Wii Shortages a Sign of Japanese Conservatism, says WSJ

December 10th, 2007, 08:02 Posted By: pibs

Via GameDaily
Despite the fact that Nintendo has boosted its Wii production to 1.8 million units monthly, the popular console continues to sell out quickly and consumers trying to purchase one this holiday may have to look hard and often. Nintendo has had to deal with speculation repeatedly suggesting that the company might be creating artificial shortages in order to further stir up hype, but Nintendo of America President Reggie Fils-Aime insists that's just not true.

Fils-Aime has commented yet again to the Wall Street Journal: "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."

More interesting, however, is the WSJ's perspective on why Nintendo didn't anticipate the level of demand they've encountered with the Wii. The Journal believes it's a matter of Japanese corporate philosophy.

"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," the business publication said. "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."

Whether the shortages are truly designed as a strategy to elevate hype around the product only Nintendo insiders really know, but clearly it's better to have the console selling out instead of sitting on store shelves. "If you flood the market, it will come back to haunt you," Christopher Tang, a professor of supply-chain management at the UCLA Anderson School of Management told the WSJ. "Psychologically, it's better if the customer is begging for the product."

Most analysts seem to think supply and demand for the Wii will finally level out sometime next year. Wedbush Morgan Securities' Michael Pachter recently said he believes it will happen next April.

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