Blue Ocean Strategy – Nintendo DS & 3DS Portable Game Consoles Struggling

When talking about Blue Ocean Strategy one of the companies that comes first in mind is Nintendo. Nintendo adopted this strategy successfully and launched some of the most innovative products in the Gaming industry that totally redefined the gaming experience. Nintendo’s success with Blue Ocean Strategy was evident with company’s strong financial performance since 2005. In 2007, Nintendo sales sky rocketed with strong sales of new Wii console and DS handheld gaming device. The momentum continued into 2008 and the company has seen significant growth in revenues in 2007 & 2008. But revenues have fallen in 2010 due to price cuts in Wii, lack of strong game titles and fall in volumes. Same story continued in 2011. Stronger yen against dollar and euro were other causes of revenue fall.

Nintendo applied the Blue Ocean Strategy to create the Nintendo DS handheld game system launched in November 2004, that was the first portable gaming system to offer dual screen gaming and a touch screen. Nintendo DS is the successor to the Game Boy Advance series of portable consoles. It also featured Wi-Fi connection that allowed players not only to download games but also play multi player games and chat with other players. As of September 30, 2011, all Nintendo DS models combined have sold 149 million units. Nintendo DS changed the way people play video games and game play experience. It caters to needs of all gamers core gamers as well as casual gamers. The DS models till today generate significant amount of revenues for the company. Nintendo DS launched further models like DS Lite (slimmer, smaller, and lighter version) in 2006, DSi (faster CPU and RAM) in 2008 and DSiXL (bigger screen and size) in 2009.

Nintendo has invested significantly on the handheld gaming devices and have released versions of this model with latest features and number of new game tittles. According to Nintendo of America, there are over 1150 titles available for the Nintendo DS, Nintendo DS Lite, and Nintendo DSi as of February 12, 2011. Brain Age, Nintendogs, Mario Kart DS, New Super Mario Bros are some of the popular games on this device. The DS model is compared with Sony PSP but the company disputes this saying DS model targets different set of audience i.e. casual gamers. Nintendo DS are easy to play, quick pick and portable to carry on person and easily attract the casual gamers to try and start playing and become core gamers. Nintendo DS is presently struggling to keep up as the market is being encroached by the smart phones with bigger display screens and more games available at cheaper rates form the mobile companies’ online stores.  

Nintendo 3DS is third endeavor as part of the Nintendo’s blue ocean strategy. It is an autostereoscopic device is able to project stereoscopic 3D effects without the use of 3D glasses or any additional accessories. The device was announced in March 2010, but officially unveiled it at E3 June 2010, was released in Japan in February 2011 and in March it was released in Europe and North America. The device received positive reviews and gamers started queuing up for the device eagerly. Sales picked up in the release weeks but As of March 31, 2011 the 3DS has sold 3.61 million units, short of the 4 million Nintendo was expecting. Sales slowdown drastically and only 710,000 units sold in the next three months.

Despite being a good and innovative device, Nintendo 3DS hardware sales fell mainly due to the encroachment of smart phones and tablets and gamers were eager to play on smart phones and tablets as the games were very cheaply available on the Mobile Company’s app stores. Smart phone and tablets games can be downloaded for as cheap as a dollar and compared with costly $40-$50 games made for especially for consoles like the 3DS. Another reason for the fall in sales is non availability of 3D game tittles in the market and 3D versions of the existing popular game tittles. Nintendo has realized this fact and have announced to launch more game tittles including the 3D versions of the most popular games in coming months. It is also planning to upgrade its software to add more functionality to the device like 3D video recording.

To further improve sales Nintendo lowered the price of 3DS hardware by 32-40% depending on the market. This has initially spurred the sales but sales slowdown and the company are expecting to miss the goal of shipping 16m units in the fiscal year to March. But the fact remains that sales growth of Nintendo 3DS model lies not in the price reduction but the availability of the 3D game tittles. This fact is being supported by the raise in sales after the recent launch of the popular game Super Mario 3D. Nintendo is expecting the price reduction and the launch of more 3D game tittles will boost the sales in the coming holiday season. Nintendo 3DS is a good case to realize how the alternate devices like smart phones and tablets with games available in the Application Stores at a cheap price of a dollar affect the innovative and disruptive Portable device like 3DS. Nintendo is still sticking to its Blue Ocean Strategy to grow in the Red Ocean market of Gaming Industry.

Discussion Points:

1. How to boost sales of Nintendo DS & 3DS hardware sales?
2. Will price cut or Game title launch boost sales?
3. How to survive the current debt crisis and US economic slowdown?