The Nintendo Brand Innovation, Research Paper Example

Introduction

The proposed brand innovation for this project is a 4 dimensional hand held gaming device that can be developed and manufactured as a product enhancement to the Nintendo 3DS. This innovation will provide key features never before used in home or portable gaming as it will combine virtual, wireless, interactive, 3 dimensional and 4 dimensional aspects of game play, such as vibration, interactivity with multiple external devices as well as live multiplayer functionality. This brand innovation will mark the 5^th Nintendo brand innovation initiative launched since the company first rebranded their card gaming model started in 1890 to the hand held gaming model in the 1980’s.

Nintendo is headquartered in Kyoto, Japan and was founded by Fusajiro Yamauchi on September 23^rd, 1889. The company was originally a playing cards company, but it would eventually develop into one of the most influential video game companies in the world. Nintendo is currently recognized as the third most valuable Japanese corporation, worth over $124 billion dollars.  The company earned this valuation through its brands like the Gameboy, the GameCube and the most recent Nintendo DS lines which include the Nintendo DS (2004) and Nintendo 3DS (2011).

Nintendo’s DS (Dual Screen) is a hand held gaming system that the company has introduced as a way to innovate within its industry and expand on the Game Boy hand held gaming model. The Nintendo DS represents the latest in hand held devices offered by Nintendo, an innovation of a product with over a 50 year history within the company.  The Game Boy was the first officially launched hand held device in 1989 which was created as a brand innovation on their trading car games first started in the late 1890’s. This innovation marked a shift of the company into a digital era, and it allowed Nintendo to take over the hand held gaming arena, and dominate the market for over a decade. In the past 15 years however the Game Boy has been challenged by a wide range of new entries into the market, such as the Neo  Geo (Neo Geo Pocket), the Sega (Game Gear and Nomad), and more recent Nokia (N-Gage).  Nintendo was still able to maintain market share during this push for new gaming systems but it has become clear as a wide range of new gaming applications on mobile devices, and the Sony    PlayStation Portable (PSP) launched on March 24^th 2005, have been introduced to the hand held gaming market, Nintendo is in desperate need of innovation.

The PSP, for example, targets the growing demographic of 18 to 34 year old gamers. While the PSP is still relatively new product in the market its launch benefited from the already well-established PlayStation name, which allowed the company to sell over 500,000 PSP units in the United States within the first two days of the launch. Sony has achieved much success through establishing third party relationships with software developers and transitioning support from the PlayStation brand over to the PSP.. The new pressure this has applied on Nintendo creates a dynamic where the company may find itself losing substantial market share if innovative efforts are not made.

Background and industry context of your chosen brand

Industry

The video game market is composed of a variety of participants.  This individuals include business men, video game software and hardware vendors, major computer corporations, providers of educational content, television production companies and publishing houses. Within this network of industries is an even deeper sub-culture formed from product design houses, distributors and retailers,   These participants are always seeking to innovate through collaborative efforts that can best optimize their results, which makes the video game industry highly competitive and easily influenced by technological advancements. This environment contributes to naturally occurring cycles of technological development which lead to standard innovative seasons where new devices are periodically introduced.

Game Boy Rebranding

Nintendo attempted to rebrand the Game Boy, in 1996, in order to extend its life as a flagship brand product. The company made the device more aesthetically pleasing by slimming-down the device and renaming it the Game Boy Pocket.  In response unit sales doubled in the United States to over 2 million, but it was a largely attributed to the fact that some of the Game Boy’s past major competitors like NEC, Atari, and Sega were no longer in the running, despite having more advanced technology and color monitors.  The Seniro editor of TWICE, a  consumer electronics trade journals,  Jim Willcox,  stated that “Nintendo stuck to its guns … they released killer applications like Tetris, kept the price point low and demonstrated that the technology was really subservient to the games or applications” (“Pudget Sound Business Journal”, 1998). By Game Boy’s 10 anniversary, Nintendo had reported 60 million in sales throughout the globe and created 450 games for the device (“Nintendo Financial Report”, 2014).

