sony tablet situational analysis
DESCRIPTION
A group and I were tasked with doing a comprehensive analysis of Sony Corp being able to compete in the tablet market successfully. The situational analysis yielded, competitive, company, industry, and market analysis of Sony tablets. The project displays the knowledge and competence I possess in regard to doing high level business and situational analysis.TRANSCRIPT
Situation Analysis Sony’s Ability to Compete in the Tablet PC Market
Thomas Gibb, Matthew Wasserman, Collin Morstein, and Chase Jackson
4/29/2012
Company and Industry Analysis
Sony Corporation is a top global media conglomerate with deep roots in the consumer electronics, music, gaming, and content distribution industries. Sony’s mission: “To deliver, through a wide range of appealing products, the most compelling and exciting content and entertainment experiences to our customers around the world,” is being ever pursued through product invention and innovation between Sony and its 1,200 subsidiaries (Hoovers 2011). Sony’s most recent venture into the tablet PC industry aims to expand the Sony brand and global network, as well as take some of Apple’s share of the tablet pc market, which yielded sales of 60,000,000 units worldwide in 2011(Oliver 2012). Sony will continue to expand in the tablet pc market, which is expected to increase to 90,000,000 units sold in 2012, but the growth in this market will cause Sony’s other electronic device markets reduce in size (Oliver 2012). The rapidly growing tablet pc market can allow Sony to reverse recent net losses and boost sales of their tablet models in addition to their online content, music, and video games. Innovations to Sony electronic devices have helped the company use tablet pc’s to assist in marketing and increase the sales of other Sony Corporation products and services. Sony’s two first generation tablet PC’s, the Sony Tablet S and Sony Tablet P, will provide customers with another platform from which they can improve their communications and networkability.
Sony Corporation Provides Technology for Inspiration and Shared Experience Sony Corporation is a leading manufacturer of audio, video, communications, and information technology products for both consumer and professional markets. Despite the total net loss, 1.2 billion dollars, for fiscal year 2011, Sony recorded $87,000,000,000 in sales (Sony 2012). Sony continues to focus more resources on its Networked Products and Services segment. In 2010, after launching new services, such as Video On Demand and Music Unlimited, Sony experienced a significant increase in sales for other products in the segment. The following year, the fiscal year that ended March 2011, 20.8% of Sony Corporation’s total revenue came from the Networked Products and Services segment, which is greater than a 5% increase from the prior year (Sony 2012). Growth in the Networked Products and Services segment provides Sony with the opportunity to further increase revenues via content and content viewing hardware. Tablet pc’s are the next step towards Sony’s mission to contribute towards a fully networked world. According to Sony Electronics’ President, Phil Molyneux, “There will be a second generation, and many more to come, so I think were in a really great direction with consumers at the center of our thinking” (March 2012).
Tablets Make Up 46.5% of Sony Networked Products and Services Segment With the Network Products and Service segment composing nearly a quarter of Sony’s total revenue, the global tablet pc market will be a future cornerstone for the company’s financial well-being. A report from Forrester projected, “34% of adults in the U.S will become tablet owners in the next four years” (Forrester 2011) Similar projections have been made by Sony’s analysts and are being acted on. However, in order to funnel more resources towards tablet pc’s Sony must cut back in other segments. In early April 2012,
Sony’s new transformation plan was announced. The plan was developed to “revitalize its (Sony’s) electronics business.” The plan includes eliminating 10,000 jobs, 6% of Sony’s global workforce. The eliminated jobs created openings for positions that would contribute to improving Sony’s first generation of tablet pc’s and effectively increase the company’s market share in the tablet industry. The change was necessary in order for Sony to remain a top contender in their markets. “Sony has been hammered by competition from Samsung in television sets, Apple in digital media players and computers, and even Microsoft in game consoles” (Wall Street Journal 2012). Much focus was directed to strengthening mobile business, targeting 22.3 billions of sales dollars, and “significant profitability improvement” in fiscal 2014 (Billboard 2012). Sony’s new tablets will create several more interactions between Sony Corporation and its consumers, which will increase sales in audio, video, online gaming, and online content. Sony’s ability to generate and distribute content to its consumers will allow it (Sony) to contend and succeed in the tablet pc industry. Sony Aims to Grow Rapidly, with Android, in the Tablet PC Market More tablet pc’s will continue appearing on the market in 2013 that possess qualities of traditional personal computers which will create a surge in growth, similar to that of smart phones in recent years(Oliver 2012).
Figure 1. Tablet Sales Worldwide, 2010-2012, adapted from “Tablet PC Sales 2012,” by
Emarketer.com, 2012.
