Here’s an article about a product that nearly everyone has been exposed to: videogame systems.  Nintendo’s Wii console and DS portable platform have enjoyed many years of success but as competitors retool their own products Nintendo will find it increasingly difficult to remain the dominant seller.

Battered by slowing sales of its Wii game console and DS handheld videogame player, Nintendo Co. posted lower annual profit for the first time in six years and said it expects profit and salesto fall again this fiscal year as it plots new products to revive growth.

Already they have had to slash prices which is an indication that their products are becoming less differentiated that they have been and, like cellphones, the nature of the market is such that dominant players tend to get knocked off their perch in favor of more nimble, risk-taking competitors that come up with new ideas while the industry leaders rely on past successes.  The scenario Nintendo is facing fits nicely in the cost-leadership vs. product differentiation discussion because here we see a company that risks losing their market position if they get “stuck in the middle” as Circuit City did a couple years ago.

Another minor issue mentioned in the article is the exposure Nintendo has to foreign currency exchange rates.  We’ll get into multinational considerations later in the semester but it is important to recognize this risk as being a big factor in the performance of companies with foreign operations.

Nintendo, which earns more than 80% of its revenue outside of Japan, said it expects an exchange rate of 95 yen to the dollar and 120 yen to the euro this fiscal year.

Nintendo’s Profit Drops as Rivals Move In — Wii Maker Plans New Products but Expects Earnings to Drop Further Amid Increased Competition for Videogame Dollars. Daisuke Wakabayashi. Wall Street Journal. (Eastern edition). New York, N.Y.: May 7, 2010. pg. B.5