Nintendo (7974) SWOT Analysis / TOWS Matrix / MBA Resources
Recreational Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nintendo (Japan)
Based on various researches at Oak Spring University , Nintendo is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nintendo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nintendo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 can be done for the following purposes –
1. Strategic planning of Nintendo
2. Improving business portfolio management of Nintendo
3. Assessing feasibility of the new initiative in Japan
4. Making a Recreational Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nintendo
Strengths of Nintendo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nintendo are -
High brand equity
– Nintendo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nintendo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Recreational Products industry
– 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.
Sustainable margins compare to other players in Recreational Products industry
– Nintendo has clearly differentiated products in the market place. This has enabled Nintendo to fetch slight price premium compare to the competitors in the Recreational Products industry. The sustainable margins have also helped Nintendo to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Nintendo is present in almost all the verticals within the Recreational Products industry. This has provided Nintendo a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that 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.
Organizational Resilience of Nintendo
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nintendo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the 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.
Low bargaining power of suppliers
– Suppliers of Nintendo in the Consumer Cyclical sector have low bargaining power. Nintendo has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nintendo to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Nintendo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nintendo staying ahead in the Recreational Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Nintendo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Recreational Products industry. Secondly the value chain collaborators of Nintendo have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Nintendo comprises – understanding the underlying the factors in the Recreational Products 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
– Nintendo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. 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 of Nintendo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nintendo are -
High bargaining power of channel partners in Recreational Products industry
– because of the regulatory requirements in Japan, 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 Recreational Products industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nintendo is slow explore the new channels of communication. These new channels of communication can help Nintendo to provide better information regarding Recreational Products products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Nintendo has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Recreational Products industry using digital technology.
Aligning sales with marketing
– From the outside it seems that Nintendo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Recreational Products industry have deep experience in developing customer relationships. Marketing department at Nintendo can leverage the sales team experience to cultivate customer relationships as Nintendo is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Nintendo is just above the Recreational Products industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Japan, Nintendo needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Nintendo has some of the most successful models in the Recreational Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nintendo should strive to include more intangible value offerings along with its core products and services.
High dependence on Nintendo ‘s star products
– The top 2 products and services of Nintendo still accounts for major business revenue. This dependence on star products in Recreational Products industry has resulted into insufficient focus on developing new products, even though Nintendo has relatively successful track record of launching new products.
Employees’ less understanding of Nintendo strategy
– From the outside it seems that the employees of 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.
Workers concerns about automation
– As automation is fast increasing in the Recreational Products industry, Nintendo needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lack of clear differentiation of Nintendo products
– To increase the profitability and margins on the products, Nintendo needs to provide more differentiated products than what it is currently offering in the marketplace.
Nintendo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nintendo are -
Better consumer reach
– The expansion of the 5G network will help Nintendo to increase its market reach. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nintendo can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Nintendo to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nintendo can use these opportunities to build new business models that can help the communities that Nintendo operates in. Secondly it can use opportunities from government spending in Recreational Products sector.
Manufacturing automation
– Nintendo can use the latest technology developments to improve its manufacturing and designing process in Recreational Products sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Developing new processes and practices
– Nintendo can develop new processes and procedures in Recreational Products 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Recreational Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 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. 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.
Buying journey improvements
– Nintendo can improve the customer journey of consumers in the Recreational Products industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Nintendo has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nintendo is facing challenges because of the dominance of functional experts in the organization. Nintendo can utilize new technology in the field of Recreational Products industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nintendo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 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.
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. Nintendo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Nintendo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nintendo are -
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 Nintendo business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nintendo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Recreational Products sector.
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. Nintendo needs to understand the core reasons impacting the Recreational Products industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nintendo in Recreational Products industry. The Recreational Products 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, 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 Nintendo prominent markets.
Increasing wage structure of 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 Nintendo.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Nintendo.
Consumer confidence and its impact on 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 Recreational Products industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– 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 Recreational Products industry regulations.
Stagnating economy with rate increase
– Nintendo can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Recreational Products industry.
Weighted SWOT Analysis of Nintendo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nintendo 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 Nintendo 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 Nintendo 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 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 Nintendo needs to make to build a sustainable competitive advantage.