Free Supply Chain Essay Sample

Executive Summary

Nintendo Company Ltd was founded in 1889 by Fusajiro Yamauchi. The Company was founded as Marufuku Company Ltd in Kyoto, Japan.  The main activities in which Nintendo Company limited is concerned with is manufacturing and marketing of its hardware and software for its video game systems. In general, the company deals with the manufacture and marketing of interactive entertainment products.

This study concentrates on the supply chain of the company. The study starts by giving a brief history of the company and its activities. This is followed by a clear analysis of the company's market and then the ordering process involved in the distribution.

As it shall be seen, the main activities of the company during the early days were production of the playing cards. The company deals with service and entertainment, where it has laid down tremendous achievements.  It has been a major contributor in the modern fashion on the virtual scene. The company operates all over the world. However, most of activities take place in Japan where it is headquartered. The company provided employment to 4,036 people in the year 2009. In 2009, the company's revenue increased by 9.9 % to $18,423 million.In the same year, the  company's net profit increased by 8.5 % in the year 2009.

Company History: Nintendo Co., Ltd.

As previously indicated, Nintendo Company limited was started was founded in 1889 by Fusajiro Yamauchi in Kyoto, Japan. The company is widely known across the world for Mario, Luigi, Donkey Kong, Zelda and Pokémon. The Company's fame also lays on its Game Boy handheld gaming systems.  Nintendo has remained a very powerful company in the past for its innovations and designs. The company has managed to study its market and then act accordingly to satisfy their customers. This strategy has helped the company to win over their competitors.

The company was under the management of Hiroshi Yamauchi until the year 2002 when he stepped down for Satoru Iwata after running the company for 52 years.

Nintendo was very much determined to diversify its market as a strategy to maximize its profits.  In 1980, Nintendo made a very important step by expanding its market to the U.S. This was achieved by establishment of a wholly owned subsidiary Nintendo of America Inc. in New York.This expansion enabled Nintendo to sell arcade and the video games at the U.S. It was during this time when the company developed a Game and Watch game, which was the first portable LCD video game. The company's move to open its operations in the U.S. market significantly contributed to its success in the world market. This success motivated the company to produce 60 Game and Watch series of games which made very large sales across the world.

Company's supply chain: Nintendo Co., Ltd.

Nintendo Company limited has a very clear supply chain. This is another aspect that has significantly contributed to the success of the company.  Supply chain is very important part of any company as it determines the availability of its products to its customers all the times. There is a need to have a clear supply chain to enable the country to avoid unnecessary shortages.

Nintendo Company limited has a number of national distribution centers. The company's distribution center in America (DC) is located in North Bend which is fully equipped with the modern equipments.⁷ The equipment is fully installed with the modern technology like automatic guided vehicle systems which are connected to radio terminals to facilitate communication. This has significantly improved the level of service to the customers.

Nintendo Company's distribution center ensures that the order and the inventory levels are statistically close to each other as much as possible. These efforts ensure that there are no shortages or surplus production. Surplus production can lead to losses as the stock gets accumulated. Stock accumulation for instance increases the holding costs which eventually reduces profit margins. It is therefore very important to maintain close levels of inventories and the orders. On the other hand, too low inventories can lead to shortages in the market.

 Nintendo Company limited has very successful distribution centers around the world. One of its most successful distribution centers is Nintendo of America.

In 1999, the company was announced as the ware house of the year by the ware housing management. This award was based on the organization's services to the customers.  The production takes place at Japan and then all other activities for the American market are done by the NOA. These activities included the distribution of the products from the centre to customers all over the country.

Later, the distribution center changed its distribution strategy in order to increase its efficiency. The organization decided to ship directly to the retail outlets instead of first storing the products at Redmond. This measure was aimed at reducing operational costs involved in the distribution process as well as increasing the level of efficiency.

In America, Nintendo of America has more than 10,000 retail stores which it is supposed to serve. In order to meet its targets, the organization designed a state-of-art, a highly automated distribution facility. This new facility was opened in 1991 and was 384,000 square foot.

