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Teaching Note: Case 24 – Nintendo’s Wii U
Case Objectives
1. To examine how external and internal forces affect competitive strategy.
See the table below to determine where to use this case:
NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The
Teaching Note gives guidance for the PRIMARY use chapters and provides suggestions if the
instructor wants to use the case to illustrate concepts from the optional Secondary chapters.
Chapter Use Key Concepts Additional Reading and/or
Exercises
PRIMARY
2: External
Environment
Industry competition five forces; general
NOTE industry report
3: Internal Analysis Value-chain analysis; resource-based
NOTE additional reading,
SECONDARY
CONCEPT
5: Business-Level
Strategy
Competitive strategy; generic strategies NOTE web article
Case Synopsis
In 2006, Nintendo had introduced its blockbuster next generation video game console – the Wii.
This new console introduced an innovative motion sensor game controller that enabled a user to
swing it in the air when playing video games, for example to mimic the motions of a batter,
In late 2012 Nintendo released its newest game controller/console, the Wii U, and initial sales
were not what Nintendo had anticipated. While it did bring some intriguing improvements to the
table, it didn’t appear to be innovative enough to once again allow Nintendo to leap ahead of its
competition the way it did with the Wii. One problem may have been the lack of new games
Nintendo had been a very successful company. Yet Nintendo sat in the midst of two potentially
dominating firms: Sony with its PlayStation and Microsoft with Xbox. In 2008 Nintendo had
been in the lead in video console sales growth and second to Microsoft in overall units sold.
Within two years of its 2006 release, Nintendo Wii had become the market leader of the
generation. However, by 2013 both Microsoft and Sony had not only copied the motion-sensing
technology, but they had started to invade Nintendo’s key casual family-user market, and in 2014
Teaching Plan
The Nintendo case relies on a good understanding of how internal assets and the forces in the
external environment drive competitive strategy, especially in a fast-moving industry. Therefore,
the instructor could position this case toward the beginning of the course, as students are
considering strategic analysis and formulation.
The instructor may also wish to use this case as a complement to the Apple case, since both rely
on strategic implementation to maintain competitive advantage. In both companies, although
innovation had allowed them to beat the competition, sustaining that innovative advantage, at
least in Nintendo’s case, was proving difficult to do.
ICEBREAKER
Since probably all students have at least heard of the Nintendo Wii, and probably some of them
have either used or own one, it might be illustrative to ask:
How many of you have used the Wii? Even if you haven’t used it, what’s your opinion?
How many of you have also used a Sony Play Station or Microsoft Xbox? How does the Wii
compete with these?
How many of you have used the Wii U? What do you think about this product?
The instructor might want to list student’s opinions about the Wii on the board. This will
illustrate Nintendo’s initial competitive advantage over competitors, a well as point out any
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign,
and also which additional readings or exercises to include to augment each discussion. Refer
1. What were key forces in the general and industry environments that affected Nintendo’s
choice of strategy?
2. What internal resources and assets did Nintendo have that gave it a competitive
advantage?
3. OPTIONAL QUESTION: How did Nintendo compete? Could Nintendo sustain a
competitive advantage?
Discussion Questions and Responses
1. What were key forces in the general and industry environments that affected
Nintendo’s choice of strategy?
Referencing Chapter 2: Analyzing the External Environment -
Organizational leaders must become aware of factors in the overall environment that might affect
their ability to create a competitive advantage. So how do managers become environmentally
Environmental scanning involves surveillance of a firm’s external environment to predict
environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint
Environmental monitoring is a firm’s analysis of the external environment that tracks the
evolution of environmental trends, sequences of events, or streams of activities. Leaders need to
What factors or trends might be most important to Nintendo? To assess how the external
environment might affect Nintendo’s strategy, it’s necessary to take a look at the factors in the
Political-Legal: Political-legal issues, especially the issues around copyrights, product safety,
Demographic: Certainly the demographics had changed. Baby boomers were getting older, while
the youngest generation was much more “wired”. But U.S. potential consumers were also living
Sociocultural/Global: Customers were growing increasingly sophisticated. They knew what they
wanted and didn’t want to pay a lot for it, but they could be seduced by a “sexy” design.
