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CASE20_Nintendo - Nintendo's Disruptive Strategy...

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Nintendo's Disruptive Strategy: Implications for the Video Game Industry INTRODUCTION In a state of perpetual innovation, the video game industry was on a path of creating greater computing power, processing speed, storage capacity, graphic interfaces, video quality, and game complexity when Nintendo challenged the prevailing business model. In this case, it is not really a question of whether Nintendo disrupted the course of the industry, but what moves its competitors will or can make in response to new industry dynamics. Disruptive technology destroys the value of existing technology and creates new markets. Once the value of radical or breakthrough innovations becomes evident, competitors will adapt their own capabilities and strategies to react to new conditions. Based on their resource availability, experience, and ability to gain access to new technology, they will strengthen their arsenal of competitive weapons for use in the current competitive landscape. What aspects of Nintendo's strategy made it a game-changer in the video game industry? What impact has it had on the competitive dynamics of the industry? How did competitors fail to anticipate a dramatic change in the terms of competition? What conditions now serve as barriers to effective competitive response? Based on the strengths, capabilities, and resources of each competitor, what strategic options are most likely to support a promising competitive strategy? STRATEGY Business-Level Strategy When the company's business strategy is designed in response to industry conditions and based upon internal resources and capabilities, the likelihood of strategic success is dramatically increased. Nintendo's ability to properly assess the video game industry and to innovatively define the market beyond its present boundaries has been the key to the company's exemplary performance. Features valued by the gaming industry, such as advanced graphics and greater game complexity, have not been Nintendo's strengths. After losing its leading market position to Sony's PlayStation in the last business cycle, Nintendo had little hope of winning back market share with faster processors and better graphics or continuing to make a profit on lower-priced consoles. The company would never be able to gain ground or compete profitably on these terms. Instead, it needed to redefine the dimensions along which success is possible. Nintendo - 1
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Nintendo's Disruptive Strategy: Implications for the Video Game Industry Radical innovation is uncommon, difficult, and risky. The process of “creative destruction” through which existing products, methods of production, or ways of administering or managing the firm are destroyed and replaced with new ones requires creative capabilities and the willingness to take measured risks. Perhaps Nintendo was more inclined to accept the uncertainties of a radical approach because it had been so clearly out-performed in the last release cycle, where Sony's PS2 emerged as an undisputed winner.
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