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Submited By:

Saurabh Singh Tomar 10DCP-033

IMT GHAZIABAD

Nintendo Wii

Project Report

Submitted to :

Dr. Rajat Gera

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1. Market and Competitive Analysis ................................................................................................... 3

Product Market .................................................................................................................................. 3

Market Analysis ¡V 3 Cs ........................................................................................................................ 3

Market Evolution and Long Term Trends ........................................................................................... 4

Environmental Factors affecting the product ..................................................................................... 5

Structural Analysis of product Category ............................................................................................. 5

Market Segmentation ......................................................................................................................... 5

Target Market .................................................................................................................................... 7

Brand Positioning ............................................................................................................................... 7

Competitor¡¦s Strength and Weakness ................................................................................................ 7

Evolving Competition .......................................................................................................................... 9

Marketing Strategies of Competitors for Competitive advantage ..................................................... 9

Effect of Technology on Industry ...................................................................................................... 10

2. Objectives..................................................................................................................................... 10

Market Segmentation and Target Market ........................................................................................ 10

Expected Market Share and Growth ................................................................................................. 11

Primary and Secondary Objectives of the Company ........................................................................ 12

3. Strategy ........................................................................................................................................ 12

Product/ Brand Strategy ................................................................................................................... 12

Communication and Promotion Strategy ......................................................................................... 13

Distribution Policy ............................................................................................................................. 14

4. Conclusion .......................................................................................................................................... 14

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1. Market and Competitive Analysis

Product Market

The product market consists of Video Game Console (Hardware Part). The global market is worth

$58 Billion in 2010. There are only three major players in the market – Nintendo, Sony and Microsoft.

The global games console market consists of the total revenues generated by Nintendo, Microsoft and

Sony through the sale of their console platforms, including any handheld systems. Market values have

been calculated using annual average retail prices for each individual market.

Market Analysis

Porter’s 5 Forces:

Threat of new entrants:

The console gaming industry, is a market in which, only very technologically advanced and well-funded

companies can enter. Loyal customer bases and established subcultures have made it so new entrants

would have to provide something completely revolutionary to get customers to switch. Microsoft was the

last big company to join the competition and they struggled for a long time, despite being a well-known

technology giant.

Competitor rivalry:

Although this market has few leaders, the competition is fierce. Nintendo squares off with industry giants

Sony (PlayStation) and Microsoft (Xbox). Each of the competitors is well funded and has the most

advanced technological innovations at their fingertips. For example, Sony nearly went bankrupt trying

to beat out the competitors through innovation, and lost close to $700 million (on the PlayStation 3) in the

first six months alone. Fortunately for Sony, they are a multi-billion dollar company and have cash

reserves that Nintendo can only dream of.

Threat of substitute products:

In such a highly competitive market, there are of course strong substitutes. Each system started with

their niche, but in order to grow market-share each has added features to eliminate the qualities that have

enabled competitors to differentiate. As they become more similar, the choice between them becomes

harder and thus the threat of substitutes is high. Nintendo being the most basic and least powerful of

the bunch means they have to continuously price themselves well below the competitors to help eliminate

the ease of substitution.

Bargaining power of suppliers:

Nintendo, like other consoles, does not make all of their own parts. Instead, they contract with experts in

the field of batteries, processors, and video cards. They are using fancy sounding products such as

“custom-made Hollywood CPU (IMB) and Broadway graphics processor (ATI),"

but actually the specifications are very unimpressive. Since these are pretty standard items compared

withPS3‟s revolutionary and custom new parts, Nintendo should have substantial bargaining power. Since

Nintendo has historically used the same manufacturers in other consoles, they should have solid

reputations with their supplier.

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Bargaining power of customers:

The gaming industry is one of luxury and in a bad economy these goods are at the mercy of the

customers. Without these customers the items would be sitting in shelves unsold and filling warehouses

creating substantial debt for their manufacturers. The customers have the power, the money, and the

marketing buzz to make or break a company rather quickly. Companies have to be careful how they price

themselves and be sure to always keep the customer in mind; there is very little room for error.

Market Evolution and Long Term Trends

Global Industry – Major Markets

Global Video Game Market

PwC estimated that the videogame subsection of the global entertainment and media market would be

the second fastest growing segment through 2014 (trailing only Internet advertising wired and

mobile).

