Phase 1 Report: Strategic Position Analysis
Industry
Nintendo of America
Organisation Name	
Organisation Contact Name
www.nintendo.com
Website URL			
Email Address			
4820 150th Ave. Northeast
Address					   
Redmond
City						  
WA
State / Province		
98052
Zip / Postal Code		
Individual
Organisation Type
Video Gaming Industry
UNITED STATES
Country					    
Nintendo of America Inc., established in 1980, is a subsidiary of Nintendo Co. of Japan. They have been the worldwide leader in the creation of interactive entertainment; they have sold more than a billion video games to the world (Nintendo 2010). In 2006, Nintendo created the revolutionary video game console “The Wii". The Wii was designed to attract larger demographic users than other gaming systems. It was, and still, very successful; attracted many people from different ages and it resulted in huge profits since it was created. 
Unfortunately, recently attitude of consumers and environment has been changing unfavourably for the Nintendo. This analysis is to reveal the key successful factors that made Nintendo a leader in its industry, touch the weak points or mistakes it has done and recommend some strategies to keep Nintendo a leading player.
Organisation Background
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Organisation Profile

1.1. External Analysis
1.1.1. Pest Analysis
In terms of external analysis, it is critical to assess whether the contextual economic, social, technological, ecological, media, political, legal and ethical aspects are conducive to a specific direction. For instance, is the local government receptive to the concept of private sector participation? How are the relationships between the local government with the communities and the private sector? These are important aspects of the macro environment which will have a general impact on industries and companies. For this purpose, we will use a model called PEST analysis. This helps you to analyse the Political, Economic, Socio-cultural and Technological factors that affect the organisation.
Reason
Rank
Factors
1.1.1.1 Political Factors
:
 4 
US is a stable democratic country and has a newly formed government that does not seem averse to the business and the business model.
Government Stability
Taxation, employment and safety law 
:
 3 
The tax rate for corporations is high in US (35 % for income about) (Financial Times 2010)
Social welfare policies 
:
 4 
There are regulations and special institutions to ensure high social welfare standards. (USA Embassy 2010)
New restrictive trade policies that specifically focus on products manufactured in US.
 2 
:
Foreign trade regulations 
:
Relations between government and the organisation 
:
US government has legislation that ensures that the console game industry has to follow a pre-defined set of rules before releasing the consoles to the public. (Chinese Embassy 2010)
 3 
Government ownership of industry and attitude to monopolies and competition policy
:
 2 
The US government trade policies are anti-monopolistic and they take a dim view of intensively competitive behaviour.
'Green' issues that affect the environment 
 2 
International watchdogs have condemned the green policies of video game manufacturers.
:
Level and type of energy consumed - renewable energy? 
Video games consume lots of energy since gamers do not usually switch the games off which (Cnet News 2008)
 2 
:
Rubbish, waste and its disposal 
International watchdogs have condemned the green policies of video game manufacturers.
 2 
:

Others
:
 0 
US is a politically stable market for the console industry with some restrictions. However organisations that focus on green policies and energy efficiency take a strong view against the gaming console industry.
Conclusion
Reason
Rank
Factors
1.1.1.2   Economic Factors
Total GDP and GDP per head growth rates (trends) 
 4 
The GDP is 14.1 Trillion and the growth rate in GDP is positive but has fallen in the last year due to the financial recession (World Bank 2010)
:
Inflation 
Inflation percent ranges from 1.00 to 2.50 % in the US market (World Bank 2010).
 4 
:
The US consumer has a greater percent of disposable income (Euromonitor 2010).
 4 
:
Consumer expenditure and disposable income 
Interest rates
 4 
Interest rates in the US market are low.
:
US currency in the recent years has been a low yielding currency and its value is fluctuating.
 3 
:
Currency fluctuations and exchange rates
The console industry receives healthy investments from private investors.
 4 
:
Investment, by the state, private enterprise and foreign companies 
During 2008, there was an impression that the video game industry was recession proof, having record sales of US$21 billion in 2008, but growth has slumped in 2009 and 2010.
:
 2 
Business cycles
 0 
:
Unemployment
Efficient distribution and communication networks in US reduce distributing costs and energy is moderately priced as well.
 4 
:
Energy costs, transport costs, communications costs
 0 
:
Others
Conclusion
Gaming console industry has proven to be recession proof as it falls under the category of packaged entertainment and relies on the launch period, disposable income and the spare time.

Reason
Rank
Factors
1.1.1.3   Socio-Cultural Factors
:
Shifts in values and culture 
 5 
Shift in perception of video games from being a hobby only for young children, to an activity for all ages and demographics, such as for families and the older generation.
Change in lifestyle
:
 5 
The industry has changed from being confined to an individual solitary experience to a large community and lifestyle
:
Consumerism 
 5 
The United States is a consumer market; the embodiment of capitalism. They emphasize maximizing disposable income, and personal choice of how they spend their money, productive or otherwise.
:
Attitudes to work and leisure 
 4 
Americans place a high priority on reaping the rewards of their labour. Despite evidence that Americans on average work more hours than the rest of the world, they have a high priority on their leisure time, which most prominently involves using the television (either watching or playing video games)
Green’ environmental issues 
:
 2 
Console manufacturers are accused of producing CO2 and being anti environment (GamePolitics 2009)
Education and health 
:
 2 
Video games are partly being blamed for negative educational and health effects. Studies have suggested that video gaming increases aggression and antisocial behaviour, as well as perpetual claims that increased obesity in children are a direct result of the video game culture. Many states have implemented legislation to protect children from potentially damaging video games (Health Central 2004).

Demographic changes 
:
 4 
Average age of gamers is 34, 25% under 18, 49% is 18-49, and 26% is 50+ (ESA 2010).
Distribution of income 
:
 4 
Relatively inexpensive. In reach of many people
:
Social mobility 
 5 
US has very high social mobility. Video game industry benefits greatly from the entire market's population.
Others
:
 0 
Conclusion
Video games have become a part of society and culture, and have been growing rapidly. Due to long stressful working hours leisure time is of importance and people usually resort to either watching Television or play video games.
1.1.1.4 Technological Factors
Reason
Rank
Factors
:
Government and EU investment policy on research
 0 
:
Government and industry focus on technological effort 
 4 
The government focus a lot on technological efforts (USA Spending 2010)
:
New patents and products
 1 
The cost for the development of new technologies in rapid cycles cannot be assimilated into the meagre profit margins generated currently in the console industry
:
Speed of change and adoption of new technology 
 5 
New technology is the lifeblood of the industry. New concepts and products are what drive the industry and make consumers excited for new products.
:
Rates of obsolescence 
 1 
Technology develops so quickly that products give the appearance of being obsolete very quickly
:
The impact of the Internet 
 5 
Consumers are highly dependent on the internet.
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Others
 0 
Conclusion

1.1.1.5 Pest Conclusion
Conclusion
In general the environment is favourable to the console gaming industry, but the political and technological factors have, to an extent, an adverse effect on it. USA economy and socio culture factors are most favourable since the success of console gaming needs consumers to be willing to spend their income on luxuries and this is available in countries with good economic factors like USA. On the other hand, technology is crucial to this industry because it's rapidly changing and advancing and political and factors could limit the extent to which the console manufacturers can develop and change.