The Ordering process

The ordering process in Nintendo Company limited has been drastically improved. The process has been automated to increase the efficiency and reduce unnecessary costs. For instance, Nintendo of America which is one of the company's largest distribution centers operates as true paperless warehouse .

Orders are sent from Nintendo of America's headquarters which are then downloaded to servers in the North Bend. This is followed by generation of labels and picking tasks by an internally customized warehouse management system. The orders can be processed in various quantities, which are in truck loads or as individual pieces. This kind of distribution system has helped in the expansion of the company's profit margins. The process requires very little workforce as most of the transaction involved in the process of ordering is automated.

The process of picking involves four computerized picking lines. According to Jeff Hodgdon , "the individual cases are then cut down and product is placed in open "picking" totes before being introduced to a gravity feed pick-to-light system using a radio frequency system".

Due to high level of the company's products during the peak time, it has been forced to outsource some of its distribution functions. The company's peak period is coincides with holidays. The sales reach their maximum during the months of December and January. To meet this demand, the company's distribution centers opt for outsourcing services. Outsourcing makes the delivery to be faster hence reducing any inconveniences.

One of the main challenges of Nintendo Company's supply chain was when it failed to satisfy its market demand. After its successful introduction, Wii provided unexpectedly big market which the company did not manage to   satisfy with their capacity then. The situation worsened towards the end of the year 2006 when more people preferred to buy more consoles for Christmas gifts. Due to these inconveniences, the company decided to its distribution workforce three times of the existing workforce. These efforts were aimed at elimination of any shortages in the month of December 2007. The average production of the Wii was increased to about 1,800,000 per month.

This strategy to increase the supply however proved impotent when the issue of quality was raised. This concerned the malfunctioning of the wrist straps which were attached to the Wiimote. Fortunately, the company managed to solve this problem by getting a stronger set of straps to substitute the older set for free.

Through out the history, Nintendo Company limited has kept a good track of innovations. In the year 2009, the company was ranked fifth as the most innovative companies in the world.In early 1990s; Nintendo dominated the entire video games industry.

In 1980, the company extended to the U.S. market. Again in 1981, the company released the arcade game Donkey Kong. According to Jorg Ziesak, the company's inventive nature was the major factor which helped the company to succeed in the Northern American market. This again enabled the company to increase its sales significantly. Donkey Kong earned the company about 180 million dollars and a return of 100 million dollars in the following year. This achievement helped the company in meeting its expenses efficiently and competently. At the end of the day, the company had managed to grab a big proportion of the global market. Later in 1985, this game was introduced to the U.S. and European markets. This once more helped fueled the success of Nintendo Company limited.

After two years, the company managed to bring in a new Family Computer (Famicom) in Japan. This game later proved to be the most successful video game in Japan.

The company did not stop there. In 1989, it launched a hand-held device called Game Boy which was the first portable console with game parks which can be interchanged. The first Game Boy introduced by the company could is said to be one of the most innovative gadgets. The DS could change the way we game on the go.

The SWOT analysis: Nintendo Company limited

The SWOT analysis of Nintendo Company limited is going to provide information about the company's business structure and operations, history and products. It also includes the company's key revenue lines.

Strengths: Nintendo Co., Ltd.

Over the past, Nintendo Company has kept a very good track of record. One of the main strengths of the company lies on the fact that it is very bright in spotting business opportunities. The Company pays more effort in understanding the consumer's perceptions and codes as the guidance in the development of good products.

 The company has realized that paying attention to non-consumers can help the company in opening new market opportunity. This realization has helped the company to achieve tremendous increases in the sales. In most cases, companies invest more on the maintenance of their customers, paying little attention on their potential customers. This tradition has contributed to the failure of these companies.  It becomes very difficult for them to compete with their competitors.

It has been observed that creation of new and profitable markets is one of the best business opportunities which a company can dream of.  For instance, in the year 2006, Nintendo came up with Wii and informed the public that this was one of the best inventions in the video games industry. After the launching, the company managed to make millions of these devices. The company's products like Super Mario Bros, Wii Sports Resort and Wii Fit Plus has made the company to be uncontested leader in the video games market creating a new market for the company.

