Assessment Of Nintendo’s Business Level And Corporate Strategy

Internal and external business environment

For a business organisation to develop strategies and policies to develop the company and to achieve the objectives of the business have to keep in mind several factors such as competition in the market, the market scenario, the resource and capability of the company etc. These factors can be divided in two categories: Internal and external business environment (Prajogo 2016). The internal business environment factors are elements which are under the direct control of the management of the company, the external elements are not. In order to develop the business and grow, the management has to seek for strategies which ensure alignment in between the internal capabilities with the external opportunities of the company. Furthermore, it also helps in dealing with the weakness in the company and the threats in the industry as well. This report focuses on the case study of Nintendo; the internal and external factors will be analyzed with the help of management theories to reach a conclusion.

Established in 1889, Nintendo Co. Ltd is a video game and consumer electronics company, which is based in Kyoto, Japan. It is a multinational organisation which has made its mark in the video game market. Nintendo is ranked as one of the world’s largest video game companies (Nintendo.com, 2018).  Some of the most popular games that have been developed by the company are: Mario, Pokemon, The legend of Zeida etc. Over the years of operation the company has gathered reputation among the stakeholders. The revenue of the company in financial year 2016-2017 was 915 million US dollar on the other hand this revenue has increased on the last financial year to around 1.32 billion U.S. dollars (as referred in Appendix 1). The company is a multinational organisation and the largest market of sales for Nintendo is North America and then Japan (Nintendo.com, 2018).  

The resource and capabilities of the company shall be discussed with the help of three elements: the stock of Assets or resource based analysis, generic value chain analysis and the value proposition of the company. The internal analysis will help in determining the business strategy of the company

It can be analyzed from the VRIO framework that has been analyzed in the appendix 5, that the company’s sustainable competitive advantage lies in the software and intangible assets that the company has (Schaltegger et al. 2016). Competitive advantage is the strategy that the company employees in order to achieve an edge over the other competitors. Sustainable competitive advantage is the strategy of the company that allows the organisation to remain in the market leadership position (Fleisher and Bensoussan 2015).

Resources and capabilities of Nintendo

According to the Porter’s value chain model a company has two sets of activities that lead the organisation towards profit: primary and secondary.

Some of the primary activities of Nintendo are:

Inbound logistics: The company manufactures a number of products as well as invests in the development of software as well. Nintendo uses the framework of quality control in order to provide their customers with the best possible products and services.

Operations: The operations of the company ranges from production, research, administration, finance, distribution, export and import etc.  The employees of the company are the most important aspect in this segment.

Outbound logistics: The company used the distribution channels to export the products in the countries of distribution. America is the largest consumer of the company (Statista.com 2018). The Distributors of Nintendo work closely with the administration in order to ensure distribution.
Marketing and sales: this is a function of the business by which the company connects with the customer and develops a valuable relationship with them. The company invests significant amount in marketing strategies. The net sales valued to 4,366 million US Dollar in the financial year 2016-2017 (refer to Appendix 2), however with the development of the software and some of the features the company has been recorded to sell 15.05 million units of the Nintendo Switch in the fiscal year 2018.

Service: the company has support and service department as well that serves the people seven days a week (Nintendo.com/consumer, 2018). On the other hand there are also a number of service centers all over the world where the products are available. Furthermore the company also has a number of information on their website which can help the customers with their issue on a basic level.

Secondary Activities that support the primary activities are: human resource, firm infrastructure, procurement, technology.  The company uses these elements in order to efficiently strategies according to the above resources that has been analyzed to maintain the competitive advantage (Liebich 2014).

In 2018, the sales and the revenue of the company as seen in the Appendix 1 and 2 have improved due to the sale of the new Nintendo Switch. The company has used the strategy of differentiation focus in order to develop the product which is targeted to a wider market. The design of Nintendo Switch is aimed at a wide demographic of video game players through the multiple modes of use. On the other hand games like The Legend of Zelda: Breath of the Wild, Mario Kart 8 Deluxe, and Super Mario Odyssey etc popularized the console.

Value chain analysis of Nintendo

Political: Nintendo has to follow a number of rules and regulations based on the country of operation. There are a number of aspects that the company has to keep in mind before taking any strategic decision like stability in the political scenario, taxation, labour and employment, safety regulations, foreign trade rules etc. As the company is based in Japan the company has to ensure the international relation with the countries of operation and distributions are healthy. In 2017-2018 fiscal years North America has been the largest consumer of Nintendo (Nintendo.co.jp, 2018) (refer to appendix 4).