Nintendo DS Debut

When the time came for Nintendo to expand on the brand, through introducing a new innovative handheld device, they launched the Nintendo DS in 2004 and then the Nintendo 3DS in 2011.  As noted on the Nintendo website, the “Nintendo DS, utilizes dual screens and touch-screen technology better enable users to interact with games. The device also takes advantage of wireless communication which enables users to experience real-time multiplayer gameplay” (System Nintendo DS., n.d., p1). In addition the device provides real PictoChat software that enables users to use it for other activities such as drawing or writing messages through a wifi connection. Nintendo 3DS also has 3d renredered graphics.. Perhaps the most intutive aspect of the device is that it allows users to play all of their old game boy games as well (System Nintendo DS., n.d., p.1).

Competitors

Nintendo’s main competitors Microsoft and Sony, despite the fact that these companies don’t target Nintendo’s most successful demographic of five to 17 years old. New competitors are starting to emerge that may pose a threat to Nintendo’s success, such as the rise in mobile tablet use and the variety of applications available. While Nintendo is considered to be a market leader, in 2012 the company reported a 34% drop in its fall sales. This in part can be attributed to the popularity of such devices as the PSP.  Sony Computer Entertainment America (SCEA), which is headquartered out of Foster City, California, works as a division of Sony Corp. of America, Inc. This branch of Sony is responsible for the marketing and distribution of PlayStation products throughout North America. The further extension of Nintendo’s competitor is Sony Corp. of America which represents a wholly owned subsidiary of Sony Corp. of Japan (NYSE). This a large global electronics firm, which runs its video game functions and operations through Sony Computer Entertainment (SCE).  During the time of the transition between Nintendo Game Boy and the Nintendo DS launch.  During fiscal year 2002, Sony Corp.’s sales revenue grew to $50.7 billion, which was an 11% increase over 1997, the year after Nintendo doubled its sales with the rebranding of the Game Boy. These numbers demonstrated that Sony PlayStation would be a major competitor in the gaming industry as PlayStation accounted for $5.5 billion of the total sales.

Rationale of why the brand needs to evolve

The real reason Nintendo needs to innovate its Nintendo DS brand is because market trends reveal that hand held devices are currently evolving within the mobile phone and mobile tablet market. This creates an opportunity for Nintendo to separate its hand held device from devices like tablets and mobile phones, through newly defining distinct unique features that can only be used on a hand held gaming device. Likewise, as it can naturally be assumed Sony and Microsoft will follow the trend, Nintendo must be diligent in safeguarding its proprietary information.

The above chart reveals that while the Nintendo DS line was successful in establishing market share in the mobile game market, in 2011 the launch of the Nintendo 3DS failed at securing that position and combatting against the rise of mbile phone an mobile tablet gaming. Android has clearly taken over the hand held gaming market and done so at the cost of Nintendo and Sony.

Nintendo’s strengths

Currently the strengths Nintendo possess as a company and brand included its emphasis on motion control introduced with the Wii devices, the affordability of its products, variety of game titles, the different Wii channels through Wifi connection such as Hulu Plus, Netflix, Photos and forecasts. The Nintendo Brand itself serves as an invaluable strength.

Weaknesses

Some of the weaknesses of the Nintendo’s brand, specifically in respect to the Nintendo DS handheld system is that there is poor online gaming quality or options. The system lack major titles, like Call of Duty and Halo. The graphics or not up to par with its competition, specifically that of PSP, and the navigation menu can be frustrating to use.

Gallagher and Park (2002) in their research on “Innovation and competition in standard-based industries” the authors breakdown a historical analysis of the U.S. video game market. They note that in order for a company to be innovative it must recruit top software developers, specifically independent software vendors. The authors state that, “history of the video game industry shows that attracting independent software vendors into the network of a platform requires the following:

1) superior technology;

2) early entry through innovation;

3) proper pricing;

4) name brand;

5) channel management;

6) entry barriers”.

