Strategic Analysis of Nintendo Games Corporation and Its Competitive Environment - Case Study Example

Nintendo Games Corporation Company Background and PESTEL Factors of Analysis Anytime that an individual would like to take a measurable approach to the ways in which a given company is expected to grow, key challenges, threats, and opportunities that may greet it within the next several months or years, it is necessary to perform what scholars refer to as a PESTEL analysis. Such an analysis weights the prospects of the firm upon five different factors. As the name suggests, PESTEL is in fact an acronym that stands for the following 4 determinants: Political, Economic, Social, Technological, Environmental, and Legal. As such, this brief report will attempt to cover each of these factors as they relate to current and existing literature on these topics with relation to the firm in question. Political Factors and the effect of governance on the given entity: The first of these determinants which will be discussed with relation to Nintendo Games Corporation is that of the political factors that could affect the overall viability and profitability of the firm within the next few years. As such, a few of these key concerns would be associated with any form of government policies that would affect the degree of intervention that the government had previously exhibited within this given sector of the economy. Oftentimes political changes incorporate many of the PESTEL factors that will be discussed as they can affect laws, micro economics, trade balance, currency valuation etc. As such, it is correctly denoted as the first determinant in that it has such a broad and overarching affect on the other factors that will be listed. Moreover, a company such as Nintendo Games Corporation serves as one of the technological pillars of the nation of Japan. Although it is impossible to measure the extent to which the government would intervene if Nintendo Games Corporation was it risk of being insolvent, it is the belief of this author that at least some effort would be made to salvage the firm from bankruptcy. In this way, a level of insurance is provided that the firm, unlike similar smaller companies, would be at risk of going under without any intervention on the part of the central government of Japan (Political Landscape 2012, p.41). Similarly, as opposed to the other determinants which will be discussed, the political determinant has the ability to directly affect sectors such as workforce training, health and safety, as well as infrastructure development and labor relations. For purposes of the outlook which the Japanese political system might affect on the viability of the Nintendo Games Corporation, the researcher would be safe to assume that the stable political and economic system that is in place within Japan would necessarily shield the company from a broad range of these externalities. Economic Factors and the effect of economic determinants on the future of the firm: Likewise, the secondary determinant that this analysis will consider is that of the economic factors that could potentially affect the firm in its operations within the future. Of all of the determinants that will be listed, this one in particular deserves the most attention. This added attention is due to the fact that the video game market is oftentimes considered a luxury market; or a market that does not satisfy a particular survival need of the consumer (Economic Landscape 2012, p.44). Accordingly, if the economy begins to take a turn for the worse, the first sectors that feel the brunt of the slow down are necessarily those that do not provide basic needs or services to the consumer. Furthermore, this economic factors ties in closely with the level to which the global economy is performing as well as the level to which domestic government intervention aids or hurts the firm in question. As the rate of recovery for the global economy has been slow, it is reasonable to assume that the economic factors to include: higher interest rates, weak currency exchange rates, and terms of trade can negatively affect the business that the firm would otherwise like to carry out within such a time period (Ali et al 2012, p. 139). As stated, this factor more so than any of the others which will be discussed has the most possibility of providing very weak sales numbers for the Nintendo Games Corporation. Social Factors and the effect of social/cultural determinants in assessing the future viability of the firm: The third determinant, that of the social changes and/or pressures which could affect the firm, is more nuanced than the others that will be discussed. These social factors are of dire importance to any firm that is located within Japans specifically as Japan has one of the fastest aging populations within the entire world. Due to the low birth rates and the increasing number of older inhabitants as a percentage of the population, this means that it will be difficult for Japan to attract workers to their firm as well as maintain the same level of research, development, and production that has previously typified the firm (Social Landscape 2012, p. 58). Moreover, the level to which new talent can be attracted to fill the previously vacated positions will be a key social determinant in whether Nintendo Games Corporation is able to remain competitive in the future. Technological Factors and the effect of emerging trends in differentiating the product from the competition and meeting the desires of the target market: With each iteration of the company’s releases, the effect of technology on the firm’s products is one of the foremost determinants that defines whether this particular firm will experience a degree of success or merely fall by the wayside as compared to the competition (Issa et al 2010, p.75). In this way, the technological determinant is a pervasive one that must be considered with great care upon each and every design development and possible new direction which might be pursued. However, beyond merely representing the attractiveness of the product to the customer, the technology that defines the nature of the Nintendo Games Corporation can be seen in the reduced costs that were experienced when the firm switched from producing cartridge games (a rather expensive method of story data in a retrievable way) to producing operating systems that ran on CDs. Such an advance was behind the competition (i.e. Sony, Sega, and Microsoft); however, it helped the firm to increase their overall profit margin and maintain a competitive advantage with the introduction of the Nintendo Game Cube. Environmental Factors and the effects of the threat of natural disaster on the business practices and planning of Nintendo Corporation: Although there is no single aspect of the PESTEL analysis that should be discounted or not considered, one might be led to believe that the environmental factors that might face Nintendo Games Corporation would within the next few years to be limited. However, the recent incidence of the Japanese earthquake and subsequent tsunami that did such massive damage to industry, infrastructure and human life within the region is but one example of the devastating effect the environment can have on industry, life, and government. As such, Japan is a region that more so than most others in the world suffers from a high incidence of earthquakes and subsequent tsunamis. As such, this danger is an existential threat to the firm. Legal Factors and the effects of the law, both domestic and international, on the way in which the firm chooses to chart its course: The least of the PESTEL forces which this brief report will analyze is that of the legal factors that could conceivably harm the firm’s ability to make a profit within the future. As noted earlier, the laws that govern the way in which the firm engages in business both domestically and internationally can directly affect the viability of the firm (Legal Landscape 2012, p. 70). Moreover, having a defined and stable governmental and judicial system is only one small part of achieving stability in this respect. The role of international law is also a consideration that the firm must continuously account for in formulating market penetration and development goals for their new and existing product lines. Conclusion: In this way, this brief report has provided a number of factors that the firm must necessarily consider prior to charting a course for the future. Although it is impossible to account for all of the events that might arise and challenge the continued viability of the firm, it is without question that many if not all of the factors that have been included in this PESTEL analysis should be considered as a means of creating a plan of action for future business goals. References Ali Abdolvand, M, & Asadollahi, A 2012, 'The Study of Strategic Industrial Planning for Using Model SWOT', International Journal Of Academic Research In Business & Social Sciences, 2, 1, pp. 136-143, Academic Search Complete, EBSCOhost, viewed 29 November 2012. 'ECONOMIC LANDSCAPE' 2012, Japan Country Profile, pp. 43-57, Business Source Premier, EBSCOhost, viewed 29 November 2012. Issa, T, Chang, V, & Issa, T 2010, 'Sustainable Business Strategies and PESTEL Framework', International Journal On Computing, 1, 1, pp. 73-80, Academic Search Complete, EBSCOhost, viewed 28 November 2012. 'LEGAL LANDSCAPE' 2012, Japan Country Profile, pp. 69-74, Business Source Premier, EBSCOhost, viewed 29 November 2012. 'POLITICAL LANDSCAPE' 2012, Japan Country Profile, pp. 33-42, Business Source Premier, EBSCOhost, viewed 29 November 2012. 'SOCIAL LANDSCAPE' 2012, Japan Country Profile, pp. 58-64, Business Source Premier, EBSCOhost, viewed 29 November 2012. Read More