Nintendo Case Assignment

Nintendo Case Assignment – Mark 4322

Group #1 – Michael Nguyen

                         Patricia Ventura

             Colby Voth

March 2, 2015

Case Issues/ Problems:

The Nintendo Company is an electronics manufacture from Japan that specializes in inventing, designing and producing consumer game systems. Nintendo’s gaming consoles are widely known for their reliability and their distinct innovation. Among their most popular devices is the handheld Game Boy, which was launched in 1989. Nintendo experienced a moderate sales growth throughout the 1990’s and in 1997 was estimated that more than 40 percent of homes in the United States owned a Nintendo device.

 Before the launch of the Game Boy color, Game Boy had already sold more than 70 million units, including 1.6 million units in Canada. Even though they experienced great success, Nintendo was still faced with obstacles to grow their sales in their market because of fierce competition.  Nintendo’s fierce competitors were from other platform developers like Atari and Sega, which left Peter MacDougall (President of Nintendo Canada) with some difficult decisions to make. Another issue facing Game Boy was Nintendo’s shift in focus to develop other consoles and devices which included the Nintendo 64. The Nintendo 64 was competing against other game consoles from other manufacturers like Sony creating even more pressure on the Nintendo Company’s leaders to brainstorm ideas how to stay above the competition.  

In 1998, the Nintendo Company began their marketing strategy for the release of the Game Boy color. The marketing team had to face many issues regarding pricing, target markets and what their overall marketing approach would be. Their pricing concerns dealt with the international conversion rates largely inflated in comparison to that of the United States price point system. For example, Nintendo had their Game Boy color priced at $79. 95 in US dollars, which in 1998 because of the inflated conversion rates converted to $120.00 Canadian dollars.

Peter MacDougall was fretful that the price would be too high for his target market. He believed this would lead to a lower profit margin and would discourage retailers from wanting to use their efforts in selling the Game Boy Color to their customers. There were two potential markets that Nintendo was trying to sell towards. The first target market was the existing teens that possibly already owned a Game Boy device and are in search of an upgrade.  The other potential target markets was aimed toward kids/tweens. The leading issue with the new market strategy was whether it could still appeal to the younger crowds without discouraging the adult users to possibly view Nintendo products as solely a “kids’ toy”. The problem regarding their approach in the Canadian market was limited and they had few options. Nintendo was unsure where to focus their advertising campaign or which of their options would be most effective in that market.  They had limited information resulting in fewer ideas on how to go about maximizing their growth in the Canadian markets.

Recommendations:

There are numerous recommendations for Nintendo in regards to the launching of the Game Boy Color. Our first recommendation would be to sell each gaming unit for $120.00 Canadian dollars. The second recommendation would be to focus evenly on both target markets: teens and kids/tweens while not losing any of the market already obtained. The third and final recommendation would be to set up interactive demos throughout different malls in Canada, a Nintendo game tour.  These are the three main suggestions that would offer the greatest benefit to Nintendo although there are still other alterative considerations.

Pricing for Nintendo game systems in the United States were influenced greatly by the United States’ price point system rather than inflation like in the Canadian market.  Since the United States had a larger market, they had control of what the price point would be. Nintendo of America priced their Game Boy Color at $79.95 US dollars. In 1998, the US exchange department converted the $79.95 US dollars to a high $120.00 Canadian dollars. Nintendo Canada, chose to keep it at this price, so they would remain consistent with pricing in the United States. At a higher price point per unit, this allowed for the largest margins possible for Nintendo Canada.  They knew by reaching a maximized profit margin, it would in turn motivate retailers to carry and aggressively sell the Game Boy Color.

Nintendo did have the option to sell the Game Boy Color at a lower price of $100.00 (Canadian dollars) but they thought the potential profits outweighed the lower price range.  Even though this lower price point had the possibility to drive higher volume sales for the teen and kids/tweens, this would also make the Game Boy Color the lowest priced unit in the world.  No one wants to be the categorized as the lowest in the world because then the assumption that the quality of the product is lessor than its competitors is assumed by consumers. This would definitely create several potential problems for Nintendo in the Unites States as well as in Canada markets.