Marketing Plan for Nintendo Wii - Research Paper Example

Executive Summary: Nintendo Wii is a gaming console organization and is known for its hottest games marketed on the internet. It was earlier a Japanese card gaming organization and made its debut in American industry in the year 1985. Since its inception, it has followed two strategies for success - Floor pricing and new product technology. The current discussion is to analyze as to how its recent product Wii should be marketed even more effectively to capture higher market share. Introduction: Nintendo was introduced to the video game industry in 1985 only to become a great hit within the people of all age groups. It rejuvenated the gaming industry single-handedly. From the inception, the company was always on the run to improve its product technology while maintaining low price levels on the other. This strategy was well accepted by the general public that it catered to economical entertainment. Thus its sales have surged into millions within a short span of time. Recently it introduced Wii which has several advanced features with a built in wi-fi capability. The company is now on the plan for implementing a strategic marketing plan which would be most beneficial for its running in the future. (Anon., 2010). Background analysis Organizational background: Nintendo was originally a Japanese playing card company which introduced its entertainment system in U.S. Today, it has its presence in over 20 countries covering Asia Pacific, Europe and America. Its customers range from 5-120 years of age. Most of them however are youngsters. (Armstrong. M., 2006). The crucial part of Nintendo’s success was its perfect planning and timing. It released its gaming videos in 1985, when the whole video gaming industry crashed totally. (Cooper.R.G., 2001), (Anon., 2005). This is similar to the research undertaken to identify aggressive competitor’s attacks on market leaders. According to the research, a competitor is said to be above-normal aggressive if he moves into new markets geographically, compete with leader’s brands, enter for the first time into the market and increase advertising expenditures. Nintendo has planned its market entry in the same manner and stood in competition with the market leaders namely Sony Play Station and Microsoft Xbox 360. (Stasch. S.F. & Ward. J., 2001). Product/ Brand/SBU: Nintendo markets video games which mainly focus on attracting young generations. Its recent edition of Wii is one such progression containing several advanced features. Other than its own games, wi-fi can also download games from the internet. It also contains several other features thus capturing the market. Delineating of Nintendo’s products on the basis of specific market areas is quite difficult as it is more internets related. However, for the sake of convenience, strategic business units can be separated on the basis of its three segments of Asia pacific, Europe and America (Anon., 2010). Industry of operation and product portfolio analysis: The Company operates in the video gaming industry and competes with Sony’s play station and Microsoft Xbox 360. It tries to install agility and operational excellence in its products. This is the modern technique of high-tech marketing. (Viardot. E., 2004). A product portfolio analysis could help in arriving at required solutions for such high tech marketing. Portfolio Analysis: Game boy advance captures the highest software and hardware sales of more than 450 million units. It is followed by Nintendo DS with around 430 million unit sales. Nintendo G.C. covers around 230 million units and Wii covers around 170 million units for 2008. Even for the current quarter of 2010, its sales are more than its competitor’s sales. However, its sales plunged to 17.05 million from a 20.52 million sold last year. Similarly, Ds lite also sold 23.35 million down from 25.62 million sold last year. (Anon, 2010). If we compile this data into a Boston Consulting Group matrix we can arrive at the following figure: (Stern C.W. & Stalk. G. 2009). Game boy advance is a star which needs high investment and captures high market share owing to the huge number of unit sales. Wii represents a cash cow which needs low investment because of low sales but high market share owing to the hype it has in the market and its pricing is higher than other products of the company. As such, product profitability would be relatively higher. DS lite on the other hand is a question mark and further investment should be done cautiously. Nintendo G.C. is already giving signs of a dog and analysis needs to be taken up for further continuance of the same. Our current product Wii which represents a cash cow however needs to increase its market share through higher sales and become a star. Further, more new game consoles have to be introduced to take up the star position to keep the markets alluring. Competencies, Distinctive capabilities and vulnerabilities: The Company has been frequently improvising its product technology to attract worldwide customers. Its distinctive capability lies in providing reliable software at floor prices. However, such floor prices may make low entry barriers for the industry thus throwing the company to the threat of competitors very easily. (Doyle. P., 2000). Key Success Factors: Nintendo achieved leadership on the KSF of pricing and product technology. It has cut its Wii price from $250 to $200 this December (Brown.M.G., 2010). This cannot be a sustained leadership. The company has to plan for new methodologies of attracting customers. Here, Nintendo can look for benchmarking with successful companies like Apple Inc. which could switch in between its gadgets for availing optimal technology output. In this way, new gaming consoles should be integrated to achieve the competency of optimal technology. (Slivka. E., 