May 3
Nintendo
2010 Nicole Wetzell
Contents PART 1: INTRODUCTION .......................................................................................................................................... 3 Executive Summary .................................................................................................................................................. 3 History of Nintendo ................................................................................................................................................... 3 Current Products..................... ........... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ............... ..... 3 Main Problem Problem ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ................ .. 3 Existing Mission objectives and strategies ................................................................................................................ 4 New mission and vision statements ........................................................................................................................... 4 SWOT Analysis Discussion ...................................................................................................................................... 4 Nintendo’s strategy strategy and its its advantages and disadvantages ..................... ........... ..................... ..................... ..................... ..................... ..................... ..................... ............. ... 5 Situational analysis..................... .......... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ............. 6 Industry analysis ................................................................................................................................................... 6 Economy Economy ........................... ......................................... ............................ ........................... ........................... ............................ ............................ ............................ ............................ ............................ ..................... .......6 Consumer behavior during and after after the recession .................... .......... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ............. 7 Buyer behavior related to gaming industry ........................................................................................................... 7 PART 2: STRATEGIC ANALYSIS ............................................................................................................................. 7 Nintendo’s SWOT Analysis ...................................................................................................................................... 7 Competitors’ SWOT Analysis................................................................................................................................... 8 Playstation (Sony) ..................... ........... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ................... ........ 8 Advantages and disadvantages of Playstation’s strategies .................................................................................... 8 Xbox (Microsoft) .................................................................................................................................................. 9 Advantages and disadvantages disadvantages of Xbox 360’s strategies.................... .......... ..................... ..................... ..................... ..................... ..................... ..................... ............. ... 9 Financial Analysis: ..................... .......... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... .................... .......... 10 Nintendo Nintendo ........................... ........................................ ........................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ................... ..... 10 Playstation (Sony) ............................................................................................................................................... 11 Xbox (Microsoft) ................................................................................................................................................ 11 Nintendo | Porter’s Five Forces ............................................................................................................................... 12 Playstation 3 | Porter’s Five Forces ......................................................................................................................... 13 Xbox 360 | Porter’s Five Forces .............................................................................................................................. 14 PART 3: Recommendations and conclusions .............................................................................................................. 15 Overview Overview ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ..................... .......15 General description of Wii Too ............................................................................................................................... 15 Comparison of actual Nintendo Strategy ................................................................................................................ 15 “We would like to to play too” plan, targeting targeting “Happenin’ Moms” ............... ..................... .......... ..................... ..................... ..................... .................. ........ 16 Long-term Strategic Strategic Objectives Objectives | 2011 - 2012 .................... .......... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ................. ...... 16 Cost ........................... ......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ .......................... ............16 Budget Budget ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ..................... .......16 Target Target market market .......................... ........................................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ .......................... ............17 Marketing Message ............................................................................................................................................. 17 Examples of Marketing Vehicles for “Happenin’ Moms” .................................................................................. 17 Creating a Sustainable Competitive Advantage .................................................................................................. 18 Evaluation Evaluation ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ................... ..... 18 Works Cited Cited ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ..................... .......28
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PART 1: INTRODUCTION Executive Summary Nintendo has always committed to its customers by providing high quality entertainment products. In 2006, the company launched the Wii game console along with a catching marketing strategy which was very successful. Today, the company has experienced decreased sales. This plan will discuss the background of the company, analyze Nintendo’s current situation along with Playstation 3 (created by Sony) and Xbox 360 (created by Microsoft) and provide some recommendations for a new game console as well as a new marketing plan.
