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Marketing strategy of Sony for portable audio device business

Research Paper (undergraduate) 2007 27 Pages

Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media

Excerpt

Table of Contents

Executive Summary

List of Abbreviations

List of Tables and Figures

1 Introduction

2 Main Part

2.1 Product analysis using BCG approach and PLC

2.1.1 Methodology

2.1.2 Analysis of Sony’s portable audio device

2.2 Comparison between Sony’s MP3 Walkman and Apple’s iPod

2.3 Evaluation of Sony’s brand leverage strategy

3 Conclusion

4 ITM checklist

List of Abbreviations

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List of Tables and Figures

Table 1 – Characteristics of product life-cycle

Table 2 – Statistic data about ownership of audio devices in German households (ARD/ZDF long-term study about mass communication)

Table 3 – Technical feature of Sony’s Walkman NWZ-A818 and Apple’s iPod Touch

Figure 1 – BCG matrix and assumed position of Sony’s portable audio devices

Figure 2 – PLC and assumed position of Sony’s portable audio devices

Executive Summary

Sony has a strong brand name and the company was successful with the Cassette, CD and MD Walkman in the 80s and 90s. However, the company missed the rapid development in the hard battled MP3 player market. In this study the Sony’s portable audio devices were analyzed by using Boston Consulting Group approach and Product Life-Cycle. Sony arranges now gradual phasing out of DOGs like Cassette, CD and MD Walkman and has a new challenge by growing the STAR MP3 Walkman. A benchmark of a current Sony’s MP3 player (Walkman NWZ-A818) to a competitor product (Apple’s iPod Touch) was accomplished. The “4 P’s” marketing mix method (Product, Price, Promotion and Place) was applied for the product comparison. Apple’s iPod scores in modern design with touch screen and multi-functionality while Sony’s Walkman convinces for excellent sound quality and high technical standards.

Moreover the Sony’s brand leverage strategy, in particular the brand extension strategy like category and line extension, was assessed. Despite of its strong brand name and high quality, Sony’s Walkman is out of the market leader and outrider role due to some failures: too late entry to the MP3 player market, strong focus only on technical features and missing out to make the MP3 player a fashion article. In the future, Sony has to maximize the market share in this growth stage. A proposed portable audio device for the future could be an all-in-one device with multi-functionality for multimedia.

“After a match is before a match” is a good slogan for the future. The winner is someone who has strength in speed, innovation and global impact. Sony should continue making innovation and expanding its demographic market as well as considering and fitting the customer needs.

1 Introduction

Sony is a global player in the consumer electronics business. The company has a leading position in the world market and a strong brand name for innovative and high quality products. Akio Morita, the founder of Sony, rightly took pride in the market-driving strategy of his company “Our plan is to lead the public with new products rather than ask them what kinds of products they want. The public does not know what is possible, but we do.”[1] The success of Sony could be shown in a variety of innovative products which contributed to build Sony to a world class company with a annual revenue of more than $60 billion: the world’s first colour video cassette recorder in 1971, the Walkman personal stereo in 1979, the Compact Disc (CD) in 1982, the Mini Disc (MD) player in 1992, the Play station game system in 1995, the Digital camera in 1997, the Digital Versatile Disc (DVD) player in 1998, the Network Walkman digital music player in 1999 and further world novelties.[2]

However, Sony suffers now from management failures, organization problems and stiff competition resulting in losing the market share and corporate return. For example the Walkman cassette player was a famous product of Sony which became a worldwide brand name. The term “Walkman” was actually included in Duden and in the Oxford English Dictionary in 1986. 2,[3] However, Sony could not repeat this success story in the fast-growing market of digital portable audio devices starting in the late 90ties. The company missed a big business opportunity with the new MP3 music format and enabled Apple to become the market leader with its MP3 player iPod. This instructive story requires Sony to rethink in strategy and re-orientate in development of new products, business models and markets.

The object of this study is to analyze and evaluate the marketing strategy of Sony for portable audio devices. Firstly, the matrix between market share and market growth, as well as, the product life-cycle stages of the two product categories “MP3 Walkman” and “CD, MD & Cassette Walkman” will be analyzed using the Boston Consulting Group (BCG) approach and Product Life-Cycle (PLC). Subsequently, a benchmark of a current Sony’s MP3 player (Walkman NWZ- A818) to a competitor product (Apple’s iPod Touch) will be accomplished. Furthermore, the Sony’s brand leverage strategy will be assessed and a future product in the portable audio segment, which could be successful, will be proposed.