Strategic groups are clusters of organisations within an industry that compete on the basis of a similar positioning, product quality and target very similar customers. This analysis is important as some organisations within industry will compete more directly with others positioned in the same group and might not even compete with others remotely positioned (e.g. Rolls Royce is a direct competitor of Bentley but despite being in the automotive industry, can not really be considered a competitor of SEAT) 
1.1.2. Strategic Group Analysis 
Growth in terms of sales of units
Price
Competitor Name
 6
Nintendo of America
 4 
 5
Microsoft Corp
 5 
 4
Sony Corp
 6 

The life cycle of an industry will strongly affect the level of competition within an industry. This is the case because a high growth rate allows most competitors to grow without having to take margin from other organisations. In opposition, low growth rates will increase competitive rivalry as organisations have to grow at the expenses of their competitors. 
1.1.3. Industry Life Cycle
Total Industry Sales
Year
 2005 
 23 
 2006 
 26 
 2007 
 35 
 2008 
 40 
 2009 
 38 
*Note* Data is sales in Millions of Units of the Americas http://www.vgchartz.com/hw_annual_summary.php

Data for the year 2010 ranges from 2nd January 2010 to 18th September 2010.

The console industry grew very rapidly between 2005 and 2007, but as the market matured the growth has plateaued. Interestingly, this shape is very similar to a stereotypical life cycle.
Analyze Life Cycle

1.1.4. Porter's 5 Forces
1.1.4 .1 Threat Of New Entrants (Entry Barriers)
Reason
Rank
Factors
:
Economies of scale 
 5 
Capital investments to initiate production are high. Ex: Nintendo Spent 370 million USD on R&D in 2008 (Davison 2008)
 0 
:
Cost disadvantages from other than scale 
:
Differentiation 
 5 
The console industry has currently targeted an age range of 8-45 (ESA 2010). There are currently no gaps in the market segments
:
Brand loyalty 
 2 
If a well established company enters the market then the threat of switching consoles is high. E.g. If Apple develops a console, apple fanatics would switch
:
Start-up capital requirements 
 5 
Investments and R&D are high in the console industry
:
Switching costs
 5 
The psychological and transactional costs are high
:
Access to supply and distribution channels 
 3 
There exist well established online and retail distributers.
:
Legislation or government action 
 0 
:
Retaliation (e.g. price cuts and advertising campaigns) 
 4 
Price cuts and advertising benefit from the economies of scale and good brand image.
:
Entry deterring price 
Due to cross subsidisation this factor is favourable. Consoles individually do not have high margins but the games /software does.
 5 
:
Others
Experience Curve. To be in the gaming industry it includes lots of costs and losses. Competitors needed long time to know "how" to do things right.
 5 
The threat of new entrants is relatively low as the market players are strong, well established and have the advantages of pricing and lower fixed costs. The start up costs are also very high and there will be a difficulty for a new company to position itself or its products any differently from the existing players in the market. Intense competition and pricing wars have reduced profit margins causing market players to focus on after-product sales (Games, accessories, online network subscriptions) rather than on the sale of the console itself. All these factors combined would make the threat of a new entrant a low threat for the existing market players.
Conclusion

1.1.4.2   Threat of substitutes (Determinants of substitution threat) 
Reason
Rank
Factors
:
Relative price/performance of substitutes 
 1 
Mobile and computer industries could be considered a high risk to this industry. Ex. Apple IPod and IPad (Digital Battle 2010)
Perceived benefits of substitute may be high.
 3 
:
Switching costs 
:
Effectiveness in meeting specific customer needs 
 1 
The focus of the console industry is that of customer interaction. If the console is highly interactive the need is met.
:
Willingness of buyers to substitute 
 2 
Short attention spans towards consoles could cause customers to switch if a new development can entice purchase.
The product has to be compatible with the target market, at the same time they have to ensure that the console is unique form the others. Customer attention and interaction are the key factors.
 1 
:
Product differentiation
Consumers will be intensely loyal to the brand and may be hostage loyalists who are attached to a brand due to high switching costs. There may be consumers who are mercenary loyalist as well.
 2 
:
Brand loyalty 
PCs and mobiles games are considered high risk on video games.
 2 
:
Product-for-product substitution 
(E.g. post mail and e-mail) 
:
Substitution of need (more reliable transports reducing the need for cars) 
 3 
Console games are considered a medium level income luxury.
No proof that this is a high risk since the cost of console games is relatively inexpensive
:
 3 
Generic substitution (disposable income: boats/homes/furniture/holidays, etc.) 
:
Others
 0 
Conclusion

The three major players in the market are now offering competitively priced products that provide relatively similar features to the each other. The threat of substitution is high and the companies try to reduce this by increasing the switching costs (positive and negative) associated with the products by providing exclusive game titles and gaming accessories. Brand loyalty is high but with short attention spans associated with customers may cause the customers to switch loyalties with more ease. With the need for generic substitution decreasing due to shrinking incomes and the possibility of product-for-product substitution decreasing due to the virtualization of popular alternatives like board games the threat of generic substitution decreases with switching between consoles becomes the major threat.
Reason
Rank
Factors
1.1.4.3   Determinants of buyer power
Concentration (number and size of the firms) 
:
 5 
The industry is almost an oligopoly, so the power of buyers does not represent a threat.
Importance of buyer's purchases to the total volume sold by the organisation 
:
 3 
Popular consoles cannot be taken of shelves; this would cause the retailer to loose sales of the product.
Differentiation of the product/service and alternative sources 
:
 4 
Consumer needs govern this factor.
Switching costs 
:
 4 
Does not represent threat since competitors are few in this industry and it's not easy to switch to others for console gaming supply.
The threat of backward integration by the buyer
:
 5 
The costs of backward integration will be very high for buyers, so it's unlikely to happen.
:
The threat of forward integration of buyers by the organisation 
 2 
It is feasible. For example Sony and Microsoft already sell products online.
Access to information 
:
 4 
Since leakage of information is considered a threat to such industry, usually competitors in this industry are highly protective and secretive.
Others
:
 0 
Conclusion
The console industry caters to a growing market segment that has an approximate size of 60 million in the United States. The end customer has a number of retail options to purchase from and since the market is a three-way struggle no retailer will try to remove a product from its shelf or switch to another supplier since its a oligopoly .There is a low threat of backward integration and the console industry is large enough to integrate forward in the event of hostile action from the retailers. The buyers in the market are important but do not have enough power to take a controlling right in negotiations due to the large market demand and the success of the consoles.

