This paper analyzes the case study on Nintendo case study on the rise and the eventual decline in the company’s revenues over time. The aim of this paper is to identify the mistakes that were made by the management of the company and which contributed to the decline of the companies` revenues and loss of market share in the gaming industry. The paper will analyze the case study from the point of the companies formation to the present day in order to identify all the major ups and downs for the company and the major strategies undertaking by the company over the years. Nintendo has faced a sharp and continuous decline in revenues since the year 2010(Jin,2017). This decline in revenues has been a point of concern for the management of the company as it loses its market share in the video games industry to rival companies such as Sony and Microsoft(Rugman And Collinson, 2009). The fall in revenue and market share has mainly been due to delay by the company in venturing into the online video games industry. The traditional gaming was becoming phased out by the new online gaming as customers viewed it as easier to use by the mobile phone device(Lee& pulos, 2016). The analysis also suggests possible solutions to the problems that faced Nintendo.
Nintendo is a company and therefore, it’s made up of various stakeholders. The stakeholders play various different roles in the company and they contribute to the success of the company. The major stakeholders in Nintendo are the shareholders who own the company. Nintendo is a publicly owned company with its shares traded in the Japanese stock market.(Ireland, Hoskisson & Hitt, 2008) The owners of the company are very important stakeholders since they play a role in determining how the company is run. The major shareholder of Nintendo is the Yamauchi family(Information resources management association,2015). The company was family owned until it decided to go public. The problem that the stakeholders are facing is that the decline in the company’s revenue decreases the value of their shares and the dividends paid to them is low. The other stakeholders who play a major role in Nintendo are the employees of the company. The company had more than 5,100 employees at the beginning of 2017.Nintendo employees play a very significant role in the development of products. The company has a very creative group of software designers based in Tokyo whose main goal is to come up with new innovative ideas that are relevant for the companies` growth (Consalvo, 2016). The employees help in implementing the company’s agenda and work towards fulfilling the vision of the company. The problem being faced by the employees is that they risk losing their jobs due to retrenchment in order to reduce the costs.
The company’s management team composing of senior and middle-level managers is also very important stakeholders for the company. They are in charge of running the companies day to day operations which eventually determines the company’s overall performance. The managers of the company are also the decision makers and the choices they make on the behalf of shareholders are very crucial in determining the success of the company. The management team of the company is responsible for the problems the company is facing and they are faced with the challenge of turning around the companies` fortunes and making it more competitive. They face the problem of being demoted or getting sacked. The suppliers and the partners of the company play a crucial role in Nintendo. The company has contracted many suppliers to supply the materials necessary for manufacturing hardware gaming devices. The company has many partnerships with other companies that help the companies grow its market share as well as minimize its costs. The other stakeholders for Nintendo are the consumers. The problem that the consumers are facing according to the case study under review is that they are not able to buy as innovative and exciting products from Nintendo as they used to do. The loyal consumers are at crossroads.
The main objective of this case study analysis is to identify the positive and negative aspects and actions taken by the company, that have shaped the performance of the company since it was started more than 27 years ago. The possible solutions to the problems experienced are recommended and possible improvements are also recommended. The paper seeks to suggest what could have been done differently to prevent the dismal performance of the company as is happening now.
The concerns for the shareholders of the company is that the companies` value and competitiveness are declining and this may impact greatly on their invested capital (Firestone, 2011). The employees are also concerned about the downfall of the company since they have an attachment to it and poor performance by the company means they are performing poorly too. The government may also be concerned with the decline in revenues means a decline in taxes paid and eventual loss of employment. The other concern that can be identified in this case is the concern by the management that the company was once the leading in video games industry but stiff competition and failure to implement right strategies have robbed it of the position.
Despite the recent challenges that Nintendo has been facing, the companies` journey since its formation is mainly a success story. There are many positive actions and successful strategies that have been implemented by the company hence helping it to grow to the point of attaining the revenue mark of $1.4billion (Anderson, Gentile, & Buckley, 2007). There were key decisions during the tenure of various people as presidents of the company that shaped the company’s future. The very crucial decision that helped Nintendo to get a breakthrough in the gaming industry is the license that Sekiryo acquired to use Disney characters in its video games. This decision helped the company to become more popular since Disney characters were already popular world over by this time.
The very enterprising and innovative new president for the company in 1966 helped the company to grow further. He came up with the idea of developing electronic toys that were unique in design. This idea became a major coup for the company since this was never seen before as people were used to wooden and plastic toys and dolls.
