Nintendo SWOT Analysis

Strengths With one of Nintendo’s strengths being its reputable brand, Nintendo has a widespread distribution channel extending beyond the traditional wholesalers. Consumers can find Nintendo products at numerous high-end retailers as well as retail websites such as Amazon. From its establishment in Japan, Nintendo has since grown to have a strong presence overseas in terms of distribution networks. Despite the roots of Nintendo being the production of playing cards, the company is synonymously recognized with gaming in today’s society as opposed to its primary competitors, including Sony and Microsoft. Recently, Nintendo has entered a tie-up with Disney. This partnership with a distinguished multi-billion-dollar company expanded their influence and appeal to children, which is their primary customer segment. By strategically implementing everyone’s favorite Disney characters on Nintendo playing cards, this will help strengthen their market. The infamous logo is adopted globally, and its products is suitable for all markets and age groups, from infants to even the elderly. Such universal presence and geographical diversification mean that the company won’t be over-reliant on specific target groups, reducing business risks. The Nintendo DS, to illustrate, is ideal for travel and on-the-go gaming due to its mobile size. The Wii, on the other hand, acts more as a family and party entertainment device which is to be aired on a big screen; moreover, it is suitable for fitness and sport purposes, too. Nintendo was also able to implement the process of skim pricing, which is when the company initially sets a high price for a product, but then lowers the price the longer the product is on the shelf. Nintendo was able to successfully charge excessive prices for limited products. Then, as they mass produced the item, they lowered the price to maximize profits. Weaknesses From the very beginning, Nintendo’s main target audience were people who loved to play video games. However, in 2006, with the introduction of the Wii, Nintendo shifted their focus and broadened their market and customer base by creating a console that lured in a new type of audience; non-gamers and families. Zeroing in on these specific audiences meant that they had to create games that were able to attract a wide range of new customers while also maintaining their old ones. This led to the creation of more family orientated games with simpler storylines and child friendly gameplay. Although the Wii became a major hit with Nintendo’s new customers, many of the serious gamers looked to other companies such as Sony and Microsoft for games that had a more in-depth gaming experience. Shifting their focus caused Nintendo to alienate one audience from another, thus leading to a loss of their old customers. Nintendo’s games are low margin items. The company relies on large volumes for profit, which can be difficult given that they share the market with many competitors, both big and small. There is a high cost of promotion as well. Nintendo launches new products frequently, and some of these products require a lot of resources for marketing. A part of their marketing strategy is to hand out free items during launches which cuts into their profit margin. Nintendo relies on outside manufacturers for acquiring parts and assembling their products. Oftentimes, these manufacturers are located overseas. If for some reason there was a conflict between Nintendo and its manufacturer(s), production of games, consoles, and more would come to a halt, which can have a great impact on the development, sales, and profits of the company. The dependency on outsourcing leads Nintendo to have a competitive disadvantage. Opportunities The majority of today’s gaming occurs online. Enhancing the Wi-FI capabilities to Nintendo’s products provides a door of opportunity for the company. With the most recent release of the Nintendo Switch, the revival and renewal of renowned gaming titles, including The Legend of Zelda: Breath of the Wild and Mario Kart 8, increases the consumer market by gaining more appeal from millennials and post-millennials who grew up with character such as Link and Mario. Bringing a sense of nostalgic childhood will influence customer groups to want to come back for more with enhanced quality and graphics. The portable size of the device, as well as the ability to link up to 8 controllers, provides endless possibilities, providing options between handheld mode for gaming on-the-go and party mode by linking the console to the big screen. Another huge opportunity for Nintendo is the fast-growing virtual reality (VR) gaming industry. According to the data from Statista, the estimated VR video gaming sales revenue worldwide is currently $15.1 billion, and this number will increase to $22.9 billion by 2020. As one of Nintendo’s major competitor, Sony had already released its VR headset for their PlayStation 4 console in October 2016. Now, customers can purchase and play more than 200 VR games on PS4. Unfortunately, none of Nintendo’s released products support VR gaming, including their latest product, the Nintendo Switch. Nintendo has put itself in an underdog position; however, the VR gaming industry is a new industry, so there are still a lot of opportunities to be found. Nintendo has realized that it is important and necessary to seek opportunity in the VR gaming industry. Some gamers noticed that after a system update on August 2018, Nintendo has added a VR mode to its Switch console. Threats Nintendo operates in a highly competitive industry. Specifically in the gaming industry, Nintendo’s main competitors are Microsoft, with the Xbox, and Sony, with the PlayStation. Nintendo also competes with other entertainment companies for consumers’ free time and disposable income. The barriers to entry are quite low since anybody with coding knowledge can develop games. The threat of substitution is quite high since consumers have the option to use online games or apps on their smartphones. The evolving aspects of the gaming industry have created this new threat since most people already have a smartphone, making it the most accessible to utilize. Such intense competition can lead to downward price pressures which would decrease Nintendo’s revenues and market share. Additionally, piracy poses a big threat to Nintendo’s games. With technology advancing so rapidly, peer-to-peer networks and high-capacity transmission via the Internet has allowed the copying of Nintendo’s products to become increasingly easy. Brand’s biggest threats The biggest threats to Nintendo are Microsoft and Sony with the Xbox and PlayStation, respectively. These three companies together are the major leaders in the gaming industry and are constantly in competition to offer the most desired product or service. All three companies offer their own version of the “ideal gaming console” to try and promote over their competitors. With regards to Nintendo, Sony and Microsoft both released many console exclusives in 2018 that made it more challenging for Nintendo to acquire new users and maintain the users they already had. Console exclusives mean that the game will only release for a certain gaming console, giving that specific company more leverage over their competitors. Some of these PlayStation exclusive titles included, God of War and Detroit: Become Human. Both of these titles proved to be a great success in the market and, for many users, was the deciding factor when it came to choosing a console. For Xbox, titles such as Forza Horizon 4, Sea of Thieves, and State of Decay 2 were exclusively released for Xbox users, with the first two titles being some of the most popular ones released. Another aspect to take into consideration when determining threats to Nintendo would be online gaming services provided. Both Sony and Microsoft have done an excellent job of connecting their console users with one another with streamlined online servers and services. Their services PlayStation Plus and Xbox Live both provide solidified and stable services to their respective gaming communities. On the other hand, Nintendo online services are still relatively new. Additionally, the unstableness and lack of features may deter some users away from Nintendo and towards one of their competitors. For many gamers, online activity is one of the most important aspects to take into consideration, and with Nintendo lacking the proficient online services at the moment, their competitors, Sony and Microsoft, continue to pose a large threat.