Reason
Rank
Factors
1.1.4.4   Determinants of supplier power
Concentration (number and size of the firms) 
:
 1 
There are few hardware manufacturers for Hardware that can meet the demand like IBM, NVIDIA, ATI but the suppliers are large and capable of meeting requirements of the industry
Importance of suppliers’ sales that an industry represents 
:
 1 
Due to the high demand for Console devices and intense competition, the supplier sales are of paramount importance. The supplier may fail to provide necessary components on a timely basis or the company may have difficulty procuring the components due to business disagreements.
Importance of the buyers in the industry as customers of the suppliers 
:
 3 
With Console Industry drawing in market share from the PC gaming industry, the buyers are an important progressive market for the suppliers like NVIDIA and ATI
With the fewer suppliers it would be hard to find qualified alternate sources.
 2 
:
Differentiation of the product/service and alternative sources 
Switching costs 
:
 1 
It would be very expensive to switch from one supplier to another due to the sophistication of the technology involved.
The threat of backward integration by the buyer (the organisation in analysis)
:
 4 
The costs to be incurred in venturing backwards into the supplier chain would be high.
:
The threat of forward integration by the supplier 
 2 
Big Video Game Card manufacturers like NVIDIA and ATI have the technological advancements to integrate forward into the console industry.
Others
:
 0 
Conclusion
The suppliers to the console industry are few and are large market players. The console industry is an important buyer for these suppliers but is not their only market. There is a limited threat of the larger suppliers like NVIDIA integrating forward as they have the technology to do so while the console industry lacks the technological credentials for the backward integration into the supplier industry. It would also raise the costs of production of the consoles which would be detrimental to the industry that depends on profit margins.
Any delay in the supply of the goods or a falling out with a major supplier is a strong threat to every player in the console industry.

Reason
Rank
Factors
1.1.4 (e) Competitive rivalry determinants
Market growth rates (life cycle) 
:
 2 
The market is reaching its maturity and the console manufacturers are now competing on gaming accessories, variations of bundled packages and pricing of the consoles.
Overcapacity 
:
 0 
Fixed costs
:
 2 
The operating costs associated with the console industry are high and that eats into the revenues of the console industry.
:
Similarity of the size and power of the competitors 
 1 
The main players in the market Sony, Microsoft and Nintendo are sufficient large and powerful in similar ways with regards to the console industry
Differentiation of the products/services provided (switching costs for buyers) 
:
 3 
The main players initially targeted different audiences but with the maturing of the market, they are competing for rival market share by innovating and offering services similar to competitors to deter switching.
Brand loyalty among consumers 
:
 2 
Consumers are loyal to their brand and the companies try to build on their consumer base
:
Barriers to exit (fixed costs of exit, emotional attachment, government restrictions, etc) 
 1 
It is difficult to exit due to the investment in the industry, the number of gaming companies that produce games exclusively or otherwise for the companies and due to the large numbers of consumers associated with the industry. A hasty exit from the industry will tarnish the reputation of the company in public eye.
Others
:
 0 
Conclusion

The Console industry is in the 7th generation and is nearing maturing in the product life cycle.
With the maturing market, the competitors are using competitive pricing through bundled packages and accessory developments that are used to either differentiate the products or offer the same features that are present on other consoles to reduce switching costs. With high fixed costs and barriers to exit, the companies can not hope to build profit margins or leave the market without public fallout. The competition is intense due to the fewer number of players but is healthy as it drives innovation and inhibits monopolistic practices.

1.1.4.6 Porter’s Conclusion
Conclusion
For the console industry, the entrant costs and restrictions are high making it a low threat and a low priority .Similarly the demand for the product and the large distribution network and the number of alternative suppliers to the products have significantly reduced the bargaining power of the buyers (the retailers).

Suppliers pose a significant threat to the console industry as they are fewer in number and cannot be easily restricted or controlled. Poor quality of the products from third party manufacturers can adversely affect the company and the product image. Also the suppliers could raise the costs of the components and affect the profit margins of the company.

Substitution is a significant threat and can occur within the existing competitors but the possibility of generic or product-for-product substitution is reducing due to increasing popularity of gaming as a popular leisure activity.

Competitive rivalry is really high among the three companies and it is what drives the industry forward. Each company is trying to build products and replicate services that competitors offer in order to reduce the possibility of losing customer share. This is the most significant force in the console game industry.

1.2. Internal Analysis
1.2.1.1 Human resources
Reason
Rank
Factors
1.2.1. Resource Audit
:
Number of staff
 4 
Compared to the productivity level the number of employees in relation to revenue is very favourable (Joystick 2008).
Age distribution
:
 3 
There is a blend of the young (circuit developers mostly) and the experienced (35 above) administrative staff (Nintendo 2009).
Education
:
 5 
Highly educated and specialized employees are hired to give the company a unique advantage in the industry (LinkedIn 2010).
:
Skills
:
 5 
High level of specialization is needed to meet the pace of technological advancement (LinkedIn 2010).
Experience
:
 4 
Experience, especially in the areas of administration and market penetration strategies is needed among employees to effectively create a competitive advantage (LinkedIn 2010).
Training (including linguistic skills)
:
 4 
Intensive training and development (Nintendo 2009)
Motivation
:
 4 
Apart from financial incentives, the organisation offers various motivational incentives such as healthcare, pensions and family insurance (Nintendo 2009).
:
Turnover
 5 
Employees undergo intensive training and development which give them a sense of belonging in the organisation (Nintendo 2009).
Attitudes and cultural awareness
:
 0 
:
Flexibility
 1 
Due to high level of specialization
Productivity
:
 5 
Industry standard
Job specifications
:
 4 
Due to high level of specialization and complex nature of industry, jobs have to be very specific
:
Recruitment
 3 
Industry standard

:
Industrial relations
 4 
Good relations with other organisations within the industry (Nintendo 2009)
:
Remunerations
 4 
 High bonuses (Nintendo Annual Report 2010)
Others
:
 0 
Conclusion
Nintendo of America has a favourable advantage in the area of human resources. According to the financial times.com (2010), each employee of the company generates over "million dollars for the organisation annually.
Also, the company strives to maximize productivity by motivating their employees through large bonuses and basic employee incentives.
Nintendo has relatively more powerful and distinguished human resources than other companies in the same industry. This could be a key factor in their current and future success.

