Nintendo’s Strategy in 2009: The Ongoing Battle with Microsoft and Sony
Nintendo, which is one of the video game industry competitors, have been the worldwide leader in creating the entertainment games. Nintendo’s video games have been sold everywhere in the world and they became in the list of the worlds best selling. The latest gaming console system, which is considered as a revolutionary video game console, was the Wii. It attracted a large number of people from different ages, which resulted in a large number of sales and profit. Unfortunately, nowadays the demand of the video games slightly decreased because of the new games and devices introduced recently. This internal analysis of Nintendo conducts its competitive strength assessment versus its competitors and analyzes the firm using the value chain analysis tool and the VRIO framework.
Nintendo’s Value Chain Analysis (Primary Activities & Support Activities)
Supply Chain Management
Nintendo, which is one of the largest video game companies, follows several steps and goes through different stages to create a value for its customers. To produce a video game controller, Nintendo outsourced the key components, which are needed for the production such as controller chips, from a number of different manufacturers. Nintendo formed partnerships with those manufacturers to supply them with the required components. The process of outsourcing the components from different manufacturers is considered as a good practice and cost effective because it reduces the production costs that Nintendo might have if they produced the components by themselves. As it is mentioned in the case, “Nintendo is not a technology company – it is a toy company” so, by outsourcing Nintendo als...
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...lities of Employees (Human) Yes No Parity Normal
Innovation Capacities
(Innovation & Creativity) Yes Yes No Temporary Advantage Above Normal
Brand Name
(Reputation) Yes No Parity Normal
Innovativeness
(Organizational Capabilities) Yes Yes No Temporary Advantage Above Normal
Low Production Cost
(Organizational Capabilities) Yes Yes No Temporary Advantage Above Normal
Excellent Product Development Capabilities (Organizational Capabilities) Yes Yes No Temporary Advantage Above Normal
References:
Questions about Xbox 360 Repair, (2014), Xbox Support, Retrieved from http://support.xbox.com/en-US/xbox-360/repair/warranty-faq
Warranties, (2014), PlayStation, http://us.playstation.com/support/warranties/ps3/
Warranty Coverage (USA and Canada), (2014), Nintendo, Retrieved from https://www.nintendo.com/consumer/manuals/warrantyinfo.jsp
The value chain analysis can be examined as to whether they provide opportunities for differentiation or cost reduction. According to Porter, the value chain model is a useful analysis tool for defining a firm's core competencies and the activities in which it can pursue a competitive advantage by following one of the two strategies:
Every company in any industry consists of collection of activities that help the company to create value for their customers, these collection of activities celled “ value chain”. The value chain has two types of activities: the primary activities and costs, and the support activities and costs. We will explain both of them that are related to Nintendo.
Internal resource is the first consideration that can lead to sustainable competitive advantage and Resource –Based View (RBV) is a theory that usefully helps a firm focus on internal resources (Kraaijenbrink, Spender & Aard, 2010). According to RBV (Valuable, Rare, hard to imitate and non-substitutable), companies have different tangible and intangible resources, these resources can be transformed into unique ability, this special ability cannot flow between firms and rival firms and difficult to reproduce. These unique resources and abilities are the source of enterprise sustainable competitive advantage. In this part, Starbucks and Apple are worth to be analyzed by RBV.
The strategic recommendations provided will improve and enable the business to cope with the competitors, while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the business. In the case study, it was discovered that there were sources of opportunities in which the company would invest.
"Microsoft Corporation, is a multinational computer technology corporation with global annual revenue of US$44.28 billion and 71,553 employees in 102 countries as of July 2006. It develops, manufactures, licenses, and supports a wide range of software products for computing devices. Headquartered in Redmond, Washington, USA, its best selling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software, each of which has achieved near-ubiquity in the desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse as well as home entertainment products such as the Xbox, Xbox 360 and MSN TV" ("Microsoft").