History of Nintendo In 1889, Nintendo started as a Japanese playing card manufacturer and remained in this industry until 1974 when it created the video game market with the Magnavox Odessey. Since then, the company has been committed to creating new and innovative video game consoles and games like Nintendo Entertainment System, Super Nintendo Entertainment System, N64, Game Cube, Game Boy, Game Boy Color, Game Boy Advance, Game Boy Advance SP, Game Boy Micro, Nintendo DS, Nintendo DS Lite, Super Mario Brothers game series, Donkey Kong and the Zelda game series (Thompson, Strickland, & Gamble, 2010, pp. C-238-239). In 2006, the company released a brand-new and unique gaming system, Nintendo Wii, which won the majority of the video game console marketing share. Currently, Wii console and game sales have dramatically dropped due to the current recession. Additionally, gamers and analysts are beginning to ask what next console release will entail, implying that demand has decreased for the console. (Thompson, Strickland, & Gamble, 2010, pp. C-238-239).
Current Products • • •
Nintendo Wii and various compatible games Nintendon DS and various compatible games Pokemon cards (Nintendo, 2010)
Main Problem Due to the recession and the fact that another game console has not been released since 2006, Nintendo Wii sales have dramatically decreased in the past couple years. In order to keep a sustainable competitive advantage over Playstation 3 and Xbox 360, the company needs to launch a new gaming system (which will please both hard core and fair weather gamers) along with a compelling marketing strategy.
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Existing Mission objectives and strategies Mission Statement: “We are strongly committed to producing and marketing the best products and support services available.” (Nintendo Corporation, 2010) Vision Statement: Based on Nintendo’s web site, the company does not have a vision statement.
New mission and vision statements Mission Statement: “Nintendo makes the high quality, innovative and unique gaming products and provides related services available world-wide.” Vision Statement: “Bringing people together.”
SWOT Analysis Discussion Strengths •
•
•
Since the 1980’s Nintendo has released several generations of cutting edge and high quality gaming consoles resulting in a strong brand name which many customers trust. This gives the company sustainable competitive advantage over competitors (Games Consoles Industry Profile: United States, 2009, p. 13). According to Games Consoles Industry Profile, Nintendo’s management team invests resources into profitable avenues and has enjoys high returns. For 2003-2007 their “return on average assets, return on investment, and return on average equity for the 2003-2007 were 8%, 9.8%, and 9.8%, much higher than the corresponding industry averages of 2.1%, 4.2%, and 5.5%, respectively.” (Games Consoles Industry Profile: United States, 2009, p. 14) Nintendo has a debt-free status while the industry average debt to assets ratio is 11.9%. The company has a great advantage over competitors because it has more financial flexibility (Games Consoles Industry Profile: United States, 2009, p. 14)
Weaknesses •
•
Nintendo hires outside manufacturers to produce key parts for its consoles and software. In 2006, Nintendo could not keep up with consumer demand of its Wii because these manufacturers would not speed up production. This had a negative impact on profits (Games Consoles Industry Profile: United States, 2009, p. 14). Nintendo’s “fun for everyone” strategy for the Wii has been highly successful; however, one of the industry’s most important group of customers, hard core gamers, want high quality graphics and intricate story lines in the latest technology. By targeting the Wii console to everyone, this group now feels ostracized and ignored, leading them to try competitive products (Thompson, Strickland, & Gamble, 2010).
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Opportunities •
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•
•
In order to play games on consoles, consumers must purchase software games. This market is expected to grow at a compound annual growth rate of 5% by 2011 creating a value of $10.3 billion (Games Consoles Industry Profile: United States, 2009, p. 15). Additionally, the console game market is growing at a rapid pace in India. This market is expected to reach $120 million by the end of 2010, from $13.3 million in 2006 (Games Consoles Industry Profile: United States, 2009, p. 15). The popularity of online gaming (also a threat ) is growing. Worldwide connections to the Internet are expected to increase to 413 million by 2010. Nintendo can capture more users because it already has a Wifi connection built into the Wii (Games Consoles Industry Profile: United States, 2009, p. 15). Nintendo can re-engage its biggest customers, hard core gamers.