1.2.1.2 Physical resources
Reason
Rank
Factors
Building and equipment:
:
Locations
Nintendo of America has one main office in Redmond, WA and two distribution centres, one in Washington, responsible for the Western US, and another in Atlanta for the east. Warehouses near the coast are an advantage as shipments from China typically come in to Seattle (Payne 2004).
 4 
Age
:
 4 
The company recently opened new offices in Redmond with a low environmental impact. Its main distribution centre is manned by employees and an elaborate automated system used to increase the speed of packaging and shipping (Payne 2004).
Repair
:
 0 
:
Flexibility
:
 4 
The company behind the conveyor system at Nintendo’s distribution centre cites the facility as a case study of one of its successes, stating the facility can handle any size of container through the process (Hytrol n.d). The facility can also handle huge volumes with throughput reaching as high just under 600,000 units per day prior to the Nintendo DS launch date in 2004 (Payne 2004).

Configuration
:
 3 
Despite Nintendo’s main offices being located in the same town as Microsoft, there does not appear to be expansion space issues for the company, as evidenced by their recent move to a brand new headquarters on their campus. Additionally, Nintendo sold off excess land to Microsoft, suggesting they are currently satisfied with their facility size (Bishop 2007). However, it would seem they have few barriers for expansion, but are not actively seeking it. Considering the reports that its main distribution centre is consistently operating at near capacity, it seems doubtful that particular facility will be unable to expand, and future expansion of distribution capacity could require a new facility or a major overhaul of the existing one.
Expansion potential
:
 3 
Nintendo recently sold off some land at their headquarters, suggesting they are currently satisfied with their facility size (Bishop 2007). Its distribution centre is often running at full capacity, so increase distribution may require a major overhaul or a new facility

Capacity utilisation
:
 3 
The Wii suffered from major supply issues in its first few years of release. Unfortunately, it is not well-known why that occurred, whether it was in the manufacturing process, the supply chain, or another reason (Wailgum 2008). So, this could imply that given the lack of supply from manufacturers overseas, the company may not be using its distribution to capacity simply because it doesn’t have enough products. Edwards (2007) suggested that the shortage is due to Nintendo Japan’s “[reluctance] to employ a second or third contract manufacturer to get it out of the supply jam”.
:
R&D facilities
 4 
Development of Nintendo’s hardware is located primarily at Nintendo’s worldwide headquarters in Japan.  However, Nintendo does have several of its first-party software developers located in America. Of Nintendo’s top rated Wii software titles, according to metacritic.com, 6 of the top 10 rated games are developed by Nintendo’s first-party developers.
Computer and communication infrastructure
:
 0 
:
Land
 0 
Materials:
Sources
:
 3 
Of the parts of the console that are able to be traced back to a specific company, they are reputable companies that make quality products. In particular, the Wii’s processor is made by ATI, one of the two top competitors in the graphics processing industry.

:
Quality
 5 
Compared to its direct competitors, Nintendo proves to be higher quality system. A research company found the Wii to be significantly more reliable than the Xbox and PS3, with 2.7% of Wii owners reporting a system failure, versus 10% for PS3 owners and 11.7% of Xbox 360 owners (Ivan 2009). NOTE: In this case, quality refers to ‘reliability’, meaning how well the machine and all its containing parts perform its roles as specified.
:
Costs
 5 
Despite the fact that Nintendo’s console does not have the graphical capabilities of its major competitors, it is the only one to make a profit on selling the actual console. One review of the company’s costs suggests that the Xbox 360 loses between $126 and $300 per unit, the PS3 loses $300 per unit, and the Wii makes a profit of $92 (Ehrenberg 2007).
:
Availability
 3 
The Nintendo Wii faced major shortages from 2007-2009, wherein they were unable to supply the demand. While the company remains tight-lipped on the reasons for the shortage, some theories suggest a shortage of certain components. Since the console is a conglomeration of a variety of different parts from different manufactures, one broken link in the chain can slow the entire process. And, while it’s unfavourable from a business standpoint, it should also be noted that competitors, particularly Microsoft has experienced shortages in their console too (Reuters 2008).
Others
:
 0 
Conclusion

Nintendo appears comfortable with their current physical resources. They have sourced their materials effectively so that they are able offer a lower price on their products than their competitors and still make a profit. However, Nintendo's well known supply problems for the first few years of the Wii's release suggests there are issues in some part of the supply chain.
1.2.1.3 Financial resources
Reason
Rank
Factors
Global sources and availability of finance: 
Borrowing capacity
:
 4 
Referring to 2010 consolidated financial statements, Nintendo liability is less than 25% of their total assets (Nintendo Annual Report 2010).
Internal funds generation
:
 5 
High returns on investments and sales (Annual Report 2010).
:
Global accounts
:
 5 
They have accounts in 18 countries (Nintendo 2010)
Global assets and liabilities
:
 5 
Their assets value is higher than their liabilities (Annual report 2010)
Control systems
:
 0 
International accounting systems
:
 0 
:
Taxation systems
 2 
Changes in taxation system could cause Nintendo financial problems which could bring extra costs on them (Annual Report 2010).
Others
:
 2 
Yen is appreciating lately, this expose Nintendo to foreign exchange risk and transportation costs since 80% of its sales are overseas (Annual Report 2010)
Conclusion
Nintendo is a long term player in the gaming industry. Though sales dropped lately, their ability to internally generate funds for future growth makes it their most powerful defence against any drop in sales or profits. Nintendo's polity to keep more than 60% as retained earnings give them a powerful financial and liquid position in their industry. These earnings could be used for developing and creating products or for any future expansion. Also their returns on sales are of average 15% and higher than other competitors in the same industry like Sony which return on sales is around 5% in the last 5 years
However, Nintendo face the risk of currency fluctuation since large portion of their sales is in USD and some in EUR. Also they face the risk of changes in taxation systems since this will cause additional tax costs which will affect the financial performance of Nintendo (Annual Report 2010).

