Nintendo Company Strategies - Case Study Example

Nintendo case study

Definition of the context

• Industry: Nintendo Co., Ltd. Is in the video games industry, interactive entertainment and consumer electronics industry
• Category: video games
• Type of Company: private company
• Founded: 1899
• Currently active in: Nintendo serves the whole world courtesy of the following international headquarters and distributors: Nintendo Co., Ltd (NCL), Nintendo of America (NOA), Nintendo of Europe (NOE), and Nintendo Australia (NAL) (Ghoshal et al. 618).
• Headquarters: Kyoto, Japan
• Competitors: its main competitors include: Microsoft Corporation, Sony Corporation, Apple, TV shows, books and magazines. An example is Microsoft which introduced the Kinect, an attachment to Xbox 360 that can do the same work as the Wii

• Current diversifications:
• Nintendo’s strategy involves a mixture of software, hardware and innovation. For long periods of time, it has been proposed to Nintendo to shift its games on to smart devices so as to generate more short-term revenues. However, the company has continuously decided to focus on its core strategies of combining software and hardware and this has maintained its value proposition in terms of long term growth (Ghoshal et al. 619).
• Nintendo focuses on partnerships with key figures not only in the same industry but also from other related industries. For instance, Nintendo partnered with DeNA and helped in the development of platinum games such as the Star Fox Zero and the Project Guard.
• Consistent innovations-the Wii U video game was as a result of the company’s innovative motion.
• The company puts software development at the top of its agenda as they considered hardware development as less important.
• The company was able to consolidate its software development with partnerships with other Japanese software developers such as Bandai, Capcom, Hudson, Konomi and Taito.

• Revenue generation
• Sale of video games

History of Nintendo

Nintendo was founded in 1889 and is considered as the oldest video-game company in the world. The company was producing card-games up to the 1960s when it started it engaged in various businesses that led to the adoption of the video game industry which has left a mark in the company. The first involvement in the industry was when Nintendo started importing the Magnavox odyssey, the first ever commercially sold video game console. Nintendo released its own first console in 1977, known as the TV Colour Game (Ghoshal et al. 618).

The company made its biggest impression in 1979 when it released a new game known as the ‘Radarscope’ which was a huge success in Japan, though failed in the U.S. This game was later redesigned to the ‘Donkey Kong’ in 1980 with the company becoming Japan’s leading game developer. In 1984, the company made the NS System as well as the Famicom system which was later renamed as the Nintendo Entertainment System (NES). In essence, Nintendo has launched many video games in the market circulated across the world. As at September 2015, Nintendo had sold more than 722.22 million hardware units.

Key issues

Despite the success of Nintendo in the video game industry, the company has passed through a lot of issues. At first the company could only make inconsistent profits with some financial years making losses. This was attributed to its initial conservative style of management and incremental innovation policy. Initially the company was a family managed company and this changed in 2002 when Satoru Iwata took over as the first ever non-family president of the company. Iwata was able to turn around the fortunes of the company with the launch of Wii in 2006 (Ghoshal et al. 626).

Nintendo faces a challenge on how they can continuously maintain their customer base as well as expanding it and defending its market from the rest of the companies in the industry. Companies such as Microsoft are catching up with the production of video games. For instance, Microsoft introduced the Kinect, an attachment to Xbox 360 that can do the same work as the Wii and even people prefer it because it is an interactive game console that has wonderful graphics.

For all its wonderful work and success in this field, Nintendo has always had a problem when detecting new trends in the gaming industry as well as embracing them immediately. This is big issue that has affected the legendary video game company.

For long periods of time, Nintendo has been shying away from online gaming since the launch of Gamecube in 2001. Online gaming has been popular in rivals such as the Sony (SNE) PlayStation and the Microsoft (MSFT) Xbox.

Concepts applied

• Kurts Lewin’s 3 Step model of change

Nintendo has applied the following three steps in ensuring that it succeeds in the video game industry through undergoing a process of change (Ghoshal et al. 627). When Satoru Iwata took power as the president of Nintendo in 2001, he created the perception that a change was needed from the previous administration and he came up with certain levels of behaviors that each member of the company was supposed to follow.

Unfreezing

Every new administration at Nintendo come up with new changes and since that it is imminent for people to resist change, the first thing that comes before a change is instilled is what can be reoffered to as unfreezing. Creating awareness of change has been key for the company before any given change. Effective communication has been key as well.

Changing

At this level, the real change is implemented and as Lewin puts it, the change moves from the theoretical part of it and becomes real. It is the hardest step to make and causes a lot of anxiety, but this has never been an issue at Nintendo whereby it has overcome and maintained its culture of change.

Refreezing

In this stage, the change is reinforced, solidified and applied for the success of the company. For instance, when Satoru Iwata came into power in 2001, he was able to institute change by focusing on novel and entertainment games and this was a big success in widening the company’s audience.

• Organizational change

Nintendo has undergone a lot of changes since its inception and most of these changes have been successful. The process of change should always be strategic and should be based upon sense-making and sense-giving. Sense-making means the construction and the reconstruction of all parties associated with Nintendo in developing frameworks that help in understanding any strategic change within the organization (Ghoshal et al. 622). On the other hand, sense giving means that the management team at Nintendo has been competent in influencing sense-making as well as influencing others in the whole process of organizational change.