2 Main Part

2.1 Product analysis using BCG approach and PLC

2.1.1 Methodology

The product portfolio analysis is an important tool for the strategic planning. Company can therefore classify and evaluate the success of current products and businesses. According to the analysis results, strategic planning for investment, as well as growth, holding or downsizing of certain products and businesses could be implemented. For portfolio analysis the Boston Consulting Group approach is commonly applied. The principle of the BCG approach is to provide a growth-share matrix (figure 1) to appraise the market attractiveness (market growth rate) and the position of the company in the market (relative market share). Four categories with typical characteristics could be defined:[4]

- Question marks: - low market share and high market growth rate
- need investment to hold the market position
- Star - high market share and high market growth rate
- create generally high profit but need huge cash for financing rapid growth
- Cash cow - high market share and low market growth rate
- create cash for the company
- Dogs - low market share and low market growth rate
- may provide enough cash but should be disinvested or phased out

Beside BCG approach the Product Life-Cycle is the second method for product analysis. The PCL method describes the course of sales and profits over the product’s life. In general a new product can (and not must) follow a typical product life-cycle with five distinct stages: Product development, Introduction, Growth, Maturity and Decline (figure 2). The characteristics of these stages can be summarized in table 1.[5] Based on the PLC analysis marketing objectives and strategies for appropriate product cycle stages can be defined and developed.

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Table 1 – Characteristics of product life-cycle

There is a relationship between the BCG matrix and the PLC stages. Most new products start as a Question mark when they are launched on the market in the induction stage and they develop to a Star in the growth stage. By low market growth they alter to a Cash cow in the maturity stage and end as a Dog in the decline stage.

2.1.2 Analysis of Sony’s portable audio device

Applied the BCG and PLC approach for the two Sony’s product categories “MP3 Walkman” and “CD, MD & Cassette Walkman” the following results are achieved:

CD, MD and Cassette Walkman:

The Cassette Walkman (MC) was a very successful product of Sony in the audio portable devices market segment in the 80s and until late 90s. It has been a successful selling of over 250 million units in 100 different models.[6] Sony permanently tried to expand the product line by launching new models with additional items, e.g. auto-reserve, remote control, pop-up ejects, Mega Bass, cordless earphones, solar-powered, water-proof, ultra-light etc.[7] The newest models (WM-EX194, WM-EX525, WM-FX 197) offer very long battery life (up to 35 h), high sound quality, analog/digital tuner, low weight and chic design.[8] However, by the triumphant advance of the digital age in the 90s, the Cassette Walkman lost gradually the popularity and the market shrunk by launching new techniques like CD, MD and MP3. In addition, the audio devices market is over flooded with cheap products particularly from China and the South East Asia which led assumedly to a significant decrease of market share of Sony’s Cassette Walkman. Today, Sony still continues to make the Cassette Walkman with new styles and features, in particular deluxe models, but the business is considerably declined. Therefore, the Sony’s Cassette Walkman can be classified as a DOG in the BCG matrix. In my opinion, the product is located on the decline stage of the PLC and it will be phased out someday.

The same assessment can be given to CD and MiniDisc (MD) Walkman. The first Sony’s CD Walkman was launched in 1984 and the first MD Walkman (so called the digital successor of the Cassette Walkman) in the 90s. The excellent sound quality and technical novelties were some of the reasons for the success of both products during years. While the CD Walkman was fully accepted by consumers, the MD Walkman had comparatively lower market growth and market share than the CD Walkman. The newest 20 CD Walkman and 4 MD Walkman models which are presented in the Sony’s website 8 show different design, accomplished technique and use-friendly features. For example, the slim-line CD Walkman D-NE920 supports ATRAC and MP3 music format, has long battery life (100 h) and high songs capacity (30 CDs could be compact in one CDR by using SonicStage software) and is protected against shock (G-protection jog proof). In comparison, the MD Walkman MZ-RH1 can play all the audio formats (WMA, WAV, ATRAC and MP3), has excellent sound quality and can communicate with the computer through USB port etc. However, from 2002 the new digital technology MP3 superseded the line of CD and MD Walkman and caused a contraction of their market. Sony declared in the annual report 2007, that sales of both CD and MD Walkman were significantly decreased due to a shift in market demand.[9] The MD Walkman, initially promising, stood in the shadow of MP3 player and could not gain significant market share. Today, if you go to electronic shops like Saturn or Media Markt you can find only some deluxe Sony’s CD Walkman. The Cassette and MD Walkman were excluded from the shop’s assortment. Based on these facts the Sony’s CD and MD Walkman are defined as DOGs in the BCG matrix and arranged on the decline stage of the PLC.

