Expalin how to manage the strategy of an organisation.
Managing the strategy of an organisation is an essential activity of the management. The paper has been developed to conduct a strategic analysis of Nintendo. Nintendo is a consumer goods producing company of Japan, established in the year 1889. Currently, the company has a large range of product portfolio that supports the demand of the consumers includes gaming devices such as Wii U™ and Wii™, Nintendo 3DS™ as well as Nintendo DS™ and games including Super Mario™, Pokémon™, Donkey Kong™ and Metroid™ (https://www.nintendo.com/, 2016). Nintendo has been identified as the world largest video gaming company with its latest technology and innovative products. Its principle competitors and products are Sony’s PS4 and Microsoft’s Xbox (Adam Hartung, 2016). The study has indentified the problems faced by the company such as expiry of product lifecycle and inadequate strategy to compete. Along with that, the immense competition in the market and changing taste of the consumers has created issues for the company to carry on its growth (https://www.nintendo.com/, 2016). The report will focus on strategic direction of Nintendo which include analysis of external environment using PESTEL and Porter’s five forces. The internal environment will be analysed through VRIO, SWOT and other Strategic analysis. In order to overcome the strategic problems, necessary strategic changes have been recommended that are required to achieve the missions, vision and objectives of the company.
Nintendo has aimed to become the leading company of the electronic gaming console industry. The company is strongly committed to their target demographics to provide best products and support assistance in services. Best product manufacturing and marketing is another vital corporate mission of the organisation. Meanwhile, the organisation has truly committed towards the market customers providing products with highest quality. Along with that, the one of the primary missions of Nintendo is to deal the customers attentively to improve the customer services and product services. Moreover, the organisation has identified the responsibility committed towards the employees so that the human resources can establish commitment and enthusiasm to provide excellent support services (https://www.nintendo.com/, 2016). High quality product manufacturing and best product services can be identified as the main agenda of the vision statement. By listening to the target customers closely, the brand has wanted to establish a unique stage for the customers. Primarily, in the next couple of years, the electronics manufacturing organisation has promised to take maximum market shares from the competitors such as Sony Corporation to become the leader of the pack (Barney and Hesterly, 2006). In terms of current objective statement, new technological advancement and innovation in electronic products have been identified as the key factors to success of the organisation. Arguably, at the present business scenario, the mission and vision statement are not smart enough to support the objectives and business goals. To motivate the subordinates, the organisational management must step forward providing significant business training to achieve the targets. Also, to put the focus on the objectives, clear and unique goals must be identified to support the business. As a result of the scenario, the current vision statement can be changed according to the objectives of Nintendo.
Currently, there are some issues in the financial status as some of the mission and vision statements have remained underperformed. Nintendo should establish new mission statements: “Innovate high-quality and unique entertainment products and provides value services accessible to universal.”, and the mission statement comes along with the company’s vision statement: “Bringing people closer together.” make it more powerful, compelling and memorable when communicating with employees
An environmental analysis is required to observe the factors that are creating different issues for the Nintendo to grow in the current business scenario. A PESTEL analysis and Porter’s five force analysis has been presented in this section to analyse the market factors and industry in which Nintendo is operating.
A PESTEL analysis has been presented for Nintendo herein below:
Political Factors: It is important to note that the political instability in different countries have made it difficult for the company to carry on with its current strategy. There is a need of flexible strategy that will help the company overcome the political burdens (Porter, 2008). The changes in the tax rates and trading policies have created problems for the company. Hence, the political factor can be identified as a threat for the international business environment.
Economic Factors: A financial downturn can be evident in the world economy that has created problem for the company to carry on with its present strategy (Ficklscherer et al., 2016). The financial downturn has resulted in low income of the people that reduced the sales of the company. Hence, the current economic factor acts as threat for the company.
Socio-cultural Factors: The changes in the cultural factors and taste of the consumers have led to increase in the demand for electronic products. Hence, it provides the electronic manufacturers with an opportunity to grow its business with a product differentiation strategy (Plow and Finlayson, 2011).
Technological Factors: Developing technology acts as a boon as well as curse for the electronic manufacturers. It helps the producers to create innovative products as well as supports the competitors to develop substitute products that provide Nintendo with high level of competition (Ficklscherer et al., 2016). Hence, the technological factors act as a threat to the international electronic industry.