Galagher and Park (2002)

In order for Nintendo to incorporate these competitive strategies the company will require higher switching costs, as well as a broader network of complementary products. All of this further enhances the company’s base. Success in building new innovative products to complement these efforts is the only way to reinforce implementing all of these competitive strategies. Through implementing such tactics, Nintendo can position itself to take on new innovative ideas and branding experiments.

Challenges and Opportunities for your innovative idea

One key challenge for Nintendo that also serves as an opportunity for innovation can be seen in the competitive environment forming around the mobile gaming market. Currently mobile phones and tablets are establishing market share within the hand held mobile device arena, and there is no reason to believe as that these devices get more advanced they will not completely overshadow devices like the PSP or Nintendo DS. One innovative way for Nintendo to combat this transition is to think ahead of this natural progression and try to expand on current trends. I think this can be done through portable gaming systems that combine both virtual play and physical play elements.

In their patent proposal Barney and Weston, (2013) introduce a gaming concept that incorporates a “wireless input device for playing an interactive motion-sensitive game using a wireless-compatible game console in which a virtual play environment is represented through one or more computer-animated visual” (Barney and Weston, 2013). Essentially the device is hand held but also incorporates motion sensitive circuitry which can in turn be connected to one’s computer, a television, or a portable visual device such as Google Glass. The device also incorporates tactile sensations like vibrations. In addition, the fact that the device is connected to a wireless connection enables it to have text or video chat streaming available, within games, Finally, similar to Xbox live and PC game systems that allow users to play against other live users online, the device would be able to incorporate this same level of interaction.

The most important aspect of this innovative idea is the marketing and branding portion of the product. While all of the above mentioned features could easily be applied to the Nintendo DS device, the most effective marketing strategy would be to promote all of these new and innovative features as an initial product launch for an evolved Nintendo DS. For example, instead of calling it the Nintendo DS4, and marketing it as the follow-up device to the Nintendo DS3, a better name would be the Nintendo DX, the Nintendo Destiny, or the Nintendo Divergent. The main premise here is that the new name needs to match the innovativeness of the devices and all of the new features it brings to the table for gaming. Utilizing virtual play, vibrations, wireless connectivity and other features, within a mobile gaming device puts the user in a 4 dimensional gaming world environment. This is the type of product launch that could reposition Nintendo within the mobile gaming market and help the company reclaim some of the market share it lost to the PSP.

Conclusion

In sum, while Nintendo has been an innovative gaming company since 1889, and a major company impacting the gaming market in the 70’s, 80’s and 90’s the influx of mobile gaming through the use of mobile phones and tablets, as well as continue pressure applied by brands like Sony PlayStation and Microsoft’s Xbox line, have results in Nintendo being more recognized as a brand for its past greatness than its current position in the market. The company is in desperate need of innovation. Throughout the report a new innovative device was mentioned that seeks to introduce 4 dimensional gaming through hand held devices. In essence this would be a collaboration between Nintendo’s Wii and its Nintendo DS line.

References

Barney, J. A., & Weston, D. C. (2013). U.S. Patent Application 13/776,426.

Edwards, Cliff, et al. (2005) Game wars. BusinessWeek. 59-66.

Gallagher, S., & Park, S. H. (2002). Innovation and competition in standard-based industries: a historical analysis of the US home video game market.Engineering Management, IEEE Transactions on, 49(1), 67-82.

iPhoneHacks (2011) iOS and android grab 58% of the portable gaming revenue In the U.S. at the cost of sony and nintendo. iPhonehacks.com Lexisnexis.  (March 2005.)  Video Game Market Share.  http://www.lexisnexis.com/

“Nintendo Financial Report” (2014) Nintendo Co. Ltd. System Nintendo DS. (n.d.)  Nintendo Retrieved April 24, 2005 from http://www.nintendo.com/overviewds

Puget Sound Business Journal, June 15, 1998

Williams Martyn.  “Let the Handheld Games Begin: Nintendo, Sony ready rival portable gaming devices. Which one will gamers go for?”  November 2004.  PC World. Retrieved February 14, 2005 from  http://pcworld.com/news/article/0,aid,11860