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Nintendo Case Solution
The company is currently on the verge of introducing a new product in the gaming market. The product is expected to arrive in the market within the first quarter of the year 2016. However, the real features of this new product have not been officially disclosed by the management. This product is codenamed NX, and it is one division that has been receiving significant attention and resources from the management. The probable idea behind this new product is to combine the features of a console with that of a portable device in such a manner that the new product gives fierce competition to the Xbox and PlayStation (Wood, 2015).
Following questions are answered in this case study solution
Compare the performance of the divisions within the company- are all divisions performing equally well? Are there substantial differences in profitability?
Analyze the investment trends- Are some divisions getting more capital investment than others? Are some businesses being starved of investment?
What corporate assets does your company have that it leverages across all businesses to derive economies of scope and scale? What dynamic capabilities / parenting advantages does your company have?
Case Analysis for Nintendo
1. Compare the performance of the divisions within the company are all divisions performing equally well? Are there substantial differences in profitability?
It is not true that all of the divisions in Nintendo are performing equally well. This section analyzed some of the information regarding different divisions and their profitability in recent years.
Wii U Division: Nintendo launched Wii U division in 2012, and it was positioned as a family console that also had added the feature of the full touch screen. This console was also the first to support high definition content. It is one of the few divisions within the company that has helped it to reach the profitable stage after facing difficulties in operations for a number of years. Wii U sales as of March 31, 2015, rose to 3.4 million units from 2.7 million units as reported in the last fiscal year (Reisinger, 2015). This also translated into an increase in sales of Wii U software. The division improved performance because new games Mario Kart 8 and Super Smash Bros. were launched for the Wii U consoles. These helped drive hardware sales as customers bought more Wii U units to play these titles.
3DS portable Division: Unlike the Wii U division, sales in the company’s 3DS portable division did not show a similar increase. 3DS portable sales declined from 12.2 million units to 8.7 million units in this fiscal year ending on March 31, 2015. Software sales also declined to 63 million units in the current fiscal year as opposed to last year and this resulted in the decline of company’s revenue to $4.6 billion which depicts a drop of 3.8% as compared to that of last year. However, on an overall basis, the decline in revenue did not impact company’s profitability as the company reported a profit of 41.8 billion yen as compared to a net loss of 23.2 billion yen in the last fiscal year (Reisinger, 2015).
The company’s portable division is also facing a threat from the Smartphone market as consumers are now willing to move to IPhones, tablets, etc. to play their favorite games. Even in the console segment, competitors like PlayStation and Xbox have proved to be much more popular (Epstein, 2015). The future profitability of the company might not present this growth trend as the company expects a slowdown in sales of its hardware and software units for the next fiscal year. Also, recent positive factors in an external environment like the devaluation of Japanese Yen helped the company post additional profits and such events are likely to not keep recurring in the future years.
2. Analyze the investment trends- Are some divisions getting more capital investment than others? Are some businesses being starved of investment?
Although it is not possible to conclude whether any divisions within Nintendo are being starved off investment, it can still be said that the company has shown inclination in making major investments in few divisions.
The company over the years has realized that Wii U division is not a high generator of sales volume. Even though in 2015 sales of Wii U have increased, but as a product division on its sales of this category has stayed well below the 10 million units mark that is a key performing criterion for the gaming giant (Wood, 2015). A major reason cited for low sales of Wii U division is that there is a lack of original gaming content that is being developed by third party manufacturers for the Wii U product line. On the other hand, Xbox and PlayStation have not faced this issue that has helped them continue to post improvements in the year to year sales data (Epstein, 2015).
In comparison to Wii U Division, Nintendo’s handheld division has been more dominant, and its sales have crossed more than 50 million units threshold. This trend has resulted in company’s reluctance to invest an additional amount of resources to build new gaming titles for Wii U when the response for new hardware purchase is lower than in 3DS case (Wood, 2015). It shows that while the company is still probably one of the few makers who are still producing content to support Wii U Division, its inclination to continue doing that has diminished due to the lukewarm response. In other ways, it might also be said that from an investment point of view 3DS handheld devices provide a better opportunity for the company to gain additional returns instead of putting resources in Wii U Division.
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