Swinburne University of Technology Faculty of Higher Education, Lilydale

MARKETING DISCIPLINE ASSIGNMENT AND PROJECT COVER SHEET

Subject Code: LBM207K Product Management

Subject title:

Assignment number and title: ____________Assignment 1: Case Studies Analysis__________________ Due date: 8 April 2011 2,261_____________ Tutor: Dr Riza Riza Mulyanegara___ Mulyanegara Word Count: Lecturer:____ Dr

To be completed if this is a group assignment

We declare that this is a group assignment and that no part of this submission has been copied from any other student's work or from any other source except where due acknowledgment is made explicitly in the text, nor has any part been written for us by another person. ID Number 7042388 Name Tay Li Wei James Signature James

704240x

Ernest Hu Yiren

ERNEST

7257559

Tan Sze Mei Maing

Christine

7257724

Norazreena Binte Ma'az

Nora

_____________________________________________________________________________________ Marker's comments: Grade/Mark: Marker's Signature:

Table of Contents
Page 1. Summary 3-5

2.

Key Success Factors

6-9

3.

Recommendations

10 - 13

4.

Conclusions

14

5.

Reference

15 - 17

1. Summary
Nintendo Co., Ltd. is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, Nintendo developed into a video game company, and has become one of the most influential organisations in the gaming industry (Nintendo, 2011). Not too long ago, Nintendo took a huge risk and created a system like no other - the Nintendo Wii. This distinctive venture could have spelled failure for Nintendo as the system is not as powerful nor is it as focused on graphics as its competitors products.

(Nintendo, 2010) However, they took a chance, stayed true to their primary objective of making gameplay entertaining and ended up with the best-selling home console of this generation. Since its release in November 2006, the Nintendo Wii has been selling like hotcakes.
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With reference to the famous Product Life Cycle (PLC) proposed by Raymond Vernon in 1966, an analysis of the stages of the PLC which the Wii has gone through is elaborated in the following. Figure 1.1

(Quick MBA, Marketing, 2010) Introduction stage At the introduction stage, Nintendo set out to produce to an unprecedented gaming console that is suitable for gamers of every age (Kemp, E, 2006, 'Nintendo in last-minute revamp of Wii launch ads. (cover story)', Marketing (00253650), p. 1, Business Source Complete, 23301893, EBSCOhost, viewed 27 March 2011). They ventured on a cross-platform push by encouraging Wii gamers to play online and begun an eight week promotion under the tagline 'Get it online' to show gamers how to connect their Wi-Fi-enabled console to the internet. This campaign took
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place on Nintendos website, encouraged visitors with instructions to view a mobile site where the videos were hosted (Farber, A 2009).

Growth This is the stage which caught many of Wiis competitors by surprise. Wiis software increased 64% over year and 2 million Wii units were sold at a 108% increase over November 2007 (Schachter, K 2008). Furthermore, during this stage, the high volume sales of 10.51 million units made Nintendo the new market leader in both the home and handheld videogame console businesses (Mutschler, A, 2007).

Maturity Today, after almost 5 years since its launch, the Wii has finally seen a drop in its sales and popularity most notably due to the emergence of competitors new products to compete with the Wii, such as Microsofts Kinect, which also has motion-sensing gameplay capability. It is generally perceived Wii is currently at this stage of the PLC. Nintendo said it might not meet its targeted profit as it brace for the outcome of sale from shoppers feeling the pinch of the slowdown (Maxwell K, 2008). Wii sales have slowed and the price of its console was cut to $200 (Mike, S n.d 2009). Wii motion-sensing game console fell for the first time since its inception three years ago. The revenue fell to $2.7 billion from $4.4 billion after three year from the date it was launched (Sadighi, L 2009). Nintendo drop the price of Wii from $249 to $199, this further price cut help Nintendo "maintain its position as the leading hardware platform in monthly sales over the short to medium term" (Mike, S n.d, 2009).

