SWOT Analysis of Nintendo - Research Paper Example

Executive Summary A SWOT analysis shows that the firms major strength lies in its loyalty, it is however weakened and by the complexities of a global supply chain and slow adaptability to technology. Its main opportunity is that it has set up contingencies to allow it to tap into future markets and adapt to projected demands. The competition in the video game market however poses a serious threat as other more dominant firms like Samsung. These firms have shown a higher acuity to adapt their products to modern technology and although Nintendo is still influential and leads the market in some sectors, it continues to lag behind in overall ascendancy. The Staying power projects that the firm has what it takes to remain in the market in posterity, since they produce quality products, are environmentally conscious and have worked to create a good reputation among their clientele base (Nintendo). The porter 5 analyses shows that Nintendo does not face a serious threat in regard to supplier power or new entrants as they control most supplies and the market is not currently very permeable due to the dominance of the firms already in it. Customer bargaining power is also limited due to the low cost of Nintendo’s products in comparison to rival firms; this is however not a long term situation and could easily change based on rivals strategic management. Threats from competing firms as well as substitute goods is substantially high since the other firm in the market provide alternatives, sometimes better ones that could reduce Nintendo’s customer base. Introduction Nintendo is one of the world’s oldest commercial firms in the world and without doubt the oldest gaming company in existence today. It was started in 1889, 124 years ago as a Japanese playing card company and today, it has a $15 billion franchise with thousands of retail outlets world over. Despite its retrospective dominance, today it is faced with stiff competition from new companies such as Microsoft and Sony, which have taken over its lead. Nintendo introduced and popularized several products like coin operated video game machines and the NES (Nintendo Entertainment System), SNES (Super Nintendo Entertainment System), the world famous Gameboy and the Nintendo 64. With time, it has become a household brand with loyal customers and it is estimated that over 40 percent of Americas households have at least one branded product form the firm. Today, the firm is not only profitable but it is also among the market leaders concerning innovation and productivity as well as ethical business practices. However to realize the degree of success it has achieved required astute strategic management to ensure the firm not only remained productive but also relevant and dynamic enough to align itself to the changing times and when need arose be the force for change. The following analysis are thus carried out to present a clear picture of the strategic management decisions that have propelled the firm to its current position as well as explicate its current industrial placement. Analysis A SWOT analysis is a critical examination of the Strengths, Weakness, and Threats and opportunities facing a business, this is one of the most popular and reliable business analysis framework since it is all-inclusive and accommodating. One of the firm’s most significant strengths is to be found in its extensive global latitude that has allowed it to realize a geopolitical presence of near universal proportions with openings in majority of the world countries. Although most of the manufacture and design is primarily carried out in Japan, it has strong distribution networks that are have taken full advantage of the advent of globalization to make itself relevant and available. The global scope of the business means it is not overly reliant on particular markets considerably reducing the overall risk by creating a variety of contingencies. Its brand and logo have been adopted worldwide and acquired a good reputation as an electronic as a symbol of quality. This has turned the products into household names, the firm retains a huge following of loyal customers, and therefore it has managed to create a strong niche in its field (Harding). The main weakness facing Nintendo is essentially a byproduct of their sizable sphere of influence; it is mostly dependent on its own supply chains, consequently it is often difficult for the management of oversee ventures. It is often exposed to currency fluctuation and regional financial situations, which sometimes marginally cuts into their bottom line. Additionally, in the gaming, industry margins tend to be low per unit and there has even been speculation that they could be selling some of their components at a loss. Besides, they are relatively slow in introducing new products and this has allowed leeway for firms like Sony to overshadow them, for instance the Wii which is their most recent console is cannot even play DVDs yet most of the competitors can (Horiuchi and Vicchrilli). The main opportunity for Nintendo’s growth is in the opening of newer and larger segments of their products. Customer demands keep shifting with time and according to current projections, the clientele is growing both younger and older; the average age of gamers in the US is 35 and children are taking on to the games at younger ages. Products like the Nintendo Wii are designed to transcend generational gaps and they will likely to cash in of the rapid growth of the gaming industry that has surpassed the movie industry (Wolverton). Furthermore, Nintendo products embody foresight since they are strategically placed to adapt to projected customer need in posterity, by providing Wi-Fi an internet enabled devices; they are likely to benefit from the exponential expansion of internet access among potential clients. The threats facing Nintendo are mostly external, for one the electronic and entertainment