Fueled by the introduction and advancement of the Apple IPad, consumer demand for tablet pc’s is reaching new levels. Figure 1 shows in 2012, global tablet pc sales are expected to be greater than eighty million, which will be an increase of 87% from the previous year. Since 2010, global tablet pc sales have increased over 200% and are still increasing (Emarketer 2010). Sony maintains the advantage of having millions of consumers around the globe that are loyal to their brand and are eager for new Sony tablets. “Apple controls approximately 62% of the total tablet pc market share in the U.S”, which is the greatest of any company producing tablets. Samsung is the second closest with 9% of U.S market share (Hachman 2012). Sony has the potential consumer-base to dethrone Apple as the leader in the U.S tablet pc market. Sony’s partnership with Android, Google, should assist Sony in becoming a top contender in the tablet market. Much like Apple in the tablet market, Android controls slightly over half of the market share in the smart phone market. Phil Molyneux characterized Android as a company that is quickly expanding and growing, which will be necessary if Sony wishes to compete with Apple and Apple IOS (Hachman 2012). Android’s worldwide awareness and ease of use make it a perfect operating system for Sony to incorporate in its products and succeed in the tablet industry. Sony Integrates Products with Tablets, Not Straying From the Company Mission Sony Corporation has kept the customer’s best interest in mind and developed a networked group of products that communicate information, transfer data, and operate on the user-friendly Android 3.2 operating system. Several of Sony’s electronic devices, including televisions, video gaming systems, and mp3 players contain 3G or 4G wireless internet capabilities. The capacity to wirelessly connect to the World Wide Web yields competitive value and increases networkability across the whole Sony Corporation product line. Inner-brand cross-product connectivity creates user-friendly environments where consumers can easily take any online content, much of which Sony owns, and share it between devices. Sony’s tablets take this idea a step further by supplying users with the Google Play Store on the Android Operating System. Once connected to the Google Play Store, users can search for, purchase, and enjoy online content with a few swipes of a finger. Sony’s biggest advantage in the tablet pc market is their tablet’s capacity to play Sony PlayStation video games. Sony also developed a remote controller to create a more satisfying tablet gaming experience. While increasing revenue by selling tablets, audio content, and video content, Sony is also able to operate in the, somewhat, monopolistic market for tablet gaming. Presently, no other tablet pc competitors offer tablet pc gaming technologies comparative to Sony’s. Sony has nothing to worry about, however, because they own the exclusive rights to all of their video gaming content, which represents the remainder of their Networked Products and Services not including tablet pc sales. Fortunately, Sony can maintain and pursue their original mission statement while competing in the tablet pc industry. The Entire Tablet Industry Reached an Estimated USD 35.3 billion in 2011 The most recent sales numbers indicate that there were 60 million tablets shipped in 2011
and a predicted 119 million to be sold in 2012 (Pettey, 2012).
The value of the Tablet Industry is derived from the devices ability to web browse, email,
and social networking capabilities, play games, listen to music, watch video wireless and
on-the-go. Market research performed by ReportLinker states that “ease of use, long
battery life, mobility, ability to multi-task, instant on/off and substantial breadth of
applications coupled with the long range of available prices," are characteristics of tablets
that have driven the value of the industry up (ReportLinker, 2012).
Mobile content consumption will likely cause consumers to migrate from traditional
computers to the tablet devices (Morgan Stanley, 2011). In fact, “consumers are spending
20% less time on traditional PCs in 2010 as compared to 2008, likely due to the rising
adoption of mobile computing devices such as tablets and smartphones,” according to a
market research performed by Morgan Stanley. As a result of the attractiveness of the
tablet’s media consumption capabilities, coupled with the increased amount of time spent
on tablets, this will lead to further growth of the tablet industry as a whole. It is estimated
that, “29% of tablet purchases will cannibalize PC sales in 2011, leading to a 3 percentage
point reduction in PC market growth in 2011, or a 5% reduction in PC units over the next
three years” (Morgan Stanley, 2011). Again, the considerably large size of the tablet industry
can be contributed to the growing amount of capabilities and ease of use of tablet PCs.
Hardware Plus Content is Trendy in the Industry When it comes to tablets, users want a sleek looking device, but also the ability to access
large amounts of content with a touch of a button. Successful tablets can, “gain access to
application stores that already contain hundreds of thousands of smartphone applications
and a growing list of tablet-optimized applications” (Morgan Stanley, 2011). Apple leads
the way with more than 60,000 iPad-optimized applications that can be found in the Apple-
owned App Store"(Morgan Stanley, 2011). The same Morgan Stanley research defines
tablet media content, stating, “content is robust, offering a considerable selection of music,
movies, TV shows, books, and magazines that can be accessed with the click of a button.