Social: The target market of Nintendo is divided among dependent as well as independent consumers. There are a certain restrictions and negative connotation in the society against video games on the other hand Nintendo has products and services which cater to families and thus help in bonding and spending quality time (Gupta 2013).  

Economy:  According to the annual report of Nintendo, 80 percent of the net sales are based on global market (refer to appendix 4).  Therefore it is significant for the company to keep a check on the international economic condition. The video game industry is based on the disposable income of the customers hence; the healthy development of the economy provides purchasing power and thus boosts the sale of the company. Nintendo has gone through consecutive years of loss (refer to appendix 1). During this time the international market had just recovered from a major economic crisis. There were other factors associated as well. Furthermore, factors such as inflation rate, exchange rates etc impact the revenue of the company. The exposure of Nintendo towards fluctuations in the exchange rate as the company exports almost 70 percent of the products to the international market.

Technological: The acceptance and advancement of technology play an important role among the people is important for a company that is based on technology. The mobile phone application of Nintendo Miitomo was a quick success however; the application did not remain relevant in the long run. However, in 2017, Pokemon Go became a world phenomenon and a social media trend. The technology that was used in developing the game was augmented reality and was based on the famous Anime series Pokemon that gained popularity in the early 2000s. The success of this technology based asset helps the company to improve increase its share value to almost double. But the company only has about 13 percent of share in the application. Nintendo also launched Smartphone which provided the company revenue but this did not help the company gain an edge over the market. However, the launch of the NX or the Nintendo Switch proved to be the game changer in the year 2017-18 (refer to appendix 2).

Conclusion and recommendation

It can be concluded form the above discussion that Nintendo is an organisation that has innovation, research and development as the major aspects that leads to the competitive advantage of the company. The sales and revenue of the organisation has increased in 2017-2018 due to the release of their new Nintendo Switch.  The largest consumer market is North America.  In order to keep up the leadership the company has to invest in innovation and come up with upgraded features to keep the customers engaged. Market survey will help in understanding the requirement of the customers and thereby develop focused products for the target market.

Reference list

Fleisher, C.S. and Bensoussan, B.E., 2015. Business and competitive analysis: effective application of new and classic methods. FT Press.

Gupta, A., 2013. Environment & PEST analysis: an approach to external business environment. International Journal of Modern Social Sciences, 2(1), pp.34-43.

Liebich, G., Von Zimmermann, P. and Rapp, R., SAP SE, 2014. Systems and methods for modeling costed entities and performing a value chain analysis. U.S. Patent 8,706,707.

Nintendo.co.jp (2017). Annual Report 2017. [online] Nintendo.com. Available at: https://www.nintendo.co.jp/ir/pdf/2017/annual1703e.pdf [Accessed 23 Sep. 2018].

Nintendo.com (2018). Corporate Information. [online] Nintendo.com. Available at: https://www.nintendo.com/corp/ [Accessed 23 Sep. 2018].

Nintendo.com (2018). Customer Support. [online] Nintendo.com. Available at: https://www.nintendo.com/consumer/index.jsp [Accessed 23 Sep. 2018].

Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in delivering business performance. International Journal of Production Economics, 171, pp.241-249.

Schaltegger, S., Lüdeke-Freund, F. and Hansen, E.G., 2016. Business models for sustainability: A co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation. Organization & Environment, 29(3), pp.264-289.

Statista.com (2018). Nintendo – Statistics & Facts. [online] Nintendo.com. Available at: https://www.statista.com/topics/2284/nintendo/ [Accessed 23 Sep. 2018].

Statista.com (2018). Nintendo’s net income from fiscal 2008 to 2018 (in thousands of U.S. dollars). [online] Nintendo.com. Available at: https://www.statista.com/statistics/216625/net-income-of-nintendo-since-2008/ [Accessed 23 Sep. 2018].

Statista.com (2018). Unit sales of Nintendo’s home consoles from 1997 to 2018 (in millions)*. [online] Nintendo.com. Available at: https://www.statista.com/statistics/227012/lifetime-unit-sales-of-nintendos-home-consoles/ [Accessed 23 Sep. 2018].

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.