Economics of Business Organizations: Nintendo Co. Ltd

1 Introduction

Report covers analysis of Nintendo Co. Ltd from the side of external economic environment

and internal organizational characteristics. Section A illustrates how macro and micro

economic factors affecting the business operation. Section B discusses internal organization

of Nintendo Co. Ltd, coordinating mechanism which it adopts and existing principal-agent

problem inside the organization. Finally, report ends with suggestion on the method to

improve efficiency of the company operation.

2 Section A. External economic environment

2.1 Macroeconomic environment

Followings are main macroeconomics factors which affect operation of Nintendo Co. Ltd.

For the reference, below are the tables which demonstrate performance of the company in

term of revenue, net profit and the share price change over the period from 2006 to 2010.

Table 1 2006 2007 2008 2009 2010

Revenue (mln Yen) 509249 966534 1672420 1838620 1434360

Net Profit (mln Yen) 98380 174294 257347 279094 228636

Share Price (Yen) 30900 67400 33750 21700 23830

2.1.1 Income level of Population

Income level of Japanese population was gradually

increasing until 2008 when the financial global crisis

hits the whole world. (Chart 1) However, drops in

income level didn’t much affect the revenue made

from the business. (Table 1) Instead it increased due to

the strong inelastic nature of the business towards the

recession. Besides, new products (Wii and Nintendo

DSi) launch have developed new market of elders and

females which eventually become main driving force

for increasing revenue. (Nintendo IRC, 2008). Another

reason which brought to success was adequate price

setting of new products. Despite of the fact that

consumers was discouraged to spend money on leisure

during recession, less than 25,000 yen expenditure was

affordable for most of the households in developed