Threats •
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•
•
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Nintendo is a global company and approximately 67% of its revenue is generated from international locations. If foreign currency values become too volatile, the company will not be as profitable and profit margins will be squeezed (Games Consoles Industry Profile: United States, 2009, p. 15). Product life cycles are very short in an extremely competitive industry. The most popular games and consoles usually have a life of less than a year. Delays in console or software development and production will have a negative effect on revenues and profits (Games Consoles Industry Profile: United States, 2009, p. 16). Many more developed countries are still recovering from the recession. While developing countries are emerging strongly from the recession, many households will lack the funds to purchase a Nintendo (The Economist, 2009). If Nintendo remains complacent and does not find ways to include the Internet into their business model, the Internet’s popularity and ease of use may obliterate the gaming industry like the music, publishing, video and computer software industries (A Giant Sucking Sound, 2009). Sony’s market share (27%) is catching up with Nintendo’s (Games Consoles Industry Profile: United States, 2009).
Nintendo’s strategy and its advantages and disadvantages Nintendo’s ‘fun for everyone’ strategy worked in 2006 with the release of the Wii. They have built several new groups of customers which constitutes as casual gamers; however, it damaged their biggest customer base, hard-core gamers. Additionally, Nintendo priced out their biggest competitors with a low console price of $250. The company must now figure out how to satisfy all these different customer groups with one new console while staying at a reasonable price.
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Situational analysis Industry analysis
In 2009, United States video game and console sales decreased 31 percent to $1.17 billion, from $1.7 billion in 2008. The NPD Group (a national market research firm) sites reasons for the decline are the deep recession and that major players have not produced a major video game console or title in the past few years. The group also believes that gamers could start moving to online gaming; however, online gaming industry numbers (i.e. subscription sales and downloads) are showing that this trend has not taken hold and is not a major threat this year (Musil, 2009). The video games console market experienced a compound annual growth rate of (CAGR) of 20 percent from 2004 – 2008. Analysts anticipated a contraction in this market from 2009 – 2011 but also expected a resume a growth trend toward the end of this period. Additionally, they also expect this market to decrease with a compound annual rate of change (CARC) of -.5 percent to $7,608.3 million by 2013, an overall 2.5 percent decrease (Games Consoles Industry Profile: United States, 2009, pp. 7-8). Economy General
While many developing countries are experiencing a strong economic recovery, the United States is expected to continue to recover from the recession in 2010. Christina Romer, a White House adviser, assumes that unemployment numbers will remain high through 2010 and then slowly decline through 2012 (The Economist, 2009). Other Economic Figures Gross Domestic Product (GDP) Although the GDP declined in 2009, it is expected to increase slowly through 2012. U.S. GDP measured in billions of dollars
2009
2010
12,983 13,182 (US Economic Forecasts, 2009)
2011
2012
13,399
13,657
Inflation
The United States experienced a period of deflation in 2009 which is an effect of the current recession. The United States economy should return to a mild inflation trend by early 2010 which should continue through 2012. Inflation for the U.S. 2009 – 2012
2009
2010
-.06% 1.9% (U.S. Department of Labor Statistics, 2009)
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2011
2012
2.1%
2.3%
Consumer behavior during and after the recession
“Understanding the Post-Recession Consumer” explains that United States publisher, Time Inc, discovered that many consumers were already beginning to feel “overwhelmed by the profusion of choices and 24/7 connectivity and were starting to simplify” before the recession. Recessions typically put psychological strain on consumers meaning that the demand for comforting and simple products have only been accentuated in the recession (Flatters, 2009, p. 108). Consumers are looking for and will continue to value brands that can be trusted and are not overpriced; information sources (i.e. social networks or consumer/product ranking information) which simplify the presentation of product choices along with products that are less complicated and easier to use as the recession ends (Flatters, 2009, p. 109). Many consumers were also already beginning to spend less money even before the recession began and this included middle to upper middle class consumers. Experts believe this new trend began as more consumers started to become unsatisfied with excessive waste and consumption. A trend of increased spending usually follows the end of a recession or during the beginning of a recovery; however many experts believe that “discretionary thriftiness” will continue as the economy recovers (Flatters, 2009, p. 110) Buyer behavior related to gaming industry
Since the first game console, Magnavox Odyssey, was release in 1972 the gaming industry has grown exponentially (The Game Console, 2010). Analysts predict that 190 million households will have a console by 2012 and 80 percent of these households will have the console connected to the Internet. Additionally, 75 percent of these households will use the console at least a couple times per week (GrabStats.com, 2010).
