Strategic Management of Change BUMGT5926

Scenario Planning

Syafiqa Anneisa Abdullah 30089404 Navaneeswary Ganesamoorthy 30089407 Rei Lynn Lim 30089392

Presentation Overview (1/2)

•Introduction •Company Profile •Microenvironmental Analysis •PESTLE Analysis •SWOT Analysis •Porter’s 5 Forces Analysis •The Industry Life Cycle •Nintendo’s Key Success Factors

Presentation Overview (1/2)

•Analysis of Key Uncertainties •Analysis of Future Trends •The Scenarios & Implications •Conclusion •References

A Brief History of Video Games

Atari to Wii

Introduction (1/2) • Video games have been around since

the 1940s.

• Over the decades, game machines continuously evolved to become powerful machines capable of stunning visuals and graphics.

• In the mid 2000 to 2007, social media, smartphone and tablet technology entered the gaming scene.

• Casual games become the norm attracting previously non-gamers into the market.

Introduction (cont 2/2)

• As the dominant force of the mobile and gaming market, in the next coming 5 years, where does Nintendo see itself competing

with threats from smartphones and other gaming platforms taking up its share of the market?

• Scenario planning : To make strategic decisions that will be a sound foundation for all plausible and possible future scenarios.

Company Profile (1/3) • Founded in 1889 in Kyoto, Japan by

Fusajiro Yamauchi.

• Manufacturer of Hanafuda “flower” cards

• Expanded in 1960s by Hiroshi Yamauchi.

• Following the crash of the cards business, Nintendo entered the toy industry upon discovering Gunpei Yokoi, a mechanical engineer.

Company Profile (2/3) • 1970: Yokoi teamed up with Shigeru Miyamoto to

create games – The Father of Modern Video Gaming, creator of iconic franchises including Mario, Zelda and Pokemon.

• The rest is history.

Evolution of Nintendo Gaming Consoles

Industry Overview (1/2) • The video game industry is dominated by 3 gaming

giants

- Microsoft, Sony and Nintendo

• Currently at the 8th generation of console production

Industry Overview (2/2)

• U.S. computer and video game software sales grew six percent in 2007 to $9.5 billion – more than tripling industry software sales since 1996.

• Halo 3, the best-selling title of 2007, took in more revenue in its first day of sales than the biggest opening weekend ever for a movie ("Spider-Man 3") and the final "Harry Potter" book's first day sales;

• On average, nine games were sold every second of every day of 2007

• The average game player is 35 years old and has been playing games for 13 years.

Industry Analysis

• The Microenvironment –C3SPM

-Company

-Customers

-Competitors

-Suppliers

-Middlemen (Distributors)

• The Macroenvironment : PESTLE Analysis

The Microenviroment (1/2)

Suppliers Nintendo’s suppliers comprised of both hardware manufactuers

and software developers.

Hardware companies supply the various parts, components and

provide the technology to manufacture Nintendo’s gaming devices.

Distributors Online and offline distributors.

The retailers: Includes specialised software boutiques, department

stores, electronic stores and hypermarkets.

Customers Diversified segment of consumers:

Students, employees, military troops; seniors and parents.

The Microenviroment (2/2)

Competitors The main competitors in this industry are Sony, Nintendo and Microsoft,

Sony has about 70% share in the market and the latter commands the

rest of the market.

Nintendo faces competition from Apple Inc while in the casual gaming

market, Facebook is a likely upcoming competitor.

The Macroenvironment PESTLE Analysis (1/2)

Political Factor Target of political activist concerning controversy about violence in

gamers.

Entertainment Software Rating Board (ESRB) that assigns ratings for

gaming content (ERSB, 2012)

Economic Factor Purchasing behaviour is influenced consumer purchasing power.

Console development cycle follows roughly the general computer

industry cycle

Consoles are not upgradeable, consumer has to buy complete new

system.

Social Factor Video games are played predominantly by young males.

