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The Sony Corporation is a multinational company with its headquarters situated in Tokyo, Japan. It is the 5th largest media company in the world in value being worth US$77.20 billion as at 2010. It had 167,900 employees as at March 2010, total assets worth $137.694 billion (2010), and a net income of $437 million in 2010. It is currently headed by Howard Stringer who is the president as well as CEO of the company with Ryoji Chubachi as the vice chairman and Masaru Kato as the CFO (www.sony.net). Founded in May 7, 1946, it has grown over the years to become big conglomerate that encompasses eight major operating business divisions which include Consumer Products & Devices, B2B & Disc Manufacturing, Financial Services, Networked Products & Services, Pictures, Sony Ericsson Phones, Music, and internet services. Appendix 1.
This growth is as a result of various acquisitions that the company has made over the years which include Columbia pictures, Incognito Entertainment, Bigbig Studios, Famous Music, Psygnosis Limited, and Guerilla Games. The consumer products and devices is the largest division of the Sony Corporation producing various electronic equipment designed for both professional and consumer markets. Major products made by the company include Sony BMG CDs, VAIO laptops, laptop batteries used in various laptop brands such as the VAIO, Dell and Apple, the PlayStation gaming console, music playing robots such as the Rolly and AIBO, digital cameras and pictures, tape recorders as well as films under Columbia pictures. It has also developed various standards used in the development of electronics such as Digital8, Umatic, MiniDisc, Betamax, Universal Media Disc, Digital Betacam, Memory Stick, 3.5 inch Floppy Disk, miniDV, DAT, and Blu-ray Disc. Europe is the company's biggest market in sales revenue followed by the Japan and the United States. Most of the production that the company makes is produced in Japan accounting for over 50% with Asia accounting for 10% of the production while Europe and the Americas accounting the rest.
Sony got into the gaming console market with the launch of the PlayStation in 1994. It then launched PlayStation 2 in early 2000 which is regarded as the most successful console having sold over 140 million pieces (Clements and Ohashi, 2005). This success resulted in the development t of a portable version of the PlayStation 2 in 2005. The PlayStation 3 was launched in 2006 joining the increasing competition in the gaming console market. The PlayStation 3 was launched on a backdrop of an oligopolistic market with the key players being Sony, Microsoft, and Nintendo. It was launched two days before the Wii gaming console from Nintendo and a year later after Xbox 360 from Microsoft. By the time of its launch, Xbox 360 has already sold 6 million pieces with anticipated sales for 2006 being 10 million while Nintendo anticipated selling 4 million pieces.
These sales figures compared to Sony's anticipated sales of 2 million pieces for 2006 were far much placing Sony in the third place behind its rivals. In addition, PlayStation 3 was placed at a disadvantage compared to its rivals as it was priced highly for both of its tow configurations which went for $500 and $600 a piece as compared to $300 for the Xbox 360 and $250 for the Wii. This increase in price was attributed to the inclusion of Blu ray optical technology in its optical drive (Fackler, 2007). Moreover, problems arising in the manufacture of the consoles resulted in a delay of the launch from May to November giving its rival the Xbox 360 ample time to have a big market share. As such, these disadvantages have prompted the need for Sony to look into its marketing environment so as to come up with ways of competing effectively and regaining its dominance in the gaming console market as was the case with its PlayStation 2 console. Below is a discussion of its PRESTCOM (Political, Regulatory, Economic, Social, Technological, Competitive, Organizational and Market) as well as SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis.
Sony Corporation is a multinational company that operates in several countries around the world. As such, the political situation of a particular country will affect the company differently from another. For example, a country that is undergoing political turmoil will not be favorable for any business and therefore a company such as Sony would be reluctant in investing in that country or will pull out from the country if it operates in such a country. A government has the power to alter any policies and regulations that control the running of businesses in that country. These changes can affect the company in a positive or negative manner depending on the nature of the new policy or regulation. A change in the government can also affect how the company operates in a certain country as the new administration may come up with unfavorable terms that may affect the company's operations in that country (Neuman, 1991). All these factors affect how PlayStation 3 is sold in different countries due to the existing political situation in separate countries.
The regulatory framework that controls how businesses conduct their activities vary from one country to the other. This is an important factor that Sony has to consider as it sells its PlayStation 3 since it is an international company that operates in several countries around the world. A government has the authority to vary various factors such as minimum wages to be paid to workers, taxes such as corporate tax and VAT payable of consumer goods. For instance, a high minimum wage would force Sony to increase its expenditure in the manufacture of PlayStation 3 leading to high production costs. If it increases the price of the console, most buyers will then opt for cheaper gaming consoles that will lead to a drop in its sales revenue. These factors must be concentrated on so that Sony is prepared for any major global changes. In addition, there are international laws that govern trade between different countries as well as trading blocks (James, et. al., 2004). These treaties could be favorable to Sony or lead to ineffective trading which affect its sales of the PlayStation 3. The company has to select trading partners and new markets based on the laws and regulations that are favorable to its operations as a whole.