2010). Possibility of marketing growth: The Company should now realize that it should more concentrate on attracting customers through other methodologies like higher advertising or finding new markets along with its new technological research and switching systems. Diversification: Nintendo focuses on casual customers who would not be willing to pay high price for their pass time. Instead, it should diversify into developing games for busy executives and serious players. It should create euphoria about matches between players of its games and popularize the winners. (Kay. M. N., 1997). Future analysis of the industry: The future for the gaming industry depends on the following features: Attractiveness of the games Wide accessibility Improved real life like gaming technologies Beneficial to the users even though they may play it casually. All these features have to be inscribed in Nintendo’s products to take the advantage of its industry structure and achieve sustained competitive advantage. As it already gained a brand name in gaming and many consumers are happy about its performance, it should try to capitalize on their gratitude. Gratitude achievement may be quite difficult in such areas of entertainment. But, when it is producing wii with combinations of fit etc. to keep its customers fit, it may achieve that lead from those customers who could profit from its gaming consoles. In future, they will try to purchase its products only. (Palmatier. R.W., Jarvis. C.B. Bechkoff. J.R. & Kardes. F.R., 2009). Situational Analysis: Objective of the organization: Its current objective is to increase its sales even in this financial crisis plan so that it can retain its market leader’s position. For that, taking up a situational analysis would be quite useful. Situational Analysis of Nintendo: It can be checked on the basis of four broad classifications - Situational, Neutral, Competitor and Company environs. (Drucker. P., 2007). Situational environs: Nintendo is facing a fall in demand for its new products. A study of SWOT (Strengths, Weaknesses, Opportunities and Threats) and PESTEL(Political, Environmental, Social, Technical, Economical and Legal) analysis could be used to understand the problem. SWOT analysis: Strengths: The Company deals in the internet technology thereby decreasing the channels of distribution. As such, it can gain its say over its suppliers. Following new technologies is always pleasant for the customers. Weaknesses: Gamers want quick games which are natural to play and exciting too. That is why, there is high competition. To reduce competition, price wars only reduce the entry barriers to the new entrants. Opportunities: As more and more customers of different ages get attracted to this gaming industry, there is high scope for advancement. The company can search for newer developing markets like BRIC (Brazil, Russia, India and China) and improve its sales. It can improvise products to rope in serious players along with casual players. Threats: Floor pricing is a serious threat to the company’s profitability and creates low entry barriers. R&D efforts to improve games may not be possible with low profitability. (Mitchell.C.J., 2004). When price wars are on the go, buyers get the upper hand on the sellers. An analysis of the PESTEL factors can improve the insights of the situation in a better manner. Here, one should note that though there are common risks like foreign exchange fluctuations, new product developments, evaluation and procurement of products, these are undergone by every organization. The main factors to be considered are those of social and technological. Other factors do not matter as the company deals in the internet gaming division. Social factors: These pertain to the factors like: Attitude of the customers, adoption rate of the gaming technology, Availability of leisure time and Popularity of the gaming consoles. Technical factors: These factors pertain to: Expenditure levels on Research and Development. These have to increase to produce better gaming consoles to rope in more and wider range of customers. Production methods: They have to be optimized to release more number of products into the market. New technological adoption rate has to be fastened through extensive marketing and creating entertainment needs in the general public. (Friend.G & Zehle. S., 2009). Neutral environs: These pertain to authorities like law making bodies etc. As this organization is mainly internet based, it transcends physical barriers to a lot extent. As such, neutral environs have very little to influence this company. Competitor environs: These detail about the competitors against whom the company has to fight for its market share. They can be depicted in the form of five forces. (Porter. M.E., 2001). The two main competitors are Sony play station and Microsoft X box 360. Rivalry between them has taken the form of price wars to allure the customers. This strategy should be changed to technological wars so that people pay higher prices for improved technology and there would be scope for R&D efforts. In this case, the buyers over power the company and that is why there a price cut from $250 to $200. As there would be no/few intermediaries, it can bargain over its suppliers to minimize the cost. Low pricing creates almost low or no entry barriers meaning that the company has a threat of competitors while getting entangled in a fight with its rivals. Company environs: They describe the facts going on inside the company. It has been reported that even though the sales dropped by 9%, the overall profitability has increased consistently. This may be due to the internal policy prudence undertaken by Nintendo. But, other than these prudent methodologies at the work place, the company needs to follow a marketing strategy which will make its brand name strong and improve