industry is very unpredictable and if Nokia’s recent fall from the top is anything to go by being on top, it is not a guarantee for continued prosperity. Today, dozens of firms are competing with Nintendo’s products such as Sony with their PlayStation as well as Xbox; therefore, if Nintendo does not take to consideration, the customer needs or if they mislead the business environment they could find themselves out of business since there are so many available alternatives (Stephen). Secondly, customer tastes change radially and quickly such that as soon as a product is out the competition is already designing substitutes and capitalizing of the flaws of the original products therefore Nintendo needs to keep on its toes to survive the exacting environment. The second analytical framework is based on Staying power, its constituent analytical factors include are; clear vision, environment, solid business model, flexible, stay on top finance, market sale strategy, board of directors and deliver consistent quality. Nintendo is “strongly committed to producing and marketing the best products and support services available,”( “Nintendo; Tetris: Axis…”) from their recent unveiling of a variety of new and improved products such as the Wii and 3Dgames, they are clearly living up to their mission and although they may not be the leading, they are competing with the industries best (Croal). Through its products, Nintendo is aiming to do more than entertain; it engenders a desire to make people lives more fulfilling by providing quality and affordable entertainment options. This is evinced by the fact that despite the fact that some of their products are just as good, if not better than the competition, they are marginally cheaper. Nintendo has a solid marketing strategy, it has endeavored to introduce new innovative products into the market to counter the competition set trends such as the Wii U, in addition in preparation for future expansion, it has established global networks and may of its products allow connectivity (Hall). It is also targeting previously unexplored options such as developing games for both adults and the youth and thus breaking new ground in its product design and marketing. Finally, it has created a tradition of quality and its customers have come to associate the brand with quality, furthermore, they maintain high ethical standards especially concerning environmental protection and other elements of social corporate responsibility. The porter 5 framework analysis assumes that five forces determine the competiveness of a business, these include Supplier power, the more power suppliers have the less the flexibility the business will have and they will be vulnerable to demands by supplies, which may not be favorable to them. In Nintendo’s case, inputs are unlikely to have significant effect as it control most of its supplies so supplier power for them is a minimal factor. The second factor is bargaining power of customers owing to their flexibility which is determined by the potential cost to them should they decide to shift. The cost of switching is considerably high in Nintendo’s case since most of their products are designed for long term use the alternatives from other firms are generally more expensive. The third force is the competitive rivalry, while shifting coast may be high, there is stiff competition in the electronic video industry from rivals such as Microsoft and Sony therefore Nintendo will be forces to adjust its product and service sin future to counter the rivalry (Muncy 3). The threat of substitute products is very high considering that the video game industry is growing very fast with improvements being regularly made by competitors as well as new inventions. Nintendo has relatively cheap consoles so it is easier for client of other firms to switch to their products than the other way round; the final factor is threats of new entrants. Despite the high competition in the industry, the main firms have fully established themselves and carved out substantial niches in brands loyalty making it difficult for new firms to enter the market, therefore, this threat is relatively low. Conclusion In the end, the three analytical techniques allow for a comprehensive understanding of the driving force behind Nintendo as well as the challenges and the direction the firm is likely to take in posterity. Using the feedback from these frameworks, the managers can plot a future course for the organization by taking countermeasure to remedy the weakness and threats such as poor technological adaptation. In the same way they can also make strategic moves that capitalize on the company’s strengths and opportunities such as the fact that they already have a global distribution networks which can exploited to maximize sales and distribute new products which they should introduce to the market if they hope to regain their retrospective dominance. Works Cited "Nintendo; Tetris: Axis for Nintendo 3DS is the Next Evolution in Puzzle Fun." Telecommunications Weekly (2011): 854. Croal, N'Gai. "Playing with Gaming; Nintendo's Recently Unveiled Wii Gaming Console could Cap Off a Remarkable Comeback." Newsweek May 29 2006: 0.  Hall, Kenji. "Nintendo Brings the Games to the People." Business Week (Online) Nov 01 2006: 1.  Harding, Robin. "Sony Vs Nintendo: Giant Sony is Hard to Kill." FT.com (2008). Horiuchi, Vince and Vicchrilli, Sam. “NINTENDO vs. SONY” The Salt Lake Tribune [Salt Lake City, Utah] 16 Nov 2006. Muncy, Robin. Nintendo: Maintaining Competitive Advantage. Gatton Student Research Publication. Volume 3, Number 1. Stephen, Lynch. "Boxing Match // it's Already the Fastest-Growing Segment of the Entertainment Industry. and with Microsoft's Xbox and Nintendo's GameCube, Video Games Will Get Even Bigger. Series: Videogames.1116." Orange County Register: 0. Nov 16 2001.  Wolverton, Troy. "Nintendo Preparing Launch of New Wii U Game Console." Oakland TribuneJun 07 2011.  Read More