Introduction To Nvidia Business Case Study
One day 3 friends have dinner together. While eating one of them get an revolutionary idea. Idea is discussed. After that they decide to make a company. But all three of them had no idea, How company is formed? They knew only one thing. One day by making a graphic processing unit, We will definitely change the world.
How Nvidia Became a 750 Billion dollars Shadow Company?
Nvidia That company without which From watching a movie on the computer To playing games Can’t do anything with this. It is today India’s 8th largest company. And Today by beating their competition, With an 83% market share Nvidia is dominating the graphics market.
But the strange thing is In spite of 21.8 Billion dollars in revenue The valuation of this company Is more than 750 Billion dollars. But the question is, Why is it so? Is all this a scam?
History of Nvidia Company
In spite of being 8th largest company of this world, Why do people call this company shadow company? And most importantly, What are the powerful business lessons, What we can learn from this case study We can implement in our business, This video is brought to by Vested.
We will talk about it later. So this story starts in 1993. When Jensen, Chris, and Curtis These three electrical engineers, While sitting together at the dinner table, Were discussing idea of a graphic processing unit.
The idea was great. And Jensen Huang knew The upcoming time will be on AI and 3D. By seeing this without any delay, These people Started working on making a graphic processing unit After working day & night finally 1 year passed. And their one product was ready.
How Jensen Huang Built Nvidia Gaming Company with His Friends
This is the time when Nvidia company started. Do you know? Many people who don’t know this company Their phone and their computer They wouldn’t be able to use these things, If this company did not exist.
And honestly, in the upcoming days your 90% work, Only depends on the future of this company. But now the question is, What is this company actually doing On which our future is so dependent.
And most importantly, Despite such low revenue Why is the valuation of the company so high? Well to understand this, You need to understand this 2 critical points.
Number 1, What is the core business of this company? And Number 2, What is Nvidia doing? Which many people are not aware of. So Nvidia’s major business Comes from these 2 things.
Number 1, GPU( Graphics processing unit) Number 2, SCU ( System on a chip unit). And interestingly on today’s date Without these two things, You can’t use any computer or phone. The world’s first GPU was made by Nvidia in 1994. It was named “GeForce 256”. But now the question is, Why is GPU so important? So now listen to me very very carefully. So GPU’s system works like this.
Every user puts inputs into the application. After which some codes are run in the application. And to run those codes, CPU is used. In which CPU, its internal memory That is it takes the help of RAM, To run those codes. And many times in that code there are graphic or visual codes.
After that CPU sends these codes further to GPU. This means toward the Graphics processing unit. After this GPU processes them and sends them to frame buffer. And frame buffer renders it Finally shows output on your output device.
The year 1995 Microsoft launches Windows 95. After Windows 95 launch, The craze for computer graphics increased so much in people, Where in 1994, Where there was just one company making GPU That was Nvidia.
Where up to 1997, More than 70 companies were present in the market. The competition in the market was increasing. And the biggest problem was, The Graphics card was such a product, Which cannot be made unique or upgraded even if we want to.
The Growth of Nvidia
Nvidia was losing its market. And other players were overtaking the company. And Nvidia was a few days away from bankruptcy. But then something happened, That changed the fortune for Nvidia. The year 2000, The Dot com crash.
In the year 1991, In those days in the US The usage of the internet among people Was increasing with high speed. Which gave rise to many internet companies. But many companies neither had a good product Nor a solid business model.
These companies were just working Because they all were internet companies. And at that time the craze of internet companies was so much, People were investing blindly in the company. And finally this Dot com bubble crashed in the year 2000. Because of which half of tech companies come to the road, And the remaining half becomes bankrupt.
And interestingly where up to 1997, More than 70 companies were making graphics card There up yo year 2000, Nvidia was a single company, That survived the dot com crash. But after this crash, Jensen Huang understood one thing, If we just kept on making graphics card, Then this company won’t survive for more time. And this is where he decided to play big.
1st Business Strategy of Nvidia
Finally in the year 2004, Jensen Huang with his team, Made Nvidia NV3 NV3 was an architecture graphic based card Which was the most powerful graphics card of that time.
The question is, Why was it like that? So see, whenever you play a video game Then there are two types of video graphics. 2D and 3D. If there is 2D graphics in the game, Then their rendering is very simple. And the graphics card at that time, They used to easily do the 2D rendering.
But if you are playing a 3D game, Then its rendering is very complex. And at that time there was no such graphic card, That could do the 3D rendering. And the ones that used to do the 3D rendering They could not render 2D. Now, if somebody had a 2D graphics card in their computer Then it can do just 2D rendering. And if someone has a 3D graphic card, Then he can do the 3D rendering.
And to solve this problem, Nvidia developed NV3. Nvidia made NV3 so powerful, Both 2D and 3D, Both these graphics togetherly, Can render simultaneously. Because of this, Users found graphics processing very easy and fast And cheaper than before. Because now they don’t have to buy 2 different graphics cards. Moreover after this Jensen, SEGA games, Hp and DELL Formed powerful strategic partnership with these 3 companies.