Environmental Factors: The changes in the environmental regulations have made it mandatory for the producers to imply corporate social responsibilities to have a competitive advantage in the market (Plow and Finlayson, 2011). Hence, it increases the expenditure of the companies operating in the global electronic industry.
Legal Factors: The companies operating in the electronic industry needs to meet several legal obligations related to production of electronic products. Some of the major legal obligations are Consumer Protection Act, Environmental legislations, proper licensing and others. Hence, it acts as threat to the global industry (Ficklscherer et al., 2016).
Porter’s five forces analysis has been presented below to observe the current situation of the industry in which Nintendo is operating:
Buyers Bargaining Power: The buyer’s bargaining power is high in the market because of availability of huge number of electronic goods producing companies in the market. Hence, the company faces a huge competition in the market (Plow and Finlayson, 2013). There is a need of product differentiation and competitive pricing policy that will help the company to carry on its growth in the market.
Suppliers Bargaining Power: There are a huge number of suppliers in the electronic products industry that reduces the power of the suppliers. Hence, the company can shift from one supplier to another to minimise its cost of production and have competitive advantage in the market (Huang et al., 2015).
Threats of current Rivalry: Looking into the statistical figures of the electronic industry, it can be seen that there are a huge number electronic producers in the market that sell innovative products at a lower price (Kim, Lee and Shin, 2015). Hence, the threats from current rivalry in high in the electronic industry.
Threats of Substitution: The threat of substitution for Nintendo is high because of the presence of low grade Chinese and Japanese products in the market (Plow and Finlayson, 2013). Along with that, Sony is a major competitor of Nintendo that produces play station and gaming consoles.
Threats of new entry: The threats from new entrants is medium because any company entering the electronics market need a huge investment to compete major companies like Nintendo and Sony (Kim, Lee and Shin, 2015).
Value Chain Analysis
The value chain analysis of Nintendo has been segmented in two different sections such as demand fulfilment and demand generation. In case of demand fulfilment, inbound logistics, operations and outbound logistics have been followed. The inbound logistic performs materials handling, warehousing and controlling the inventory. Packaging, assembling and conversions have been done in operations (Ouzrout et al., 2009). Finally, order processing, shipment and delivery have been done in outbound logistics (Plow and Finlayson, 2011). Demand generation segment includes marketing and sales and after sales service have been promoted to create significant development. Effective marketing and services have boosted the business structure of Nintendo. The support activities of value chain include procurement, technological development, human resources and modern infrastructure to show the strengths. A value chain model has been presented below:
Managing the strategy of an organisation is an essential activity of the management. The paper has been developed to conduct a strategic analysis of Nintendo. Nintendo is a consumer goods producing company of Japan, established in the year 1889. Currently, the company has a large range of product portfolio that supports the demand of the consumers includes gaming devices such as Wii U™ and Wii™, Nintendo 3DS™ as well as Nintendo DS™ and games including Super Mario™, Pokémon™, Donkey Kong™ and Metroid™ (https://www.nintendo.com/, 2016). Nintendo has been identified as the world largest video gaming company with its latest technology and innovative products. Its principle competitors and products are Sony’s PS4 and Microsoft’s Xbox (Adam Hartung, 2016). The study has indentified the problems faced by the company such as expiry of product lifecycle and inadequate strategy to compete. Along with that, the immense competition in the market and changing taste of the consumers has created issues for the company to carry on its growth (https://www.nintendo.com/, 2016). The report will focus on strategic direction of Nintendo which include analysis of external environment using PESTEL and Porter’s five forces. The internal environment will be analysed through VRIO, SWOT and other Strategic analysis. In order to overcome the strategic problems, necessary strategic changes have been recommended that are required to achieve the missions, vision and objectives of the company.
Nintendo has aimed to become the leading company of the electronic gaming console industry. The company is strongly committed to their target demographics to provide best products and support assistance in services. Best product manufacturing and marketing is another vital corporate mission of the organisation. Meanwhile, the organisation has truly committed towards the market customers providing products with highest quality. Along with that, the one of the primary missions of Nintendo is to deal the customers attentively to improve the customer services and product services. Moreover, the organisation has identified the responsibility committed towards the employees so that the human resources can establish commitment and enthusiasm to provide excellent support services (https://www.nintendo.com/, 2016). High quality product manufacturing and best product services can be identified as the main agenda of the vision statement. By listening to the target customers closely, the brand has wanted to establish a unique stage for the customers. Primarily, in the next couple of years, the electronics manufacturing organisation has promised to take maximum market shares from the competitors such as Sony Corporation to become the leader of the pack (Barney and Hesterly, 2006). In terms of current objective statement, new technological advancement and innovation in electronic products have been identified as the key factors to success of the organisation. Arguably, at the present business scenario, the mission and vision statement are not smart enough to support the objectives and business goals. To motivate the subordinates, the organisational management must step forward providing significant business training to achieve the targets. Also, to put the focus on the objectives, clear and unique goals must be identified to support the business. As a result of the scenario, the current vision statement can be changed according to the objectives of Nintendo.
