As of December 1, 2006, Nintendo has sold over 387 million hardware units and nearly 2. Billion software units worldwide. Currently, it is selling the Nintendo WI, which is its seventh generation video game console. The major, distinguishing feature of the WI is its wireless controller, the WI remote, which can be used as a handheld pointing device and can detect motion and rotation in three dimensions. The WI has sold over 3 million systems as of January 10th 2007 thus placing Nintendo among the market leader.
Despite its high volume sales to consumers of all demographics, Nintendo has recognized a steep increase in the number of women gamers and thus wants to gain a share in that market as well. Since the gaming industry as a whole is not catering to the needs of women or taking their preferences into account, it will be monetarily beneficial for Nintendo to attack the market with slightly modified products, accessories and extensive marketing techniques. Nintendo attempts to break free from the myth of video games as being “boys toys” and is looking to place WI and some of its software as having features that will appeal to the female audiences.
Given the enormous buying power that women have, this is the perfect opportunity for Nintendo to make another mark in the field – provide “female friendly’, gender auteur games, thus taking this segment of gamers by storm. While the following marketing plan aims at placing WI in new markets that have not yet been “exploited”, it also aims at solving what seems to be a matter of grave concern for existing WI users – safety and usability of the console. Nintendo has had to replace wrist straps of WI controllers and about 200,000 AC adapters resulting from breakage during use.
Consumers are of the view that WI can be / has been physically harmful to them and to children, and this perception needs to be changed. A positive psychology about the product needs to be induced in the minds of nonusers and they need to be shown ways of using the console without having harmful results. In trying to achieve both of the above mentioned goals, the plan suggests marketing strategies that include extensive advertising, promotions, PR campaigns and press releases.
It talks at length of how all the available media can be paralleled to communicate WI as an innovative, gender neutral, harmless game console that needs to be experienced by all. Gaming Industry Growth Trends The industry and its growth have, in the past, been primarily dependent on the introduction of increasingly spectacular graphics and the development of more employ game software. In the recent years, however, the traditional success formula of developing splendid and complex games has become less productive.
Video game is fast developing into an industry with the expected importance of first mover advantage, mass acceptance of the product and technical innovation. Recognizing this need for change in methods of product development, Nineteen’s strategy over the past year has been to expand the gaming population by introducing new devices equipped with touch screens and microphone ports to enable intuitive game play along with wireless communication capability. These features have made it possible to introduce software innovations that expand the definition of video games.
New user demographics have been cultivated by introducing a software lineup. After the huge success of Nintendo ADS and its “easy, safe and charge free” WI-If Connection, Nintendo launched a new gaming console “WI” (pronounced “We”), during the calendar year 2006. With its unprecedented controller, “WI” has set a new standard as a video game interface. Competitive structure of the console game market Console games, with their high profit margins, represent the main stream of the idée game industry and are marked by an oligopolies control at the hardware and any action of one of them can have a measurable impact on the entire market.
The three main manufacturers of video games, Nintendo, Microsoft and Sony currently control the industry, with Saga having recently withdrawn. There is tremendous competition with each of the players trying to gain a larger share of the market than the others. Nineteen’s biggest competitors so far have been Sony Computer Entertainment with its Play station and Microsoft corporations X Box. But with the creation of WI, Nintendo has introduced a winner – a winner that will eat a huge chunk of the console game “market share pie”.
The WI does not only benefit from having a top of the line wireless movement- sensitive controller with a different variety of games, but also from having been placed as one of the most affordable of all the available console games. Distributors and retailers Distributors are responsible for the physical storage and delivery of the product, and retailers usually for the sales effort. The distribution and retailing of the games is notable for its role in the maturation stage of the gaming industry.
Nintendo works with a wide variety of intermediaries in North America and across the world, in order to insure that all its products, currently the WI, is made available to customers on demand. Sales, Profits and Financial Position of Nintendo Company limited With respect to the handheld game products of the electronic entertainment division, both “Nintendo ADS” hardware and software recorded very strong sales for the nine month period ended December 31, 2006. “Nintendo ADS” hardware has been the fastest rising game platform ever in the Japan market, and, in addition, has sold well in overseas markets.
As a result, sales in the first three quarters have reached 18. 88 million units on a worldwide basis. As for “Nintendo ADS” software, net sales have also accelerated, supported by a number of million-seller titles. Sales have been led by “New Super Mario Pros. “, with 8. 64 million units sold on a worldwide basis and continuing strong sales of “Touch! Generations” titles such as “Brain Age: Train Your Brain in Minutes a Day! ” and “Nintendo”. In the console business, “WI” hardware (launched at the end of last year) got off to a favorable start and “WI” software titles such as “The Legend of Zelda : Twilight
Princess” enjoyed brisk sales as well. As a result, net sales rose to 712. 5 billion yen (72. 8% up y/y), causing operating income to reach 167. 6 billion yen (102. 5% up y/y) despite a rise in selling, general, and administrative expenses, which was primarily driven by higher marketing expenses. Income before income taxes and extraordinary items was 220. 7 billion yen (50. 5% up y/y) primarily due to 26. 0 billion yen (45. 2 billion yen last nine-month period) of foreign exchange gains. Net income reached All in all, Nineteen’s financial position continues to be very strong.