1.2.1.4 Intangible resources
Reason
Rank
Factors
:
Technology - ‘know how’ 
 5 
The organisation has gained experience on both software and hardware development that spans over two decades and they are known for their innovative products.
Patents & Copyrights
:
 5 
They have a large number of patents (766) and they have really recognizable intellectual property (Mario) (Nintendo 2010)
Know how 
:
 4 
The organisation has managed to maintain their high market share in the face of strong competition.
:
IT and communication systems (internal and external) 
:
 0 
Production systems 
:
 4 
They have efficient and effective production plants with fantastic processing systems.
Customer, supplier and competitor information
:
 4 
The internet has become an essential tool for gathering industry information
Internal process information 
:
 0 
:
Relationships with suppliers, distributors and customers 
 4 
Nintendo has a very good relationship with not only its customers and essential suppliers; they also have a healthy competitive relationship with other industry players (Nintendo 2009).
Customer loyalty
:
 0 
:
Brands 
 5 
Nintendo is a very well known brand and they tend to use family-friendly brands for their games. e.g. "Mario" and "Donkey Kong"
Price premium
:
 4 
Looking at the profits they get from selling console games compared to relatives, Nintendo has price premium (Ehrenberg 2007)
:
Organisation reputation
 4 
Others
:
 0 
Conclusion

1.2.2.1 Primary Activities
Describe and Analyze
Rank
Factors
1.2.2. Value Chain
Inbound logistics
:
 4 
The company is fairly tight-lipped on their manufacturing processes. However, many of the component parts are manufactured by secondary sources, and then sent and assembled in Nintendo-owned factories. Sometimes Nintendo will purchase companies that make potential parts for their consoles as a means of making the product cheaper or with better features (Dietel & Royer 2003).
Operations
:
As Nintendo of America is not responsible for transforming any raw materials to finished goods, they are unable to provide any value to customers in this stage.
 4 
:
Outbound logistics
:
 4 
Nintendo tend to control the retail outlets compared with Sony and Microsoft (Dietl & Royer 2003)
Marketing & Sales
:
 5 
Nintendo tends to control sales and marketing process (Dietl & Roycer 2003)
Customer service
:
 3 
Nintendo’s warranty policies do not feature anything unique. Most consoles needing repair require returning to a Nintendo service centre. As is the case with the other major consoles, anecdotal evidence of positive or negative service experiences are mixed.
Conclusion
While Nintendo's outbound logistics is strong, the biggest impact on providing value has been in their marketing of the Wii. The Wii was marketed as a relatively inexpensive and enjoyable experience that everyone can enjoy. The bundling of a simple and easy to pick up and play, Wii Sports, had a major impact on its success, and in 2009 overtook Super Mario Brothers as the best selling game in history, with over 45 million units sold (Ivan 2009).
1.2.2.2 Secondary Activities
Describe and Analyze
Rank
Factors

:
Firm infrastructure
 4 
Being in the Gaming Industry since 1985, Nintendo has a well developed robust infrastructure and is well established in USA with both hardware and software development branches in USA.
:
Human resource management
 4 
Strong HR policies and policy driven work ethics drive the company. It corresponds to the accepted industrial HR Practices (Nintendo 2010).
:
Technology development
 5 
Technology and innovation have always been the driving forces and strengths for the Nintendo company. The company prides itself on its innovation. Has 766 patents in US
:
Procurement/Purchasing
 4 
From Nintendo's success, they have well integrated the supportive activities with the primary. Good integration made it able to succeed and gain higher sales since 2006.
Conclusion
Nintendo has a well established infrastructure, internationally accepted HRM policies and has a strong focus on technology development that helps it bring innovative products to market.
Nintendo value chain shows a higher extent of integration compared to competitors which gives it a competitive advantage over them (Dietl & Royer 2003)

1.3. SWOT Analysis
Opportunities
Shifts in values and culture 
Change in lifestyle
Consumerism
Social mobility 
Speed of change and adoption of new technology 
The impact of the Internet 
Economies of scale 
Differentiation
Start-up capital requirements 
Switching costs
Entry deterring price
Others-Threat of new entrants
Concentration (number and size of the firms) 
The threat of backward integration by the buyer
Threats
New patents and products 
Rates of obsolescence
Relative price/performance of substitutes

Effectiveness in meeting specific customer needs 
Product differentiation 
Concentration (number and size of the firms) 
Importance of suppliers’ sales that an industry represents
Switching costs 
Similarity of the size and power of the competitors 
Barriers to exit (fixed costs of exit, emotional attachment, government restrictions, etc) 
Other Opportunities
Other Threats
Strengths
Education
Skills
Turnover
Productivity
Quality
Costs
Internal funds generation
Global accounts 
Global assets and liabilities
Technology - ‘know how’ 
Patents & Copyrights 
Brands
Marketing & Sales
Technology development
Weaknesses
Flexibility
Other Strengths
Other Weaknesses

Strengths  +  Opportunities
1. Consumer lifestyle in the US is rapidly changing even a person aged 45 has taken an interest into casual gaming. With the launch of Wii Nintendo has captured this opportunity and will continue to serve this need.

2. Nintendo has advantage over price as they do not incur heavy costs as compared to Sony and Microsoft. Their objective is to encourage gaming, and a low pricing structure will initiate easier adoption by new segments, growing a bigger market share for the company.

3. The employees at Nintendo are highly skilled and have an advantage of technical know-how; this will save the company on higher investment into development of consoles thus gaining differentiation over product and perceived quality.

4. Nintendo has been in the Gaming business since 1983, and is the only focused business giving them a better exposure and market awareness. This wins the company a Good Brand image and greater customer loyalty.

5. Being innovative they have captured a small part of the online gaming through Wifi feature in the DSi. This can also help broaden the focus of the company.
Weaknesses  +  Opportunities
1. Due to their lower pricing strategy, the threat of switching cost is resolved.

2. In-house training for staff
     a. Deeper knowledge of customer need
     b. Better development of Products
More innovation 

3. Broaden Focus in Market through Complementing products and accessories.

4. Better portfolio spread as they are Innovative and target specific
Strengths  + Threats
1. Single product focus: consoles and games is the only focus for Nintendo, this poses to be a threat as the company lacks diversification.
2. Lack of employee flexibility, No out of the box thinking.
3. Low pricing, but slow innovation – erosion of Market share by Sony and Microsoft (KINECT) with similar product offerings.
Weaknesses  +  Threats
1. Games and their consoles have a very short life span in the industry. Nintendo only focuses on gaming and has no other variations in its portfolio. The staff are only fixated to developing Video game consoles, this poses as a threat to the company. Competitors like Sony and Microsoft have a range of products in the portfolio which complement each other. E.g.  Purchase of the PS3 will add value to a consumer who already acquires a Sony Bravia HD TV.

2. Cracked games are a serious issue, Consumer purchase falls when crack versions are available.

3. They have let other competitors gain market share by not innovating

1.4. Organisational Purposes
1.4.1. Vision
Please state the vision of the organisation
The basic strategy that Nintendo has been deploying is the expansion of the worldwide gaming population. To this end, Nintendo is striving to encourage people from all over the world, regardless of age, gender, language, culture background or gaming experience, to embrace and enjoy the video games as a mode of entertainment (Nintendo Annual Report 2009).

Nintendo has been expanding consumers who enjoy video games by increasing the base of Nintendo DS by positioning it as a handheld game system that enriches the owners' daily lives, and Wii, a home console game system that put smiles on surrounding people's faces. (Nintendo Annual Report 2009).
Evaluate Vision
Nintendo is aiming to be the ultimate gaming console for individuals of different age groups. It wants to widely spread among families. It is implementing this by creating games like the Wii Sports where mothers and grandparents have the chance to use the Wii.

