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While ‘loss-leaders’ and unorthodox pricing strategies are hardly regarded as a new phenomena, such is the extent of global competitive market pressures nowadays that we commonly see organizations competing in seemingly ‘extreme’ ways. One latest example was the launch of Nintendo’s new Wii U console, where it was declared by senior executives that for the foreseeable future their new hardware will be sold at a price lower than its manufacture cost.

The Japanese giant expects (or, rather!) hopes to claw things back and eventually move into profitable scenarios, by cutting manufacturing costs in the future and through add-on sales (e.g., software and accessories). There will clearly be much expected of their management accountants to come up with (innovative) ways to find and exploit future ways to change the profitability of this new product – what would you do?

This approach of “abandon short-term profits to maximize later earnings” represented a whole new strategic intent for Nintendo, but is a strategy that is becoming more commonplace, especially in the technological world. Sony followed a similar route with its PlayStation III console in 2007, and Microsoft did the same with its Xbox 360; it is also (unofficially) reported that Amazon will at most be breaking even on its newest kindle tablets.

The main objective of such bullish strategies is to capture the global markets, seize the global baton, before the next competitive product(s) appear, as well as capitalize on add-on sales. But this management approach obviously also comes with its (significant) risks. There is an obvious (growing) need for useful management information here, and clear importance of management accountants’ expertise, e.g.:

  • Markets/predictive analysis
  • Competitor analysis
  • New product design and development
  • Broader business (change) knowledge

Source: ‘Nintendo’s Wii U games console will be sold at a loss’, BBC News “Technology” website, 28.10.12