Currently, there are some issues in the financial status as some of the mission and vision statements have remained underperformed. Nintendo should establish new mission statements: “Innovate high-quality and unique entertainment products and provides value services accessible to universal.”, and the mission statement comes along with the company’s vision statement: “Bringing people closer together.” make it more powerful, compelling and memorable when communicating with employees.
An environmental analysis is required to observe the factors that are creating different issues for the Nintendo to grow in the current business scenario. A PESTEL analysis and Porter’s five force analysis has been presented in this section to analyse the market factors and industry in which Nintendo is operating.
A PESTEL analysis has been presented for Nintendo herein below:
Political Factors: It is important to note that the political instability in different countries have made it difficult for the company to carry on with its current strategy. There is a need of flexible strategy that will help the company overcome the political burdens (Porter, 2008). The changes in the tax rates and trading policies have created problems for the company. Hence, the political factor can be identified as a threat for the international business environment.
Economic Factors: A financial downturn can be evident in the world economy that has created problem for the company to carry on with its present strategy (Ficklscherer et al., 2016). The financial downturn has resulted in low income of the people that reduced the sales of the company. Hence, the current economic factor acts as threat for the company.
Socio-cultural Factors: The changes in the cultural factors and taste of the consumers have led to increase in the demand for electronic products. Hence, it provides the electronic manufacturers with an opportunity to grow its business with a product differentiation strategy (Plow and Finlayson, 2011).
Technological Factors: Developing technology acts as a boon as well as curse for the electronic manufacturers. It helps the producers to create innovative products as well as supports the competitors to develop substitute products that provide Nintendo with high level of competition (Ficklscherer et al., 2016). Hence, the technological factors act as a threat to the international electronic industry.
Environmental Factors: The changes in the environmental regulations have made it mandatory for the producers to imply corporate social responsibilities to have a competitive advantage in the market (Plow and Finlayson, 2011). Hence, it increases the expenditure of the companies operating in the global electronic industry.
Legal Factors: The companies operating in the electronic industry needs to meet several legal obligations related to production of electronic products. Some of the major legal obligations are Consumer Protection Act, Environmental legislations, proper licensing and others. Hence, it acts as threat to the global industry (Ficklscherer et al., 2016).
Porter’s five forces analysis has been presented below to observe the current situation of the industry in which Nintendo is operating:
Buyers Bargaining Power: The buyer’s bargaining power is high in the market because of availability of huge number of electronic goods producing companies in the market. Hence, the company faces a huge competition in the market (Plow and Finlayson, 2013). There is a need of product differentiation and competitive pricing policy that will help the company to carry on its growth in the market.
Suppliers Bargaining Power: There are a huge number of suppliers in the electronic products industry that reduces the power of the suppliers. Hence, the company can shift from one supplier to another to minimise its cost of production and have competitive advantage in the market (Huang et al., 2015).
Threats of current Rivalry: Looking into the statistical figures of the electronic industry, it can be seen that there are a huge number electronic producers in the market that sell innovative products at a lower price (Kim, Lee and Shin, 2015). Hence, the threats from current rivalry in high in the electronic industry.
Threats of Substitution: The threat of substitution for Nintendo is high because of the presence of low grade Chinese and Japanese products in the market (Plow and Finlayson, 2013). Along with that, Sony is a major competitor of Nintendo that produces play station and gaming consoles.
Threats of new entry: The threats from new entrants is medium because any company entering the electronics market need a huge investment to compete major companies like Nintendo and Sony (Kim, Lee and Shin, 2015).
