1. Nintendo is competing in the “Toy Industry”, and more sub level into “Electronic Gaming” Industry. Industry has shifted from traditional toys towards electronic entertainment to an complete entertainment solution provider. Customer preferences were changing. Gaming is not only for kid any more. Target audience for gaming became adults between 18-35. New customer audience needed more violence and better graphics in the games. Nintendo games were considered “dull”.

Looking at industry using porter five force theory:

a) Competition: It has grown stronger among the player. Technological advancement and cost were two major driver for the competition among the players. Sony and Microsoft started competing hard and gaining market share. Both companies brought their expertise from other industries i.e higher graphics, DVD player, CD player etc. b) New Entrants – Entrance to industry was difficult because of high R&D and manufacturing expenses. Benefit Nintendo had disappeared with Microsoft bringing its expertise from computer gaming system. It has major advantage on hardware and software. c) Substitute – Home computer industry was a increased threat to the traditional gaming industry. People were more attracted to offering from home computer gaming. d) Buyers – There are currently three players in the video games industry; Sony, Microsoft, and Nintendo. This gives the consumer plenty of choice and some power. However, there are some attributes of the video game industry which provides the suppliers with power over the buyers, i.e. once a consume has purchased a games console the switching cost to a competitor can be quite high. e) Suppliers – Suppliers were getting more vertically integrated. Sony that was at first supplier to NES got forward integrated and introduced it own gaming system. Fierce competition among game manufacturer pushed hardware down.

2. There are two strategies being used in the video game industry. The first is the current market, which grew from the belief that better technology, and better graphics would lead to better games. Which is still the strategy being used by both Sony and Microsoft and has proved successful for them.
The other strategy is the idea that good technology, good interactivity, good variety, and good access ultimately spawn better games for more people. This is the strategy, which Nintendo has adopted.
Nintendo refused to compete with Sony and Microsoft on the cost ground. They believed that dropping the price was suicidal.

NES growth strategy was not only to focus on the product but also on the “experience” that product brings for the customers. Nintendo was successful in creating value of their product in the non gaming environments where competing forces as low. For example they developed demand for DS in non conventional gaming areas such as learning, productivity tool and even in the art gallery. Another strategy adopted by NES was to focus on creating gaming console and games directed towards non gamers and families. While Sony and Microsoft was still competing in market for 18-35 years old gamers, NES created new segment that additionally included families. In my opinion NES converted whole gaming idea into a “family entertainment” event.

Another innovation brought by NES was in the marketing technique. They successfully created a brand for themselves. NES adopted “Viral marketing technique”. Media was hooked to NES Wii product and they got more of free marketing. NES picked name for the console “Wii” to reinstate that product developed by them is for everyone and not targeted to any specific segment.

NES started introduced strategy of complementing. They started proving free basic games with the console. They also changed approach to the games. They made games “Easy to learn and hard to master”. It kept the interest going in the gamers.

NES developed affective manufacturing system. They were very successful in