Application marketplaces offer a wide array of options that significantly enhance the tablet
computing experience beyond traditional desktop computing.”
If a tablet enters the market without the ability to access all facets of media content, it is
destined to fail. This “current trend” is a result of the Apple iPad paving the way with
breakthrough technology and accessible content, including vertical-integration. The iPad is
so influential that competitors wait to see what Apple comes out with before releasing any
technology of their own (Pettey, 2012).The effect of the trend is felt mostly by Apple’s
competitors. In response, competitors such as Samsung and Sony are trying to develop at
“platform ecosystem” by creating large stores of available content (Pettey, 2012).
Both Samsung and Sony utilize the Google Android operating systems as a platform to
access the content ecosystem. Morgan Stanley market research suggests that, “Android has
the best shot at competing with Apple in the tablet market; we also think that Motorola
Mobility and Samsung Electronics are the best-positioned Android tablet vendors in the
near term.” Tablet produces will need to be lean and adapt to industry trends in order to
compete with the Apple iPad.
The Tablet Industry is Growing Rapidly and Cannibalizing the PC Industry The tablet PC is a relatively new device and is currently experience a period of large sales
growth. Gartner research shows that, “worldwide media tablet sales to end users are
forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60
million units” (Pettey, 2012). A 98% sales growth from one year to another is substantial
and, naturally, tablet producers see an excellent opportunity ahead.
The increase in tablet sales is cannibalizing PC sales. In fact, one study industry analysis
states that 1 of 3 tablet sales will cannibalize a PC sale. In other words, “a would-be PC
buyer chooses a tablet instead of a PC” (Cathers, 2011). The cause of the growth of the
industry and obsolescence of PC is, again, due to the capabilities tablets possess. A study
shows that, “those somewhat or extremely interested in purchasing a tablet will not need
to purchase a PC after a tablet purchase" (Morgan Stanley, 2011) Individuals are now more
likely than ever to purchase a tablet PC to suit their computing needs. This switch, from
traditional computing to tablet computing, signals large growth in the PC market.
The effect of the industry growth is will likely cause an increase in tablet producers, as well
as a continued downturn in PC sales. Market research performed by Morgan Stanley states,
“competition is poised to heat up significantly in 2012 with the launch of an onslaught of
Android 3.0 tablets from tier-1 vendors (and many more from tier-2+ vendors), the
Blackberry Playbook, and, to a lesser extent, Windows 7 tablets and Hewlett-Packard
webOS tablets later in the year.” Other companies have witnessed the profitability of some
tablet manufacturers and want to a “piece of the pie.”
In order to gain any share of the market, producers must hardware and software that is
able to compete with the likes of the iPad and Samsung Galaxy. With the continued success
of tablet sales, studies show that 26.5 million PC’s will not get sold this year, a 7% decrease
(Cathers, 2011). As a result, “the lost PC sales would translate into some $18 billion in lost
revenues for the PC makers. With the exception of Apple, what PC makers might lose in PC
sales is unlikely to be recouped in media tablet sales in 2012” (Cathers, 2011).
Apple Holds Majority of Market Share, Competition Increased in 2011 In 2010, the Apple was responsible for 15 of the 16 million of all tablets shipped. The iPad
continued to be at the top of the pack in 2011, with 65% of the total market share (Morgan
Stanley, 2011). The reason for the iPad’s sales dominance is due to its superior technology
and user experience, including applications and available content. The iPad also leverages
its, “first-mover advantage, large installed base of iPad optimized applications (more than
60,000) and content, and overall user experience driven by vertical integration” (Morgan
Stanley, 2011).
The iPad has paved the way in the tablet industry and its competitors are looking to steal
some the iPad’s market share. In an interview conducted by the Wall Street Journal,
Carolina Milanesi said, “Despite PC vendors and phone manufacturers wanting a piece of
the pie and launching themselves into the media tablet market, so far, we have seen very
limited success outside of Apple with its iPad" (Sherr, 2012). The result of the immense
success of the iPad has been a signal for entry for competitors. The Wall Street Journal
reports that, “Apple Inc. faces new competition in the market for tablet computers, but
analysts said the second-generation iPad unveiled Wednesday will help the company stay
ahead of rivals” (With new iPad, apple tries to stay ahead of wave of tablet rivals, 2011).
The article goes on to document the recent of new competitors entering the market saying,
“Apple was first to market with a tablet last year, but there's no shortage of companies
coming out with competitive products. The consulting firm PRTM counts 102 announced
tablets from 64 different companies” (With new iPad, apple tries to stay ahead of wave of
tablet rivals, 2011). Regardless of all the new found competition, iPad is expected to retain
80% of the total market share. Tablets utilizing the Android operating system are second to
the iPad, in terms of sales, making up about 31.9% of tablet sales in 2012 (Sherr, 2012).