The fact that the market of Cassette, CD and MD players (includes portable devices) reached the decline stage can be partly evidenced e.g. using statistic data about ownership of audio devices in households in Germany. Table 2 shows that the percent quotient of German households in possession of Cassette and CD players considerably increased from 1995 to 2000, but decreased or stagnated from 2000 to 2005. The quotient of MD player has slightly increased at a low level in contrast to the highest growth asserted by MP3 player.[10]

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Table 2 – Statistic data about ownership of audio devices in German households (ARD/ZDF long-term study about mass communication)

MP3 Walkman:

The word first MP3 player came out in the late 90s with 32 MB memory. However, the market really leveraged since Apple released the first iPod player with big hard drive-based storage instead of removable discs in October 2001.[11] From this time the MP3 player market explodes from a niche to a booming market. The MP3 player segment, which only had about 5 % market share in 2001, reached over 50 % of the market’s sales in 2004.[12] The market researcher iSuppli Corp. estimated in 2005 that MP3 player shipments should rise from 37 million in 2004 to 132 million units in 2009. The annual growth rate amounts to approximately 29 %.[13] This estimation was absolutely right, as the business with MP3 player really rocked upwards in the recent years. The market leader, Apple, sold 100 million iPods until February 2007 and provided a new record: from October to December 2006, approximately 21 million shipments were achieved. Included music business the Apple’s sales in these 3 months amounted to $4 billion. The half of Apple’s revenue results nowadays from selling of the media-based products, mainly from its best seller iPod.[14]

[...]


[1] Kotler et. al (2004), p. 13.

[2] Available from: http://news.sel.sony.com/en/corporate_information/sony_brand (24.11.2007).

[3] Czartowski T. (2006), p. 342.

[4] Kotler et. al (2004), p. 45-48.

[5] Kotler et. al (2006), p. 321-334.

[6] Kotler et. al (2006), p. 353.

[7] Kotler et. al (2004), p. 290.

[8] Available from: http://www.sony.de/ (accessed 24.11.2007).

[9] Sony’s Annual Report 2007. Available from http://www.sony.net/SonyInfo/ (accessed 24.11.2007).

[10] Breunig C. (2006). Mobile Medien im digitalen Zeitalter. Available from http://www.media- perspektiven.de/uploads/tx_mppublications/01-2006_Breunig.pdf (accessed 24.11.2007).

[11] Borland J. (2004). Apple, Sony on a collision course. Available from http://www.news.com/Apple,- Sony-on-a-collision-course/2100-1041_3-5206708.html (accessed 24.11.2007).

[12] Market research study. MP3 players and other portable audio players in the United States. Available from http://www.researchandmarkets.com/reports/344136 (accessed 24.11.2007).

[13] Shyam N. (2005). Portable MP3 players: Booming market looks for new twist. Available from http://www.isuppli.com/catalog/detail.asp?id=6783 (accessed 24.11.2007).

[14] Hohensee M. (2007). Wie eine Kirche. Wirtschaftswoche Nr. 9 (26.02.2007), p. 58-61.

Details

Pages
27
Year
2007
ISBN (eBook)
9783640381289
ISBN (Book)
9783640380923
File size
485 KB
Language
English
Catalog Number
v132246
Institution / College
University of applied sciences, Munich
Grade
1,0
Tags
Marketing strategy Sony Portable audio device BCG analysis Product life cycle

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Title: Marketing strategy of Sony for portable audio device business