Nintendo is looking to penetrate the market and gain market share by focusing on a neglected segment which is the "casual gamers". By introducing the Wii, Nintendo was able to step forward in achieving its goal.
1.4.2. Mission
Please state the mission of the organisation
At Nintendo we are proud to be working for the leading company in our industry. We are strongly committed to producing and marketing the best products and support services available. We believe it is essential not only to provide products of the highest quality, but to treat every 
1.4.2. (A) Evaluation Matrix of Mission Statements 
Criteria
1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival,             growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
Who are the firm's customers?
What are the firm’s major products or services? 
Geographically, where does the firm compete? 
Is the firm technologically current? 
Is the firm committed to growth and financial soundness?
What are the basic beliefs, values, aspirations, and ethical priorities of the firm? 
What are the firm’s distinctive capabilities or major competitive advantage? 
Is the firm responsive to social, community, and environmental concerns? 
Are employees a valuable asset of the firm? 

Evaluate Mission 
The mission statement is considered very general regarding products and customers. Nintendo does not specify what kind of customers they are targeting.
Also Nintendo does not specify the products they are creating except confirming that they are of 
1.4.3. Objectives
Please list the objectives of the organisation: 
- Nintendo will keep trying to further the penetration of the Wii
- Nintendo will encourage more people to try the Wii by offering innovative games
-Nintendo’s market share and boost sales without losing touch with the current market of 5-17 
Evaluate Objectives and Stakeholder's Expectations 
Nintendo does not have clear general objectives; yet it has objectives regarding each product they create. Nevertheless, the above objectives are mentioned in the annual report. They want the Wii to be highly spread among people, and they are implementing this strategy with the 
Phase2 Report: Formulation Of Strategy
Nintendo of America
Organization Name
:
2.1. Business Portfolio Decision
Corporate level strategy is applicable for a multi-business organisation and is concerned with strategic choices made at a higher level in relation to the whole group. This is the level where the corporate purpose and aspirations in terms of the group’s overall mission and vision are defined. It is at this level that the group’s strategic scope is delineated in terms of related or diversified operations. Decisions have to be made in terms of geographical scope; whether the company will be operating on a local, national or international basis. 
2.1.1 Divide the firm into Products/Services
Products/Services
DS
Wii
DS software
Wii Software

You can get Market data from Market Research reports like Datamonitor, Euromonitor, Mintel Reports or other useful websites. You need to input the annual value of sales of each market in which each of your SBU operate (whole market). 
2.1.2 Measure the Growth Rate
Growth Percent
Year
Products/ Services
Sales
DS software
 0 
 160951254 
 2008 
Wii Software
 0 
 144586458 
 2008 
DS software
 51 
 242638114 
 2009 
Wii Software
 74 
 251612467 
 2009 
Wii
 0 
 20055733 
 2008 
DS
 0 
 31725831 
 2008 
 39 
 44198809 
 2009 
Wii
 53 
 30777409 
 2009 
2.1.3 Measure the Relative Product Share
 2009 
Products/Services of the Business
Sales of
Relative Average Sales
 0.31 
 44198809 
DS
 1.70 
 242638114 
DS software
 1.76 
 251612467 
Wii Software
 0.21 
 30777409 
Wii
 569226799 
Total Company Sales

2.1.4 Position SBU's along the Matrix

Analyze Evaluate
Hardware:
When we look at the BCG both the consoles are positioned as DOGS this is because they do not reap high margins for the company. Reason for this is that the creation or development of consoles requires a high investment and huge costs, but the company cannot set a high price. Technology is rapidly changing and consumers are looking for good innovation but at reasonable rates. Casual gamers (main market segment) are not willing to pay a high amount to acquire a console. Hence Nintendo’s innovation meets its consumers' needs and is kept simple. 
The market growth rate for DS is slow as it has been in the market for a while, but its contribution margin is much higher to the business than Wii. Wii on the other hand is relatively new but its market share is growing rapidly as it is positioned to target not only the teens but the whole family and older segments.
Life cycle of consoles is short lived but it is the heart of the business, hence they should be harvested. In this case the company should invest 40% of extra revenue generated from the cash cow into the consoles to improve them, thus capturing a higher market share. Even if the company develops variations to their consoles, they will still be positioned as dogs, as consoles don’t sell as much as the software’s. 
Software:
These are vital sources of revenue to the company, they do not include high costs and margins set are much higher. 
DS games are positioned as Cash cows, as they have been in the market for a while and adoption process is much quicker, hence generating high revenue. Games like Pokémon, Mario etc. are high in demand and awareness. These games have a high market share but a slow growth rate, and generate much more than what has been invested into development. But they cannot be relied on in the long run. 
Wii software is positioned as a Star, with much higher market growth than the DS and a higher market share. They cater to a wide audience ranging from Kids learning games to fitness for adults.  The revenue generation is much higher and these software’s have to be developed to keep the portfolio strong.
Conclusion:
The consoles are not the main source of income to the company, due to high investments the cost of production is HIGH, but the price cannot be set with high margins. The Software is what reaps the profits for the company.
Consoles grow gradually but software developments have to be quick as their life span is shorter, games have to be developed. Attention span of customers is short towards games and that is what the industry thrives on. 
Revenues Generated by the Stars and Cash cows should be re-invested into the business 60% into Hardware as it is the main unit and 30% into software development. Also bear in mind that the consoles will remain in the current position as they do not sell at the rate of games. Each household may purchase only one console but require 10 games depending on the users. The current software spread by Nintendo is perfect as it attracts every segment of the Population, and caters well to the need.