Sony Holds a Small Percentage of the Market Share in the Tablet Industry, but Newly
Released Tablets are Poised for Success
Tablets using the Google Android operating system occupy 54% of the tablet market share
and Sony tablets make up about 1% of those tablets (Graziano, 2012). Sony’s extremely small
market share is due to late entry into the marketplace. According to a PC industry analysis
firms are trying to compete with the iPad based on product differentiation. Sony Corp.
launched two new media tablets on September 1, 2011” (Cathers, 2011) Sony released
their tablets nearly two years after Apple released the iPad.
Although, Sony’s tablets entered late they possess differentiating and trendy capabilities,
including, “tablets that can run games created for PlayStation, and have applications that
connect to Sony’s Music Unlimited and Video Unlimited content stores. We note Sony’s
effort to push hardware plus content, which is similar to Apple’s strategy." With ability to
access Sony’s content stores, the tablets market share is likely to increase in the coming
years.
Sony is currently a small player in the growing tablet market. A closer look at Sony’s main
competitors will reveal the factors for success in the tablet industry. Specifically, Apple and
Sony control a large portion of the market share and are Sony’s most formidable
competitors. Through a detailed competitive analysis, Sony will learn why their
competitor’s tablets control the marketplace.
Competitive Analysis
Sony’s entrance into the tablet market will be held in comparison to of the most relevant
and formidable competitors in the tablet market, Apple and Samsung. Both organizations
have a strong market share of the tablet industry and are shaping the industries future.
Apple, a highly focused computer company, is essentially the pioneer of tablets and
leverages their software prowess and media content to be successful in tablets. In stark
comparison Samsung is similar to Sony as being a large conglomerate with different
divisions; they leverage their diverse resources into making multiple tablets meeting a
range of consumer needs.
Apple is in the Business of Personal Computing Experience
Apples mission is "Apple is committed to bringing the best personal computing experience
to students, educators, creative professionals and consumers around the world through its
innovative hardware, software and Internet offerings." (Apple). With that in mind Apple
created the world renowned “Macbook” laptops and line of small consumer electronics, the
iPod, iPhone, and recent iPad. This line of computing has been designed to make the
experience easy. They have now expanded from the making of personal computers to
tablets, small electronics, telecommunications, application development and content
management.
Apple has a Small Segment of the Computer Industry Compared to Sony
Currently the market for personal computers in the United States is 414.6 million for personal computers including tablet computers shipped during 2011 year, up 14.8% from the year earlier. (Caufeild)
Table 1: Apples global and domestic market share for 2011
Global Domestic
Units 13.4 Million 21.97 Million
Percent 3.1% 5.2%
Note: Market Date Adopted from Caufeild, B. (2012, March 08). Forbes Technology. Retrieved April
28, 2012
As the data suggests Apple’s strength is not in its global sales, Apple actually ranks in the
lower 40% of market share. This is attributed to two reasons; first they have less than 118
Apple retail stores internationally. (Apple Corporation) One of the largest reasons for
Apples success was because of the customer service available to customers of Apple
products at their genius bars. Second is Apples price on their products, their cheapest
laptop is priced at $1,000 while many PC counterparts can be as low as $400. (Caufeild)
This is why you see extremely wealthy countries such as Western Europe and emerging
markets, China, having the bulk of their retail stores there.
Sony currently has 130 retail stores globally, 28 in the U.S. Sony can use these stores to
create a more service oriented product to complement its tablets. Additionally Sony can
capitalize on a global tablet market by offering cheaper but still quality products because
international consumers can afford them.
Figure 1: [Data used from] "Ipad -- How Big, How Fast?." Black Book - Apple: Ios - Powering The Mobility Revolution (2010): 57-63. Business Source Complete. Web. 25 Apr. 2012.
In Quarter 4 of 2011 Apples sold 4.9 million PC units, 35.1 Million iPhones and 15.4 million
iPad units. If we were to count the total 20.3 million units sold as all PCs, Apple’s market
share would rise higher, placing it first in the rankings. (Cathers) For 2011 the Company,
had a 88% unit growth over the year-ago quarter for iPhones a 151% unit increase for iPad
and a 7% unit increase over the year-ago quarter for Mac Books.
9%
28%
63%
Q4 Apple Computer Sales
PC
iPad
iPhone
Table 2 shows Sony in comparison sold 9.6 million VAIO PC’s, an annual increase of 1.9
million units, while tablet figures are still unavailable. This means that Sony has a strong
share of the PC market and needs to use the VAIO name as a means of expanding their
tablet market.