Value Chain Analysis
The value chain analysis of Nintendo has been segmented in two different sections such as demand fulfilment and demand generation. In case of demand fulfilment, inbound logistics, operations and outbound logistics have been followed. The inbound logistic performs materials handling, warehousing and controlling the inventory. Packaging, assembling and conversions have been done in operations (Ouzrout et al., 2009). Finally, order processing, shipment and delivery have been done in outbound logistics (Plow and Finlayson, 2011). Demand generation segment includes marketing and sales and after sales service have been promoted to create significant development. Effective marketing and services have boosted the business structure of Nintendo. The support activities of value chain include procurement, technological development, human resources and modern infrastructure to show the strengths. A value chain model has been presented below:
• Tough Market Competition: Identifying the current scenario of the market, Nintendo has faced significant market competition from competitors such as Sony and Microsoft. Latest gaming consoles launched by the competitors have captured the maximum market share from the organisation (Hilman, 2015).
• Latest Technology in Gaming Industry: Modern technology in the gaming industry has been another issue in business model. As the technology has been updated on a regular basis, the life-cycle of the products has been shortened very fast (Lapersonne, 2013). Therefore, it creates problem for the gaming console manufacturing company like Nintendo.
• Lack of Innovation: On the other side, the R&D team of Nintendo has failed to launch net set of innovative gaming software or consoles to beat the competitor’s products. Therefore, the business sector of the company has shrunken notably in the recent couple of years.
Porter’s Generic Strategy
In order to create competitive advantage in the market, Nintendo must identify cost focus in the narrow market whereas in terms of broader perspective product differentiation will be evident based on Porter’s Generic Strategies. Meanwhile, the company will follow business level strategy as there is still an opportunity to stabilise its position in the industry (Eldring, 2009). Hence, the company does not need any corporate level strategy such as merger and acquisition. In the Appendix D, Porter’s Generic Strategies for competitive advantage has been shown. Through the identification of existing scenario of Nintendo, the cost of the products must be increased to penetrate the segment markets at a robust pace (Thompson, Strickland and Gamble, 2008).
By focusing on the product cost, the organisation should identify alternative ways to manage cost of manufacturing so that latest gaming consoles can be offered to the target demographics at an affordable price range for narrow time frame. On the other hand, in broader perspective, the R&D team of the organisation needs to invent some unique gaming consoles and software that can set a new trend in the upcoming future (Cohen, 2006). Such advanced decision making must required additional financial funding to promote differentiation.
In order to identify the success of the proposed strategy, the organisation’s position and market share must be analysed. By targeting the prime customers for the products, effective sales target can be promoted to be achieved (Pearson, 2009). On the other hand product differentiation can provide new objectives at the broader market perspective. As the current market of the gaming consoles has significant demand of latest gaming software, the organisation can utilise the opportunity to improve the sales and net income (De Kluyver and Pearce, 2009). Currently, innovation is a key challenge for the business of the company. Hence, product differentiation may provide the edge over the current situation. The best selling provide can supply the profit margin required by the organisation for success.
The latest strategy must be utilised promptly to understand the effect on the sales of the products. Meanwhile, the success rate of the strategy must be described to the management to meet the expectations of the stakeholders. Through the identification of standard procedure of the strategy, a list-to-do must be developed to analyse the risk and reward (Lapersonne, 2013). Moreover, the strategy must identify the level of competitive advantage to be drawn through this move. The critical factors and advantage of the product differentiation strategy will certainly help the organisation to recover the lost pride in the upcoming business environment.
Nintendo has a good market research and development team capable of developing innovative ideas and products. Though the company is passing through financial downturn, it can apply for new loans to invest on product development. It can hire new talents and buy new ideas from the market (Ghamari, 2010). Hence, the product differentiation strategy with a focus in narrow market segment is the suitable strategy to maintain its growth and achieve its mission, vision and objectives.
Conclusion and recommendations
Analysing the strategic scenario of Nintendo, it can be seen that the company needs a product differentiation focus strategy to achieve its mission, vision and objectives. A product differentiation for the segmented market will help the company to fight the immense competition against Sony. Along with that, the company needs to invest capital on research and development to produce innovative product. It can focus on developing new products other than gaming consoles to seek growth in the market. The new products will help the company to achieve competitive advantage in the market and have a better market positioning. For instance, the new product category may include Real-time strategy video games that can be played via personal computers. Such gaming products can open up new market for the company. Furthermore, the company has announced the release of new NX console by March 2017 to support the business. Herein, The Verge has been utilised tactically by the organisation to promote innovative products such as Power Glove, Wii U Gamepad, Beam Gun, Wii Nunchuk Controller and Wii U Pro Controller for additional business development in the target market. The latest Nintendo products will certainly create a market sensation to establish the market authentication within the gaming console industry.
References
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