Background of the Case
Sony had become the leader in producing radios for consumers by 1950. It later expanded to other home entertainment devices like televisions. The company’s long history of innovativeness resulted in brands like Trinitron, Betamax and Walkman. However, due to the company’s policy on protection of intellectual property rights, the reluctance to license its technology to competitors, it lost its market share to inferior technologies.
Competitors like JVC were able to win more customers with their VHS video tape that had poorer quality with longer recording time which apparently, the customers preferred. On the other hand, Sony stuck to Betamax, which provided higher definition video but with a shorter recording time.
In the 1980s and early 1990s, Sony entered into the video gaming market as a supplier of components to the Nintendo Entertainment System (NES) home console. Then, it launched the PlayStation console in 1995 when Nintendo failed to introduce technologies with better gaming experiences. The PlayStation console offered developers incentives like higher margins and advanced development tools. Sony developed partnership with more than 160 software-developing companies in Japan. By 2005, the PlayStation had become the most popular console with unit sales exceeding a million and about 7,000 game products.
In 2000, Sony launched the famous PlayStation 2 (PS2), which was accompanied by a similarly popular hand held PlayStation Portable (PSP) in 2003, even though PSP was not as successful as previous Sony’s home consoles. In early 2005, the company introduced the popular PlayStation 3 with a processing power two times powerful than that of Microsoft’s Xbox 360, the most significant rival at the time.
Problem/Issue
Despite being a giant in the gaming industry, Sony failed to consider a number of important factors, which gave Xbox a major boost and competitive advantage. For instance, the company failed to focus on the priorities of the consumers. It failed to realize that what mattered most to the gamers was nothing but the game itself. This meant that having an inferior library was a major disadvantage to the company. The price tag of the PS3 also contributed to the low sales, especially when competitors like Xbox and Nintendo developed products worth almost less than half of the value for Sony’s product. The amount of effort made during advertisement of PS3 did not match the content of the console. Due to this factor, the customers were very disappointed, which attracted negative publicity.
Situation Analysis
Sony’s major competitors like Microsoft and Nintendo were able to meet the needs of the consumers (the players) by learning their preferences. In addition, they were able to supply their products in line with the prevailing market demand. By doing this, they successfully satisfied real game players who could not be convinced to wait a few months for another product to be launched.
One of the keys to success in the gaming industry is having a library of gaming titles to be offered to the consumers. In fact, this is what PS3 failed to consider. PS3 was launched with only fifteen titles, some of which had previously been available for the Xbox 360. In 199, Sega launched the ‘Sega Dreamcast’, which was hard to find in stores several months after its release.
With a price tag of $600, PS3 was the most expensive console compared to its rivals. Despite subsidizing the cost, PS3 was still more expensive than Xbox 360 by $200. The high cost, coupled with its lack of vibration feedback feature, discouraged consumers from choosing PS3.
Analysis of Alternatives
The main issue that prevents PS3 from achieving its target value of sales in the market is the price factor. It is clear that the price tag is high due to the imbalance that exists between the features included and the customers’ preference. For instance, PS3 uses a blue ray drive while competitors use the relatively cheap HD DVD.
Sony used lower hard drives in order to reduce its price. However, it was apparent that memory was not something consumers were ready to sacrifice, even though came with an SD slot. Therefore Sony needs to identify the consumer preferences before making a decision on which features to sacrifice.
The opinion of the current research is that “Content is king”. This implies that Sony needs to launch consoles with a library of quality titles. This can be seen in the case of Sega with Sega Dreamcast, which sold out and was hard to find in stores several months after its initial release.
Recommendations and Implementation
This analysis recommends that Sony should do a thorough investigation on consumer preference before coming up with a new product. This is evidenced by the failure of PS3 to have a good reception from consumers despite having higher cost of production.
Sony should also embrace flexibility, especially when technology and technological resources are concerned. For example, instead of sticking to its own formats like ATRAC, the giant company should be willing and ready to embrace other formats in order to capture a wider range technology developers as well as consumers in the growing market.
There should also be a balance between the quality and the pricing of the products developed. Sony developed PS3 with blue ray, which led to an increase in the market price, yet the rival Xbox 360 was using the HD DVD, which caused a reduction in its market price.