitors Palpitation 4 and Oxbow One, WI IS has the great advantage of being backwards compatible.
Thus, though it s not possible to play WI IS games on WI, the consumer is able to play old WI software on the WI U. In addition, WI U supports older Nintendo game systems as well trough “Virtual Console” and will also support the old WI Virtual Console controller with all games. Both Palpitation 4 and Oxbow one lack this feature. (WDALYIC, 201 3) WI U Virtual Console supported systems: WI (game discs) Gamble (downloads only) Nintendo 64 Super Nintendo ONES Neo Gee SAGA Master system 2. 1. Price As with the predecessors, WI IS benefited from charging a lower price for their console compared with its main competitors Sony and Microsoft. Sony Palpitation 4 was announced at a price of $399 in the US, and Microsoft Oxbow One at 5499. 99 in the SIS (Sign, 2013). WI U had a starting price of $349. 99. As of September 201 3 the price was cut by $50 to a suggested retail price of $299. 99. (Akin, 2013), 2. 1. 6 Exclusive titles The exclusive titles have always been one of the strongest selling arguments or any Nintendo system.
An example of an exclusive title is the first party games produced by Nintendo that are not released on any other console. These high-profiled titles, among others are heavy bullet points for Nintendo when it comes to attracting customers. (Birch, 201 3) WI LLC exclusives: Bayonet 2 The Wonderful 101 The Legend of Zelda: Wind Weaker HAD The Legend of Zelda WI U (To be announced ) Mario Kart 8 Super Mario AD World WI Fit U 2. 2 Weaknesses 2. 2. 1 Weak sales figure WI IS ‘s sales figures showed a negative impact on Nintendo’ profits for their first quarterly report after the WI IS launch. 0,000 WI U units were sold worldwide for that quarter: 90,000 in Japan, 60,000 in North America and 10,000 in Europe and Australia. 1. 03 million WI LLC games were sold within the same three-month period. (Pitcher, 2013) 2. 2. 2 Dependence on suppliers Producing a video game console often means that the success of the company partially relies in the key components and entertainment services created by third party suppliers. Failing to receive the products from suppliers may increase costs and affect the demand.
Nintendo ‘ s lack of third party support of software may create a disadvantage as compared with its competitors. According to Nintendo president Saturn Twat, their weak third party support is due to the lack of sales of third party software at the launching of WI CA in 2012. “There were so many games released by third party publishers for WI LLC during the launch period, but most of them were converted from other platforms and therefore could not enjoy brisk sales. As a result, some software developers have become pessimistic about WI U. – Saturn Twat” (Curran, 2013) 2. . 3 Child friendly image For targeting the highly skilled gamers segment, the family friendly image could be a disadvantage. Many of the more enthusiastic gamers found the iris party games too child friendly. Moreover, the awareness of Nineteen’s lack of third party support, which confined the variety of games, could have negatively affected this target group towards buying WI U. 2. 2. 4 Loading time After releasing the WI LLC in 201 2, Nintendo received complaints about long loading times when switching between applications within the consoles operating system.
Nintendo, and president Saturn Twat acknowledged the problem and apologized publicly about the unreasonable loading times. He also affirmed to solve the problem by two upcoming updates, one in the spring of 2013 and one in the summer of 2013. East, 2013) 2. 3 Opportunities 2. 3. 1 Growing online gaming market and social networking The demand for online games has increased in the last period, and social networking websites like Faceable is expected to spread the distribution Of video games worldwide.
The overall revenue, from PC’s and video game consoles, is expected to reach 36$billion in 201 7 (Nintendo Marketing). WI LLC has created a distinctive online environment, which includes an online shop, a game download service and a multilayer game and chat services called Universe. This new features came directly integrated with the WI U insoles and allows the consumer to discuss games, share experiences and discover new content with other players from the world. Thus, Nintendo has created a worldwide social network within the console (Nintendo, 2013). . 32 Improved sales due to price cuts and launch of high-profile titles WI IS ‘s previous troubling sales figures has improved remarkably after the price cut they implemented in September 20th, 2013. Nintendo has announced that sales of the WI IS console have increased by more than 200% in September, compared to Augusts’ sales figures, before the price cut. (Leases, 201 3) In edition, the recent releases of high-profiled titles powered by Mario and Link, strengthens the probability of improvements in future sales sign efficiently.
High-profile releases: super Mann AD world – November 22, 201 3 The Legend of Zelda: Wind Weaker HAD – October 4, 201 3 2. 33 Improved cooperation with third party suppliers Some of the skepticism against Nintendo and WI IS is based on Nintendo predilection of supplying first party games, instead of focusing on greater game variety by involving third party software producers. However, president Saturn Twat has acknowledged that Nintendo alone are not able to develop very type Of software to satisfy all consumers.