Table 2: Comparison of Sony and Apple PC Growth
Sony Apple
2011 Q4 Sales (Units) 9.6 million 4.9million 2011 Growth (%) 20% 7% Sony should integrate features on its tablet, S and P, to work with its highly successful VAIO
personal computers, such as calendars, music, application, and documents. Similar to the
way Apple uses its moderately successful MacBook as a selling point for the iPad because
they highlight how the iPad will integrate functions between the two.
Apples Tablet Industry is Growing
For 2011 there was a 151% increase in the sales of iPads, so there is a clear demand for iPads. Research from Morgan Stanley’s assessment on tablets also suggests overall tablet demand is still underappreciated, by their analysts estimates shipments could reach 100 million by 2012. This means that Sony will have a difficult time obtaining a sizable market share of the tablet industry. Sony has only begun to enter the market and while Apple holds 68.9% of the tablet industry.
Table 3: reprinted from Morgan Stanley. (2011). Tablet Demand. New York: Morgan Stanley.
According to IDC's Worldwide Quarterly PC Tracker which gathers PC market data in 55 countries by vendor, form factor, brand, processor brand and speed, sales channel and user segment. The research includes historical and forecast trend analysis as well as price band and installed base data. This PC tracker includes Desktop, Notebook, Ultra Portable, but does not include handhelds such as the iPad. This April the world reached its billionth mark for personal computer sales and estimates it will be at 2 billion in 2015.
The projected PC growth is an important opportunity for selling more VAIO tablets in the coming years. Coupled with the proposed integration of tablet and PC applications this can mean higher tablet sales.
The iPad fits Apples Mission Creating a light, “clean” computing device is directly in line with Apples mission to “create an easy to use computer for students, educators, creative professionals and consumers around the world” The definition of tablet computing is a, mobile computer that is light and portable with touch screen interface. (Morgan Stanley) The iPad helps mitigate the shift into Smartphone’s because people are less reliant on PC's to accomplish tasks like email and directions. But the fallacy of smart phones is that they don’t have raw computing power, tablets attempt to bridge that gap. Therefore tablets are means of creating a powerful computing tool that is light, clean and mobile. Sony needs to create its own mission and image of “bridging” the gap in computing. Sony will need focus on its Make.Believe image of uniting communications effort across their products. This focused effort will display to customers how Sony’s image reflects the value of what tablet computing is and how Sony integrates it into their business.
Samsung Produces More Patents than Sony
Samsung has spent more on research and development than Sony over the past decade
translating into more advanced technology. Samsung and Sony are both multinational
conglomerates, with multiple subsidiaries ranging from industrial ship building to life
insurance, but Samsung continually produces more patents. A firm’s knowledge base is the
foundation of the firms’ innovation thus; it is ultimately linked to a firm’s success in the
consumer electronics industry.
Figure 2: Joo, S. H. (2010). Samsungs Catch Up to Sony . Journel of Asia Pacific Economy, 271-287.
This has shifted Samsung’s electronics division into the flagship of their company and
industry with consumer electronics such as, LCD and LED screens, mobile phones, semi-
conductors, and televisions. Samsung’s 3-D panel television division made a record
$246,511,423 while Sony lost $1 billion for 2011 from its high end television department.
(Joo)
Samsung Controls a Small Share of Personal Computers but Large Share of the Tablet Market
Samsung's global market share in personal computers currently stands at 1.7 % which
translates to roughly 1.428 million units for quarter 4 2011. However Samsung’s emergent
tablet market has sold about 2 million units of the Galaxy Note equipped with a 5.3-inch
screen and a stylus since sales began in October, and “good sales” of its Galaxy tab.
(Krishnamoorthy) Data suggests that in February of 2011 Apples tablet market share was
reduced from 96% to 75% largely in part to the rapid sales of galaxy tablet and popularity
of android operating systems. (Krishnamoorthy)
The research shows that a company with similar size and scope of Sony does not need to
have a firm foundation in personal computers to be successful in the tablet market. Rather
the success of Samsung’s tablets seems to be poised toward easy operating systems and
unique features.
Samsung’s Tablet Industry is Success Comes with Legal Issues
0
500
1000
1500
2000
2500
3000
3500
Patents
Years
Sony Vs. Samsung Patents
Samsung Total
Sony Total
Samsung has obtained 16% of Tablet market share 3rd for all tablet competitors from 2011
to 2012. (Grabham) Additionally in the coming months and year there is high growth
potential of their market share because of their new Galaxy 10.1 tablet. This rapid growth
can cause issues for Sony in emerging into the tablet market since market share is rapidly
eroding from Samsung’s success.
