.. ations for playing Nintendo Games, restaurants, shops, and most importantly demo versions of the Nintendo Channel and its hardware. Customers will be able to purchase a variety of passes, from all day to half day or even hourly. Initially we will build in ten major cities, five domestic and five internationally. Specific locations are projected domestically to be New York City, San Francisco, Chicago, Atlanta, and Seattle. While internationally, we will open in Japan, London, Paris, Sydney, and Rome. After these initial openings, we plan to expand the amount of Gaming Worlds to forty in five years. Finally, Nintendo will broaden its current game production to include women and children.
In order to achieve these results, we plan on producing more games based on problem solving and learning, along the lines of Tetris. While for children, specifically those under the age of six, we plan to produce inexpensively priced games with a range of topics from some learning to Pac Man type products. Both of these markets have been so far left relatively untouched. We feel that appealing to both of these markets, allow Nintendo to not only improve revenue generation but also better satisfy our customers complete wants and needs. Marketing Position As the interactive entertainment industry grows more competitive and shelf space decreases, there is a growing need to maintain a firm’s market position through advertising and marketing. To this end, we believe that while Nintendo currently is the 146th highest advertiser in America, that this is not enough.
We plan to achieve a top 100 ranking within five years through various promotions and programs. These programs will be focused not only on our consumers through rebates for purchase of the N64, but also through discounts given to retailers for use of their shelf space. In addition to promotions and rebate programs, Nintendo is planning to revamp our web site to better communicate information to our consumers. The new version will provide information on the company, game playing tips, release dates, write ups on demos including actual game images, and also the ability to sign up for weekly reminders of game release dates, as well as new game tips. While providing these services directly to our consumer, we believe that Nintendo’s support of a uniform rating system will not only provide piece of mind for our consumers, but also a positive brand image of the Nintendo name. We believe that a combination of both the IDSA and SPA rating systems will allow consumers not only to get a general feel for the age appropriateness of a product, but also the specific breakdown of material within the game.
Industry Analysis In recent years the interactive video game industry has went through many changes. Nintendo and SEGA have been the giants in the video game industry throughout the 1980s. The sales, which have been growing since mid 1980 have slowed and were relatively, flat through out 1994. However the next generation game players, which were released in 1995, gave a whole new dimension to the video game industry. New competitors like Sony, 3DO-based systems, and Philips were challenging Nintendo’s market-share.
The market size in 1995 reached approximately $15 billion in sales and reached $18 billion in 1996. Sales have increased once the next generation systems were fully on line in 1996, however the profits were weak because of razor thin profit margins on hardware, software proved to have a higher gross margin. Though out the 1990s the key to success in the video game industry has been innovation and technological advancement. The rivalry among the competing sellers in the industry is very intense, especially in the area of game quality. The revenue hits games accounted for as much as 30% of revenue from video game sales. The advancements in the personal computer industry is clawing away market share from the industry.
In recent years the bargaining power and leverage has shifted from suppliers to the retailers. The limited shelf space and lining up software developers has been a bid challenge for competitors in the industry. There is a number of key factors which have driven the industry in the past. Product innovation and technological change were key. The fact that Nintendo lagged behind in introducing a 16-bit system has cost it 50% of the 16-bit market share and allowed SEGA to gain a firm foothold in the industry. Marking has also played a large part of video games sales.
TV commercial & magazine ads helped boost sales for video games and created hit games. SEGA and Nintendo are the dominant companies in the fight for market share in the video game industry. In 1994, Nintendo’s net sales were 4.7 billion and SEGA’s net sales were 4.0 billion. Each of the companies had market shares of 45% of the video game industries. The other companies Atari, 3DO-based, and Philips CD-I has 1%, 7%, and 1% respectfully.
Sony’s playstation did not come out until 1995. Before 1996, SEGA and Nintendo had 90% of the market share of the video game industry, leaving little room for other companies. The introduction of next generation platforms changed all that. The six main companies; Nintendo, SEGA, ATARI, 3DO-based, Sony and Phillips reshuffled the market-shares to 37%, 27%, 2%, 21%, 10%, and 3% respectfully. Nintendo and SEGA were still the dominant powers, but 3DO and Sony took away large portions of market-share from the two industry leaders.
The key factors that determine the competitive success or failure of a company in a marketplace are the particular strategy element, product attributes, resources, competencies, competitive capabilities, and business outcomes. Each company must have good technology, manufacturing, distribution, marketing skills and organizational capability. Technology in the video game industry is one of the most important factors. They need to always be on the cutting edge and never lag behind. SEGA introduced the Genesis, which was the first 16-bit system on the market, 18 months before Nintendo 16 bit Super NES.
The SEGA CD was released well before any competing system. SEGA has introduce it’s 32-bit system, Genesis 32X, a full year before similar system from Nintendo or SONY. So far, SEGA has been the first to come out with; in return Nintendo was forced to play catch up. With Nintendo the strategy was characterized by the industry as slow & steady wins the race The video game industry is attractive and there are above average profitability possible. There is tremendous industry growth potential.
In 1994, the video game industry was a 15 billion-dollar industry worldwide. In 1985 it was less then 100 million. Two thirds of the children in North America between the ages of 6 and 14 played video games. There is a tremendous amount of money to be made in the video games industry. It not only has a large percent of children 6 to 14 in North America but also have a large percent of people 18 and older who play video games.
Nintendo did a study of ages of players. The look at under 6, 6-14, 15-17, and 18+ and the percentage of players o f NES systems was 2%, 48%, 11%, and 39% respectfully. Business.