Sony Corporation - a Flagship Japanese Company - Case Study Example

Sony Corporation – a Flagship Japanese Company Brief statement of the problem In the launch of PlayStation 3 in November 2006, Sony faced two major challenges: despite the more sophisticated technology, PS3 was unable to meet the expectations of the customers; and the initial projected sales volume of 6 million by March 2007 proved to be unrealistic with nearly 1/3rd of stock was left unsold by February 2007. The high euphoria created by Sony with regard to its PS3 model was not only short lived but the higher rate of returns for the model had seriously damaged the credibility of Sony. The faster processor, superior Blu-ray technology and greater storage were major technology based factors that were supposed to provide it with competitive advantage against its rival like Nintendo Wii and Xbox60. But the post launch period showed significant reduction in sales volume, especially in Europe where its launch was lacklustre in terms of sales volume and customer satisfaction. (147) Analysis of the situation, issue or problem Sony Corporation is a flagship Japanese company in the field of electronics goods and home entertainment products like television, stereo and other technology based audio-visual devices. It relies on technology based innovation to maintain its competitive advantage across the globe. It is known for its superior quality audio visual products like Betamax, Trinitron and Walkman that were quite popular amongst the people at large. Betamax was videotape with high quality video but short play time and more expensive than the JVC’s videotape that had VHS platform with long playtime. Walkman was portable music player that was hugely popular and remained so for a long time till CD players came into the market. Trinitron was patented television technology with greater image superiority that established its market position in the international market. Its Blu-ray technology offered high definition video content. The products and innovation of Sony were backed by its proprietary claims and promoted its own unique formats that were not compatible with others audio visual based products. It also has restrictive licensing terms that adversely impacted its market expansion. These were huge drawbacks as they helped its competitors to gain significant market share. The digital revolution of late eighties and nineties enabled its competitors to develop products that could play wide variety of audio video format whereas Sony’s digital players remained confined to its own format of audio video products. Apple's iPod had witnessed stupendous success in the market because of its ability to play more than seven audio formats. But its entry in the gaming section and its introduction of PlayStation in 1995 was a huge challenge as Nintendo and Atari had already created a niche market position. But superior technology using 32 bits 3D graphics console became a market leader because of strategic market plans. It forged partnership with 164 Japanese companies for developing software and games. At the same time, it offered huge incentives in terms of higher margin and advanced development tools to developers. As a result, by 2005, it had become the most popular console had more than 7000 games. It was followed by PS2 with higher processing power, greater graphic and which was compatible with its previous model. This further strengthened its market. But its PSP or PlayStation Portable was not so successful mainly due to its higher cost and limited number of creative games. The launch of PS3 was a major disappointment for Sony. There were many complications to its launch. Sony’s sales projection of PS3 was broadly based on its superior technology but they failed to deliver in the reality. It was not able to meet its initial launch sales also in North America and consequently had to import from Japan. Secondly its European launch was huge setback as it totally failed to attract the market. Its advertising gimmick ‘Play beyond’ also backfired mainly due to its high cost as against its rivals Nintendo and Xbox 360. Moreover, Sony’s use of ‘rumble’ technology to reduce cost was found to be an infringement on the rumble patent which gave it a lot of negative publicity. Most importantly, PS3 was not backed by a good library of games. It was launched with only franchise based 15 titles which turned out to be versions that were available to Xbox also. Review of alternative remedies or solutions Sony’s restrictive licensing should be eased out and made more attractive for franchising. Franchising is one the most cost effective mechanism to expand market across lager geographical area. The company is known for its innovative and high quality products with huge market potential. But factors like its unwillingness to share its knowledge across the industry, its unwillingness to compromise on quality and cost have been major detractors to its success. Indeed, its high cost is mainly due to its refusal to use other formats or to makes its format compatible with other. This also considerably limits the playing options for its customers who can use more games and music with their Nintendo, iPod and even Xbox. Thus, it is important that Sony must encourage new product development that is able to accept and incorporate the modules of other formats so as to give its products versatility. Sony’s superior technology of PS3 must be backed by timely and efficient delivery of stock. The return of more PS3 shows that there must have major defects or drawbacks. Sony needs to carry out more comprehensive study on its various features and evaluate customers’ feedback so as to improve and improvise it as per the requirements and expectations of the people. The company also needs to evolve more creative brand strategy to re-launch PS3. The advertisements are most effective platforms to create needs and unique image (Schiffman & Kanuk, 2006). Sony should exploit this feature and meet the expectations of gamers with new PS3 which would meet the challenges of the people. Recommendation of solution PS3 must be re-introduced with lower price tag and ore features. The model should also have compatible format so that it can play wide variety of audio visual games, music and movies. Developers should be given more incentive in terms of higher margin and royalty. It should use franchisee to expand its market. Licensing restrictions should be relaxed so that it can be manufactured by others, thus reducing over cost and increasing efficient delivery of increased demand. A large library of compatible games should be maintained with quality content that is not only original but is also able to satisfy customers. The company must use social network sites to get feedback and new ideas. The social networking would enable it to constantly upgrade its products to suit the changing requirements of the customers (Bruns, 2007). Moreover, the feedback would help it to rectify drawbacks and innovate on ideas to create new products that challenge customers (Kotler et al., 2007). Sony should also improve its public relation and sponsor academic events and community welfare programs to create market credibility. It should also conduct a survey to evaluate its rivals’ products. This would facilitate understand the reasons for their success, especially that of Nintendo Wii and Xbox 360. Conduct five force analysis to rectify its weak points like making it more cost effective and expanding its library of games and exploit its strength, vis-à-vis technology and innovation to overcome market resistance. Defend of the choice of solution PS3’s main drawback was its high cost and very limited content based games. Its higher quality and technology driven PS3 was way ahead of the products of its rivals. Thus, reducing the cost and expanding its database of games through greater incentives to developers would help in meeting the demands for more creative games. The easier licensing formalities would further help to reduce the cost and make it hugely competitive vis-à-vis Nintendo and Xbox. PS3 is primarily intended for 18-35 years of demographic target. Thus, promoting the products through social networking and using academia would be a great idea to make it popular. They would understand and utilize the technology to enhance their gaming experience thereby significantly increasing its sales. Most importantly, becoming proactive participant in the development activities would boost its public image and provide it with market credibility which would help it to gain competitive advantage in the digital gaming industry. (words: 1369) Reference Bruns, Axel. The Future Is User-Led: The Path towards Widespread Produsage. 2007. Web. 28 October 2012. . Case study provided. Kotler, Phillips et al. Marketing. Sydney: Pearson Education, 2007. Schiffman, L. and Kanuk, L. Consumer Behavior. 9th ed. NY: Prentice Hall, 2006. Read More