Matrix Type
Price
Perceived Quality
Name of Competitors
2.2. Business Unit Level Strategy - Competitive Strategy
 3 
 2 
Nintendo of America Nintendo of America
Good Price Value for Money
 2 
 3 
Microsoft Corp
Good Offer Value for Money
 1 
 3 
Sony Corp
Excellence Premium Quality
Best Offer: Targeting well informed quality conscious and price sensitive customers. Only sustainable if company holds a competitive advantage in terms of  difficult to imitate low costs combined with strong strategic capability in terms of unique resources and core competences. This strategy carries the risk of provoking price wars or creating adverse effects in terms of customer’s perceptions towards the company's brand image. To overcome this risk, excellent brand management and communication to the market is required.
Good Offer Value for Money: Targeting price sensitive customers in search for value for money. Company needs to have low costs to maintain reasonable margin. This strategy can provoke price wars. Good brand management and communication to the market is required in order to preserve brand image.
Excellence Premier Quality: Targeting the lowest segments by offering the cheapest products/services through a very low cost base. Company should not pretend selling quality but simply assume and reinforce its lowest price proposition - "You get what you see."
Good Price Value for Money: Targeting price sensitive customers in search for bargains. Company needs to have low costs to maintain reasonable margin. This strategy can provoke price wars.
Nowhere Play Safe: This is a conservative strategy as the company tries to please all customers by offering products of moderate quality at moderate prices. The risk is that their offer might end up not being good enough for those prepared to pay more for quality, or being cheap enough for those to whom low price is a key purchasing factor. As a result, there is a risk getting stuck in "no man's land"
Too Expensive Value for Money: This strategy is doomed to fail as customers will not continue paying an average price for products they perceive to be of lower quality. The company should expect decline in sales and market share.
Cheap: Targeting the higher segments by promoting best quality at a premium price. Only companies with a very strong brand identity and premium quality should aspire to follow this strategy based on differentiation.
No Value for Money: This strategy is doomed to fail as customers will not continue paying a higher price for products they perceive to be of average quality. The company should expect decline in sales and market share.
Nonsense: This strategy is nonsense. Why would customers pay a high price for products they perceive to be of lower quality? Companies should consider change their positioning or expect disastrous results.
1
2
3

Excellence Premier
 		Quality
Sony Corp
        Good Offer
   Value for money
Microsoft Corp
        Best Offer
 
3
H
I
G
H
        Too expensive
    No value for money
        No where
        Play safe
          Good price
     Value for money
Nintendo of America
2
A
V
E
R
A
G
E
Q
U
A
L
I
T
Y
        Nonsense
 
    No value for money
         Low price
1
L
O
W
LOW
AVERAGE
HIGH
PRICE

 Internally, the company emphasizes high creativity and innovation. A strong work force due to specific hiring of educated and skilled employees and retention of employees through financial and training incentives. Additionally, they have committed to high efficiency in their distribution and in inventory management practices. This is meant that the company is well positioned to do create and market their products effectively and efficiently.
Nintendo of America value chain activities are generally above average in the industry. In particular their technology development, while not necessarily being the most state of the art, is creatively applied to be the most appealing to consumers. Therefore they don't produce the most expensive product rather the most attractive ones.
Both the micro and macro environmental factors are generally positive for the industry. The companies that are going to do well are the ones that can best capitalize on favourable conditions. 
One of the biggest parts of Nintendo's stated purposes is expansion of the world wide gaming population by introducing it to new segments that were previously neglected. From this perspective, Nintendo strategy of providing a higher value gaming experience compared to the other rivals has been successful. However, they have also stated that they did not want to lose touch with a major existing market segment, 5-17 years old males. From this perspective, their current strategies are less successful than their rivals because this particular segment has significantly different values than the "new gamer" market.  
However, gaining both segments with a single product has not proven to be possible yet for any company. If Nintendo is to focus on one particular segment they risk alienating the other and if they target both simultaneously then they dilute the impact to both segments. 
Nintendo: adopts a TICKING STRATEGY as they focus on the casual gaming market. The reason for doing so is because the leisure time gaming market is growing rapidly, but these consumers do not want to pay a high price on the purchase of consoles. Hence Nintendo follows a low price and medium quality route as they are trying to keep it simple and want to comply with the target segments. The Company keeps up with innovation but simplifies it for its customers to makes it more user friendly and a more reasonable purchase. Nintendo has been in the gaming business far before Sony or Microsoft stepped in, and the Brand is recognised for fun and interactive games. It is a brand that is much appreciated for its leisure time interaction.
Sony:  Adopts a ROLLS ROYCE strategy as their product carter to hard core gamers. They follow the route of high price and high Quality, as their target market requires them to keep that standard. The perceived value for SONY among its consumers is much higher as it ranges in different products that support the gaming experience like the HD TV, 3D TV, and Surround Sound etc. So if a consumer owns a Bravia TV, it would be reasonable for them to buy a PS3 and enjoy the benefits of a live gaming experience, hence increasing the value of purchase.
Microsoft:  has a TRYING HARD strategy as their focus is also on the Hard core gamers but they are trying to yield a higher market share hence follow the route of high quality at medium price. Microsoft also has a high perceived quality as its former and dominant business is that of computer software.
Analyze / Evaluate
2.3. Development Strategy
2. Product Development
1. Market Penetration/ Consolidation
Opened different branches
Segmented product variation
Focus on Casual Gamers
Lower pricing for products
Relaunch old SNES games
 iQue Player
No planned updates for Wii
3D update for the Nintendo DS
Successor to Wii?

Selling assets
Withdrawing outdated products
New Game Titles
Updates to existing titles
Competitive pricing
Launching new game titles
Product bundling
Bundled packages
Wii Accessories
Netflix
Netflix
Cheap Gadgets/Expensive games
Bundled packages
3. Market Development
4. Diversification
Game Developer Partners
Exercise with Wii Fit
Streaming Movies & TV
Accessing internet
Shopping
Repair services
Distributors in every state
Joint Venture: iQue
Global Distributors
The Pokémon Company
Love Hotels
Taxi Cabs
Food Industry
TV Network
Toy Industry
Seattle Mariners

Users should consider the organisation's growth strategy in terms of its products and markets. The first quadrant, Market Penetration/Consolidation corresponds to the growth strategy by which the organisation continues to focus on its existing products to the existing markets. The aim is to increase market share (Market Penetration) or sometimes to even reduce the existing scope of operations (Consolidation) by withdrawing from some markets or downsizing the product portfolio. Sometimes it is appropriate to do so even if it might result in a loss of market share. Other times, the right strategy is not to grow or downsize but simply to protect the current market position by defending and maintaining the existing market share. 
2.3.1 Market Penetration and Consolidation
Description
Nintendo has over 20 branches in 5 different continents of the world. This strategy helps the organization to penetrate markets through gaining of first hand market information.
The company, unlike most of its competitors, focuses more on the casual gamers, who are attracted by the simplicity and family orientation of the Nintendo brand. 
Nintendo uses low pricing as a strategy for reaching out to low income markets. This market has a tendency to be more price sensitive than quality sensitive.
Furthermore, by relaunching old SNE games, the company has targeted old Nintendo consumers who are of an earlier generation.
2.3.1.1. Market Penetration
Keypoint/Fact
Opened different branches
Segmented product variation
Focus on Casual Gamers
Lower pricing for products
Relaunch old SNES games
 iQue Player
2.3.1.2.1. Withdraw or Downsizing 
2.3.1.2. Consolidation
Description
Nintendo in 2009 sold of some of its assets in America. This strategy although prompted by the recession, was a consolidation strategy for the company. By selling assets the company reduced its fixed cost which allowed them make more profit.
Keypoint/Fact
Selling assets
Withdrawing outdated products
2.3.1.2.2. Maintain Market Share 
Nintendo uses its competitive pricing to maintain a higher share of the console gaming industry. According to Financial times.com (2010) Nintendo maintains a 43% hare of the industry in America (in terms of sales).
By bundling up games along with their consoles, Nintendo gives its brand an edge over competition and this enables it maintain its lead in the American market.
Description
Keypoint/Fact
Competitive pricing
Launching new game titles
Product bundling