PART 2: STRATEGIC ANALYSIS Nintendo’s SWOT Analysis Strengths High quality and cutting edge products Sound management decisions Debt-free status
Weaknesses Dependency on outside manufacturers “Fun for everyone” strategy ignores core customers
Opportunities Growth in the software game market Rapid growth in the console game market in India
Threats Volatile exchange rates Short product life cycles
Online gaming becoming popular
Weak, recovering economy in developed countries
Re-engage core customers
Sony’s market share Competition with smart phones
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Competitors’ SWOT Analysis Playstation (Sony)
Strengths
Weaknesses
Large company has more resources to draw from
Legal troubles
Diversified product offering reduces the risk of profit loss
High manufacturing costs negatively effects profits
Brand is trusted by consumers
Opportunities
2009 restructuring will increase savings Focus on Brazil, India, Russia and China may impact growth Continue to launch new video game titles
Threats
Volatile exchange rates Weak, recovering economy in developed countries Nintendo has the market share Competition with smart phones
(Datamonitor USA, 2009, pp. 16-17) Advantages and disadvantages disadvantages of Playstation’s Playstation’s strategies
By examining the features of Playstation 3, it can be assumed that Sony is targeting the console toward the industry’s most valuable customers, hard core gamers. Initially, Playstation 3 was priced out of the market. The console originally cost $999 and costs $299 today. With a 120 GB hard drive, the console has more computing ability and has better graphics than the Wii allowing for more in-depth games with better graphics and more involved story-lines. Desirable features include the ability to play High Definition Blu-ray DVDs as well as MP3’s and CD’s. Playstation 3 customers can also stream complimentary music videos through “Vidzone” (Scott, 2009). In 2009, Playstation 3 continued their strategy of attracting hard core gamers by releasing another extremely popular and exclusive to Playstation 3 game, “Final Fantasy XIII,” which is expected to sell 2 million copies in Japan alone. Yusuke Tsunoda, an analyst at Tokai Toykyo Securities Company believes that this game “should help lift sales of the Playstation 3,” and that “The Wii has peaked out, but Playstation 3 is still on the upswing” beginning to make a compelling impact on Nintendo’s market share (Alpeyev, 2009). Keeping core customers satisfied is a proven strategy for Playstation 3. The company may have even stolen members of this highly coveted market from Nintendo; however, Nintendo also won over many new customers increasing their own pool of people who will consider a new gaming console. Although Playstation 3 holds more appeal for the industry’s biggest market, hard-core gamers, the console still lost many sales back in 2006. In 2010, Playstation 3 will play catch-up with the Wii by releasing similar wireless remote controllers entitled Move for $100. What makes Move unique from the Wii’s controllers is the PlayStation Eye camera, “which tracks a glowing ball atop the controller and lets games better track your 3-D movements in space” (Kirby, 2010). With such a late introduction into the market place, it makes more sense for Playstation 3 to introduce completely a new technology or console to the market place.
