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Product Life Cycle
Sony Corporation is a Japanese multinational company headquartered in Tokyo, Japan. It is the fifth largest electronics corporation in the world. It is one of the leading manufactures of electronic products sold in the global market and primarily deals with electronic products and component parts. The company is a business unit that operates in six segments. This makes it one of the most comprehensive electronic companies in the world. Additionally, Sony is a semiconductor maker and is among the top twenty leading semiconductor makers in the world. The company offers a variety of products around the world that are of high quality.
One of the organization’s products that has reached its stage of maturity is PlayStation. PlayStation, which is abbreviated as PS, is one of the video generation games introduced to the market by Sony Computer Entertainment in Japan. In 1994, Sony launched the product to compete with other electronic entertainment companies’ products in the global market. As stated, this product was introduced in the market in 1994, but it became successful in 2000. The first stage, which involved product introduction in the market focused on intense marketing effort, designed to clearly identify and promote public awareness. After the introduction of this product to the market, many consumers became more interested in PlayStation. This contributed to the growth of the company, as many customers became interested in PlayStation. In addition, sales increased, as did other competing products in the market. The product however became one of the most profitable products of Sony.
The company decided to redesign PlayStation into a new, refined product, which became commonly known as PlayStation 2. It is much the same as PS, but was only developed and designed in order to attract many customers and compete favorably in the international market. It became the most successful video game at the time. PlayStation was developed into portable games in the market by the year 2005. The company decided to produce another new brand by redesigning PlayStation 2 into another new product, which became known as PlayStation 3. It was released in 2006 in the market as an accessory that allows players to control video games by use of motion controllers.
PlayStation reached the maturity level when the product reached its saturation within the market. Some consumers of PlayStation at this stage began leaving the market. This contributed to poor profit margins and the Sony Company decided to seek ways of restoring the market share of the product. The company attempted to differentiate this product, its brand and trademarks in order to overcome competitors. Sony used this technique of product differentiation to overcome price wars and intense competition in the market. In 2010, Sony Company announced that it was removing the Linux functionality from the third generation of PlayStation, PS3 (Wikinvest, 2010).
The maturity stage of PlayStation was one of the hardest stages in the product cycle to operate in because this is the point where many competitors began to sell their products. In this stage, the product supply is usually normal but many sellers move to bandwagon when they have made enough profits from the previous sales. This factor led to the stabilization of sales, which led Sony Company to introduce differentiated products into the market in order to maintain sales. They decided to design PlayStation 3 so as not to lose their market share for the product. The reason why many customers enter the market at the maturity stage is due to occurrence of price war and intense competition. The market becomes saturated forcing the big players to leave the market. This is when their products are no longer worthy, and competitors’ products become more available, thus resulting in poor profits made. The margin per unit becomes low compared to the efforts made in marketing the product.
The available financial resource assessment for PlayStation in Japan, which privately promotes global investment, can be reviewed in the following ways. First, the Sony Computer Entertainment Company together with its subsidiary markets distributes PlayStations. The company manages a third of licensing programs. It offers its products within the home country (Japan) and the international market. Sony Company was expected to lose its financial and total revenue of about 260 billion yen, which is approximated at $3.2 billion, in the financial year of 2011 due to the problems arising from the earthquake in Japan (Bloogberg.com, 2011). The projection for the 2011 financial year has not yet been indicated anywhere but in October 2010, Sony was ranked among the leading electronic manufactures in the world. Japan is still struggling to hold back further loss caused by the horrific earthquake, tsunami and nuclear crisis. Pension funds and other institutional investors can play a vital role in investing in the company in order to help them rebuild the economy. Japan needs to enlist the private sector given the stiff financial situation, which would improve their product life cycle (Saaksvuori and Immonen, 2003).
In addition, the Japanese government seems to command great financial resources through taxation and borrowing, together with its monetary policy powers. The current financial year is the third consecutive whereby the public sector’s financing provides more of the company’s resources than revenue does, as a way of investing in the company. This is mostly done by the Japanese government in order to promote infrastructure and assist many companies operate smoothly. This will encourage even investors from around the world to invest in the company thus helping it perform better. The long-term interest rates of the government bonds have fallen drastically by about 1.4 percent, and the annual interest payments continue to rise due to the outstanding debt, which also increased. This has not only helped Sony but other companies as well.
