Market Segmentation in Delivering Market Strategy for Sony Electronic Products for B2C Thesis

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Sony Corporation is a global leader in the consumer electronics industry. With more than a half century of experience, the company is often on the leading edge of technological developments, in this industry. Despite the troubles the consumer electronics industry has experienced in recent years, the television segment of the industry is one of the most profitable. Buyers, suppliers, new entrants, and substitutes are only a minimal threat in this industry; however, the similarity of the products makes this a very competitive industry that is highly price sensitive. Sony has three basic product lines in this market segment: LCD televisions, Internet televisions, and 3-D HDTVs. Their LCD product line is their best positioned product, with Sony third in the market for market share control and a high rate of market growth. The company's 3-D television product line is not as well positioned. Although they control a large portion of this very new product market, market growth is not expected to be as vigorous as standard LCD televisions, or Internet televisions. In a price sensitive industry, it's surprising that 3-D televisions are significantly more expensive than standard LCD sets. This is especially true when one considers that much of the components for standard and 3-D televisions are the same. However, this high price for this new technological development is partially due to a need to recoup the company's research and development costs. In addition, since Sony is one of the first entrants in the market, this early entry affords the company higher margins until more competitors emerge.

Sony Corporation Historic Overview:

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Sony Corporation was founded in 1946, as Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering). In 1955, the company began to use the Sony logo. Three years later, the company officially changed their name to Sony Corporation and was listed on Tokyo Stock Exchange. In 1960, in addition to establishing Sony Overseas in Switzerland, the company also "launched the world's first direct-view portable TV, the TV8-301" ("History," 2010).

Thesis on Market Segmentation in Delivering Market Strategy for Sony Electronic Products for B2C Assignment

Innovation and expansion continued for Sony through the 1960s and 1970s. In 1968, the company the first Trinitron color television was introduced, while the company also expanded into the United Kingdom, which division was later reorganized as Sony UK Ltd., in 1993. Three years later, Sony launched the VP-1100, a 3/4-inch u-matic color video cassette player. The 1970s saw Sony establishing factories in San Diego, California and in Bridgend, Wales. Continued product advancements including the short-lived Betamax VCR and the revolutionary Walkman set Sony apart as a leader in the electronics industry ("History," 2010).

Three and a half-inch floppy disk drives, CD players and camcorders ushered in the 1980s for Sony Corporation. In 1988, Sony bought CBS Records and formed Sony Music Entertainment. In 1991, the purchase of Columbia Pictures saw Sony forming Sony Pictures Entertainment. As technology advanced, Sony has strove to stay at the cutting edge of developments ("History," 2010).

In 1993, Sony Computer Entertainment was formed. This was followed shortly after by Sony's launch of the home-user PC series, the VAIO. The introduction of the Cybershot DSC-F1, in 1996, and the partnership with Ericsson to for Sony Ericsson Mobile Communications, placed Sony fully into the digital camera and mobile telecommunications segment. Sony also established a foothold in the Chinese electronics market during this time frame as well ("History," 2010).

The next step in home entertainment, for Sony, was launched in 2003, with the world's first high capacity, Blu-ray Disc recorder. This new technology allowed for six times more information to be stored on a disc than previous DVDs. This significant amount of capacity was the first step in developing a 3-D television. This was further facilitated by the 2005 introduction of Sony's new BRAVIA high-definition, flat-screen television line ("History," 2010).

In 2006, Sony reached a manufacturing agreement with Samsung Electronics, to manufacture their 8th generation amorphous TFT-LCD panel line, at a joint venture facility. The next year, Sony signed a contract with FIFA, and became an official partner until 2014. 2007 also saw Sony partner with Qimonda, to design low power, high-performance DRAMs for graphic and consumer applications. As 2007 came to a close, Sony introduced the first organic light emitting diode TV, the XEL-1. A year later, "Sharp and Sony signed a non-binding memorandum of intent to establish a joint venture to produce and sell large sized LCD panels and modules" ("History," 2010).