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Xbox (Microsoft)
Strengths
Weaknesses
Large company has more resources to draw from Diversified product offering reduces the risk of profit loss Brand is trusted by consumers
Opportunities
Threats
High price when Xbox 360 was first released
Expose emerging markets to the product
Console has a long way to catch up market share with Nintendo
Low game console market share
Market wireless controller and headset
Distrust among Europeans
“Alan Wake” game
Better graphics
Complicated hardware Competition with smart phones
(Datamonitor USA, 2010, p. 29), (royaltyuniverse, 2007) Advantages and disadvantages disadvantages of Xbox Xbox 360’s strategies
Like Playstation, Xbox 360 also has geared its console and games to hard core gamers. The Xbox 360 uses a wireless controller and headset (this allows fellow gamers to communicate with one another). Similar to the Playstation Xbox 360 has a 120GB hard drive which also gives the ability to store games, TV shows, movies, music and pictures from “Xbox LIVE Marketplace,” an online service that gives the ability for online multiplayer gaming, to download games and other media and instant messaging. There is an additional $89.95 annual membership fee to join “Xbox Live” (Scott, 2009). Initially, Xbox 360 was priced at $549, much higher than Nintendo Wii. Today it is priced at $300 (Scott, 2009). The latest, highly anticipated game, “Alan Wake,” is being released in 2010, and also exclusive to Xbox 360. With its in-depth story line, high technology features and eye-catching graphics, many analysts predict that this will be one of 2010’s hottest games and could dramatically boost Xbox 360 console sales (McEachern, 2010). Like Playstation 3, Xbox has decided to release products that attract the primary target market of hard core gamers. Once again, making sure this market is satisfied is a good strategy; however, Nintendo is reaching many more people by creating products that appeal to everyone. There is a lot of power in large numbers which means if each company continues with their own strategy, Nintendo could always have more sales. Xbox 360 also plans to play catch up with Nintendo by releasing their own version of Nintendo’s wireless remote controllers as an add-on to the Xbox 360 called Project Natal, except this technology does not involved controllers at all. Gaming expert Jason Kirby explains that “Instead it relies on advanced infrared and motion-sensor technology so that players' whole bodies become the controller.” Wedbush Morgan Securities analyst Michael Pachter believes that Microsoft’s new controller will become popular like the Nintendo Wii and will “outsell Sony five to one” (Kirby, 2010).
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Although it’s a rather late response, Xbox’s Natal sounds like more innovative technology than Playstation’s Move, a more appropriate response to the Wii. If Nintendo does not take action and update their techonology, this is a possible threat.
Financial Analysis: Market Share
In 2008, Nintendo led the game console market with 58.40% of the market share followed by Playstation with 27.7% of the market share and Xbox trailing behind with 13.9% of the market share. Nintendo
When looking at recent financial information, it is determined that Nintendo is a sound and profitable company. Due to the enormous popularity of the Wii game console release in 2006, some ratios experienced a sharp decrease from 2006 to 2007. The company has experienced a slight downward trend from 2007 – 2008, but many companies have experienced the same trend due to the deep global recession. Profitability
Nintendo has a strong gross profit margin for 2006, 2007 and 2008 of 42.24%, 41.16% and 41.86% respectively. The gross profit margin fell approximately 1% between 2006 and 2007 because the popular Wii console was released in 2006 boosting sales and profits. Nintendo has a weaker net return on sales. In 2006, 2007 and 2008, this was .19, .18, and .15 respectively. The fact that this ratio is decreasing is also a sign that Nintendo needs to reevaluate their operating procedures and the cost of goods sold. From 2006 – 2008, the company has enjoyed an upward trend on the return on stockholders’ equity. The average return is between 12 and 15 percent (Thompson, Strickland, & Gamble, 2010, p. 104). In 2007 and 2008, Nintendo experienced above average returns in this area (Nintendo, 2007) (Nintendo, 2008). Liquidity
Nintendo carries very little to know debt, making this company very liquid. A strong current ratio is considered at least a 1.0 and most companies strive for a 2.0 . In 2006, Nintendo had a very high current ratio of 5.41 (because the popular Wii console was released that year). In 2007 and 2008, the company still had a current ratio of 2.7. While these ratios are still very strong, a downward trend is still present and Nintendo should make sure they are not losing too many assets (Nintendo, 2007), (Nintendo, 2008). Additionally, Nintendo also experienced a similar trend in regards to their quick ratio. In 2006, 2007 and 2008, the company had a quick ratio of 5.41, 2.78, and 2.71, respectively. While these numbers are very strong, a downward trend is present and the company needs to investigate they will be able to continue to pay off their liabilities without selling their inventory over the next five years (Nintendo, 2007), (Nintendo, 2008).