The current social trend on the rise are non gamers who have no

prior experience or interest in video games.

The number of female gamers are also on the rise. Digital downloads

and in-game purchasing is gradually becoming the norm.

The Macroenvironment PESTLE Analysis (2/2)

Technological Factor Technology has improved processor speed, visuals and memory capacity for

gaming consoles.

Disruptive innovation in the form of smartphones and tablets have

significantly altered consumer lifestyles.

Legal Factors The legal issues faced by the industry are trademarks, copyrights, licensing,

online ownership and demands of intellectual property.

Environmental Factors The video game industry uses a lot of plastic and metal resources for its

hardware.

In the current era majority people are environmentally aware.

Manufacturing game consoles creates non-biodegradable waste which is the

byproduct of this industry.

SWOT Analysis (1/2)

STRENGTH

Nintendo has Shigeru Miyamoto, the creator

of Nintendo’s most successful game

franchises and intellectual property.

Low upfront costs

The Nintendo brand name is a world cultural

icon synonymous with video games.

Nintendo has past success with family

gaming model

Nintendo has had extensive experience in

the video game industry.

Uniqueness of hardware motion detection

when it comes to the Nintendo Wii

WEAKNESSES

Console power weaknesses

Limited selection of software for hardcore

gamers.

Brand name –Long perceived by the gaming

community as a kid’s toy or for casual

gamers.

Shigeru Miyamoto may eventually retire

from the gaming business.

SWOT Analysis (2/2)

OPPORTUNITIES THREATS

The first to introduce motion technology in

video games.

The availability of technology

Variety of multiple gaming platforms.

Design games for novice and casual gamers

including seniors and adults

Sony and Microsoft are capable of mimicking and

improvising on Nintendo’s technology.

Disruptive innovation caused by Apple’s iPhone and

iPad successful ventures in the mobile and smartphone

market.

Third party software developers choose to develop

games for smartphones and Facebook due to lower

cost of production and higher potential returns.

Social media gaming on Facebook is gaining popularity

amongst casual gamers.

Loss of potential customer due to limited sophisticated

games selection for the hardcore gamers.

Slow to adopt an online model for downloadable

content and microtransactions on a wide scale for

games on its systems.

Porter’s 5 Forces Analysis

COMPETITIVE

RIVALRY

WITHIN THE

INDUSTRY

(HIGH)

Threat of

Substitute Products

HIGH

Bargaining

Power of Buyers

HIGH

Threat of New Entrants

MEDIUM

Bargaining

Power of

suppliers

HIGH

Image source: http://13plymouth.com/wp-content/uploads/2010/09/lifecycle.bmp

Video Games Industry (1985 – 2012)

Nintendo’s Key Success Factors (1/2)

Key Success Factors

Definition: The combination of factors required

to accomplish organisational business goals

(Thebusinessdictionary, 2011)

Nintendo’s Key Success Factors (2/2)

• Dominance over the casual gamers and portable gaming market

-In 2001 – 2006, Nintendo have a big share over the casual

and mobile gamers market with the Nintendo Wii and Nintendo DS.

• Pricing advantage -Nintendo’s consoles are more affordable than its competitors.

• Strong brand name. -Nintendo is well known for its games including Super Mario, Pokemon and Zelda.

Analysis of Key Uncertainties

• Rapid advancement of tablet and smartphone technology

- Tablets and smartphone becoming more powerful

• Uncertainty to the market size and potential returns

• Other alternative forms of digital entertainment.

-Facebook, digital platforms, Google +, internet TV, Apple TV

Analysis of Future Trends (1/5)

• Increase in social networking, mobile and digital markets

- Social networking platforms become more

popular.

-Availability of cheap or free games for

download on digital platforms, ie

iTunes and Facebook.

-Smartphones and other mobile devices

Will penetrate into Nintendo’s

market share

Analysis of Future Trends (2/5) • Tablets as the next generation of console games

-The gaming industry will drive the evolution of technology for

tablets.