its market share. Marketing Strategy for Nintendo: The company should now move forward from mass marketing to high-tech marketing. It should identify its businesses in terms of segmentation, targeting and positioning. Segmentation refers to dividing of Nintendo’s business areas into separate strategic business units and then applying customized marketing mix for each area. 3 segments of Nintendo have been identified for the purpose of control and execution of marketing strategies under which there would be delineation of strategic business units. (Katarsons. J. & Christy. P., 2005). Targeting: Now each segment has to target its customers on the basis of: Intensity of competition that the company faces in that segment Growth forecasts for that segment The cost and your ability to reach your customers Entry barriers to other competitors and Profitability potential. Positioning: It is an attempt to know how a perceived product is managed through the potential customers. Usually, a word or phrase is used to inspire that anxiety in the customer. (Stonehouse.G. Hamill.J. Campbell. D. & Purdie. T., 2000). It has been observed that customers do not stay loyal for too long. Even if they stay loyal, servicing them becomes a cost issue. So, instead of playing on customer loyalty, it is better that the company tries to position itself through sheer hard work and winning the applause of the general customers. (Reinartz. W & Kumar. V, 2002). In the case of Nintendo, putting smiles around the surrounding people’s faces is the positioning phrase used. (Anon. 2006). Other than these techniques, efforts also need to be put in the direction of marketing mix for proper positioning of the product in the minds of the customers. Marketing mix of Nintendo: The overall organizational objective of Nintendo is to increase both market share and profitability through expansion of gaming audiences worldwide. For achieving these objectives, two main jobs are performed. They are: The offering: These comprise of product, price, place and promotion of the organization. The methods and tools for such offering: These comprise of people, process and physical evidence for making that offering happen. (Smith. P.R., 2003). Product: It is the benefit which the customer perceives to buy that product. Naturally, the core need for buying this gaming console is entertainment. It improvises on this idea of entertainment to include improved features and making gaming more natural and fun oriented. Price Strategy: The Company has always banked on the floor pricing strategy and sells its products at almost half the price of its competitors. However, by doing this, it is losing the overall high profitability which its competitors are able to achieve even with low sales. Place: As its gaming technology can be available on the internet and can be played on any screen, place is of little worry to the customers. It is only on the part of the company to ensure that it meets to the consumer’s demands worldwide. For that it needs to put in logistical efforts vividly. Promotions Strategy: Its promotions strategy is continuous improvisation of its products and releasing of newer and extended versions regularly. This should be the strategy to stay alive and agile in such competition oriented industry. The methods and tools for abovementioned offerings also are discussed below: People or employees: They need to be highly committed and work for the fulfillment of the organizational objective rather than theirs own. Looking at the 85% jump in profitability of the company, the same appears to be true in this case. Production process and services delivery: The Company has been catering actively in its services delivery and has been able to meet its current demand expectations. To sustain this continuity, it needs to enhance R&D facilities to introduce more exciting products. Physical evidence: It hardly needs to emphasize on its buildings as it sells on the web. However, to cater to the employee’s needs and other organizational activities, physical evidence is a necessity. Recommended Marketing Plan: After an extensive study of the company’s organizational Background, situational analysis, marketing strategy and marketing mix, we can arrive at the following marketing plan: The company is in the field of gaming industry for casual players. It needs to diversify into newer markets of roping into serious players and executives to make gaming console a serious business. It can conduct matches over the net and popularize the winners. Efforts need to be taken to increase the market share of wii so that it becomes a star in the future. For that a careful marketing plan needs to be deciphered. Company’s strategy of floor pricing has to be curbed and the company needs to profit new product technologies thereby raising entry barriers for its competitors. Targeting and positioning of its products has to be done more carefully to ensure that potential customers get roped in. It should not go in for mass marketing any further. New products have to be developed to improvise its marketing mix to continue the profitability of the organization. There should be possibility of switching over its gaming consoles for optimal technology. Conclusion: It has been observed that Nintendo wii is a successful product with high market share. However, pricing is an issue that the company is not able to make huge profits. Further, through low pricing, the entry barriers for new comers are also lowered. To avoid such threat from existing and upcoming rivals, it is better that the company discards pricing strategy and improvises on new product technology, diversification and finding new markets. Further, marketing efforts also have to be improvised to target their customers and customize products according to their tastes. 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