At March 31, 006 total liabilities were *186. 4 billion ($1 ,593 million), and the current ratio was 5. 59 to 1. The balance of cash and cash equivalents was 3. 31 times total liabilities. Working capital was *836. 5 billion ($7,149 million). The receivable turnover period increased by 6 days compared with the previous fiscal year to 34 days. Inventories were *30. 8 billion ($264 Million). The inventory turnover period was 29 days. The debt-to-equity ratio was 0. 19 to 1 at March 31, 2006. Total assets as of December 31, 2006 increased by 326. Billion yen compared to the previous fiscal year-end to 1,486. Billion yen, mainly due to the increase in notes and trade accounts receivable resulting from the recent boost in net sales. Net cash from investing activities increased by 54. 0 billion yen primarily due to proceeds from time deposits exceeding the transfer payments for deposits. Net cash from financing activities decreased by 49. 3 billion yen primarily due to the payment of cash dividends. As a result, net cash and cash equivalents during the nine month period ended December 31, 2006 increased by 146. Billion yen versus the beginning of the reporting period to 763. 5 billion yen. Opportunity and Issue Analysis Like every other product in the market, Nintendo faces an array of opportunities and threats. While the threats could significantly affect Nineteen’s operating performance, share price and financial condition, the opportunities can be leveraged upon in order to ensure a secure future. However, one must remember that unpredictable risks and opportunities may exist other than the ones set forth herein.
Economic environment In recent years, the market for computer and video games has grown exponentially. Sales of such game consoles were approximately $29 billion dollars in 2005 and will have grown to $44 billion dollar by 2011. According to “Data monitor”, every American household has on average two video games and about 42% of the American population is expected to purchase video games in 2006. The number of women video game players is also on the rise and Nintendo WI sees a great opportunity in serving this rising demand.
Despite the increase in overall demand for games in the last few years, it has been seen that the video game industry is significantly impacted by consumer preferences. It is characterized by short product life cycles and a very high demand around the holiday season. Although production is targeted at the equilibrium point of supply rejections are extremely difficult to obtain – this can lead to the risk of excessive inventory or inventory obsolescence, both of which could have an adverse effect on Nineteen’s operations and financial position.
Nintendo distributes its products globally with overseas sales accounting for approximately 70% of total sales. While these global markets are extremely important to the business, the majority of monetary transactions are made in local currencies. In addition, the Company holds a substantial amount of assets including cash deposits denominated in foreign currencies without exchange contracts. Thus, fluctuation in foreign exchange rates would have a direct influence on earnings not only if foreign currencies were converted to Japanese yen but also if reevaluated for financial reporting purposes.
Japanese yen appreciation against the U. S. Dollar or Euro would have a negative impact on Nineteen’s profitability. Technological Environment Since the WI is at its introduction stage, there is plenty room to develop accessories for this particular product. Examples of WI accessories are Skin cases for the WI Remote, Skin cases for the console, sports controllers (golf club, baseball bat, ND tennis racket), dance pads, and guitar controllers. Furthermore, Nintendo may develop controllers for women games such as skillet and turner for cooking games or soccer cleats for soccer games.
In the recent past, Nintendo has also incorporated some advertisements and quick product messages within their games. Most noticeable have been the ad boards in the Nintendo WI game “Madden 2007”. This kind of In-game Product Placement (PL) is a great way to generate extra revenue. Also, since Nintendo WI games can be played online, Nintendo can apply dynamic PL – therefore charging advertisers based on the number of viewers or IP address. While Nintendo continues to develop innovative and appealing products and accessories, the development process is complicated and includes many uncertainties.
Despite the substantial costs and time needed for software development, there is no guarantee that all new products will be accepted by consumers due to ever shifting consumer preferences. In order to leverage on some of the products that have taken markets by storm, Nintendo has steadily increased the number of intellectual property licenses. Examples of Nintendo merchandise are its apparel, domestic goods (bedding and towels), food and beverages, gifts, publishing, and toys. This not only generates extra revenue and profits for Nintendo but also promote brand awareness and brand loyalty.
Piracy and unauthorized copying are growing concerns in the entertainment security measures continues to mature, the technology preventing these violations is being developed at an extremely slow rate. This has resulted in a significant loss of sales revenue to the video game industry. As of 2005, the video game industry reported a lost of more than $3 billion dollars to piracy. Nintendo commissions a number of outside manufacturers to produce key components or assemble finished products. In the event of their commercial failure, Hess manufacturers may not adequately provide significant components or products.