Another area of strength for Nintendo Company limited is its innovative nature. Since its development, the company has continuously been innovating new products in the market. This has been achievable through an intensive research programs. Nintendo was always determined to be ahead of its competitors. In the early 1990s, the perpetual successes of Sega Enterprises limited gave posed a very stiff completion to the company. In reaction to this threat, Nintendo upgraded its eight-bit machinery. Finally, Nintendo managed to increase its sales by 63 percent.

Weaknesses: Nintendo Co., Ltd.

Despite of the tremendous achievements that the company has recorded, it also suffers some weaknesses. These weaknesses tend to pull the company backwards. One major weakness of the company is its poor handling of the online gaming compared to its rivals in the online space .

Nintendo's dominance in the industry was threatened in 1994 when Sony entered the market. The main reason why Sony outperformed Nintendo during this time was the type of console launched by Sony which was technologically superior to Nintendo's console. The first impact of this competition to Nintendo was a massive loss of the market share. The company had for long been enjoying market leadership. However, this new entry in the market grabbed the company this power. Since the company had no capacity to maintain the technological progress maintained by its competitors at the time, is continued to lose its market share.

The company came up with new strategies to capture back its market leadership but it was not successful. Instead, it continued to lose its market share. This battle continued with the other market giants which later intensified. Things were even worse to Nintendo when the market analysts proposed that Nintendo Company limited should completely exit from the highly competitive console market in order in order to concentrate on the developing software.²⁵ However, the company resisted and defiantly continued with its struggle to get back its control over the market.

Nintendo has a very well organized pool of resources. These resources form a very firm foundation on which the foundation of the company's successes is based.  These resources can be divided in to two categories, the tangible and the intangible resources.

Tangible resources

These are the company's valuable assets which can be quantified and can be seen. Human capital is one of the company's tangible resources. The upper managerial level usually has a very significant influence on the company.The Company's upper levels management determines the company's failures and successes.

Since its development in 1889, Nintendo Company limited has been run by two leaders. Both leaders have recorded excellent leadership skills. The first leader was Fusajiro Yamauchi who was succeeded by Satoru Iwata in the year 2002. These two leaders have demonstrated a quench to innovate, an aspect that enabled the company to maintain its leadership over the market despite of the stiff competition.

Nintendo has a very efficient set of manufacturing equipments which enables the company to produce efficiently. The company has also enough financial capital for funding the company's daily operations. The funds are also used in the funding of researches in which the company is involved.

The company's innovative nature has been maintained through continued research operations. These research operations are usually very expensive. However, due to the financial stability of the company, the company has managed to sustain these research operations.

Intangible resources

Intangible resources are those assets that are useful in creation of value to the customers but cannot be physically identified.Nintendo Company limited has a significant amount of intangible resources through which it has retained its position in the market. These resources have accumulated in the company over the time and they are becoming more and more useful to the company with time.

One of the most valuable intangible resources of the company is the brand name. The company has established its market all over the world. All the products from Nintendo Company limited therefore enjoy easy identification across the world. This universal recognition of the company's products has helped it to increase its sales significantly.

Another vital resource of the company is its reputation. The company has kept world wide record of its success and innovations. The company has been introducing more efficient and affordable in the entertainment industry. This reputation assists eases the company's process of marketing its new products since the market has enough information about the company. For instance, when the company launched the Wii, its demand exceeded the supply.

In fact the company was forced to double the workforce in order to satisfy the market in the following year. The company's workforce know-how is another form of its intangible resources. Nintendo Company has an experienced and qualified staff has developed a culture of innovation and quality service to its customers. This has enabled the company to maintain its market leadership. The skilled workforce has also helped the company to maintain high level quality products beyond those from its competitors.

Both the intangible and the intangible resources of the company are interactive. For instance, the company uses financial resources to purchase the assets.  The workforce can also generate funds for the company which can later be used as the company's capital. These two kinds of resources have a very significant role by creating value to the customers.

From the above analysis, it can be concluded that the company's production and distribution activities are very significant determinants of the company's success. Nintendo Company limited has a well organized supply and production systems which has helped the company to maximize its profit through adaptation of efficient and cost effective operations.

 

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