2. Key Success Factors

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In todays market, companies must be on the ball in finding effective strategies to keep pace with changes in the business environment. So how is the Nintendo Wii differentiated from the rest? Reflecting back on their success story, there is clearly a strong strategic recipe behind the scene. With reference to Deschamps and Nayaks basic strategies of product competition, we identified 3 of such strategies which Nintendo executed that led to Wiis success: Competing through product proliferation Competing through value Competing through innovation

(Deschamps, 1993) In the following, Wiis key success factors will be elaborated according to these 3 strategies.

Competing through product proliferation

Launching Strategy Nintendo used various launching strategies for the Wii. Firstly, market tests were done to figure out who actually were their targets. Through market tests, it was suggested that non-gamers would give this machine a go. Thus, the company pumped 70 percent of its U.S. TV budget into programs aimed at the 25 to 49-year olds. Knowing that this group of people spends exceptionally more time on print media, Wii ads were put on grey haired publications such as AARP (a nonprofit, nonpartisan membership organisation that helps people 50 and over to improve the quality of their lives.) and Readers Digest. (Gaudiosi, 2007).

Secondly, the Nintendo Wii saw a scarcity of stocks in retail shops. Stocks were sold out in a matter of hours. This could be the sellers use of scarcity strategies as a way of signaling his quality to uninformed consumers. (Stock & Balachander, 2005) In addition, it could also be a possible motivation to raise the perceived value of the products as a collectors item.
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Competing through value

Relative affordability Nintendo released its Wii console at $250/set making it the cheaper than its two main competitors - Sony's Playstation 3 and Microsoft's Xbox 360. (Hamilton, A, & Oda, Y 2008.). Everyone loves the Wii because of its low cost compared to other gaming systems. This makes it perfect for consumers who look to purchase gaming entertainment at an affordable price. The reason for its low price is straightforward. Its simplicity of using off the shelf parts from numerous suppliers led to its affordable selling price, among those was a cheap, lower-powered chip (OBrien, J, 2007). The DS, with its efficient mobile processor, had already proven that new gaming experiences are possible without the fastest chips. A low-power chip also meant that the machine could be left on overnight to download new contents without overheating (Gaudiosi, J 2007). This approach, backed by excellent design and product quality has been a crucial contribution to Wiis success.

Competing through innovation

Exploitation of a non-existent market Another key reasons why the Wii console succeeded, was their intelligent approach of avoiding direct competition. Over the years, leaders in the gaming industry such as Sony and Microsoft have been continuously developing better versions of their products in a bid to capture market share. However over these periods, one thing remained unchanged the size of their target market, which consists of regular console gamers. Meanwhile, Nintendo shunned away from an already intense competition between this industrys giants and exploited a market which was nonexistent yet at that time. According to Igor Ansoffs

growth vector matrix, they pursued something known as a diversification strategy developing a new product for a new market. Figure 2.1 Ansoffs Growth Vector Matrix

Nintendos strategy for Wii

(Quick MBA, Strategic Management, 2010) They developed something which everyone, not just limited to the regular gamers, could consume. With such a product characteristic, it meant that the Wii has a much wider target market segment as compared to its competitors products. Coupled with Wiis product differentiation, it is evident why the Wii became so successful.

Easy to play, even for non-gamers As mentioned earlier, Nintendos main competitors have been trying to outdo each other by being product-oriented. Typically, advancement in technology for gaming consoles will only make the gaming consoles more difficult and complicating to play, thereby limiting the range of its target market segment to just the regular avid gamers. In a bid to attain market share in the midst of such a saturated industry, Nintendo took an unprecedented approach taking one step backwards by building a gaming console with fewer technological features. Doing so makes the console easier for people to play, even for unlikely players such as the elderly. Instead of having controllers full of buttons, the Wiis remote is built

with a wireless motion sensor controller with minimal buttons, allowing players to easily learn how to play its games. Figure 2.2 The elderly having fun with the Wii

(Technology Gossip The Technology News Blog, Video Games, 2009)

With such a simple user-interface, the Wii opens the world of gaming to not just the gaming regulars, but also to people who were previously not interested in video games (Manes, S, 2006, Nintendo Wii, Forbes, Vol. 178, Issue 10, p.86, viewed 22nd March 2011). By being able to do so, they gained a broader market segment, allowing Nintendo to generate a more lucrative business.