However Samsung is locked in multiple legal spars over copyright of technology used in
their new Samsung Galaxy tab 10.1. Due to these legal’s actions the sales of units is being
banned in multiple countries. Sony has an opportunity to exploit the stagnation in global
tablet sales, by filling the galaxy tablet void. Currently Samsung’s lawyers are trying to
appeal the bans to open up 2 of the top 10 wealthiest countries.
Table 4: Countries where Galaxy 10.1 is or was banned
Germany Australia United States
Ban Status Ban removed in Feb 2012 Ban Upheld In litigation
Note: Krishnamoorthy, A. (2012, Februrary 28). Samsung Aims to have Higher Sales. Bloomberg
Businessweek.
Samsung Creates Multiple Tablets to Fit Company Vision Samsung has what is called “Vision 2020” in which it hopes “to contribute to a better world and a richer experience for all.” (Grabham) Samsung does this by having 3 different tablets released to cater to the need of a variety of customers. Their Galaxy tab is a “bridge” between Smartphone and tablet. Their Galaxy 7.8 is seen as a “Kindle Killer’ and Galaxy 10.1 are to accommodate the large screen and computing needs that many iPads users require.
Samsung has leveraged three key strengths: "New Technology," "Innovative Products," and "Creative Solutions" (Associated Press)in order to help dominate the market. Sony will need to either fill the void in tablet consumers’ appetites or create a product in order to rival existing competition as Samsung has done.
Samsung Aligns Corporate Strength with Tablets, Sony Should do the Same
Samsung’s most profitable sector for the last 4 years has been their smart phones. They reported a 4.45 billion net profit for the first quarter, up 81.29 percent from 2.78 trillion won in the prior-year quarter, and 26.17 percent higher than 4.0 trillion won in the preceding fourth quarter. (Caufeild) By entering the tablet market they have been able to integrate their most successful part of the business, smart phones, and utilize that. Samsung has already begun introducing larger screen tablets that can rival the iPads and utilizing the 3D screens from their smart phones and inputting them into the tablets.
Additionally Samsung has created the Social Hub, “the seamless integration of social media such as, twitter, facebook, and tumblr to be accessed easily through tablet or smartphone.” Sony can also utilize their most profitable sectors like media content and video gaming to integrate with their tablets. With the exception of Apple, in respect to music and video, there is no competition in the tablet industry. Sony can build on their exclusive media network to promote exclusive content.
SWOT Analysis
Strengths
Since Sony’s establishment as a consumer electronics company they have grown into a global
force for innovation, acquisition, and evolution. Sony has a large established infrastructure that
many of their competitors are still struggling to build. Their brand name, manufacturing
capabilities and content empire remain to by Sony’s greatest assets.
Sony’s most valuable strength is its brand recognition. After being in business for over half a
decade Sony has established one of the most recognizable electronics brands. They have
been pioneers of new technology such as VHS, Blue Ray, and the Sony Walkman. This
recognition means new products will be meet with easy customer acceptance, hopefully in
terms of their tablets.
Sony possesses a media empire. Sony owns Sony Media group known as 1 of the big 4 music
companies accounting for 25% of all mainstream music produced in North America. Some
analysts say that Sony has a larger marketplace for eBooks, music, and video than Amazon,
making a Tablet from Sony formidable enemy to the Kindle Fire business model.
Additionally Sony’s Play station branch can and is integrating their highly successful games
to be part of the online Sony community. This is a unique quality that Sony has over all
other tablet competition. No other manufacturer has in house gaming development.
Weaknesses
Sony released their tablet into the marketplace in September of 2011, with no prior
experience in the tablet PC field. As a result, Sony’s late entry into the tablet market could
prove to be a weakness. Also, the Sony’s weakened financial state will be another
weakness, as it relates to the success of their tablets.
Sony’s late entry into the tablet industry. Sony’s two tablets were released almost two years
after the iPad. As Sony enters the market, Apple already has a firm hold of the marketplace,
followed by Samsung and Motorola. Samsung and Motorola use the same Android
operating system as Sony, so surpassing the two companies will be difficult. Both Samsung
and Motorola have had time to build customer loyalty and adapt their products to customer
needs. Little is known about the capabilities of the Sony tablets, potentially causing
customers to be reluctant to purchase the device (Gizmag, 2012).