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Leverage
One of Nintendo’s strongest characteristics is the fact that the company carried very little to no debt in 2006 - 2008. This gives the company incredible leverage against competitors (Nintendo, 2007), (Nintendo, 2008). 1
Playstation (Sony)
Overall, Sony Corporation generated 7,730.0 billion yen in 2009, a 12.9 percent decrease from 2008. Additionally, they recorded a net loss of 98.9 billion yen. The games business unit accounts for 12.7 percent of total sales (Sony Corporation, 2010, p. 2). In 2008, Sony’s games sales and operating revenue declined by 18 percent; however, Playstation 3 game software sales increased. The business unit had a loss of 58 billion yen, a 66.1 billion yen improvement from 2007. Sony officials state that this is because of the global recession as well as the fact that “the yen appreciated compared to the US dollar and euro.” (Sony Corporation, 2010, p. 4). In 2009, the company sold 10.06 million Playstation 3’s, 7.91 million Playstation 2’s and 14.11 Playstations. Sony also sold 103.7 million, 83.5 million and 50.3 million units of software for each game console, respectively (Sony Corporation, 2010, p. 22). Xbox (Microsoft)
Overall, Microsoft Corporation generated $58,437 million in 2009, 3.28 percent decrease from 2008 (Microsoft Corporation, 2010). In 2009, the Microsoft’s Entertainment and Devices Division earned $7,753 million, a six percent decrease from 2008. Xbox 360 console and game software decreased $161 million or three percent in 2009; however, 11.2 million consoles were sold in 2009 over 8.7 in 2008. Microsoft officials say that the decrease in revenue is due to lower prices per unit, volatile foreign currency exchange rates combined with research and development expenses (which increased by 16 percent) (Microsoft Corporation, 2010).
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Note: Due to fact that Sony and Microsoft are much larger and offer many other non-related products, only the Playstation 3 and Xbox 360 divisions will be ana lyzed. Financial ratios will not be used for these companies because not all the data is disclosed.
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Nintendo | Porter’s Five F rces
Substitutes: Strong threat: Smart phones, iPods, home computers and online gaming are a few of the many substitute home entertainment entertainment products that consumers can use instead
Supplier power: Weak theat: elecrontic components are inexpensive unless they are custommade
Rivalry: Nintendo introduced unique and cutting-edge technology creating a sustainable competitive advantage over competitors
New entrants: Low threat: market is an oligarchy and difficult to enter
(Games Consoles Industry Profile: United States, 2009)
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Buyer power: Weak threat: Due to slow production, the Wii was consider d a scarce product in 2006 and 2007. There was ot too much buyer bargaining power or sell r-buyer collaboration because customers were lucky if they could find the co sole.
Playstation 3 | Porter’s Fiv e Forces Substiutes: Strong Threat: Smart phones, iPods, home computers and online gaming are a few of the many substitute home entertainment products that consumers can use instead
Supplier Power: Weak threat: elecrontic components are inexpensive unless they are custommade
Rivalry: An all-inone system, inclues High Definition Blu-ray DVDs as well as MP3’s and CD’s
New Entrants: Low threat: market is an oligarchy and difficult to enter
(Games Consoles Industry Profile: United States, 2009)
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Buyer Po er: Strong thr at: Nintendo Wii was priced much lower making t e console m re attractive to buyers
Xbox 360 | Porter’s Five F rces Substitutes: Substitutes: Strong theatre: Smart phones, iPods, home computers and online gaming are a few of the many substitute home entertainment products that consumers can use instead
Supplier Power: elecrontic components are inexpensive unless they are custom-made custom-made
Rivalry: Comes with a wireless controller and h adset (this allows ellow gamers to c mmunicate with one another).
