If you attended a business 101 class on how to run a successful company, do you think professors would teach and encourage the following?

  • Refuse money from customers
  • Make potential customers angry
  • Do not meet the demand of customers

Yet for all the people who believe that Nintendo is intentionally withholding Wii consoles from the market to inflate demand, that's exactly what you are saying Nintendo is doing.

The point of business is to make money and it more or less boils down to a numbers game. Sell as many products as you can for the highest price the market will accept. From the perspective of a business owner/investor/stockholder, having media "buzz" and hype is gravy, but the idea that Nintendo would sacrifice substantial amounts of profit and market share in exchange for media "buzz" is foolish. Buzz is something that companies have no control over and has no measurable monetary value. Do you honestly believe Sony, Microsoft and Nintendo, who are looking to establish their platforms, would continually trade sales/market share for something that is intangible and something they can't control? Inflating demand is a strategy that works in the short-term, but to continue to do so is risky and not a sound long-term business strategy (especially with competitors who are looking to out sell you). I think that's a huge gamble and good companies like Nintendo don't gamble.

Nintendo did make a big mistake by not anticipating demand better, but the reality is that Nintendo, despite its vast cash reserves from years of making profitable game systems (console manufacturers usually lose money on the console and make the money back on software), is not a Sony or Microsoft-size company with near limitless resources. To launch a game console around the world is an astronomical expense and managing the manufacturing is extremely tricky. A major mistake for a company like Nintendo could be prove to be disastrous (remember Dreamcast anyone?).

With so much at stake, Nintendo is better off playing it safe than sorry when it comes to its manufacturing, but I don't think the executive board and investors of Nintendo are happy with the shortages. These are people that don't care about videogames or media buzz. They only care about market share and financial bottom-line and that is who Iwata and the chiefs of Nintendo have to answer to. It's for that reason that I firmly believe Nintendo is doing everything in its power to put more Wiis on store shelves.

Chi Kong Lui

Chi Kong Lui

In the 1980s, Chi grew up in small town on the outskirts of New York City called Jackson Heights. Latino actor, John Leguizamo referred to the town as the "melting pot of the world," and while living there, Chi was exposed to many diverse cultures, as well as a bevy of arcade classics such as Pac-Man, Space Ace, Space Harrier and Double Dragon. Chi's love of videogames only seemed to grow as his parents finally caved and bought him an 8-bit Nintendo Entertainment System (after being the only kid in the block without one). In the 1990s, Chi finagled his way into the prestigious Fiorello H. LaGuardia High School for the Performing Arts.

Somewhere between all the gaming, Chi some how managed to finish high school and get into the New York Institute of Technology. At the same time, Chi also interned at Virtual Frontiers, an Internet software consultancy where he learned the ways of HTML. Soon after acquiring his BFA, Chi went on to become the lead Web designer of the Anti-Defamation League. During his tenure there, Chi was instrumental in redesigning and relaunching the non-profit organization's Web site.

Today, Chi is the webmaster of the American Red Cross in Greater New York and somehow managed to work through the tragic events of September 11th without losing his sanity. Chi considers GameCritics.com his life's work and continues to be amazed that the web site is still standing after the recent dotcom fallout. It is his dream that GameCritics.com will accomplish two things: 1) Redefine the grammar of videogames much the same way French film critic Andre Bazin did for the art of cinema and 2) bring game criticism to the forefront of mainstream culture much the same way Siskel & Ebert did for film criticism.
Chi Kong Lui
Subscribe
Notify of
guest
10 Comments
Newest
Oldest
Inline Feedbacks
View all comments
Ed Grimley
Ed Grimley
13 years ago

you have clearly never been to the Nintendo World Store then, where they blatantly tell you “NO” they don’t have any in stock, followed by no definitive answer as to when they will have more in (if ever)… only to begin bringing units out by the butt load not even five minutes later. clearly their stock employees must be so efficient, that they’re somehow able to unload trucks, tally quantities, and tranport all of these fresh units to the sales floor straight from the oven in record breaking time… all the while most floor staffers stand around jabbering on in… Read more »

Apathy Curve
13 years ago

Sigma wrote: There is however a very, very large cost to bring up short-term manufacturing capacity. And not only in direct financial cost but also in quality control. Bingo. Conspiracy theories are spawned by a witch’s brew of ignorance and impotence. Those people screaming that some cabalistic “market manipulation” on the part of Nintendo is responsible for the shortages, rather than a simple infrastructure shortfall, have plenty of both ignorance and impotence. Best business practices will always dictate the actions of a well-run company. Nintendo is simply reacting in the most logical and efficient manner available to them as a… Read more »