The introduction of Laser Clay Shooting and projection system in 1947 excited many users and the entire industry players. During this period, the company went on an innovation spree and it produced a series of games that were very popular with users. The games had creative titles such as “The Legend of Zelda” and “Donkey Kong”. The high level of creativity during this period was a major positive for the company and its value grew three fold.
Between 1981 and 1990, the revenue for the company grew from a mere $0.2billion to $2billion(Bossom & dunning, 2017). The growth in revenue was due to Hiroshi`s focus on innovation and new product development. During the 1990`s Nintendo was a superior leader in console gaming industry and it had a market share surpassing 90%.
By the turn of the century, Nintendo ventured and conquered the console gaming industry in Europe and North America. The development of Wii was another high point for the company and it helped to double the revenues of the company.
The major mistake that brought about the woes that Nintendo is undergoing now is the failure in strategy, the decision by the company’s management to ignore the online gaming market which was new and growing at the beginning of 2001 (Novak, 2012). The decision to focus solely on the traditional gaming devices was definitely a strategy mistake by the management of the company. It presented an opportunity for its competitors to grow without any counter action and with time, the results of this decision could be felt. The fast changing technology meant that people were no longer interested in playing console games and the traditional video gaming devices were abandoned.
The increasing use of the internet also meant that more people were interests playing games on their PC or mobile devices which could assess the internet. The company under the leadership of Iwata failed to acknowledge the changing consumer needs and act accordingly(Lee & pulos, 2016). The competitors who were Sony with its leading brand Sony Play Station together with Microsoft through XBox took full advantage of this and they developed games that consumers needed and they both enjoyed success in the market(Verbeke, 2013).Nintendo finally recognized the importance of the mobile gaming market in 2014 and it ventured the market. Nintendo’s failure to protect its intellectual property rights was also not a smart move. It is estimated that in the year 2010, Nintendo lost more than ?112billion on piracy.
The major problem that Nintendo needs to contend with is stiff competition from both PlayStation and Xbox. The other major problem that Nintendo is facing is that of infringement on intellectual property rights. The company is losing billions of Japanese yen per year through piracy and this has a huge effect on its revenue(Chan And Chan,2016). The net sales by the company have been decreasing drastically until they hit a record low of 549,780units(Wolf, 2015). The total assets value for Nintendo has also been decreasing as evidenced in the financial reports in the case study. The revolution of the gaming industry and failure of the company to accommodate the changing consumer demands is the major problem for Nintendo.
In order to solve the problem of competition, Nintendo has to put together strategies that will help the company to retain its competitive advantage and therefore outperform its rivals in the market. The decision by Nintendo to enter the mobile gaming industry in 2014 is a step in the right direction towards ensuring that Nintendo becomes more competitive in the market(Claudio, 2013). The company has to become more innovative and to develop superior products. Nintendo also needs to concentrate on making online video games and mobile phone games which are becoming more popular by the day. This move will help the company to increase its competitiveness. The problem of infringement on the patent right should be solved by the company patenting each and every idea or product made(Daidj,2015).The piracy problem can be reduced by prosecuting the people found to have infringed on the rights of the company and this will help to discourage similar occurrences.
The problem of decreasing revenue can be solved mainly by understanding consumer needs and reacting accordingly(Verbeke, 2013). The company should keep up with the pace of technological advancement and revive its research and development department so as to help the company develop more innovative products. This will help to increase the demand for the company’s products and hence increase revenue.
The loss of revenue due to infringement of intellectual property rights should be resolved by the company taking legal action against all perpetrators. The company can also price its products fairly so as to discourage piracy due to the high prices of products.
Nintendo should focus on making software and source out a partner to manufacture the hardware. This will help the company to focus on the core functions of the business and to manage cost and therefore the revenues and profits will increase. Nintendo can also increase its revenue by issuing licenses to the companies that need to use its characters as long as they are not direct competitors. The costs of the company should be cut down by restructuring the company so as to make it more efficient.
The suggested solutions will be of huge impact to the management of Nintendo. The solutions with help the management to identify the reasons why the revenue of the company has been declining and evaluate the solutions suggested here so as to consider how practical they are for his company. The suggested solutions will help Nintendo to turn around by reducing costs and increasing sales for the company.
Conclusion
The paper has analyzed at length the case study of Nintendo Company and to identify the high points and low points in the company’s history since its formation. The essay also discusses the possible solutions to these problems. Nintendo should invest in research and development in order to ensure that the company continuously develops products that are very competitive in the market. Nintendo should also use the focus strategy and ensure that they focus on developing software only and procure hardware from other companies which have a cost advantage. Nintendo also needs to deal with the infringement of intellectual property rights by consistently prosecuting perpetrators so as to ensure that individuals understand the seriousness of this crime.
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