WSJ said:Nintendo Plays It A Wii Bit Cautious
Even a year after Wii's holiday-season debut, Ian Arcuri is discovering that finding Nintendo Co.'s popular videogame console isn't as easy as playing it.
"I still don't understand how something out that long, which should have a supply chain so mature, could be so hard to find," says Mr. Arcuri, a program manager at a technology company in Cary, N.C. He has been unable to find a Wii for two of his children despite searching for more than a month.
While Nintendo's problem illustrates how tough it is for companies to try to predict demand for a product, even in the second year, it also is emblematic of the Japanese company's native caution. In the past two years, for example, Nintendo has set earnings forecasts so conservative that they achieved them in just nine months.
. . . .
Because Nintendo puts a great deal of focus on cash flow, it tries to keep its inventory as low as possible. Such a strategy is rare among Japanese companies, which have tended to focus on revenue growth and market share.
. . . .
The frustration of U.S. shoppers could become a problem for Nintendo as it seeks to keep up the momentum of a business that has surpassed expectations. Nintendo has twice revised its forecast for the number of Wii consoles it expects to sell in its fiscal year ending March 2008, now predicting sales of 17.5 million units, compared with a forecast of 14 million at the beginning of the year.
. . . .
Already, the persistent shortages have led to speculation by angry consumers that Nintendo was deliberately keeping supplies short to create more hype for the product. Reggie Fils-Aime, the president of Nintendo's U.S. division, denies this, saying Nintendo simply didn't anticipate this level of demand for the Wii this holiday season.
"It really is a missed opportunity if we're not able to satisfy that demand, which is why we're working so hard with retailers," he says.
Supply-chain management experts say missed opportunity may still be better than being stuck with excessive supply. Unsold Wiis could create a negative impression that consumers don't want the product. The consequences are so painful that many companies end up erring on the side of a shortage.
"If you flood the market, it will come back to haunt you," says Christopher Tang, a professor of supply-chain management at the UCLA Anderson School of Management. Nintendo may be missing opportunities by allowing other people to profit from the shortage by charging premiums, but Mr. Tang says that isn't entirely a bad thing because it creates hype. "Psychologically, it's better if the customer is begging for the product," he says.
And more at link: http://online.wsj.com/article/SB119697501146616201.html?mod=hps_us_inside_today