Introduction
Nintendo is among the most famous gaming console manufacturers in the world. Sony and Microsoft are the main competitors, attracting many customers with their PlayStation and Xbox. Each organization has its market share, and they do their best to overcome the other rivals. The financial ratio analysis and additional research activities demonstrate that Nintendo has a competitive advantage because of its high net profit margin.
Analysis
The financial ratio analysis framework implies that specific metrics of the selected organizations must be compared. This assignment deals with data from the last five years for Nintendo and its competitors. Most attention is drawn to the net profit margin because this indicator shows the percentage of net revenue converted into profits. If this margin is high, it is more likely that this company will have a competitive advantage.
Microsoft
A suitable strategy is to analyze the financial ratios of the three organizations. Figure 1 demonstrates that Microsoft’s Net Profit Margin doubled between 2018 and 2019. Since then, this metric has been above 30 and shown less significant year-to-year fluctuations (Macrotrends, n.d.a). In 2022, the selected margin was 36.6863, a decent outcome (Macrotrends, n.d.a).
Nintendo
Figure 2 by Macrotrends (n.d.b) shows that Nintendo experienced a gradual increase in the Net Profit Margin from 2018 to 2022. Over this period, the selected metric grew significantly from 13.2227 to 28.1766.
Sony
Sony is in a different situation because its Net Profit Margin demonstrated the most notable year-to-year fluctuations in both directions. As per Figure 3, the margin’s lowest point was 5.7443 in 2018, reaching its peak in 2021 with 13.0207, while 2022 saw a value of 8.8916 (Macrotrends, n.d.c). This analysis might demonstrate that Sony has the highest Net Profit Margin and, therefore, a competitive advantage, while Sony is in the most disadvantaged position.
Comparison
However, one should understand that this straightforward comparison is not working because Sony and Microsoft consist of many segments, and gaming consoles only represent one of them. In particular, the discussed Net Profit Margins may present a distorted picture, leading to false conclusions. That is why it is reasonable to find additional information to help identify whether Nintendo has a competitive advantage.
The presented case analysis mentions that Sony and Microsoft suffer losses while manufacturing their consoles, while Nintendo is the only business with a significant profit margin (Case 20, n.d.). In addition, the company expects that many people played Nintendo games in the past but have not purchased a console (Case 20, n.d.). These individuals are indicators of Nintendo’s competitive advantage and will drive future growth.
Conclusion
In conclusion, the assignment has demonstrated that Nintendo, Sony, and Microsoft are leading rivals in the niche of gaming consoles. These organizations compete to get higher market shares, and it is reasonable to identify which company succeeds. The financial ratio analysis allowed for comparing the three organizations’ net profit margins.
This framework demonstrated that Microsoft had the highest margin, but this outcome may be distorted because the company has many segments. Additional research activities were conducted to determine that Nintendo has a competitive advantage because this organization has the highest profit margin in the gaming console niche. Furthermore, Nintendo expects a stable inflow of customers in the future, which will help it overcome its competitors.
References
Case 20. (n.d.). Nintendo: Could the Switch turn on gamers? [PDF document].
Macrotrends. (n.d.a). Microsoft financial ratios for analysis 2009-2023 / MSFT. Web.
Macrotrends. (n.d.b). Nintendo financial ratios for analysis 2009-2023 / NTDOY. Web.
Macrotrends. (n.d.c). Sony financial ratios for analysis 2009-2023 / SONY. Web.