Sony is experience a decline in financial performance. Sony has been experiencing a decline
in annual revenue since 2008. Both operating and net profits have been steadily declining
as well. Specifically, the networked products and services division of the company, the
division responsible for tablet PC’s has, “recorded double-digit decline in revenues during
FY2010” (Datamonitor, 2011). With the decline in revenue, Sony will be less able to adapt
to the changing business environment. Due to their current financial state, Sony will be less
flexible, which could affect their ability to develop and promote their tablet PC’s
(Datamonitor, 2011).
Opportunities
Sony Corporation has the resources to increase revenues and extend its network in the
tablet pc industry. The tablet market is projected to continue expanding by millions of
consumers in the future. Tablets could serve as a virtual storefront in the hands of
consumers, increasing video, audio, and gaming content. In addition, Sony Corporation has
partnered with Android, the leading operating system in consumer preference over Apple’s
IOS.
Sony’s content can create a competitive advantage in a rapidly growing market. The
company owns exclusive rights to all of the Sony PlayStation video gaming content as well
as content owned by Sony Music. None of Sony’s competition in the tablet pc market has
produced tablets that have the gaming and content viewing capabilities of the two Sony
tablets. In the past year, PlayStation software sales have increased and become a revenue
leader in its segment. Sony has also added PlayMemories, a cloud date storage provider,
which allows Sony tablet users to store content, up to 5GB for free, online without using
storage space on the tablet’s memory card. Without the limits of data storage space
consumers will be able purchase more content for all of their Sony devices.
Google (Android)’s market growth will boost Sony’s network and sales. A study performed
by ComScore, in late 2011, revealed Google owned over 40% of the mobile operating
system industry’s market share. Users are beginning to prefer the Android OS to Apple’s
IOS for the first time since the IPAD was released. Sony’s vast inventory of available content
will be available to users via the Google Play Store and is purchasable by any online
payment method. Android has recently developed a newer format of its operating system,
Android 3.2, which increases user friendliness and increases operation speeds.
Threats
Sony must surpass its competitors by establishing strong relationships with customers and corporate partnerships for personal electronics in order to become the tablet market leader. Sony already is playing catch up with company trends in the tablet market, missing out on millions or billions dollars of revenue. While Apple already has a strong market position with a strong customer base, they also have contracts with corporations obtaining electronic tablet products over the upcoming years. Sony must do the same in order to establish themselves as a true tablet market competitor and/or leader.
Losing Possible Revenue to Competitors
Sony is already trailing behind the leaders of the tablet pc market, missing out on huge amounts of profits for their company. Sony must look in different areas of personal electronics to generate profits in new devices in order to sustain a financially stable business. There has been a steady line of quarterly losses in our company. There is a lot of money to be made in this new and rising tablet pc market. It would only be at our own detriment if we didn’t dedicate or invest more time and money to the new tablet pc market leader.
Figure1. Share of Industry Profits for Leading Mobile Companies. Adapted by businessinsider.com, 12/2011
This figure shows how some of these mobile device companies are making in profits, not sales, but profits. If Sony obtained a good portion of some of our competitor’s revenue, we would be greatly increasing our overall business position for future success, not just in the tablet pc market.
Form Corporate Partnerships for Tablet PCs
Currently Sony has no formal corporate relationships for companies purchasing tablet pcs, this huge market that is going untapped. If Sony doesn’t form these partnerships early, other companies will take Sony’s spot, along with our profits. Tablets are going to be on the cutting edge for companies to have reliable, fast, and mobile computing. Companies are adapting tablets because they enable their employees to do their work from anywhere and at any time. According to Morgan Stanley “As our survey shows, 21% of companies currently purchase tablets for employees, but a staggering 51% of companies expect to purchase tablets for employees over the coming year. In total, 67% of companies surveyed expect either to purchase tablets or provide support for employee-owned tablets over the coming year.” This shows Sony that there are corporate partnerships to be made, while forming a huge customer base to provide for. To miss out on these partnerships, is a huge threat for Sony becoming the leading electronics brand in the market.
With evaluating Sony’s SWOT analysis, you must consider the tablet market trends, and the new way people are using their PCs. To become the new market leader you must first evaluate the market as a whole, in order to surpass the competition and gain market share in the process.
Market Analysis
The new form of pc usage with tablets has opened a completely new market for Sony to
venture into. Sony is currently third in the tablet market, behind Apple, and Samsung. The
current market shape is based on the hardware, apps, user experience, and a shared
network for content consumption (cloud computing). With the result of consumers having
a high brand loyalty based on these features and services that certain brands of tablets
include in their purchases.
The New Tablet Market and Sony’s Position
The tablet market is fairly new to the pc market as the first tablet was released in April
2010 with the iPad by Apple. The market has grown exponentially since then (--and is still
expected to continue to grow--) as new companies have decided to enter the market with
their own tablets. Sony has just recently developed and released their own tablets within
the last year and a half, but they have already obtained the third position in the tablet
market. This was fairly easy for them to obtain as they are already a major competitor in
the personal electronics market. But they should have the goal of being the market leader
for tablets, which is the hard part moving forward.