There are various economic factors that affect any business. The most important are the four major factors of production which are land, labor, capital, and the entrepreneur. All these factors have to be present so as to come up with a business. The economic status of a country affects the availability of these factors which makes the Sony Company to invest in countries that these factors are available. In addition, there are other economic factors that affect the success of any business such as business cycles which dictate the highs and lows of business activities. Recessions are characteristics of low business cycles when business record the lowest sales revenue with most companies reducing their workforce in order to save on operating expenditure (Neuman, 1991). As such, the PlayStation 3 console will be affected as its sales will go down as the demand for it falls. Another factor that may affect the product is the ever changing exchange rates bearing in mind that Sony is an international company that operates in numerous countries. These countries have different currencies and exchange rates dictate how one currency will change in favor of another. With the subsequent change exchange rates, Sony has to determine the most suitable price that the PlayStation 3 will be sold at so as to ensure it still gains profits from the sale of the console.
The Sony Company has so far gained a good social rating as a result of the positive reputation it has had as a result of the high quality products as well as services that it provides to its customers. PlayStation 2 has had a lot of success selling over 150 million units which has enabled Sony to acquire 70% of the gaming console market. These high sales indicate the trust that its consumers have over other rivals in the gaming console industry. In addition, the company has been able to study and interpret consumer trends within the gaming console industry providing them with products that meet their tastes as well as technological needs. In addition, most consumers are amazed by new breakthrough technology which the company has for along time been investing in with high research and development expenditures (James, et. al., 2004).
Technological advancement has been one of the major reasons that the company has been one of the leading manufacturers of gaming consoles. It invests heavily in the research and development of new technology to be used in its products. The Sony Corporation has for years worked around the application of cutting edge technology so as to produce customer friendly products that meet their needs and tastes (Shankar and Bayus, 2003). It also uses technology in the production of its products which provides the company with efficient productivity saving on both costs and time. This has helped the company to stay ahead of its rivals through the mass production of consoles that are enough to serve its markets in cost efficient ways. For instance, the use of advanced technology has enabled the company to develop slimmer consoles as compared to its rivals which appeal to its customers as they are more portable as compared to their rivals. PlayStation 3 uses similar hardware that is used in the making of super computers making the console of high quality. The consoles have in built Bluetooth 2.0, HDMI 1.4 and USB 2.0 and Wi-Fi networking technology.
Sony's gaming products exist in an oligopolistic competition with the other major competitors being Microsoft and Nintendo. Nintendo has been in the gaming industry for over 20 years while Microsoft has been in the industry for about 10 years. Under such a competitive environment, Sony has to develop gaming consoles that will out do those of its rivals so as to ensure that it has the larger market share as well as the highest sales per unit and total sales revenue. The success of Sony's PlayStation 2 indicated that company is able to compete effectively in this restrictive market and should use this success to ensure that its other gaming console products are a success as well (James, et. al., 2004). With such competition, Sony has to ensure that it provides it consumers with among consoles that are targeted at meeting their needs as preferences through the use of the latest cutting edge technology.
The company is headed by several executives who are in charge of various divisions and departments within the organization. See Appendices 2 and 3 below.
Any business aims at selling its products or services to customers in exchange for revenue so as to make profit. As such, the availability of a suitable market that has sufficient buyers for a business's products and services is essential for its shorter as well as long term success (Neuman, 1991). In addition, a business has to have a reliable supply of the various goods and services that it requires so as to produce the goods and services that it offers to its customers. The main consumer for Sony's PlayStation 3 is the gaming community which mostly comprises of men between the ages of 15 up to 30. Moreover, the addition of Blu-ray technology in the PlayStation 3 console also appeals to those consumers interested in high quality movies with this group of consumers being of all ages. Some of the suppliers that Sony uses include Nvidia who provide graphics cards, Terra Soft Solutions who provide operating systems and IBM that provides processors.
The company should develop a competitive marketing strategy based on the SWOT and PRESTCOM analyses so as to ensure that PlayStation 3 gains the number one position in the gaming console market. It should cut its prices on both its configurations so that it will increase its demand among consumers of the gaming console. The company needs to market the console as an all round entertainment hub since it has various functionalities such as Blu-ray playback functionality and high-end gaming capabilities. The advantage in this is that the console costs much less compared to purchasing multiple products that offer each of these capabilities alone. Video players that offer Blu-ray technology are sold rather expensively while single high end gaming consoles are also expensive on their own.
The company should make it easy for PlayStation 2 owners to migrate to PlayStation 3 so that it can be able to gain more popularity as the PlayStation 2. This will help PlayStation 3 to become the console of choice for the numerous PlayStation 2 users who might want to use the more advanced PlayStation 3 which has more interactive and technologically advanced features. The Sony Company needs to ensure that PlayStation 3 is able to compete effectively with its rivals so as it can be the leading gaming console as its predecessor the PlayStation 2 is.