-Apple is already using games to promote and sell its iPads

-Developers viewing tablets as the ideal foundation for

developing games

Analysis of Future Trends (3/5)

Analysis of Future Trends (4/5) • Shift into games-as-a-service

model -Games are evolving to become a service.

-More social games and virtual

worlds are created to fill in market space.

-Subscription base models,in-game

Purchases and premium membership

Memberships, virtual goods and

microtransactions will become the revenue

streams for such games.

In-game purchases (3/5)

Analysis of Future Trends (4/5)

• Slowed growth of traditional game retailing and publishing

-Console game manufacturers will continue to decline in sales in both hardware and software

-Traditional retail game stores will gradually exit the market.

-Gaming giants will produce their final console (8th generation) before going completely digital.

Analysis of Future Trends (5/5)

• Emergence of digital content and new publishing models

-Third-party software developers such

as Ubisoft and Electronic Arts will

concentrate on developing games for

the mass market and serious market.

-Business models for gaming will

change.

Scenario Themes: Pokemon Evolution

Scenario Themes and Implications (1/7)

Scenario Theme 1: Pokemon Evolution - The market for digital contents and games grow rapidly

- Increasing trend in casual gaming

- Smartphone and tablets become a popular

gaming platform

-Third party game developers (Ubisoft and

Electronic Arts choose to develop games for

Digital platforms, i.e. Apple iTunes)

- Perception of console games as being too costly

to develop for

Scenario Themes and Implications (2/7)

Strategic Implications of scenario -Nintendo need to adapt and change its existing model to fit the

trends.

-Include a digital platform for casual gamers to access their vast

library of affordable or free games.

-Redesign existing popular franchises (i.e. Mario) to

suit the casual gamers market

-Create new games that appeal to the casual gamers

-Design a console that attracts both casual gamers

and existing gamers.

Scenario Themes 2: Link

Scenario Themes and Implications (3/7)

Scenario Theme 2: Link

-Trend for casual gamers growing but not as fast.

- Existing digital platforms (i.e. iTunes) are flooded with low-quality, no brainer games.

- Existing games on smartphones and social media lack the sophistication of console games.

- Many third-party game developers are

-Still uncertain of the new revenue model.

Scenario Themes and Implications (4/7) Strategic Implication of Scenario

- Nintendo to protect its reputation for producing quality games.

- Leverage on its brand assets by making their games available across various platforms including social media, iPhone, iPad and smartphones.

- Spread brand awareness of its games to gradually win casual gamers over as Nintendo fans.

Nintendo’s Popular Game Franchises (5/7)

Scenario Themes and Implications(6/7)

Scenario Theme 3: Bob-omb - Video game console industry continues to decline and

traditional retail and online game shops dies off.

- Tablet technology catches up to the performance of game consoles.

- Popularity of casual games and gamers increase .

- The revenue generated attracts well-known third party game developers.

- More quality games are produced for the

smartphone, social media and other digital platforms

Scenario Themes and Implications(7/7)

Implications of Scenario - In the worst case scenario, if Nintendo does

not keep up with the trends, competing social

and mobile devices will take over the casual

gamers market.

-Third party game developers will not want to

develop games for Nintendo due to it being too

costly.

-Nintendo will eventually pull out of the

hardware market to cut its losses

-Will focus on developing games for existing

Platforms instead.

Conclusion • The console gaming industry matures and is entering the

decline phase.

• Console manfacturers are facing stiff competition from tablet, smartphone and social media technology.

• Casual and mobile gamers are on the rise.

• In order to compete and sustain in the long-term, Nintendo must evolve according to the technology and social trends.

• Its strength lies in its popular game franchises.

• To compete effectively, Nintendo needs to spread its brand awareness through its franchises and create games that appeal the casual gamers market.

Q and A

Thank You Very Much

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