Technological: Technology, especially the growth of the Internet, had created new opportunities
and challenges for delivery of content and for promotion. The pace and direction of change
Help students apply Porter’s Five Forces of Competition to the video game console industry by
drawing a diagram on the board similar to the following and having students fill in the details:
Rivalry
Very High
Substitutes
Buyers’
Power
Suggested: The three major
rivals compete for market share.
Quest for lower prices pushes
the end consumer has
little economic power,
Suggested: Depending on the
commodity, lots of competition
among suppliers keeps supply up
Suggested: Within the
video game industry the
threat of substitute
New
Suggested: With three companies
Based on the external environmental factor analysis, the video gaming business has three strong
competitors trying to carve out a piece of the “profit” pie. The rivalry is very strong in the video
game industry. Each company tries to be the first company to introduce the latest generation of
NOTE – ADDITIONAL WEB LINK TO INDUSTRY INFORMATION:
Global business requires assessment of many factors. This special report from October of 2007
highlights some of the challenges facing the video gaming industry:
http://www.businessweek.com/innovate/di_special/20070813thepowerof.htm
The Entertainment Software Association published “Essential Facts about the Computer and
Video Game Industry” in 2013, available at http://www.theesa.com/wp-
content/uploads/2014/10/ESA_EF_2014.pdf Several interesting facts emerge; for instance, in the
U.S., women age 18 or older represent a significantly greater portion of the game-playing
population (31 percent) than boys 17 age or younger (19 percent). Some of the top reasons
What are some of the external environmental factors highlighted in this collection of reports that
Nintendo should consider?
2. What internal resources and assets did Nintendo have that gave it a competitive
advantage?
Referencing Chapter 3: Analyzing the Internal Environment -
When one firm outperforms others by a wide margin over a long period of time, it’s important to
figure out how this could be. The answer may lie in how that firm arranges its activities and
Remember, value-chain analysis is a strategic analysis of an organization that uses value-creating
activities. Value is the amount that buyers are willing to pay for what a firm provides them and is
Every activity should add value. Take a look at Exhibit 3.1 to see the value chain activities.
Based on the relationships between these elements, Nintendo can make a choice of how to
proceed to craft a competitive advantage. Nintendo’s value chain is captured visually in the
following diagram:
Value chain activity How did Nintendo create value for the customer?
Primary:
Inbound logistics (distribution
Not in the case: Poor assessment of initial Wii product
Operations (efficient work flow
Appears to be a cost efficient production process for the
Outbound logistics
scheduling, finished goods
processing)
Significant delays producing games to play on the
Marketing and Sales (motivated
sales people, innovative
Developed a product for all ages, effective and creative
promotion of the original Wii via TV, Internet, and
Service (ability to solicit
customer feedback & respond)
Presumed good, due to presence of loyal customers.
Secondary (or support):
Procurement (win-win
reduced dependence on single
supplier)
Relationships with third-party developers appear to be
Technology development (state
personnel)
Open-ended, team-based approach to innovation, access
Human resource management
& retention mechanisms)
Excellent recruitment and retention of key talent was
General Administration
Poor planning, lack of anticipation of product
access to capital, effective top
stakeholders)
Wii brought more profit per console than the Microsoft
Primary Activities
In terms of primary activities, the key to Nintendo’s ability to differentiate itself in the market
appeared to reside in its operational choices and marketing. However, lack of finished goods
Support Activities
With regards to support activities, a competitive advantage is achieved by developing a strong
general administration that is built around visionary leadership and a culture that pushes for
In addition, see the concept of the resource-based view of the firm, and the three key types of
resources: tangible resources, intangible resources, and organizational capabilities. A firm’s
strengths and capabilities – no matter how unique or impressive – do NOT necessarily lead to a
An important issue to focus on here is the importance of intangible resources like innovation and
reputation. Especially in mature brands like Nintendo (well-known for the NES, DS, and