Michael D. Gallagher, president and CEO of the Entertainment Software Association: December

(„09) sales broke all industry records and underscores the incredible value consumers find in

computer and video games even in a down economy.

48%

20%

20%

12%

Major Markets

USA Europe Japan Rest of the World

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Video Game Console Market: Steady Growth Through 2012

Market has experienced dramatic growth since 2007

Web-based video game advertising experiencing the most rapid expansion, with a CAGR of 18.5%

E-marketer predicts web-based market size to be $478M by 2012

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Video Game Console Market: Steady Growth Through 2012

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Environmental Factors affecting the product

Political

Factors such as taxation policies, foreign trade regulations and social welfare policies influence the video

game industry. Video games have a tendency to play with the emotions of people which in turn can

threaten peace and law, a country being multicultural. Therefore Government has the authority to control

the contents of the video game frames.

Economic:

Places such as U.S. and Japan are largely dominated by video game business. Therefore contributing

towards the GDP of their countries. Interest rates have not much impact on the video game business as

they manufacture their own units. The disposable income of the consumer in the video game industry has

an effect on their buying behavior. For example people who fall under low income range may not afford

to buy a video game on high price. Nintendo‟s low manufacturing cost was also one of the reasons for it

to sell its games at a nominal price, therefore increasing its sales.

Social:

The social factors that influence the video game industry are population demographics, income

distribution, lifestyle changes, social mobility, attributes to work, consumerism, level of education and

consumer behavior. Nintendo‟s action to open the World of Nintendo showrooms was to attract and

influence customers and show interest towards fulfilling the customers‟ needs. Also, games have an

influence to the culture of people; bring aggression n children, etc. all of which has an impact on the

industry.

Technological:

The role of technology is vital in this industry as it focuses on technological efforts for competitive

advantage. Every new development uses new technology. Though there are restricted innovations in the

gaming industry, the speed of technological transfer is very high. Nintendo‟s role from playing cards to

toys to video games and then with each console introduced, included many technological changes.

Technological up gradation increased hardware costs and discouraged innovation. The online capability

of Nintendo Wii was a major change in the technology of the video game industry.

Environment:

The video game industry uses a lot of plastic resources. Playing games on television or computers does

consume a lot of power. Nintendo Therefore see to it that their games utilize low power. On the other

hand protecting the environment and practicing a “green” lifestyle is a value many of today‟s parents are

trying to teach their children. Nintendo facilitates in that effort through the creation of “Super Mario

Sunshine” and “Chibi-Robo:Park Patrol”, which challenges players to improve the environment around

them.

Legal:

The legal issues faced by the video game industry include trademarks, copyrights, licensing, online

ownership, revenue recognition and demands of intellectual property. The other issues that can be

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considered are product and health safety. It has become an accepted practice for the console

manufacturers to lose money on the hardware and to recover the loss by charging high licensing fees to

game publisher and developers.

Market Segmentation

When releasing the Wii in 2006, Nintendo clearly chose to differentiate itself from its competitors – target

a very different, underserved, segment of the gaming market .

• Geographic

• Demographic:

• Psychographic

• Behavioural:

2006: “Our focus is interactive game play, a whole new way to play, that puts fun back into this

business. It allows everybody to pick up and play and isn't focused on the core gamer” –

President, Nintendo US

Target Market

Behavioral Targeting

Benefits sought – what do people want out of the product? A fun, simple, personal, quick, social

entertainment experience [Different than current video games – often complicated, require significant

investment of time, not necessarily personalised]

Usage rate – how often will the target use the product? Not that often. A Nielsen study showed that Wii

owners used their consoles significantly less than Xbox 360 or PS3. Wii games targeting those wanting

fun in quick manner, easy to pick up and learn, and not require serious time investment

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User status – Non-user/first-time user/occasional user – Wii was specifically designed to expand the

market. Nintendo wanted to go for a previously underserved target population, and that meant making

their games appealing to the first-time user

Demographic Targeting

As part of their market expansionary strategy, Nintendo specifically targeted those demographics that

weren‟t being served by contemporary video game offerings

Gender: Women

Age: Outside the traditional age range of 12-35

Family life cycle: Married with children

Psychographic targeting

Lifestyle / Personality: Nintendo specifically targeted active, social people, looking to do things with

friends/family. Much less emphasis on deep single-player game play / intense 3D graphics.

