Nintendo's Disruptive Strategy: Implications for the Video Game Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Nintendo's Disruptive Strategy: Implications for the Video Game Industry
In April 2008, Nintendo was ranked seventh in the annual BusinessWeek-Boston Consulting Group ranking of the world's most innovative companies. The award recognized the company as an innovative design powerhouse that had challenged the prevailing business model of the video game industry with its new video game console, the Wii. The video game console industry traditionally went into a new cycle every five to six years. In 2006, when the newest generation of video game consoles was introduced, Microsoft and Sony had continued with their previous strategies of increasing the computing power of their latest products, the Xbox 360 and the PlayStation 3. This time, however, Nintendo had planned something different. The company believed that the video game industry had been focusing far too much on existing gamers and completely neglecting non-gamers who could well be the source for future growth. Armed with this insight, Nintendo had developed a radically different strategy by producing the Wii, whose processing power was dwarfed by that of the PlayStation 3 and Xbox 360. Nevertheless, it soon became evident that Nintendo's Wii was a runaway success. How has Nintendo achieved this success? Has the company really disrupted the video game industry? What course of action is available to Nintendo's competitors?
Swot Analysis of "Nintendo's Disruptive Strategy: Implications for the Video Game Industry" written by Ali Farhoomand, Havovi Joshi includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Game Nintendo facing as an external strategic factors. Some of the topics covered in Nintendo's Disruptive Strategy: Implications for the Video Game Industry case study are - Strategic Management Strategies, Strategy, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Nintendo's Disruptive Strategy: Implications for the Video Game Industry casestudy better are - – challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing energy prices, geopolitical disruptions,
digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Nintendo's Disruptive Strategy: Implications for the Video Game Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nintendo's Disruptive Strategy: Implications for the Video Game Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Game Nintendo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Game Nintendo operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nintendo's Disruptive Strategy: Implications for the Video Game Industry can be done for the following purposes –
1. Strategic planning using facts provided in Nintendo's Disruptive Strategy: Implications for the Video Game Industry case study
2. Improving business portfolio management of Game Nintendo
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Game Nintendo
Strengths Nintendo's Disruptive Strategy: Implications for the Video Game Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Game Nintendo in Nintendo's Disruptive Strategy: Implications for the Video Game Industry Harvard Business Review case study are -
Effective Research and Development (R&D)
– Game Nintendo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Game Nintendo has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Game Nintendo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Nintendo's Disruptive Strategy: Implications for the Video Game Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Game Nintendo has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Nintendo's Disruptive Strategy: Implications for the Video Game Industry Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Game Nintendo in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Game Nintendo is one of the most innovative firm in sector. Manager in Nintendo's Disruptive Strategy: Implications for the Video Game Industry Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Strategy & Execution industry
– Nintendo's Disruptive Strategy: Implications for the Video Game Industry firm has clearly differentiated products in the market place. This has enabled Game Nintendo to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Game Nintendo to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Game Nintendo is one of the leading recruiters in the industry. Managers in the Nintendo's Disruptive Strategy: Implications for the Video Game Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Game Nintendo are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Game Nintendo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Nintendo's Disruptive Strategy: Implications for the Video Game Industry Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Game Nintendo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Game Nintendo has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Nintendo's Disruptive Strategy: Implications for the Video Game Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nintendo's Disruptive Strategy: Implications for the Video Game Industry are -
Skills based hiring
– The stress on hiring functional specialists at Game Nintendo has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry, it seems that the employees of Game Nintendo don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Game Nintendo supply chain. Even after few cautionary changes mentioned in the HBR case study - Nintendo's Disruptive Strategy: Implications for the Video Game Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Game Nintendo vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Game Nintendo 's lucrative customers.
Slow to strategic competitive environment developments
– As Nintendo's Disruptive Strategy: Implications for the Video Game Industry HBR case study mentions - Game Nintendo takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Game Nintendo has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Ali Farhoomand, Havovi Joshi suggests that, Game Nintendo is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Game Nintendo has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
No frontier risks strategy
– After analyzing the HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry, in the dynamic environment Game Nintendo has struggled to respond to the nimble upstart competition. Game Nintendo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Nintendo's Disruptive Strategy: Implications for the Video Game Industry can leverage the sales team experience to cultivate customer relationships as Game Nintendo is planning to shift buying processes online.
Opportunities Nintendo's Disruptive Strategy: Implications for the Video Game Industry | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Game Nintendo in the consumer business. Now Game Nintendo can target international markets with far fewer capital restrictions requirements than the existing system.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Game Nintendo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Game Nintendo is facing challenges because of the dominance of functional experts in the organization. Nintendo's Disruptive Strategy: Implications for the Video Game Industry case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Game Nintendo has opened avenues for new revenue streams for the organization in the industry. This can help Game Nintendo to build a more holistic ecosystem as suggested in the Nintendo's Disruptive Strategy: Implications for the Video Game Industry case study. Game Nintendo can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Game Nintendo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Game Nintendo can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Game Nintendo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Game Nintendo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Game Nintendo can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Game Nintendo can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Game Nintendo can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Game Nintendo can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Game Nintendo to increase its market reach. Game Nintendo will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Game Nintendo to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Game Nintendo can use these opportunities to build new business models that can help the communities that Game Nintendo operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats Nintendo's Disruptive Strategy: Implications for the Video Game Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry are -
Environmental challenges
– Game Nintendo needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Game Nintendo can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Game Nintendo in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Game Nintendo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Game Nintendo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Game Nintendo needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Game Nintendo
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Game Nintendo.
Shortening product life cycle
– it is one of the major threat that Game Nintendo is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Game Nintendo needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Game Nintendo can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Game Nintendo in the Strategy & Execution sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Game Nintendo high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Game Nintendo demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Game Nintendo business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Nintendo's Disruptive Strategy: Implications for the Video Game Industry Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nintendo's Disruptive Strategy: Implications for the Video Game Industry is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nintendo's Disruptive Strategy: Implications for the Video Game Industry is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Game Nintendo needs to make to build a sustainable competitive advantage.