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Nintendo: Once Again Back from the Brink

In the Fall of 2012, Nintendo released Wii U. This gaming device was designed to replace the very popular Wii which was then 6 years old. But the release did not meet Nintendo’s expectation for sales and profits. A gaming device is useless without exciting and enthralling games for it. It seems that although the device was great, the games were not. Nintendo competes in an industry where the games drive the devices. The misstep in 2012 forced Nintendo to re-evaluate its marketing strategies. Enter its latest device, Switch, released in 2017. By April 2018, Nintendo was back on top of the global video game industry with sales of 15 million Switch devices and 63 million games. How did they get there?
The success of Switch surprised many analysts who believed that the future of video games was on smartphones not on consoles. Gamers though found the Switch’s versatility and design very attractive. The device is sleek, portable, and easy to use. It retails for $299.99. However, the successful launch of Switch was also the result of a carefully crafted marketing strategy that began a few years prior. The weak sales of Wii U along with the demise of companies like Sega and Blackberry, caused Nintendo to consider whether it should stop designing consoles and focus on licensing its games on rival systems, specifically smartphones. The company culture just couldn’t imagine abandoning the core craft that had contributed to its historical success. However, pressure from investors caused it to continue to explore the mobile (smartphone) platform. Nintendo partnered with Niantic Inc and this resulted in several apps – Mario and the extremely popular Pokémon Go. Nintendo’s game creators are artisans. New hires learn the craft from senior personnel, essentially working as apprentices. So, in 2015, Nintendo was back on the radar with its new mobile games. It then introduced a low-price gaming system, NES Classic Edition, without any additional games. NES Classic Edition was launched with 30 of Nintendo’s most popular games and sought to rekindle some of the passion of the 80s. By the time Switch launched, millions of people had re-connected with their favorite childhood Nintendo characters and enjoyed the new versions on their smartphones. These included The Legend of Zelda: Breath of the Wild (named game of the year by the Academy of Interactive Arts & Sciences), Mario Kart, Super Mario, and Pokémon Go.
Although the picture for Nintendo is rosy, it faces very stiff competition. Microsoft remains at the top of the online gaming world with its Xbox One and Xbox360 Games with Gold. Tencent, a fast growing Chinese video gaming company has its MOBA League of Legends and has recently signed a deal with Danish toymaker, Lego, to develop online games. So, Nintendo is not standing still. It is already evaluating options for future growth. Some of the launches already planned include more mobile games and an online subscription service for Switch that allows gamers to compete against one another*. Other products being tested include (a) a toy line which consists of cardboard assembly kits that allow gamers to transform the Switch detachable controller into motion-sensitive objects like mini pianos and (b) an expansion of its network service by hosting a tournament game for Mario Tennis Aces. Some of the trends impacting the gaming industry include the increasing popularity of eSports in which players compete in organized gaming events and the potential for breakthroughs in virtual reality that drive it mainstream.
*Bloomberg’s Business reports in its October 1, 2018 issue that Nintendo is having problems with its online subscription service. According to this article “Users have had 18 months to try the service for free, and they haven’t stopped complaining, even at that price. Built on the cheap, Switch Online lacks the must-have features for today’s multiplayer titles.” (p.22)
Sources: “The Legend of Nintendo” by Felix Gillette, Bloomberg Businessweek, June 25, 2018, p. 54-59.
“Gaming trends to watch out for in 2018” by John Stevens, The Next Web, https://thenextweb.com/contributors/2017/11/30/gaming-trends-watch-2018/ accessed August 16, 2018
“Top 12 online gaming companies powering this global industry” by Technavio, June 30, 2016, https://www.technavio.com/blog/top-12-online-gaming-companies, accessed August 16, 2018
1. Using Exhibit 3-1 as your guide, analyze Nintendo’s internal and external market environment. (50 points)
2. Evaluate the four opportunities described in the last paragraph of the case in terms of their potential for profitability and fit with Nintendo’s core competencies. (50 points)
Tips for Writing an Analytical Paper
1. Define the marketing principles used in your answer. In other words, demonstrate that you read the assigned readings.
2. Analysis is NOT the same as opinion. Analysis is based on facts and principles. You organize your answer around the marketing principle(s) that is(are) relevant to the analysis.
Example: A target market is a homogeneous group of customers that the company chooses to pursue. Starting with this core definition as your guide to analyzing who is the company’s target market, you must find evidence of how the customers in the group are similar (homogeneous) as well as evidence that the company is pursuing them. Notice that the definition guides you in determining which facts are relevant and important. Connect the relevant facts to the definition.
3. Edit your answer before submitting it. Correct all errors (grammar, organization and spelling).