Blue Ocean Strategy is based on 150 strategic moves spanning more than 100 years that have been studied in over 30 industries. The authors’ objective was to compare successful companies to their less successful competitors to analyse for a trend and common strategy. The result was the blue ocean strategy, which emphasises creating uncontested markets. The book is divided into three parts. The first part of the book explains the “cornerstone” of Blue Ocean Strategy which is value innovation. Kim and Mauborgne say “[w]e call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space” (Kim and Mauborgne, 2005, 1...
Value chain model highlights specific activities where the information systems could be applied. This model is set to identify leverage points in which IS could have a strategic impact to enhance company’s competitive position. The value chain perceives firm as a series of interconnected activities that add a margin of value.
Value chain analyses a firm 's internal activities such as planning, production, and development, packaging and distribution so as to create value for clients. The function of the value chain is to identify the sources for cost reduction along with quality improvement. It means value chain is used to identify the strong and weak points, positive and negative points, the scope of improvement; in a nutshell, the advantages and disadvantages of the activities taking place in the system. The value chain is also called as a strategic analysis tool and it is a well-known concept in business management industry.
In the previous part of our work we were talking about Porter’s value chain of McDonald’s fast-food restaurant. It is known, that before making a statement about competitive priorities, the company should know the objectives of the operation. Is it customer oriented? Does it cover shareholders’ and suppliers’ interests? However, now we consider that McDonald’s has taken into account all of the interests of business environment.
For instance, Harley Davidson may be forced to change their marketing strategy due to the entrance of a new competitor into the market. Second, Harley Davidson has to learn new skills and technologies quickly. For example, technologies are changing rapidly, so it is crucial for Harley Davidson’s business plan to change or alter in order to keep up with innovation. Third, this organization has to effectively leverage its core competencies while competing with its competitors. This is, Flexibility is required for Harley Davidson to learn how to use primary value-chain activities and support functions in the way that allow the organization to produce their products at a lower cost with differentiated features compare to their competitors in the market
III. SWOT ANALYSIS A. Strengths 1. Market: Currently, billions of dollars are spent in the video game market every year (Video Game Industry, n.d). With that much money being circulated, the demand for video games is evident and the Xbox console is in a very strong market.
For assessing the industry profitability, Porter 5 Forces analysis tools were used to analyze one organization evaluation. In this case, the technique were used to analyze 7-Eleven Convenience Store specifically in Malaysia. Porter 5 Forces consists of 5 important area which is Threat of New Entrants, Bargaining Power of customers, Threat of substitute Products and services, Bargaining Power of suppliers, and competitive rivalry within the industry. Theoretically, the more powerful these forces in an industry, the lower its profit potential. The strength of each force differs by industry and changes over time. The competitive advantage that 7-Eleven has using these five forces is it has raised the barrier of entry for other competitors to enter the convenience store market as new competitors will require a huge capital investment in order to implement the information technology in their business in order to be competitive. Also, hypothetically being the first in the market, 7-Eleven could have made contracts with the Malaysia government to not allow other 24-hour convenience stores in the market for a certain time period, such as Astro had done, thus having a monopoly market in the beginning of their operations which will allow them to target a bigger market share.
This essay plans to focus on the corporate strategy of Microsoft, and show how Microsoft has used diversification successfully within their corporate strategy to gain a competitive advantage.
When Microsoft entered the video game console market, they were faced with a dilemma: whether to manufacture the Xbox themselves or outsource it to a third company. Microsoft ultimately chose to outsource the production to Flextronics. Flextronics’ 'industrial park' strategy is what allowed it to manage its supply chain, making the production of Xbox more efficient and cost effective. They also had factories around the world, which were all under the centralized information system, s they could shift the production from one country to another if necessary for optimal profitability.
The outsourcing activities of Dell and HP are considered to be one of the many reasons for their downfall in the recent past as they have not been able to perform well in their response to service requirements. Some competitors such as Apple have therefore outsourced only the manufacturing but have kept the design, branding and after sales service in house.