Kotter’s 8 steps to transform your organization

This strategy follows the following 8 steps in ensuring that an organization maintains its competitive edge in the market. These steps are as follows:

• Increase urgency
• Build coalitions
• Vision
• Communication
• Enable action
• Quick wins
• Don’t let up
• Make it stick

Nintendo follows closely the Kotter’s 8 steps and this has transformed the company and maintained its competitive edge in the market. The first thing is that when the top management senses an emergence, say, for instance possibility of losing customers to competition, they tend to increase urgency and this has ensured survival of the company. Secondly, in the process of change, each department is restructured with the intentions of minimizing costs as well as redefining job roles and responsibilities. Urgent and effective decision making is crucial in line with Kotter’s third step of creating vision for the company. The president and the top management then communicates the process of change as well as explaining clearly the reasons behind the change. The next step is that Nintendo provides the necessary training and appraisals so as to help motivate employees and increase their level of commitment. The next step is checking whether the change is in line with the goals of the company. The seventh step involves implementing the change in line with expansion plans so as to increase the company’s competitiveness. Lastly, Nintendo ensures that all changes are institutionalized.

• The Crescendo Model

According to the crescendo model, Nintendo creates a team of employees who are committed to the company and believe in retaining the best talents and expertise (Ghoshal et al. 623). Employee motivation is key for the retention of the best team of workers in any organization. In the normal market, companies loose employees and have to replace them with new member very other time. However, the crescendo model works 4 concepts so as to retain the best team of employees starting g from the top management to the subordinates. These concepts are:

• Galvanize-creating a top team that is well motivated and is ready to renew their services to the company
• Simplify-Nintendo focuses on simplifying all its operations and ensuring that anything complex is well articulated to everyone
• Build-in this area, Nintendo focuses on developing new capabilities through trainings workshops
• Leverage-for long periods of time, Nintendo has been able to maintain momentum in its operations as well as stretching their advantage they hold in the video games industry.
• Rhythm mechanism/the rhythm of change

Nintendo believes that any change in the organization can affect its productivity either positively or negatively. The intensity and frequency of the change is important and it will help in determining the rhythm of the company. Nintendo holds the culture that the length of the change periods as well as the stability periods determine the success of the change. Regularly changing companies usually have better long term performances. This aspect has made Nintendo to continuously remain competitive in the market. Rhythm helps in reducing stability risks and loss of change routines.

• The six basic parts of the organization

Nintendo follows these 6 basic parts of an organization aimed at creating a strong and effective organization that works to serve its customers and help achieve and exceed long term profitability. These are ideology, middle line, support staff, operating core, strategic apex, and techno-structure.

• Ideology- this is the invisible part of Nintendo that keeps it together as an organization including the people’s beliefs and values.
• Middle line-Nintendo has a very strong middle management tasked with the responsibility of supervising the staff members.
• Support staff-anything that Nintendo outsources tries to keep and maintain for the benefit of the organization.
• Operating core-the main Nintendo works are undertaken within the organization
• Strategic apex-Nintendo’s top management is always competent and makes key strategic decisions for the company.
• Techno-structure- the processes within the company are analyzed within Nintendo.
• Strategic partnerships

Nintendo focuses much on partnering with the mist famous companies both in the same field and outside the industry and this has enabled the company to stay competitive in the market. For example, Nintendo partnered with DeNA and helped in the development of platinum games such as the Star Fox Zero and the Project Guard.

• Key coordinating mechanisms

Nintendo follows the following key coordinating mechanisms within its operations and has maintained the competitiveness of the company. These mechanisms include mutual adjustment, direct supervision, standardization of both work and outputs, standardization of norms, and standardization of skills.

Alternative courses of action

Nintendo is in an industry that has attracted a lot of competition especially from Microsoft and Sony corporations and for the company to still maintain or increase its competitive edge in the industry, it has to consider applying various courses of action.

• Drop the hardware business completely- the company’s strength has never been in the area of hardware development. Nintendo makes very reliable consoles and are considered as the main source of console games more than any other company in the industry, except maybe Sega Company. This clearly indicates that its main strength has been in the field of video games and they make wonderful games. In fact, research shows that Nintendo is the manufacturer of the best games in the world. At the moment, video games make the biggest assets for the company and everyone desires their games, but not their hardware. Yes, they make some components of hardware but people consider them as costly and inconvenient. Nintendo can decide to completely drop the section of hardware development and put all its focus in the games field.
• Replacing the handheld markets with smartphones and tablets- another alternative course of action that Nintendo can adopt is the majoring fully in manufacturing games that are played in smartphones and tablets rather than in the normal handheld devices. The company is considered as having a monopoly in the handheld market. However, due to the increased technological advancements, they can consider changing to smartphones and tablets which are commonly used nowadays.
• Migrate to other platforms- currently, Nintendo has 3DS and Wii U in the market. The company can consider dropping this and move to other platforms by the end of 2016 after they have done well to their current customers.

Alternatives

Advantages

Cons

Weight

Drop hardware business

• Nintendo is excellent in video games
• No wasting of time as focus will be in the field of games

• May be risky dropping hardware development completely
• May impact negatively to the brand name

4/5

Focus on the production of games played via smartphones and tablets

• Wide coverage as almost all youth uses smartphones
• High possibility of success

• Market is saturated
• There is a lot of competition

3.5/5

Migrate to other platforms

• The company has had successful migration to various new platforms
• Possibility of success

• Market is already saturated
• Risky

3/5

Course of action

From the table, it is very clear that the option of dropping hardware business got the highest score, followed closely by adopting smartphones and tablets in games development and in third came the option of migrating to other platforms.

Action plan

Although it is imminent that Nintendo will soon adopt new platforms after exhausting the 3DS and the Wii U, it is recommended that the company may first drop the business of software development before embarking on the other two alternatives. However, this will depend on the urgency of the company, but it is always good to start with the option which obtained the highest score as seen in the table.