In addition, certain manufacturers may not have the capacity to provide the ordered amount of components. A shortage of key components could lead to issues such as margin decline due to higher pricing as well as insufficient product supply, and quality control. Competitive environment Nintendo is engaged in a business categorized under the massive entertainment industry. Therefore, the availability of other forms of entertainment affects Nineteen’s business. If consumer preferences shift to other forms of entertainment, t is possible that the video game market may shrink.
In recent years, the online gaming market in the US has grown tremendously owing to the fact that broadband Internet access has become affordable. By October 2003, the Forrester Research group estimates 22. 7 million American homes will have broadband access and it is projected to vastly increase to about 55 million homes by 2007. Due to the increase of more people being online, Nintendo WI is forced to deal with more competition, especially with free online games and the increasingly popular massively multilayer online games (OMG).
The emergence of new competitors resulting from technological innovation could also have a detrimental impact as well. In the video game industry, it may become even more difficult to generate profit as more research and development expenses and marketing expenses are required and as price competition intensifies with giant enterprises entering into the market. As a result, Nintendo may find difficulty in maintaining or expanding its market share as well as sustaining profitability. Legal and political environment Nintendo engages in business in territories such as the Americas, Europe, Australia, and Asia in addition to Japan.
Expansion of business to these overseas markets involves risks such as unpredicted enforcement or changes to laws or regulations, emergence of political or economic factors that prove to be a disadvantage, inconsistency of multilateral taxation systems and diversity of tax law interpretation leading to a disadvantaged position, difficulty of recruiting and securing human resources, social disruption resulting from terrorist attacks, war, and Socio – Cultural environment Video games have evolved into one of the most pervasive, profitable and influential forms of entertainment in the United States and across the world.
They have become a cultural phenomena, especially so in America, where game creatures such as the Poke have evolved into giants in the youth culture. Video games elicit powerful reactions in their players, such as fear, power, aggression, wonder, Joy and even learning. Given this pervasive nature of video games, they are not only being used to serve the primary purpose if entertainment but are also being harnessed to facilitate learning. These new trends are very important growth avenues for Nintendo WI.
Target Market Having described the product that is being sold and in what quantities, here is a rife description of the target market or “who the product is sold to” – the markets that video game manufacturers have been targeting in the past and the new markets that need to be penetrated. From past studies it has been defined that video game players are 62% male and the rest 38% female. According to the “2006 Essential Fact about the computer and video game industry’ by Entertainment Software Association, women 18 or older represent a significantly greater portion of the game-playing population (30%) than boys age 17 or younger (23%).
However, teenagers are not the only ones that play games. Parents also play games. 9% of the parents say that they play games because they are asked to, 75% consider it is fun for the entire family, 71% think it’s a good opportunity to socialize with the kid and 62% believe it’s a good opportunity to monitor game content. The typical parent gamer is 37 years old and surprisingly 47%of them are women. Among gamer parents 80% report they play video games with their children and 66% feel that playing games has brought their families closer together.
Studies show that 69% of American heads of households play computer and video games. This means that games are very popular among the Americans. If we look at the age, we become conscious that the average game player age is 33. In 2005, 31% of Americans under 18 played games, 44% of Americans between the ages of 18-49 and 25% over the age of 50. From the above results it can be concluded that people of all ages, both sexes and from all walks of life play video games for varied reasons. But what can also be revenue.
These are markets of women gamers. Even though games are perceived as “boys toys” and most games are created to address men, the number of women playing games is constantly on the rise. No one so far has really created games to satisfy the naming needs and wants of women. And this is what Nintendo is trying to do – gain more market share by focusing on female friendly games. Considering that women these days have an enormous buying power, Nintendo is aware that catering to their gaming needs is the best marketing strategy they can adopt.
Marketing and Financial Goals The main goals of this marketing plan are as follows: 1. Encouraging product trial – Playing is Believing 2. Creating product awareness 3. Bringing to light the factors of product differentiation markets (women) 5. Enhancing brand image 4. Targeting new Marketing Strategy Overview: Simply put, customers are no longer a given – Just because a product is being manufactured it does not mean that people will buy it. Therefore, in order to survive, businesses need to keep their old customers while constantly trying to make new ones.
In order to make and keep customers, companies need elaborate marketing strategies which provide a road map to delivering value to distinct customer groups. Like all successful strategies, ours too begins and ends with the customer and what WI can do for them. Studies have shown that the Nintendo WI is at a stage where it is selling in large numbers to customers from all demographics. Therefore our intent in designing this marketing plan lies not in trying to increase sales or to break even.
The main goal of this plan is to place WI as a product that will appeal to the women gamers and to communicate it as one with no implications of physical harm. As a secondary result of these promotions, we will definitely achieve an increase in sales as compared to the previous financial year. Nineteen’s strategy for marketing the WI has so far been to provide hands on experience of the console – playing is believing. In an attempt to penetrate a new market Nintendo is looking at delivering this same formula to women gamers. Every