Also, the company endeavored to strengthen the relationships with third party suppliers when developing the WI U, by providing them with access to hardware at an earlier stage (n nonintervention, 2013). 2. 4 Threats 24. 1 Intense competition Nintendo operates in a highly competitive industry, where its main competitors can be narrowed down to Microsoft (Oxbow) and Sony (Palpitation). Both Microsoft and Sony are engaged in production, distribution and development of hardware and software products.
They are companies well established in the market, with high brand awareness and international residence. Moreover, WI U competes with tablets, such as Pad and Samsung Tab, and smartness as Phone and Samsung Galaxy. More and more people move towards tablets and smartness mainly because of their multitasking features, affordable games and a high number of developers engaged in creating new applications due to their familiar software. Microsoft and Sony are preparing to release their new game consoles at the end of 201 3, and consequently this will have an impact on WI IS sales.
Nintendo president Saturn Twat however, has stated that the launch of Sony s and Microsoft’ s new consoles will benefit Nintendo as well, as it will energize the whole video game industry (Nintendo. Co. JP). 2. 42 Currency fluctuations Nintendo is a company that operates worldwide, and is consequently affected by different currency exchange rates that can either enhance or reduce turnovers. WI U is present in Japan, the U. S. And Europe, and among others it includes currencies like Yen, U. S. Dollar, Euro or British pound.
Among political stability, interest rates and inflation, the most risky factor in currency variation is the debt registered by many countries. Especially in Europe, due to greater risk of financial crisis and fear of them not being able to serve their obligations. 2. 4. 3 Short product lifestyle The gaming software and hardware market is characterized by frequent introduction of either updated or new products, and a short economic lifestyle. Based on analyzing product releases for Nintendo, Microsoft and Sony, the industry of video game consoles has a lifestyle of approximately 6 years.
The lifestyle is also highly affected by competitor product releases. * Release date based on the first region a console was released in. (Chock, 2012 *Edited) 3. 0 Consumer behavior 3. 1 Market segmentation When analyzing WI U ‘s current situation, it is essential to take in account Nineteen’s marketing strategy and how they have defined their segments and target groups. In the case of WI U, it facilitates to first look into the segmentation Of its predecessor, WI, to get a better understanding of WI challenges today and its troubling sales figures. 3. 1. Nintendo previous segmentation strategies Before entering the market of the seventh generation 1 of video game consoles in 2006 with the WI console, Nintendo had a complex task in front of them; selecting the most advantageous marketing strategy. Nintendo ” s previous approach was influenced of “selective specialization”, targeting both he ‘highly skilled gamers and family-friendly segment”, with one core product. However, such strategies can lead to confusion about the product since “family-friendly” and “highly skilled gamers” segment rarely have the same needs.
The launch of WI in 2006, clearly pointed out that focusing on other segments would be Nintendo ” s new strategy. Nintendo abandoned the highly skilled gamers segment, and put all marketing resources on targeting the casual ; and non gamer segment. Further progress of this new marketing structure also brought to the surface other undeserved sub-segments, within the casual and – non-gamer segment. More women, and elderly people, not previously interested in video games, now discovered the fun and benefits that were to gain from playing WI.
Families, in general, quickly adopted this new, less pricey console, allowing the parents and their kids to have fun and play on a mutual playground together. This turned video gaming into a more positive matter from a parenting point of view, and thus, Nintendo had also proved the importance of finding the right segments for their products. 3. 1. 2 Entering the eight generation of video game consoles Before the launch of Nintendo ‘ s latest innovation, WI U, Mr.. Twat, global resident of Nintendo stated that their new product would target not only the casual gamer, but also highly skilled players as well.
This fits well with the strategy of upcoming releases of WI CA titles. Super Mario AD world, WI Sports Club, WI Fit U and Mario&Sonic at the Socio 2014 Olympic Winter Games are all titles that appeal to the casual gamer segment, while games like Bayonet 2, Zombie and Call of Duty: Ghosts are clearly targeting the highly skilled gamer segment. Thus, Nintendo once again will be returning to selective specialization segmentation, aiming to target different segments with one core product. The issue here, in contrast to their targeting viii, is the obvious contradiction between the segments.