Brand Positioning

Ways that Nintendo positioned themselves to target their previously-selected target market segments:

• “Wii would like to play” Campaign: Showcased families, children, women gaming together

• Nintendo ensured a selection of simple, time-uninventive, social games (each Wii comes with Wii

Sports – pick up and play) [Will look at that more in a second]

• Low initial financial investment required (e.g. low price)

Perceptual Map

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Competitors

The two main rivals to the Nintendo Wii is Sony's Playstation 3 and Microsoft's Xbox360.Without this

competition, Nintendo may not be to the point that it is now. It could rest on it laurels and not supply its

customers with newest and greatest ideas.

Competitor’s Strength and Weakness

We will take the strengths and weaknesses of the following companies and compare them with those of

the company of our consideration Nintendo Wii

Evolving Competition

PS3 Move is showing more flexibility, trying to differentiate itself in the market – targeting both the

casual and the hardcore, and especially families that have both

Xbox360 Kinect are going head-to-head for the casual gamers – fun, simple, quick, active, social games

for everyone

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Marketing Strategies of Competitors for Competitive advantage

Sony PS3 Move :

Sony is targeting the more active side of the gaming demographic (want more of an experience than

just using a button-based controller), but not necessarily social people

Sony‟s trying to provide a platform for both casual & serious motion gaming

Sony‟s trying to appeal to both light users and heavy users

Again, Sony‟s trying for broad-based appeal – from the whole family of non-gamers to the hardcore

PS Move is differentiating itself in the motion gaming market – users who are interested in motion

gaming, but want more serious games than “Wii Sports” or “Kinectimals”

Part of PS3‟s recent “it only does everything” campaign – targeting both hardcore gamers and casual

ones; likely families that include both

Xbox360 Kinect :

Largely Same as WiiBenefits sought – what do people want out of the product? Microsoft‟s trying

to provide its own fun, simple, personal, quick, social entertainment experience

Microsoft wants this product to appeal to those wanting fun in quick manner, easy to pick up and

learn, and not require serious time investment

Non-user/first-time user/occasional user/Wii user – Microsoft wants to use the same expansionary

strategy that the Wii did.

Effect of Technology on Industry

Research and development of new console technology is the frontline in winning over potential

buyers. –Consoles that can support superior games with outstanding graphics capabilities traditionally

win consumers–Expensive R&D, short PLC INDUSTRY

Marketing Objectives

Creating new segment by launching a disruptive technology product.

Market Segmentation and Target Market

Blue Ocean strategy/Disruptive technology:

After realizing its past mistake when aiming for a younger audience, Nintendo set out to remedy this: the

appeal of the Wii console goes, as a matter of fact, far beyond the “regular” target age groups and enters a

whole new dimension. Nintendo has started tapping into the “casual gamers” category; reaching far

beyond the “hard-core gamers” which the PS3 and Xbox 360 target directly. Nintendo‟s mission seems to

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be “to encourage people around the world to play video games regardless of their age, gender or cultural

background”, capturing young and old alike.

According to Blue Ocean Strategy theory, there are three groups of noncustomers that any company can

reach out to: (1). “soon-to-be” noncustomers who are on the edge of the market, waiting to jump ship, (2).

“refusing” who consciously choose against the market and (3). “Unexplored” noncustomers, who are

sitting in distant markets.

The Wii offers the first tier a leap of value that attracts them (casual gamers), and, while the second tier

customers seem mostly unaffected, it is the thirds tier that seems to have been readily attracted by the Wii.

The Wii has even been praised for use as means of recovery as physical therapy for patients, being

prescribed by doctors to regain strength and help with rehabilitation of certain injuries.

Targeting

Wii should be targeting the same consumer base as discussed in topic number 7 of part one with looking

to penetrate the serious gamers segment too.

