Nintendos Strategy 2009: The Ongoing Battle with Microsoft and Sony - Case Study Example

2. External Analysis a. Five Forces Analysis The threat of new entrants is low because there are already numerous proprietary products and entrance and exit costs are also high. Competition is quite intense already, with Nintendo, Sony, and Microsoft battling for the same market segments, though the last two companies have only recently decided to include casual gamers as their new markets. The threat of substitutes is somewhat higher during the recession, because other gamers would prefer cheaper substitutes to recreation than buying expensive consoles.

For Nintendo Wii, people can just choose regular sports and exercise, as well as play online, interactive games versus buying Nintendo consoles. Buyer power is moderately strong, because casual gamers are price sensitive. The 2008 recession, in particular, led to large decline in video game console revenues for Nintendo, Sony, and Microsoft, as consumers scrimped to save money and focus on essential needs. Supplier power is somewhat low, because there are numerous suppliers already, though only a few have a reliable record and can respond to changing market demands.

Nintendo used to rely on a single manufacturer before, but already formed additional manufacturing partnererships to expand its manufacturing base. Rivalry is very high, because of slow market growth during the recession, high fixed costs, and relatively low switching costs. Sony and Microsoft also intend to cut Nintendo's Wii market share by offering similar products in the future. At the same time, Sony's PSP3 and Microsoft's Xbox 360 have distinctive title, power, and graphic capabilities that appeal to hard-core gamers and other consumers looking for a more “total” entertainment experiences. b. Key Driving Forces The key driving forces of the industry are the economic and social conditions of the markets.

The recession has affected the sales of consoles. June 2009 sales of the video game industry fell by 31 percent compared to the same period in 2008. Even the sales of Nintendo Wii dropped from 5.17 million to 2.23 million from June 30, 2008 to June 30, 2009. The market place is also becoming more expansive, as former non-console players decided to buy Nintendo Wii, which offered greater interactivity and a whole new gaming experience, with its motion-sensitive wand. Furthermore, Nintendo's research revealed little differentiation among gaming devices.

The company realized it is time to revolutionize video gaming experience by offering a unique game interface. c. Strategic Group Map Based on the strategic group map, the two variables considered are strategic focus differentiation and product price. Sony PSP3 is the most expensive, followed by Xbox 360 and Nintendo Wii/DS. For strategic focus differentiation, Nintendo is the most differentiated of all, because of its first-mover advantage for its wand-based consoles. PSP3 is second, because it offers a Blu-Ray optical drive and online interactive features.

The third is Xbox 360, which differentiates itself through offering online multiplayer gaming network and having user-friendly PC-style features. d. Key Success Factors-KSFs The three key success factors are offering attractive prices, expansive and