New Entrants: Low threat: market is an oligarchy and difficult to enter
(Games Consoles Industry Profile: United States, 2009)
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Buyer Power: Stro g threat: was priced at $549, much higher t an Nintendo Wii. Toda it is priced at $300
PART 3: Recommendations and conclusions Overview When “Wii 2” is entered in to the Google search engine, many electronic gaming blogs appear in the search with titles like “New Wii by 2011”, “Nintendo to Release “Wii 2” in 2010, or “Rumor: Nintendo Wii 2 with Blu-ray and 1080p Coming in 2010?”. If a history of the video game console market is examined, a new console is released every five to seven years (GrabStats.com, 2010). While Nintendo has not confirmed whether they will be releasing a new console, the Wii was released in 2006. Based on industry trends, it can be assumed that a new console is due to be released by 2011 or 2012. Because the Wii was such considered cutting-edge technology in 2006. The company has many different parties to impress with a new system. They must please both fair-weather and hard core gamers as well as their shareholders. The company will build on the 2006 excitement created by the innovative remote controls by making improvements to the new system, Wii Too. With the release of a new console, a new integrated marketing communications plan will need to be designed and implemented for Wii Too.
General description of Wii Too Wii Too will improve upon the Wii by making the wireless remote controls more precise and responsive to movement to attract the new audience that won over customers in 2006. Since the original Wii did not impress hard-core gamers with its bigger selection of simpler gamers (over complex games with epic story lines) and rudimentary graphics, Wii Too will incorporate a more sophisticated graphics card that supports HD TV’s to offer some of the features and games hard core gamers want. Wii Too will be able to support a diverse array of games, from simple ones like bowling to sophisticated ones with beautiful graphics.
Comparison of actual Nintendo Strategy Currently, Nintendo has not confirmed a release of a new console. Additionally, there is not an active integrated marketing communications plan for the Nintendo Wii. In 2006, Nintendo implemented an aggressive marketing plan with the message “We would like to play.”
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“We would like to play too” plan, targeting “Happenin’ Moms” Long-term Strategic Strategic Objectives | 2011 - 2012 201 2 •
•
•
Nintendo will create and execute an integrated marketing communications plan that will increase brand loyalty among existing users. Additionally, Nintendo will increase sales to $20,000,000 with the impending Wii Too release. Nintendo will also fulfill their vision statement of “bringing people together” by continuing to create and commission games that allow groups of people to play together.
Cost (for the integrated marketing plan only)
Due to the popularity of the Wii console, revenue for 2008 was $16,724,230. The marketing budget for the specified target market will be 12.5 percent of 2008 sales and 10 percent of the 2010 sales totaling $2,000,000. Launch date
October 2011, in time for the holiday season. Budget (for the 2011 integrated marketing plan; United States only):
Budget 2011
TV advertising Internet Print advertising Outdoor advertising Events (PR) TOTAL
$600,000.00 $500,000.00 $500,000.00 $200,000.00 $200,000.00 $2,000,000.00
Assuming that revenue will increase to $20,000,000 in revenue the marketing budget will stay the same because 10 percent of sales will be used instead of 12.5%. Budget 2012
TV Advertising Internet Print advertising Outdoor advertising Events TOTAL
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$600,000.00 $500,000.00 $500,000.00 $200,000.00 $200,000.00 $2,000,000.00
Target market
While many different target markets will be selected for different communications plans, we will discuss how to make “Happenin’ Moms” consider Wii Too as a more inexpensive way for the family to spend time together. “Happenin’ Moms” are younger mothers between