Expected Market Share and Growth

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Looking at these charts we can see that Wii is still the market leader but it‟s global saes as well as market

share is going down year on year. This is also due to new product introduction by Sony 360 Move and

Xbox360 Kinect. To tackle the competition and to maintain the market leader position Nintendo should

bring the new product Wii2, which should have the same gaming experience like Wii1 but come with

superior graphics and processor so that Wii2 can make inroads into serious gamers segment too.

Primary and Secondary Objectives of the Company

1) Primary objective of the company should be to regain its market share.

2) As all major markets are on the verge of saturation or are already saturated, like USA.

Wii2 should look to target the developing markets like India and China.

To maintain the competitive advantage created by the Wii console, Nintendo must

consider many possible courses of action to find new competitive advantages. One

way to compete is to broaden its video game genres beyond simple, family-friendly

games. Games for the PlayStation and Xbox consoles often focus on intricate fantasy

role-playing games (RPGs) for mature audiences. Although Nintendo has some RPGs,

notably The Legend of Zelda series its current focus is on puzzle and exercise games.

If Nintendo were to introduce a more varied selection of video game genres to its

software collection, the company would be in a better position to pull customers from

Sony and Microsoft. However, this could risk damaging Nintendo‟s brand, as it would

be challenging to move away from the family-friendly image without the possibility

of backlash.

A second course of action for Nintendo is to continue developing innovative game

technology. With the insight of Satoru Iwata and game designer Shigeru Miyamoto,

Nintendo should continue looking to the future of video gaming. A recent article by

BBC News discusses Nintendo‟s recent introduction in Japan of the 3DS, a hand-held

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console that allows users to play games in three-dimension (Buerk, 2011). The article

points out that Nintendo is a leader in handheld consoles, and this new console

definitely helps the company maintain its competitive industry in that field. Nintendo

could work on developing a similar 3D capability for the Wii, to further revolutionize

the gaming experience.

And third strategy will to target the untapped markets like India and china where there

is a large consumer base and Wii has the proven expertise of tapping the non gamers

market successfully.

Strategy

Product and Branding strategy:

•Brand Equity Associated with Nintendo

•Universal Brand Name

–The name Wii is simple and can be easily remembered by people of different languages-the name also

sounds like “we” which is a core representation of their product appeal

•Free 90-day warranty Extension

Features –Console with built in Wi-Fi capability

–Motion sensor bar

–Wii wireless remote controls

–speaker, rumble feature and expansion port

–Free game included with purchase of console

•Wii Sports

Recommendations:

To improve graphics and processor.

Should promote Wii as the symbol of victory.

Communication and Promotion Strategy

Communication •Entertainment for All

–A new and innovative interactive gaming system for the whole family

•Advertising Slogans:

–"Wii would like to play"

–"Experience a new way to play.“

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Promotion Nintendo should consider expanding its reach to social networking and mobile

devices. Mike Snider, USA Today, recently wrote about the popularity of games for Facebook and

smartphones. According to Snider, Facebook game developer Zynga has increased its value to $9.3

billion and “more than one-third of smartphone owners play games” (Snider, 2011). Snider explains,

“mobile games do not seem to be cannibalizing traditional games” (Snider, 2011). Nintendo should

consider tapping into this industry and designing simple, puzzle-type games for Facebook and mobile

devices. This would align with the company‟s current focus on simple games for non-gamers and may

open the brand to a new market, given the popularity of smartphones. The company could even develop

capabilities to allow users to play social networking games on the Wii console.

Distribution Policy

Nintendo is not just an American based system. However, they do have two distribution centers

located in North America: one in Redmond, Washington and the other in Atlanta, Georgia.

Nintendo has distribution centers around the world. Each center distributes their regions version

of Nintendo‟s systems or games. Retailers get their inventory from Nintendo, no middlemen are

involved. This is because Nintendo advertises the MSRP of $249.99 and sells to businesses at

around $241.00. Minimal profit is made with the sale of the Wii through a retailer. All the profit

comes from selling games and accessories.

Conclusion: To conclude, Nintendo must continue pressing forward with innovative technology and game concepts.

The company faces a great deal of competition, but also has many options to help maintain its current

competitive advantage. Careful consideration of the company‟s current strategy, and the environment in

which it operates, will lead Nintendo toward an effective strategy to maintain competitive advantage and

ensure success.