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Unformatted text preview: Manager’s Challenge Take A Moment Manager’s Challenge The Nintendo Entertainment System was the hottest toy on the mar- ket in the mid-1980s, and the company ruled the video-game indus- try for years. But a series of strategic blunders has left the once-influential Nintendo tagging along as Number 3 behind Sony’s PlayStation, which owns a whopping 65 percent of the U.S. market for videogame systems, and Microsoft’s Xbox, at 20 percent market share and growing. Back when Nintendo was king, the majority of video console players were younger than 18, but today the opposite is true and the average player is 29. While Sony and Microsoft have catered to older customers with cutting edge games, Nintendo has continued to provide mostly kiddie-content. In addition, their game consoles are morphing into all-in-one home entertainment systems. Nintendo, meanwhile, has stuck to its more-of-the-same strategy, arguing that people who buy and play video games enjoy the famil- iar and aren’t interested in new gimmicks. Perhaps Nintendo’s biggest strategic error, though, has been its failure to see partnership as a key to competitive advantage. Sony’s PlayStation was originally built to merge Sony’s hardware with Nintendo’s software, but Nintendo pulled the plug on the joint project because managers did- n’t want to help a potential competitor. Nintendo’s relationships with game developers have also been adversarial, whereas Sony and Microsoft have forged close partnerships with outside game design- ers to keep their all-important game libraries fresh and exciting. In just a decade, Nintendo’s share of the U.S. video console market shriveled from 90 percent to about 15 percent. As sales continue to slip, Nintendo’s new CEO and president Satoru Iwata faces some serious strategic decisions. 1 If you were the CEO of Nintendo, would you continue to focus exclusively on games or compete head on with Sony and Microsoft in the battle for broader home entertainment? What strategies might you adopt to help Nintendo regain a competitive edge in the console industry? Take A Moment daft ch08.qxp 10/21/2004 3:56 PM Page 267 268 PART 3 Planning The story of Nintendo’s decline and the rise of Sony’s PlayStation illustrates the importance of strategic planning. Managers at Sony formulated and implemented strategies that have made PlayStation the player to beat in the video console busi- ness, while Nintendo managers failed to respond to increased competition and changing customer expectations. Satoru Iwata is analyzing the situation and consid- ering strategies that can ignite growth and revive the declining company. Every company is concerned with strategy. Japan’s Fuji Photo Film Company developed a strategy of being a low-cost provider to compete with Kodak. Fuji’s relentless internal cost-cutting enabled the company to offer customers lower prices and gradually gain market share over the giant U.S. firm. McDonald’s devised a new strategy of downsizing its menu items in response to changes in the environment.strategy of downsizing its menu items in response to changes in the environment....
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