Expansion continued in 2009 with an agreement with Epson, in which they acquired their small- and mid-sized TFT-LCD business operations. In July, 2009, Sony established a joint venture with Sharp to manufacture and sell large-sized LCD modules and panels. In September 2009, Sony formed another strategic alliance, this time with Hon Hai Precision Industry of Taiwan. This alliance was formed to produce LCD TVs for North and South America. October saw another step in the development of 3-D televisions, with Sony's development of a single lens 3-D camera technology. This camera allows for smooth and natural 3-D recording, even for fast-moving materials like sports. In January 2010, Sony formed a joint venture with IMAX and Discovery Communication. The venture is developing the first 3-D television network to provide programming 24 hours per day, seven days a week, in the United States ("History," 2010).

Electronics Industry Overview:

Sony operates primarily in the consumer electronics market. This market consists of revenues from the sales of audio visual equipment and gaming consoles. Audio visual products include: televisions, DVD players/recorders, CD players, sound systems, home theater systems, portable digital audio, in-care entertainment systems, radios, and video recorders. Gaming systems include both consoles for home use and portable game consoles. Datamonitor includes North America, Western Europe, Asia-Pacific, South America, and Eastern Europe in the geographic regions that make up the global market ("Global consumer," 2010).

The global consumer electronics market has experienced decelerating growth rates since 2008, and this trend is expected to continue for 2010. This market is anticipated to grow at an erratic rate through 2014. In 2009, the global consumer electronics market posted revenues of $253.7 billion. This represented a compound annual growth rate (CAGR) of 6.1%, from 2005 through 2009. The CAGR is anticipated to decelerate to approximately 2.7%, from 2009 through 2014. This CAGR rate would drive the market value to $289.5 billion at the end of this period. Europe and Asia-Pacific are projected to be the two highest growth geographic areas for this period, with anticipated CAGRs of 4.2% and 3.4% respectively. The European market is anticipated to reach a value of $84.1 billion and the Asia-Pacific market is anticipated to reach a value of $76 billion, by 2014 ("Global consumer," 2010).

The 2005 to 2009 CAGR of 6.1% is not representative of the true slowing of growth of this market. To get a better picture, the annual CAGR for each of the years in this period should be reviewed. In 2005, revenues for the global consumer electronics market was $200.4 billion, by 2006 revenues had grown 9.4% to $219.2 billion. 2007 also saw substantial growth, with revenues reaching $239.4 billion and a CAGR of 9.2%. However, by 2008, growth slowed significantly with revenues reaching only $250.2 billion and a CAGR of just 4.5%. By 2009, growth was nearly stagnant, with revenues only increasing by $3.5 billion, to total revenues of $253.7 billion and a CAGR of 1.4% (See Table 1) ("Global consumer," 2010).

Television Market Segment:

The audio visual equipment market segment has been the most lucrative segment of the global consumer electronics market. In 2009, this segment generated $231.7 billion in revenues, or 91.3% of the global consumer electronics market overall. This is compared to only 8.7% contribution in revenues by the gaming consoles segment (See Figure 1) ("Global consumer," 2010).

This segment of the global consumer electronics market can be further segmented geographically. The Americas, both North and South America, make up 47.7% of the global market value. Europe is the second largest geographic segment, accounting for 27% of the global market value. Asia-Pacific comes in a close third, making up 25.3% of the global market ("Global consumer," 2010) (See Figure 2).

Five Forces Analysis:


The Five Forces Analysis of the television segment of the global consumer electronics industry uses degree of rivalry, buyer power, supplier power, substitutes, and new entrants to gauge the competitiveness in the industry, for Sony. The similarity of manufacturers to one another, in the television segment of the electronics market, creates an extremely competitive environment. Manufacturers are forced to build their brand identity in the marketplace, as well as differentiate their televisions through continual improvements through research and development. These manufacturers have opportunities for organic growth, if they have sufficient enough capital outlay. To further complicate the market landscape, retailers must take consumer's needs and desires into consideration when determining which manufacturer's products they carry. However, retailers must still maintain a good working relationship even with manufacturers they aren't currently featuring, in case new product developments occur that they wish to carry in the future. In addition, retailers want to make sure they maintain relationships with manufacturers… [END OF PREVIEW] . . . READ MORE

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