Raz
Raz
13 years ago

I think your logic is a little black and white. While it does for the most part work like what you say, it does not in the case of all products (luxery goods is a prime example). A simple way to look at it is this, whats better, sell 1,000 units in 1 year and then no more, or 1500 units over 2 years and then no more. The simple answer is option 2 because not only do you sell more, over time you can produce them cheaper so your margins become greater. There is a downside of course and… Read more »

SoxFan13
SoxFan13
13 years ago

Nicato- I understand what you’re saying, but they ARE an underdog. Their position in the last console war (xbox, ps2, gamecube) sets them up as the underdog this time around. That fact that they make the most money on their consoles only shows why they are a smaller company. A larger company (sony and MS) has the funds to manufacture its console at a loss for later gain on software. Nintendo does not. Their products are solid, and thier costumer service is top notch (particularly in comparison with MS and Sony). These attributes also point to a smaller, “mom and… Read more »

Frost
Frost
13 years ago

I work at Toys R Us in Sterling, 30 miles outside of Washington DC. Every two weeks on a Sunday we have Wii’s. Not just 10-12 or 20-30 units but usually around 60-80. Just last week we had about 83. These “Wii Sundays” have been going on since early January. I don’t know what the inventory allocations are at other retail corporations but usually every Toys R Us gets more then 40 Wii’s every two weeks depending on the population and traffic at each store. We always sell out instantly and always have lines. People are now realizing there is… Read more »

Chi Kong Lui
Chi Kong Lui
13 years ago

On the size of Nintendo… Sigma brings some excellent data to the table (so have others). It would also be interesting to know how many employees and office locations/factories each company has as well. Perhaps we should replace the word “large” with “diverse.” Nintendo doesn’t make operating systems, flat-panel TVs, applicances, etc. Nintendo, for the most part, has all of its eggs in one basket. Based on that, I think the perception of Nintendo’s size is in some ways warranted. On supply and demand… I considered some of what Raz said in regards to luxury items, but I think most… Read more »

Carmine "Cai" M. Red
Carmine "Cai" M. Red
13 years ago

Considering that the Wii is being shipped at a rate faster than either of its competitors the XBox 360 or PS3, I think it’s safe to assume that Nintendo is doing a lot already to meet demand. I don’t know of any other console that has shipped 6 million units worldwide total in just 4 months of existence… not even the great and mighty PS2 did that! In the next Fiscal year they plan to ship 14 million units worldwide… which, I believe, is a yearly shipment target only exceeded by the PlayStation 2’s own past shipment numbers (16 million… Read more »

Sigma
Sigma
13 years ago

There’s nothing “small” about Nintendo. Particularly in the video game market. Sony has a market cap of $52B. That’s the complete company, not just the video game portion. Nintendo, not a great deal smaller at $41B, and that’s video games alone. And it’s a far more profitable company, bringing in 3 times the return on equity that Sony does. As far as video game resources go (and that what we’re really talking about here), Nintendo has far more within its’ grasp than the competition does, whether you’re talking financial, expertise, or even just manufacturing. Even as far as raw cash… Read more »

Nicato 1.1
Nicato 1.1
13 years ago

I detest the “Nintendo is a smaller company” argument. For one, it’s never presented with a shred of evidence, but always assumed. And it’s specious. MS dwarfs Nintendo and Sony several times over, so it hardly seems justified to clump Sony and MS together. Thirdly, for all practical purposes, all it says is that Nintendo could survive a fiscal nuclear failure like Microsoft did with Xbox. Fourthly, Nintendo is the console maker which profits the most from it’s consoles. Finally, it paints an almost laughable picture of Nintendo, the most time-tested of videogame companies, being any kind of underdog. Nintendo,… Read more »

Brad Gallaway
Brad Gallaway
13 years ago

i think your logic is essentially right but it still boggles my mind that despite an on-fire launch and high demand that they haven’t been able to ramp up production now that it seems clear they have the green light to do so without fear of catastrophic loss. i’ve been scouring the city for a Wii and only yesterday did i finally find one… the GameStop where i found it said they had received *one* in the last month, and the one i got was it. i just have a hard time believing that Nintendo isn’t able to do more… Read more »