Even though WI had different sub-segments, such as elderly, women and family, none of these carried an extreme contradiction towards each other, and thus required only one marketing campaign to be effective. They were all family-friendly; just like the Nintendo brand itself. The needs of casual, family-friendly gamers are though very different from the needs of highly skilled gamers. This can create great confusion around the product and among its consumers if not executed well, which indicates that he marketing strategies have to include different announcements towards each segment. 3. Motivation Firstly, the fact that it is a new gadget, could itself motivate specific consumers to buy a WI U. Technophiles will always feel the need to reduce tension by buying the latest gadgets on the market. A relatively cheap price, compared to Oxbow One and Palpitation 4 strengthens the motive. Furthermore, WI IS is upgraded with an HDTV-output, which most consumers today would consider a necessity since almost all TV ‘ s produced today are HAD-compatible. Also, WI IS comes included with “Davit”, – a TV-watching tool hat allows you to search for shows over Internet, trough video APS and live TV, all in one place. (Anastasia, 201 3) 3. Personality Nintendo has a very strong brand personality. Being one of the biggest names in the video game oligopoly since the 1 980 ‘ s, many consumers attribute the name with certain traits or feelings. In contrast to Microsoft and Sony, whom many consumers would associate with core gaming, many consumers associate Nintendo with more easy played, child – and family friendly games. 3. 5 Consumer attitude WI U inherited most of its attitudes from the Nintendo brand, and its predecessor, WI. This line extension of WI LLC is counting on stimulus generalization in order to transfer the positive attitudes from the brand towards the product.
However, Nintendo has not managed to create strong or unique customer attitudes regarding WI U, due to a marketing strategy that emphasized the capability of the hardware, more than the potentiality of upcoming and available software. This strategy was not very successful in reaching the audience since it did not emphasize high-profiled titles, nor managed to generate emotions. Additionally, due to lack of marketing and ad repetition, both consumers and some retailers have found it hard to extinguish the differences between WI U, and its predecessor WI, which has created much confusion and uncertainty about the product.
To clear out this issue, Nintendo released a chart, comparing the two consoles and detailing the different features of respective console. Nintendo later had to re-release the chart, due to consisting confusion around the product (Child’s, 2013). Among the positive attitudes are the secondary brand associations. The associations that were inherited from its predecessor WI and Nintendo. Other important attitudes is the “fun attitude”, due to its association with the aiming industry and the awareness of WI and Nintendo. The “innovative association”, with the WI U they didn’t just update the hardware, they also developed new features.
Once again they created a new innovative way of playing. Furthermore, the associations made with family and beginner friendly games are important attitudes, shaped thru multilayer games like party U, Nintendo Land, and by the easy way the new control are handled. 3. 6 Changing brand beliefs The value expressive function is characterizing this business. Consumers within the gaming industry in general have positive attitudes towards the latest technologies and games. However, first party games are rarely enough for these consumers, who Often demand a high variety Of games.
When failing to reach customer expectations, consumers will prefer consoles of their competitors due to greater game variety. Nintendo has fully acknowledged the need for third-party game support in terms of game variety, and high-profiled titles, both first and third party, are expected to be launched at the end of 2013 and beginning of 2014. The upcoming games aim to boost WI U sales and its awareness among the other target groups, and attain the positive attitudes that come along with high-profiled games, new genealogy and high game variety. . 0 Culture and social influence Nintendo is a multinational company, which means that cultural and social influences have a major impact on consumer decisions due to highly different disparities among countries. Within cultures different stereotypes or subgroups exists based on nationality, geographic location, social status, values and norms. For marketers, the role of culture is absolutely central in regards of customer decision-making, and cultural awareness is essential in order to attain a better understanding of customer behavior.
Despite the fact hat new information communication systems and the steadily increasing globalization constantly makes the world a “smaller place”, people with different cultural backgrounds continue to differ heavily in terms of habits, taste, values and norms. The study of culture is a vast subject and for the purpose of this study the differences between Japanese, U. S and European cultures wore broadly analyses using social psychologist Egger Hypotheses cultural dimensions theory. In Europe the analyses showed comprehensive differences between countries, especially between Eastern Europeans and North and West
Europeans; thus a general analysis was done. 4. 1 Power distance Japan is described as a middle power distance culture, where the hierarchy is clearly defined in companies, and families and people act accordingly. In the CSS however, even with a similar score as Japan, people consider themselves equal in the chain of command and families. The opinions of consumers are important, and companies tend to rely on customer opinions when decisions are to be made. Whereas in Europe a distinction between supervisor and subordinate is being made, they are considered as equals. 4. 2 Uncertainty avoidance
Japan scores high on the uncertainty avoidance dimension. Along the years, mainly due to natural disasters, Japan has been forced to learn how to react in uncertain situations. Thus, they have created rigorous norms that are followed not only for sudden natural disasters, but also in the entire economic environment. Accordingly, people in Japan may not be confident in new products that are not providing absolute facts and detailed information, and before they decide to try something new, all possible risk factors should preferably be annihilated.