The Growing Tablet Market
Accoirding the Infinite Reasearch “The market is only in its infancy, and new opportunities
and competitive advantages will abound as the space continues to develop.
Overall, Infinite Research expects that 147.2 million Tablet computers will ship in 2015, up
from 16.1 million units in 2010.” As shown in Chart 1.
Chart 1. Worldwide Tablet Shipment Forecast from 2010 and 2015
Note: Wordwide Shipment Forecast reprinted from “ Worldwide Tablet Computer Market
Research” by Infinite Research. 2010 by Infinite Research.
Chart 1 shows the projected amount of tablets shipped worldwide in 2015 compared with
the total amount of tablets shipped in 2010. There is projected to be over nine times the
amount of tablets shipped in 2015 than in 2010. This means that this market is and will
continue to grow exponentially in the near future. Sony should definetly try to grow their
tablet market share in the near future to obtain the best market position for their
companies future.
Tablets are Shifting the Way People Use PCs
Tablets have opened everyone to a new market, and with that, the way we use, collect, and
share information and applications in our daily lives. There has been a growing market for
tablets as content consumption has become the biggest use of pc and devices alike like
smartphones and tablets. Several Reasons are:
Social Networking
Watching Videos/ Music/ Media
E-mail/ messaging
Cloud computing
Tablets allow users to share information instantly and from any where. A study done by
Morgan Stanley states our analysis of personal computing usage suggests that computing
will increasingly migrate towards mobile devices, including tablets and smarpthones, over
time. Approximately 75% of total personal computer usage is spent consuming and sharing
content, as opposed to creating content Tablet users are spending less time on existing PCs.
Particularly for content-consumption and content-sharing activities such as browsing,
email, and social networking, 30% of tablet owners are reporting reductions in time spent
on existing PCs. Indeed, our analysis of total time spent on PCs (tablet owners and non-
tablet owners) suggests that consumers are spending 20% less time on traditional PCs in
2010 as compared to 2008, likely due to the rising adoption of mobile computing devices
such as tablets and smartphones. (Morgan Stanley, pg.8)
Users have also come acustom to having a cloud computing network integrated into their
devices. This feature also the user to access, save, and load any information they want
saved on a company server where they can remotely access the information any where at
any time, without the device. This is a great advantage over old technology, because now
even if you lose or damage your device, you can still obtain the information and contacts
through this feature basically backing up all the vital data you want.
Sony Tablets Must Add Value to its Tablet PCs The growing market of tablets is due to evolving way that people use, store, and share their
data with others. Sony tablets must include vital features for the users to feel they are
obtaining a great user experience without giving up other services or extra money for that
matter. None of these tablets are exactly cheap, and most of them have very similar
hardware specs, so you must innovate a service or feature to increase the value a Sony
tablet in the customers eyes. In the next section, a set of recommendations is provided that
will greatly add value to Sony’s tablets.
Recommendations
Evaluating the Sony’s market position in the tablet market, we recommend three strategies
to advance Sony’s position and add value to their tablet products:
1. Develop exclusive content
2. Create Corporate Tablet Market
3. Promote Products and Services
Develop Exclusive Content
Sony must develop more exclusive content for their customers in order to provide products
and services that are strictly on Sony products to stand out in today’s market. Sony has
already developed games that are only on their Sony Playstation gaming console. This gives
Sony’s customers added value to their products, while forcing competitor’s loyal customers
to switch over to Sony in order to obtain these exclusive Sony games. Sony also already
owns movies, music, and other electronic devices like PSP. All of these things you can
completely or partially include in features or services exclusively for Sony tablets.
Developing exclusive content will give Sony a competitive advantage over rival tablet pc
companies. This will also increase the value to potential and existing customers. Exclusive
content will give more incentives to keep a loyal customer base for the future as well.
Create Corporate Tablet Market
Sony must enter in the corporate tablet market in order to keep up with the market trend,
and gain the corporate revenues that come along with doing so. Corporations are now
purchasing their employees tablet pcs, instead of the traditional desktop pc. They are doing
this because tablets give employees the ability to work from any where at any time. This
increases the employee productivity causing the company to be more productive, and
making more money. Sony will miss out on a huge corporate market and possibly great
corporate partnerships if they don’t enter into this market soon. There is a huge potential
for long-term growth and sales in this market. Sony has to get in this corporate market
soon or the majority of companies will already acquire a tablet pc provider.
Promote Products and Services
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