Nintendo Nintendo SEGA’s Strategy SEGA’s strategy is to become a world leader in video entertainment. Their strategic intent is to build an entertainment empire. To achieve this, SEGA has adopted a technology oriented strategic plan that focuses on acquiring and maintaining competitive advantages in fields such as multimedia, computer graphics, virtual reality, and high tech amusement theme parks. The research and development spending has been boosted to capture the market before the competitors. SEGA’s strategy is characterized as first at all cost since the burn they took from Nintendo on the release of the 8-bit system.
SEGA has competed in both the in-home and out of home video entertainment. The United States theme park industry is now a $6 billion industry. SEGA’s future strategy includes entrance into this market with their SEGA theme parks. These parks will provide games with high-tech graphics and virtual reality simulations. Plans include 50 parks in the United States, and another 50 in Japan.
SEGA has been involved with arcade games, and used that technology to implement games for the home systems. SEGA’s marketing plan includes the SEGA Club, a push in Japan’s market, and a review of their European markets. The SEGA Club is a marketing channel for SEGA to capture teens and pre-teens. SEGA’s objective is to bring good, clean video game entertainment and educational products to the market for teens and pre-teens. SEGA also plans to put more emphasis on Japan, since the margins for sales in Japan are much higher. This includes new products, increased advertising, and marketing that is more extensive. SEGA is also planning marketing research in Europe in order to respond better to the consumer preference and competitive conditions.
Their goal is to improve sales and gross margins in the European market. SEGA’s new product development includes the SEGA CDX, which is a 32-bit platform that uses CD’s or cartridges. In 1994, SEGA test marketed the SEGA Channel in the United States. Genesis owners could play games, obtain game play tips, news, contest, and promotions. Another development is the PICO system. This is a book like toy for children that convert pictures from books onto the television.
This was SEGA’s first attempt to penetrate the educational market for children. SEGA also offers video game equipment that attaches to exercise equipment. Analysts believe this could eventually be a $2 billion market. SEGA has also employed a pricing strategy that has caught on throughout the industry. This strategy is for systems to have components.
The fully loaded Genesis system had three components, the game player, the SEGA CD, and the Genesis 32-X. This got consumers to buy the system in installments. Nintendo Corporate Strategy Vision/Mission The old strategy of slow and steady wins the race has grown obsolete, shown by the recent loss of market share to SEGA. It has become quite clear that in order to be effective in the interactive entertainment industry, Nintendo must adapt its corporate strategy to keep pace with the market. In other words, Nintendo must produce innovative products using the newest technology and expand in new markets, while maintaining the high quality of our products.
Strategic Objectives We see the future of Nintendo relying on three key areas: Development, Product Expansion and Marketing Position. Under each of these categories there is potential for tremendous growth. Development is key to Nintendo’s growth in future. Under this category, Research and development into faster and more efficient machines will provide Nintendo with an edge in the market. This foresight, reflects the strong change in Company philosophy. With our recent release of the N64, we plan to aggressively market and develop this product. Finally, we plan to increase our revenue from internal development to 50%.
Within five years, we see Nintendo expanding its product line to embrace not only interactive TV, but also large scale Gaming centers and underdeveloped demographic markets. Finally, Nintendo plans to capitalize its market position through lobbying for a uniform rating system, as well, as maintaining current high levels of advertising and improving communications with customers through internet web site development. Development From industry experience and analysis, it is quite clear that success in the interactive entertainment and specifically the videogame industry are directly related to staying atop of the newest technology. With this in mind, we plan to focus on both sides of the development coin: Hardware and software development. With the release of the N64, Nintendo is planning on releasing a minimum of 10-15 games in the first year for the N64 and steadily increasing the number released throughout this product’s lifetime.
This will create a solid foundation of demand from our consumers, while not under satisfying them from the start. In addition, we will focus on developing new accessories to add value to the gaming experience. While marketing and expanding the products offered for the N64 is vital to Nintendo’s current success, we must continue to move forward. Nintendo is set on constantly improving the efficiency and speed at which its devices operate. With this is mind, we plan to begin development of the N128 within the next year.
Under this development program, the N128 will be test marketed within two years, including the connection for our Gaming World Channel. If all goes as planned we would have this product out on the market within three to five years. Additionally, we plan on testing to see if N64 games should operate on the N128. Just as importantly, a majority of our revenue comes from game sale, so it is very important that we concentrate on developing games with the most resent advances in all integral aspects of game production, such as audio, video, and special effects. Product Expansion While Through the N64 and the development of faster machines, Nintendo will at least maintain its position in the videogame market.
We have to look forward to where the market is going and what will be necessary to be successful there. With this in mind, we have developed three new services and markets to enter into: Interactive Channel Service, Gaming Centers and untapped demographic markets. Nintendo’s Gaming World Channel will be a fully interactive premium cable station offered through local cable service. It will allow subscribers to try out the a broad range of games including demos of the latest release and soon to be released games. With the advances made in mutli-band technology, subscribers will be able to play networked games versus another of the other users.
This channel will be marketed like that of an HBO or CNN, based on a monthly subscription. We will tier the pricing to provide users different packages. The Basic package will include the broad games with some of the demos and network play. While the Premium package will allow for all of the services. Nintendo’s Gaming Worlds will showcase the latest in technology from interactive theme rides, internet cafes directly linked to Nintendo’s web site, games st …