3. Recommendations
In a bid to prolong Wiis maturity stage in the PLC, our team has come up with offensive strategies and defensive strategy which we would recommend Nintendo to implement. As shown

in figure 3.1 is a depiction of how a product could be prevented from entering into the decline phase in the PLC, if the products maturity stage is extended or its growth renewed. Figure 3.1 Life cycles and limits to growth

(Baker et al, p. 18)

Offensive Strategies
As its name suggests, this strategy seeks to inject new life into a product, with an objective of initiating a new growth phase (Baker et al, p. 420). Our team has brainstormed 4 offensive strategies, as detailed in the following.

Adding a DVD-playback function The products of Nintendos rivals in this industry such as the Xbox 360 and the PS3 both have the DVD-playback function. As for Sonys PS3, it is even capable of playing Blu-ray DVDs

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(Perenson, M, 2006, Burning Question: PS3 The Blu-ray Movie Experience, PCWorld, viewed 25th March 2010). Today, DVD players are considered a must-have in homes. However at the same time, people look to products which have multiple functions as they want to save as much space as possible in their homes. Hence, consumers would probably want a gaming platform that has the DVDplayback functionality. The current Wii in the market does not have this feature, so Nintendo could probably tackle this issue by adding on this feature to the Wii. Such an add-on could further persuade people who do not own a Wii yet, to purchase one.

Making the Wii more compact When space is a premium you do not want a console that is not able to squeeze into your TV cabinet. Take the iPod for instance - it is the smallest hard drive unit around. The iPod, with rave reviews for its design, functionality and size has since then dominated the MP3-player market (Jefferson, G n.d) What Nintendo can improvise for its console is to make it even more compact and handy, just like the iPod - so that consumers can bring it everywhere and anywhere. Ideally, the size of a portable cd player will be a good investment. With the resizing of the console, it can virtually be placed anywhere on your entertainment center. Parents with children can put it in their cars, plug it to their in-built LCD TVs and children will be entertained throughout the whole journey.

Adding on a voice-recognition function to the controllers of Wii Currently, the only Wii games which require any form of voice recognition are karaoke-themed games, which involve a mandatory externally attached microphone. One thing which Nintendo
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could do is to add on a voice-recognition feature to its original controllers. Doing so not only allows consumers to save money from buying the external microphones, it could also open doors to third-party game developers who could introduce new Wii games by exploiting this in-game voice-recognition feature, thereby making the Wii an even more attractive purchase.

3D & HD visual effects during games 3D technology has the potential to change how we consume entertainment. The concept of 3D is not new and is very expensive to be implemented on gaming but is seen as a mainstream 3D gaming option but demand has still been strong and we know that people want it (Jansen, D 2010). We would recommend adding on a side product to enhance 3D visual effect by using red-cyan glasses on Wii. Being a side product, it will not have any impact to the selling price of the Wii console, meaning that it will remain affordable for consumers. But for those who have the additional means financially, they can purchase the 3D glasses separate for enhanced gaming pleasure.

Increasing Wiis hard disk storage space Another area Nintendo have to look at is finding a solution to enlarge its internal memory space. Right now, a minuscule memory card holds a fraction of what the PS3 and the XBox offers. It is now a problem because gamers are increasingly frustrated with the limited space offered by Nintendo (Chubb, 2008). Failure to fix this problem promptly might result to gamers falling away, this might set in motion the 'decline stage' of the Wii. In fact, this group of people who are yearning for more space are avid gamers and fans of the Wii (Sylvester, 2008).

Defensive Strategy
Besides executing the offensive strategies as mentioned above, there is also a viable defensive strategy which our team thinks that Nintendo could use to sustain Wiis maturity in the market
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price reduction. One of the key selling points of the Wii is due to its substantially lower cost as compared to other gaming consoles. By further reducing the price of the Wii, it further entices consumers to purchase it.

4. Conclusion
There are endless features which could be added to the Wii to augment it and improve its overall value. However no matter how good a product is or how much it is modified, it will inevitably face elimination one day due to the advancement of technology. Hence, what Nintendo should do
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for its future developments is to keep in mind the two key driving forces that impelled the Wii towards its success being innovative and consumer-oriented.

