Jeremy Fain from the Tech IT Easy blog puts it nicely:
Wii doesnt intend to be a best-of-breed videogame console. Nintendo is trying to bring non core gamers back to gaming [..] with the Wii. Wii wont equal video game but Wii aims at meaning fun. Nintendo focuses on the consumers feeling rather than its product. (-> read post...)
The attributes in the graphic show that Nintendo is competing on completely different terms than Sony and Microsoft. The Wii is cheap, has no Hard Disk, no DVD, no Dolby 5.1, weak connectivity, comparatively low processor speed, but blows minds away with its innovative motion control stick (check out the demo video below). The stick integrates the movements of a player directly into the video game (think tennis, golf, sword fights, ...). With this feature Nintendo opens up the console world to a completely new public of untapped non-gamers...
All of the above describes nothing else than the characteristics of a blue ocean strategy:
A strong value innovation for (many new) customers (i.e. motion stick)
Cost reduction by eliminating features (i.e. no HD, no DVD, no Dolby 5.1, low processor speed)
These two characteristics defy the conventional wisdom that you should either go for cost leadership or differentiation but not for both (remember Michael Porter...). In Kim & Mauborgne's terms this means that while Microsoft's Xbox and Sony's PS3 are fighting each other fiercly in a red ocean (i.e. the existing market), Nintendo's Wii is calmly sailing in the blue ocean it created for itself (i.e. a new market)... By the way, Switzerland is not innocent as to the creation of this blue ocean: An Italy-based division of STMicroelectronics, which is headquartered in Geneva, Switzerland, has put forward to Nintendo the integration of motion sensors into their consoles.