Nintendo is a major player in the video game industry. The company has successfully used a disruptive strategy to conquer the market. Sony’s Play Station (PS) and Microsoft’s Xbox have successfully gained their place in the market niche using improvements in technology. Nintendo has employed a disruptive strategy that involved the design of a gaming console that targeted non-gamers.
This enabled the company to improve its competitiveness. Within 3 years of launching the console, the company became the second most valuable company in Japan (Farhoomand, 2009). This is a clear indication of the success of Nintendo’s disruptive strategy.
The 1970s marked the birth of the video game industry. During this period, teenagers played video games in malls and game arcades. Later, the introduction of home consoles enabled people to play video games at home. The video game industry is a technology intensive industry. The development of the personal computer enabled people to play computer games instead of using proprietary consoles. However, video game consoles retained their popularity.
The last decade of the 20th century saw the introduction of Sony’s Play Station (PS) console. Sony’s advertising strategy enabled the product to become a hype entertainment. It allowed the company to attract the youth. The lucrativeness of the industry prompted Microsoft to join the market through the launch of the Xbox. High-definition (HD) video technologies made it possible for the companies to improve the quality of their games.
In addition, increased speed of broadband connectivity ensured the companies could offer services more efficiently. Since its onset, video game companies focused on gamers. Nintendo developed a strategy that focused non-gamers through the launch of the Wii. The Wii enabled the simulation real life games (Farhoomand, 2009).
Nintendo has utilized a disruptive strategy to gain a competitive advantage over the other players in the industry. Disruptive strategy attempts to discard old business clichés. It strives to remodel the landscape of the market.
Companies that use a disruptive strategy usually target certain situations where the complacency of their competitors has made them overlook or underserve certain customers. Therefore, a disruptive strategy leads to radical changes in the industry. It leads to a permanent change in the industry (Yami, Castaldo & Dagnino, 2010).
Traditionally, the video game industry focused on gamers. Therefore, it developed interactive games that attracted gamers. Technological advancements have increased the sophistication of games. This made it difficult for the gamers to understand some games. Nintendo strived to formulate a strategy that would reduce the complexity of games. In addition, it aimed to reach non-gamers as video game companies usually ignored the non-gamers.
Targeting non-gamers would enable the company to increase the number of its customers significantly. This strategy led to the development of the DS. The DS was a handheld device that increased interaction with gamers. Gamers could tap or write on a touch-screen with a stylus. This reduced the complexity of games. Gamers did not have to use complicated sets of buttons.
The success of the DS paved the way for the development of the Wii. The Wii had a controller that looked like a remote control panel. It had motion detectors that enabled gamers to play games by simply moving the controller. The motion detectors translated the movement of the controller to a screen. This made it possible to simulate real life games. The ease of use of the Wii was one of the major factors that fueled its popularity.
The Wii enabled Nintendo to capture non-gamers. Users could engage in push-ups, yoga, and other exercises. This enabled the product to have a significant impact on the health industry. In fact, various therapists recommend the use of the Wii in performing various activities that improve an individual’s health (Farhoomand, 2009). Nintendo’s disruptive strategy presented company a chance to improve its revenues.
Microsoft’s Xbox 360 was Wii’s major competitor. Microsoft launched the product in November 2005. This was approximately one year before the launch of the Wii. Microsoft’s head start of one year enabled the company to capture a sizeable percentage of the market. In addition, it provided the company with an opportunity to develop a huge archive of games prior to the launch of the Wii. The variety of games is one of the major factors that affects gamers’ decision to purchase a certain video game console.
Therefore, a huge archive of games improved the competitiveness of Xbox 360. Various parties believed that early entry into a market enabled Sony’s Play Station to capture the market. Therefore, Xbox 360’s early entry may have given it a competitive edge over other companies in the industry. Sony Play Station 3 (PS3) could not compete effectively with Wii since it was very expensive. In addition, it was not profitable. Sony made a loss upon the sale of each PS3 (Farhoomand, 2009).
Competitors should develop a new business model alongside their existing business models to enable them to counter the challenge posed by Nintendo. This strategy will enable the competitors to counter the threat posed by Nintendo while retaining various important aspects of their existing business models.
The competitors should ensure that the business models are in separate entities. This would prevent the entities from competing with each. This would avoid a situation where managers of the parent company may feel that the new business model is growing rapidly at the expense of the parent company. Therefore, they may try to constrain it.
Having a new business model prevents the parent company’s existing culture and practices from being an impediment to the success of the new business model. It is a fact that the current business models of Microsoft and Sony are the major barriers that inhibit the ability of the companies to compete effectively with Nintendo. The business models make it difficult to produce products at a low cost. This reduces the profit margin of the companies. In addition, it necessitates the companies to sell their products at very high prices.
This reduces the competitiveness of their products. The companies should develop a new business model that focuses on the cost effectiveness of their products. This may necessitate the development of new low-priced video game consoles. These consoles may have a lower quality than the initial consoles of the companies. This may require the companies to launch a new line of low-priced products.
This would enable the companies to retain their existing customers and create a new market segment in the industry. The new products would compete with Nintendo’s Wii on price. On the other hand, the old video game consoles would compete with the Wii on quality. Therefore, this strategy will enable the companies to tackle Nintendo from two fronts. This would increase the likelihood of the companies wresting control of the industry from Nintendo.
References
Farhoomand, A. (2009). Nintendo’s disruptive strategy: Implications for the video game industry. Hong Kong: Asia Case Research Center.
Yami, S., Castaldo, S. & Dagnino, B. (2010). Coopetition: Winning strategies for the 21st century. London: Edward Elgar Publishing.