At that time, SEGA game used to make many popular games. Like Sonic dash. Now to play this game people used to buy laptops/computers. Mostly people use to buy HP or Dell computer systems. Now in HP and DELL computer systems, To play these games That too very nicely, They will need some type of graphic card. And this is where Nvidia comes in.
HP and DELL All the computers that used to get sold, In all those computers, Nvidia used to add their graphic card. This partnership brought all 3 players into a profitable situation.
Who wants to play a game of SEGA like sonic dash, They use to buy computers from HP or DELL. Why? Because in HP and DELL computers, Nvidia used to add their graphic card. And not used to give in to other computers. Because of this HP and DELL sales increased. Nvidia had profit Because their graphic cards were indirectly sold.
2nd Business Strategy Of Nvidia
And SEGA games were played more. And today Nvidia’s these partnerships From companies like Volkswagon and Tesla Google, Amazon, and Microsoft like more than 50 companies. Because of this, no company can think of beating Nvidia. Now the question is, The company that just does the revenue of 21.8 Billion dollars, Why is the valuation of that company 750 Billion dollars? Well, the answer to this is hidden in second critical point.
What is Nvidia doing? Which most people are not aware of. Nvidia is not in the business of graphics cards. Nvidia is in the business of addiction. If you closely observe today’s scenario In this world ESPORTS The craze for Electronic sports is increasing day by day.
Game developers and publishers make games. Leagues people Hold these games internationally between people. Not only this, The craze of it is so much on a local level, Some are busy with Pubg chicken dinner And some for Fortnite’s victory umbrellas’ And this is where Nvidia comes in.
Nvidia is like the sugar in tea. Without which tea is always incomplete. So gaming companies’ motive is to create addictive games. Whenever you play these games, Your brain release a chemical called dopamine. Because of this, you feel good. By any chance, if you lose this game, Then you get stressed. And to manage it, Your brain releases cortisol hormone.
3rd Business Strategy Of Nvidia
When cortisol is released in our body, Our body is in a stress state. And no one’s body wants to stay under stress for a long time. To balance out, Our bodies demand something Because we can get dopamine again. And our stress levels get balanced and come down. Now, what will you do for this dopamine? You will play the game again.
But this time you want to win. Because of this loop, you get a competitive attitude in game. And as you win any video game, You feel superior. And this feeling of superiority, To keep this feeling alive, Gamers go to any extent. Now, what does Nvidia do? Nvidia makes graphics card. Which shows your graphics very clear And provides a good gaming experience to you.
Because of this, The better experience you have the better you play the game. You must have often listened that, If any game is not properly working on your computer Then people must have often told you Change your graphics card.
How The Gaming Industry Works?
There is some problem with your graphics card. Now to maintain this superiority, People invest a high amount in good graphics cards. So that their gaming experience is better. And they don’t need to come out of this stage. And this is where Nvidia makes tons of profit.
Along with this, there is one more thing that is booming. That is cryptocurrency. Crypto miners also require high-end graphic cards. And because crypto miners earn money through it, So they buy graphic cards worth lakhs of rupees.
And if you see anyone’s cryptocurrency mining setup, Then there they don’t use one graphic card. Minimum 4, 5, 6, 7 And in fact, don’t know how many graphics cards are used. Nvidia’s biggest competitive advantage is Their profit margins. Graphics card is such a business, In which the profits are too high.
Real Business of Nvidia Gaming Company
So in spite of low revenue The growth of Nvidia is at the next level. Nvidia to their investors in the last 5 years, Gave returns more than 660%. The stock that was just for $25 in 2017, Today it is trading at $195. And how amazing it would be, If you could take benefit of Nvidia’s this growth.
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Business Lessons From Nvidia Business Case Study
First lesson, Keep a futuristic vision. Google or Apple, Tata or Reliance All these companies, not for today But what will happen after 10 years What kind of future will happen? Take decisions keeping these things in mind. If you are starting any business, Then ask this 3 questions to yourself.
Number 1, Will my business be relevant after 5 years from now? Number 2, Is my business scalable? And number 3, What is the thing that can close my business?
After removing answers to these questions you will know that, The business that you are planning to do, What will be the future of that business? Second lesson. Sell the solution and not the product. People always pay for solutions and not the product.
People never give money for the product. Money is always provided for solutions. Graphics card is such a product, If you sit and tell specifications of the product Then that person will get troubled.
So by telling specifications and features You can’t sell a graphic card. And Nvidia earns so much money because, They never focus on selling graphics cards. They sell a good video performance solution. Similarly, if you want to sell anything, Never focus on selling the product. Try selling the solution and not the product.
Third and most importantly, Keep innovating. In 1997, more than 70 companies were making graphics cards. But in the year 2000, Only one company survived. Why was it so? Because all those companies, Did not innovate. But Nvidia survived because They regularly innovated. Firstly, they innovated their product. After that their business processes.
Third and most importantly, Brought innovation in their business partnerships. Because of which with 83% market share, Nvidia is dominating the graphics unit market. Every business has some or other hidden secret, That helps to beat other businesses.
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