Nintendo of America, Inc.
Since 1980, Minoru Arakawa has served as president of Nintendo of America, a subsidiary of Nintendo Ltd. Under his leadership, the company grew to become a major provider of computer games and software to American consumers. Forced in the mid-1990s to shift strategies, the company remained a viable competitor in the industry and has made internal changes, such as developing more resources in-house, to continue as a force in this highly competitive industry. Moreover, the company continued to develop new games and resources to meet consumer demands.
Minoru Arakawa was born in 1946. He studied engineering and obtained master's degrees in that subject from both Kyoto University and the Massachusetts Institute of Technology. In 1981 he immigrated to the United States and began serving as president of Nintendo of America, a subsidiary company of Nintendo Ltd. Although an outwardly quiet and mild-mannered man, colleagues at Nintendo described Arakawa as a savvy negotiator with a competitive and stubborn streak. He worked well with coworker Howard Lincoln even when Lincoln was selected over Arakawa for the top position of chairman of the company. The two shared adjoining offices and regularly spent family holidays together. Arakawa married Yoko Arakawa, the daughter of Hiroshi Yamauchi, head of Nintendo Ltd.
Arakawa came to Nintendo of America in 1980, when he was hired by his father-in-law and head of Nintendo Ltd., Hiroshi Yamauchi, to serve as president of Nintendo of America. Previously, Arakawa had built office buildings and hotels in Vancouver, British Columbia and had worked for trading companies in Japan such as the Marubeni Company.
Prior to 1993, Nintendo held the majority of the $6 million market for video games in the United States. In 1994 a number of changes were implemented by the president of Nintendo Company Ltd., the parent company of Nintendo of America, which redirected the company strategy and, to a large extent, affected the career of Arakawa. The reason for this action was Sega, Inc., which proved to be a formidable competitor in this market. Sega unleashed its Sonic the Hedgehog character, and it rose to become a popular selling product, beating sales of Nintendo's Super Mario character and related games. Sega was merciless in its strategy of upstaging Nintendo. It launched an advertising campaign that labeled Nintendo's Mario character as uncool. Sega's offensive was swift and fierce, making it difficult for Nintendo to respond quickly.
After its 1993 assault and advertising coup, Sega grabbed 57 percent of the American market for the 16 bit consoles used to play the games. Yamauchi, Nintendo's president, blamed Arakawa for the loss in market because Arakawa failed to respond quickly and effectively to Sega's ad campaign.
Moreover, Yamauchi implemented several changes in response to the situation. In a move that surprised the business world, Yamauchi elevated Nintendo of America Executive Vice President Howard Lincoln to chairman, bypassing his son-in-law Arakawa in the process. According to Television Digest, the move demonstrated an unexpected power shift in the company.
Yamauchi publicly commented on his decision, claiming that he wanted to see Arakawa give more authority to high level Americans but that was not all. Yamauchi publicly criticized Arakawa, making it clear that his job was in jeopardy if his performance results did not improve. Such criticism exposed the company's weaknesses. A Nintendo vice president of marketing, Peter Main, admitted in a Television Digest article that the business needed a jolt and that a lot of fundamental changes were underway, including relying less on Japan for supplying company software and hardware development. The change in leadership was needed to redirect the company along a more aggressive and visible direction.
Arakawa instigated an aggressive marketing campaign to respond to market share losses caused by Sega. Software began to be developed in-house in order to cut costs. Nintendo also directed its focus away from CDROM software, believing that consumers would find the necessary hardware too expensive.
Despite what may have looked like internal rivalry to outsiders, Lincoln and Arakawa remained close friends and often spent holidays together when they weren't overseeing the company from adjoining offices. By 1995, Nintendo Ltd's sales had climbed to $4.7 billion, with Nintendo of America contributing less than half to the total. Arakawa had enormous respect for Lincoln and according to Arakawa's wife, was very impressed with Lincoln from the start. Another Nintendo customer, Gregory Fischbach, founder of Acclaim Entertainment, commented that the company had recognized that the two men knew how to work together and if the company aligned them, maybe one plus one gets three. The two complemented each other with their skills. The more extroverted Lincoln served as media point person, and dealt with abstract ideas, while Arakawa was better with numbers. Both were skilled negotiators.
Chronology: Minoru Arakawa
1949: Fusajiro Yamauchi started Nintendo Ltd.
1980: Immigrated to United States of America.
1980: Became president of Nintendo of America.
1992: Nintendo Ltd. purchased Seattle Mariners baseball team.
1993: Nintendo negatively impacted by Sega ad campaign.
1993: Stalled publication of Game Over: HowNintendo Zapped an American Industry, Captured Your Dollars, and Enslaved Your Children.