ages 30 – 40. Most of these hip and cool mothers are married, have 2 – 3 children from 7 – 15 and have a full-time career. Their annual household income is $50,000 - $100,000.While shuttling the kids off to school, practice and other various activities, these time-strapped moms are looking for ways to bring the family together while keeping the kids happily entertained. Rationale: It’s not a secret that many women are the main decision makers on how money is spent in within families today. In the Forbes magazine article, Susan Malfa, a senior vice
president of sales for Bravo, Oxygen and Women@NBCU says that “Women are not only buying in the typical categories like groceries, home and family items, but they are also shopping for traditionally male and big-ticket items such as financial products and flat-screen TV's” (Goudreau, 2009). More so, the Forbes article describes “six out of ten women describe themselves as their family's "chief technology officer" and say they're just as involved as their husbands when it comes to buying devices and gadgets” (Goudreau, 2009). Marketing Message
Marketing communications will show “Happenin’ Moms” that Wii Too offers entertainment for the entire family. Advertising will also convey that mom can also use the console to work-out at home with the “Wii Active” and “Fit” games. Examples of headlines include: • • • • •
“We would like to play too” “There’s something for the whole family” “This isn’t your typical family night” “Creating new memories” “Everyday nights lead to special memories”
Examples of Marketing Vehicles for “Happenin’ Moms” •
•
TV Advertising Cable advertising (O Channel, TLC and HGTV) o o Network TV advertising (NBC, CBS, ABC) Internet Advertising Realsimple.com o o Facebook.com o Parenting.com Google AdWords o Additionally, Nintendo will develop an e-mail list and blast out information, family night ideas and offers to a targeted list. A fan page will be created on Facebook which will include updates and videos.
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•
Print o o o o
•
•
Real Simple Magazine Parenting Oprah Magazine Redbook
Outdoor/ambient advertising o Billboards and other advertising will be displayed near daycares and schools. Nintendo will also find some of the United States’ best cities to raise a family and o have artists create sidewalk chalk illustrations of families playing Wii Too. o Nintendo will also work with cereal companies to advertise and come up with special promotions on the back of cereal boxes to interest moms and kids. Events and Public Relations o Nintendo will sponsor family events around the country. They will make a Wii Too console stations available for families to try at the event. o Nintendo will also pitch stories to many media outlets like The Today Show, Good Morning America, related magazines, newspapers and blogs for press coverage.
Creating a Sustainable Competitive Advantage
Assuming that Playstation and Xbox will continue to exclusively market to hard-core gamers, Nintendo will continue to have a sustainable competitive advantage by making improvements to please both hard-core and fair-weather gamers increasing the pool of people who will consider using the game console. Nintendo had great success by asking everyone to consider the Wii as their gaming console of choice. Nintendo needs to build on this strategy by segmenting and targeting the masses, creating a more personal connection. Finally, it will become easier for kids to convince mom to consider the console if Nintendo has already demonstrated some benefits to mom, thus gaining approval on a more expensive toy (traditionally for kids and teens).
Evaluation Success of the plan will ultimately be determined by sales; however surveys will be conducted to find out demographics and psychographics of customers as well as questions to determine how customers are using the Wii Too (i.e. are customers playing games by themselves or as a family).
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Appendix A: Nintendo Annual Reports 2007 and 2008
(Note: 2006 information in included in the 2007 report)
2008
19
20
21
22
2007
23
24
25
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Appendix B: Nintendo Financial Ratios Nintendo
2006
2007
2008
Profitability Ratios
Gross profit margin Net return on sales Return on stockholders’ equity
42.24% 0.193183 0.100995
41.16% 41.86% 0.180325 0.153874 0.160407 0.206543
5.589003 5.419835 836456
2.94497 2.788138 926237
2.876486 2.718498 1079612
N/A
N/A
N/A
Liquidity Ratios
Current Ratio Quick ratio Working capital Leverage Ratios
Debt-to-assets
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