The third place

Nintendo have gone from being the number one games console manufacturer in the world to being a distant third, behind the corporate juggernauts of Sony and Microsoft. However, rather than try and battle it out for market share in a declining market, Nintendo have taken a far more pragmatic approach and opted for third place. In fact Nintendo have moved away from the whole notion of fighting for market share and instead are looking to grow the market by appealing to a much wider audience.

James Surowiecki of the New Yorker has written an excellent piece on why Nintendo are so smart with their strategy.

“the prevailing wisdom is that companies need to be market leaders, or face disaster. This approach was famously institutionalized by Jack Welch, who, when he took over as C.E.O. of G.E., laid down a rule that he described as a “central idea” of his tenure: the company would quit any business in which it was not No. 1 or No. 2. The lesson that people took away from this was clear—third place is for losers…

“Nintendo, though, has not just survived out of the spotlight; it has thrived. It has five billion dollars in the bank from years of solid profits, and this past year, though it spent heavily on the launch of the Wii, it made close to a billion dollars in profit and saw its stock price rise by sixty-five per cent. Sony’s game division, by contrast, barely eked out a profit and Microsoft’s reportedly lost money. Who knew bringing up the rear could be so lucrative?”