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What is Nintendo’s strategy? How do you think its strategy evolved?

Nintendo based its strategy on their core capability of inventing and promoting
new video games. The company did not rely much on the hardware to make
profit, on the other hand this was seen merely as a tool. Their core focus was the
software and the brand image they were building. This is evident as they
developed a research and development unit dedicated to creating new
innovative video games. Also, they outsourced much of the production and kept
the design of the games in-house, as it was considered their core capability. Their
strategy is to create competitive advantage that is not easily imitable by rivals.
An illustration of this is the fact that they used cartridges that included a security
chip without which they could not be run. In addition, they created World of
Nintendo, “Fun Club” of Nintendo players, a TV show, a movie and a magazine in
order to establish and promote their brand image. Another part of their strategy
is geographic expansion. They launched a new model of their game system in
order to match US preferences. By creating customer loyalty, they continued to
increase their market share. Furthermore, they created new territory to compete
in, which can be seen as a blue ocean strategy. In 1981 they were the first
company that worked on a home video game system.

However, there have been some competitions since 1987, and the market share
for Nintendo started to decline, as we can see from the exhibit 6. Its competitors
introduced new home video games system that had better sound and quality
effects. Nintendo’s strategy was not to upgrade their system to match with the
rest, as it was costly rather than a development in performance. Instead, they
kept selling the old 8-bit games because there was still a market growth for it,
and postponed the launching date for the new ones until they felt it was the right
time. As a result, despite the decline in market share, Nintendo’s profit margins
throughout the 1990s remained significantly superior to the competition.
Moreover, Nintendo expanded their market segments not only to children, but
also to adults with an introduction of “Game Boy”, a portable game system that
brought home video games into workplace.