One of Sony’s optimal financing sources is Sony Life Insurance Company, which is a private organization of the Sony Group. Sony Life Insurance is a private organization of the Japanese insurance company that was founded in 1979 with its headquarters located in Tokyo. The Sony Insurance Company is appropriate because it will enable the company’s products be insured against any risks such as earthquakes or tsunami. Thus, the company will be able to continue with their daily operation of the business as they will be compensated against any loss or damage caused by the severe crisis. Sony established its financial services in Japan from the year 2004, which included the Sony Banking System and Sony Life Insurance Company. Sony Company has benefited from Sony Life Insurance Company as it has been one of the most profitable segments, with an operating margin of 13 percent. Sony Life Insurance Company enables Sony protect its products, including PlayStations, against any damage through compensation.
The available bilateral financial sources outside Japan that promote global investment include the Department for International Development (DFID) and the Ministry of Foreign Affairs-Global Opportunities Fund, both of which are found in the United Kingdom. These are the two bilateral development cooperation agencies that give financial support to Japan companies in order to promote better performance in industries thereby becoming competitive in the global market. Throughout the product cycle of Sony’s products, the company can benefit from the bilateral financial sources in order to help them improve on any issues that may arise. Mostly when products have reached the maturity level, they begin to decline in profitability due to decline of sales. Thus, with help from such bilateral financing sources, companies can be able to create brand equity thus creating more market for their products (Saaksvuori and Immonen, 2003).
Additionally, multilateral financial sources outside the home country (Japan) that can promote global investment include the International Bank for Reconstruction and Development (World Bank) and European Investment Bank (EIB). These are among the multilateral financial institutions that can promote global investment. These banks can invest some resources in Sony Company in order to enable it get enough resources for creating products that are competitive in the international market. Most of the multilateral institutions, especially the World Bank, help many private sectors across the boarders improve their business. They provide them with financial support in order to enable them meet the demanding needs of the company including production of innovative products that are of high quality. This enables the company compete favorably with other players in the industry across the world.
As touched on, one of the optimal financing sources for Sony’s PlayStation is the International Bank for Reconstruction and Development Bank (World Bank). This multilateral company is located in many places in the world. In Japan, it is has its offices in Tokyo. The World Bank has helped many businesses in both private and public sectors. This is the most favorable financial source appropriate for PlayStation. It is appropriate for the company because World Bank provides diverse cooperation and supportive services to companies that have been affected by any crisis or which may want to develop further in their business. In addition, it is an appropriate bank because it helps companies that may have a problem due to the financial crisis. The bank helps organizations develop in their business because through their financial assistance, they can be able to create and design products that can be accepted in the global market.
The two foreign markets for this mature product, PlayStation 3, include the United States and Europe. These two foreign markets are among the geographical regions where the sales for PlayStations are relatively high when compared to other geographical locations. The possibility of extending this product’s life cycle in the selected markets is high. First, these selected markets may have many consumers of this product thus creating a need for extending the products to these areas. Secondly, it seems that these two markets have high-income level earners, who are the highest consumer of the product. This makes it possible for the product life cycle to produce high profits due to high sales. This product has been highly competitive in the United States and Europe unlike in the home country – Japan – since 2005.
In conclusion, PlayStation is one of Sony Company’s products that have reached the maturity level. The maturity stage of PlayStation was one of the hardest product stages to operate in because it saw other competitors penetrate the market. One of the optimal financing sources of the company is Sony Life Insurance Company, which is a private organization of Sony Group. This financial source played a vital role in the product cycle of Sony Company. Additionally, there are available bilateral and multilateral financial sources that have contributed to better performance of Sony’s products. One of them is the World Bank, which is a multilateral bank. This bank provides supportive services to Sony in order to enable the company meet its demanding needs. Lastly, mature products of Sony are mostly sold to European and United States markets because of high consumer demands in these two areas.
Reference
Bloogberg.com (August 23, 2011). ‘Sony Computer Entertainment Inc.’ Bloomberg Business
week. Retrieved on August 23, 2011 from http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=2524001
Wikinvest (2010). Business Segments. Retrieved on August 23, 2011 from
http://www.wikinvest.com/stock/Sony_%28SNE%29
Saaksvuori, A., & Immonen, A. (2003). Product life cycle management. Berlin: Springer.
Stark, J. (2007). Global product: Strategy, product lifecycle management and the billion
customer question. London: Springer.
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