1994: Arakawa bypassed for chairman promotion by Howard Lincoln.
1997: Released Nintendo 64.
1998: Released Zelda 64.
Typical of past Nintendo strategy, Arakawa and Lincoln kept their future plans quiet while Sega publicly touted triumph. Unknown to Sega at the time, Nintendo was developing the game Donkey Kong Country, a product released in 1994 that sold 7 million copies in its first four months on the market. According to Lincoln, Nintendo also was in better financial shape than Sega during the public trouncing. In Puget Sound Business Journal Lincoln claimed that in 1994, Nintendo profits were five times greater than Sega's, and that Sega held $2 billion in debt while Nintendo had none.
Social and Economic Impact
Between 1985 and 1995 under Arakawa's leadership, Nintendo of America grew from 75 to 1,400 employees and sales rose from $100 million to $4.7 billion. During this time the company introduced three new game platforms: the Nintendo Entertainment System, the Game Boy, and the 16 bit Super NES. During those 10 years, American consumers purchased more than 65 million games and corresponding software programs in the millions.
Throughout the 1980s and 1990s, Nintendo and Sega dominated the video game market and filled a void left by the failed Atari Company in the 1980s. Nintendo and Sega sold game hardware—machines to play the games on—relatively cheaply and made money off related software. In fact, software proceeds made up a large part of Sega's and Nintendo's profits in 1993, with a combined total of more than $1 billion. Walter Miao, an industry analyst said in Fortune that "you can talk all you want about the electronic highway and video on demand but the only place anyone has ever sold anything interactive is in games." Miao predicted that the computer game market would grow to $7.5 billion in 1994. Between 1987-1993, Nintendo and Sega managed to place 64 million game machines in American homes, nearly half of that market penetration was achieved in 1993, when Nintendo games reached 30 million American households.
Nintendo continued to diversify its products and released the Nintendo 64 in 1997. The new product boosted Nintendo sales figures and attracted players other than the typical Nintendo customer, a 7-14 year old boy. Market research by Nintendo indicated that 40 percent of those buying the new Nintendo 64 were over 18 years old. In 1998, Nintendo planned a release of a related product, the game, Zelda 64. Nintendo, while monitoring the Internet gaming market, did not believe that the two types of customers overlapped. The company, in the late 1990s, continued to focus on video games rather than interactive games that could be played over the Internet.
Nintendo used its clout to modify the publication of Game Over: How Nintendo Zapped an American Industry by forcing the publisher to discard thousands of book dust jackets that featured the Nintendo character Mario. The book gave an inside look at management practices at the company, portrayed Yamauchi as a workaholic and Minoru and wife Yoko as fearless bootstrappers who weren't afraid to work on assembly lines when needed.
Arakawa and other Nintendo peers such as Lincoln regularly practiced community philanthropy and remained quiet about it rather than taking the opportunity to promote themselves. When Yamauchi purchased the Seattle Mariners baseball team for $75 million to keep the team in the community, Arakawa and others annually gave away 600 baseball tickets to a boys and girls club. Cost to the company for the yearly donation (including tickets, soda and food) was estimated at $500,000.
Sources of Information
Contact at: Nintendo of America, Inc.
4820 15th Ave. NE
Redmond, WA 98052
Business Phone: (206)882-2040
Baker, M. Sharon. "A Feistier Nintendo Fields Tag Team of Lincoln and Arakawa." Puget Sound Business Journal, 10 March 1995.
Carlton, Jim. "Nintendo's Lincoln is Named Chairman of U.S. Unit as Market Share Slides." Wall Street Journal, 16 February 1994.
Deutschman, Alan. "Books and Ideas, Mind Games, Trade Myths, and More." Fortune, 31 May 1993.
Dun & Bradstreet, Inc. Million Dollar Database. Dun & Bradstreet, 1997. Available from http://www.dnbmdd.com/netbrs/pgate...cope=range&x_rangelo=1&x_rangehi=1.
Gross, Neil and Robert D. Hof. "Nintendo's Yamauchi: No More Playing Around." Business Week, 21 February 1994.
Newnham, Blaine. "Mariners Home: Ditto Fans: Team has to Wait for Any Boost in Attendance." Seattle Times, 13 June 1992.
"Nintendo America Shuffles Top of Deck." Television Digest, 21 February 1994.
Sheff, David. Game Over: How Nintendo Zapped an American Industry, Captured Your Dollars, and Enslaved Your Children. Random House, 1993.
Snider, Mike. "Nintendo Plans Zelda 64 for Next Big Play." USA Today, 23 June 1997.
Tetzeli, Rick. "Serious Fun, Forget Pacman." Fortune, 27 December 1993.
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