2.3.2.1. Modified Product Development
2.3.2. Product Development
The company has not announced any new product developments in terms of Console and Console related accessories. The products that are planned for launch are modifications of existing equipment like the Nintendo 3DS.There is also speculation of a successor to the Nintendo Wii but there is no official confirmation as of yet.
Description
Keypoint/Fact
No planned updates for Wii
3D update for the Nintendo DS
Successor to Wii?
2.3.2.2. New Product Development
Nintendo has announced new game titles to successful series like Legend of Zelda, Donkey Kong and Mario. New games have also been announced (Nintendo 2010).Games like Nascar 2011 have been announced for the Wii (Metro, 2010).
Description
Keypoint/Fact
New Game Titles
Updates to existing titles
A very effective product development strategy is to develop, as much as possible, a complimentary portfolio so that the sales of one type of product would, hopefully, lead to the sale of other complimentary ones. With this respect there are two main possibilities. One called grouping/bundling is to sell products/services as a bundle at an overall lower price (computer, software, printer, scanner, etc.). The other option, cross subsidisation, is to sell an initial product a very attractive price, even without making a huge margin, so that it could most probably lead to the subsequent sale of other complimentary products (e.g. Printer and ink cartridges). 
2.3.2.3.1. Grouping/ Bundling Strategy 
2.3.2.3 Complementary Product Development
Nintendo offers a whole list of gaming accessories like the Wii Balance Board, Wii Wheel, Wii, and Zapper etc that can be purchased separately or purchased as a bundled package.
Nintendo also bundles games with the console devices, accessories with games and offers services like NetFlix for online TV and movie streaming (Nintendo 2010).
Description
Keypoint/Fact
Bundled packages
Wii Accessories
Netflix
Netflix

2.3.2.3.2. Cross Subsidisation Strategy 
Nintendo employs cross subsidisation by providing gaming accessories at low prices.
For example the Nintendo Wii Motion Plus sells for $ 20 while the games that are sold for it are priced between $14 and $50.Purchasing the accessories would lead the customer to purchase the games that would work using it thereby accounting for the lower hardware costs. (Nintendo 2010, Amazon 2010).
Description
Keypoint/Fact
Cheap Gadgets/Expensive games
Bundled packages
2.3.3.1. New Market Segments 
2.3.2. Market Development
Description
Keypoint/Fact
2.3.3.2. New Uses
Nintendo's primary audience was gaming but with the development of the device and infrastructure it has branched out into newer uses like Exercise (Wii Fit and the Wii Mat),Streaming movies and TV channels, accessing internet ,shopping online etc (Nintendo 2010).
Description
Keypoint/Fact
Exercise with Wii Fit
Streaming Movies & TV
Accessing internet
Shopping
2.3.3.3.1. New Territories Within the Same Country
2.3.3.3. New Geographical Markets
Nintendo has an already well established network in the US market with distributors in each state (Nintendo Corporate 2010).
Description
Keypoint/Fact
Distributors in every state
2.3.3.3.2. International Market Development 
Joint Venture with Dr Wei Yen in china led to the creation of low cost Nintendo hand held consoles that are sold only in China (iQue 2010).This is Nintendo's attempt to penetrate the Chinese 
Description
Keypoint/Fact
Joint Venture: iQue
Global Distributors

2.3.4.1.1.1 Related Vertical Backward Integration 
2.3.4.1.1. Related Vertical Integration 
2.3.4.1. Related
2.3.4. Diversification
Nintendo supplies games for its consoles but it also has affiliates, forges strategic partnerships and contracts game developers for creating games.
Description
Keypoint/Fact
Game Developer Partners
2.3.4.1.1.2 Related Vertical Forward Integration 
Nintendo does not integrate forward into the supplier chains and uses distribution networks of existing companies like Amazon and retail chains to sell their products. However, they offer repair services which are considered a forward integration.
Description
Keypoint/Fact
Repair services
2.3.4.1.2. Related Lateral/Concentric Integration 
Description
Keypoint/Fact
2.3.4.1.3. Related Horizontal Integration 
Nintendo created the “The Pokémon Company “a company to manage its Pokémon franchise. The company produces games, television shows, anime movies, trading cards etc (Pokémon 2010).
Description
Keypoint/Fact
The Pokémon Company
2.3.4.2. Unrelated Diversification/Conglomerate 
Nintendo at the beginning didn't have a clear objectives and strategy to follow, so they diversified in many businesses like, hotels, cabs and food. Now Nintendo owns the Seattle Mariners, a US Major League Baseball team (seattlle.mariners.mlb.com 2010). However, after entering the toy industry, Nintendo started to have a more focused strategies to penetrate the market.
Description
Keypoint/Fact
Love Hotels
Taxi Cabs
Food Industry
TV Network
Toy Industry
Seattle Mariners

Draw major conclusions and provide key recommendations based on the analysis you have undertaken of the organisation's situation in terms of the external and internal factors, organisational purposes and expectations as well as its strategic choice in terms of its portfolio, competitive and development strategies. 
Make sure your conclusions are based on your key findings from the analysis.
3 Conclusions and Recommendations
Nintendo initiated the inclusive gaming concept, but Sony and Microsoft has caught up and moved into Nintendo’s strongest segment with:
Price cuts
Motion control gaming
Family friendly gaming

Nintendo aims to find the delicate balance between casual and hard-core gamers, but may face market decline

The consoles themselves are not the earnings makers, software (the games) is!
Consoles are the catalyst? No console sales, no software sales 

Financially, Nintendo suffers from operating exclusively with the Yen currency, despite a huge portion of their sales being in US Dollars and Euros
Conclusions
Become more aggressive!
• Play offence: Create new products with comparable graphical prowess to competitors
• Play defence: Protect own market share – price cuts? Bundling?
• Don’t play the game at all

Invest more in digital distribution
• Reduces costs and physical materials
• Method to reduce piracy, shrinkage, reselling
• A market Sony (PSN) and Microsoft (Xbox Live) are already more active in

Financially they could purchase forward contracts to fix the exchange rates between the Yan and USD so they won't have the risk of exchange fluctuations, yet they will always face the possibility of losing especially if the Yan appreciated more than what is expected.
Recommendations