5. References
Chubb, D, July 2008, Nintendo Wii Hard Drive: More Space For Virtual Console & Wiiware, http://www.product-reviews.net/2008/07/28/nintendo-wii-hard-drive-more-space-for-virtualconsole-and-wiiware, viewed 20 March 2011
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Deschamps, J.-P. and Nayak, P.R. 1993, Lesson from product juggernauts. Prims, Second Quarter

Farber, A 2009, 'Nintendo in major drive to prompt Wii console gamers to play online', New Media Age, p. 03, Business Source Complete, 41129325, EBSCOhost, viewed 27 March 2011.

Gaudiosi, J 2007, 'WHY Wii WON', Business 2.0, 8, 4, pp. 35-37, Australia/New Zealand Reference Centre, EBSCOhost, viewed 22 March 2011

Hamilton, A, & Oda, Y, 2008, The Wizard of Wii, Time, 171, 22, pp. 42-43, Academic Source Complete, Accession Number 32177006, EBSCOhost, viewed 27 March 2011

Internet Center for Management and Business Administration, Inc, 1999-2010, Marketing The Product Life Cycle, http://www.quickmba.com/marketing/product/lifecycle/, viewed 28 March 2011

Jefferson, G n.d., Latest MP3 players are smaller, cheaper, better, USA Today, n.d., Newspaper Source, Accession Number J0E139079049802, EBSCOhost, viewed 27 March 2011

Jansen, D 2010, Bringing Home Entertainment Into The Third Dimension', Tech Trader, 2, 3, pp. 24-31, Business Source Complete, 51003169, EBSCOhost, viewed 27 March 2011
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Kemp, E 2006, Nintendo in last-minute revamp of Wii launch ads, Marketing (00253650), p. 1, Business Source Complete, 23301893, EBSCOhost, viewed 27 March 2011

Maxwell, K, 2008, 'Nintendo's Net Rises On Robust Wii Sales', Wall Street Journal - Eastern Edition, 31 October, Academic Source Complete, 35065831, EBSCOhost, viewed 27 March 2011

Mike, S n.d 2009., ''Super Mario Wii' takes a leap back to a storied..', USA Today, n.d., Academic Source Complete, J0E314487070009, EBSCOhost, viewed 27 March 2011

Mike, S n.d., 'Wii joins Xbox, PS3 in price drop', USA Today, n.d., Academic Source Complete, J0E303640742909, EBSCOhost, viewed 27 March 2011

Mutschler, A 2007, 'Nintendo Wii trumps Xbox 360 in sales', Electronic News (10616624), 53, 35, p. 34, Academic Source Complete, 26445974, EBSCOhost, viewed 26 March 2011

Nintendo, 2011, Corporate, Company History, http://www.nintendo.com/corp/history.jsp, viewed 25 May 2011

Nintendo Talks To IGN About Wii, 2006, http://wii.ign.com/articles/703/703593p1.html, viewed 23 March 2011

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OBrien, J, 2007, Wii will rock you, Fortune International (Europe), Vol. 155, Issue 10, pp. 3444, viewed 20 March 2011

Sadighi, L 2009, 'Nintendo Profit Slides on Slower Wii Sales', Red Herring, p. 2, Academic Source Complete, 43622380, EBSCOhost, viewed 26 March 2011

Schachter, K 2008, 'Wii Leads Video Game Sales Rise', Red Herring, p. 2, Academic Source Complete, 36602794, EBSCOhost, viewed 26 March 2011

Stock, A, & Balachander, S 2005, 'The Making of a "Hot Product"- A Signaling Explanation of Marketers' Scarcity Strategy', Management Science, 51, 8, pp. 1181-1192, Business Source Complete, EBSCOhost, viewed 22 March 2011

Sylvester, M, 2008, Nintendo Wii hard drive coming soon?, http://vc.nintendolife.com/news/2008/05/nintendo_wii_hard_drive_coming_soon, viewed 20 March 2011

Technology Gossip The Technology News Blog, Video Games, 2009, http://www.technologygossip.com/tag/video-games/, viewed 28 March 2011

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