Q1: PS 1 and PS 2 achieved high profitability and dominant market share in the past.

A number of factors collectively contributed to success. 1. Superior know-how in hardware and software created new demands among a broader market of young adults Powerful hardware achieved great differentiation and started a new generation cycle A variety of high quality software greatly promoted hardware sales, especially at later stage of life cycle

2. Capability in supply chain management which earned Sony advantages in: 1) Ability to pricing at competitive level in a market that commands oligopoly feature 2) Ability to ensure adequate supply of product 3) Ability to be first-to-market in a very cyclical industry, which gained Sony tremendous first mover advantages including o Time to establish new standard which is critical in hi-tech industry o Preemption of market share since console and game titles are not cheap to many targets who probably have limited budget o Boost in long run profitability because: While hardware is one-off purchase, it paves way for software sales which ensures long-term profitability A leading market share is arguably required to attract competent software programmers

3. Sonys strong brand equity in consumer electronics lent credit to PS 1. The proven success of PS 1 further contributed to the popularity of PS 2 and the huge success of PS2 accordingly lent great halo effect to PS 3.

4. Expertise in marketing, distributing and licensing console and game titles including consistent and clear positioning to clearly defined segment: hard-core gamers

Q2/3: In an attempt to retrieve success for PS 3, it makes sense to firstly figure out what are blamed for its past failure. Accordingly, the paper in Figure 2 compared marketing strategies of PS 3 with key competitors, and in Figure 3 outlined possible problems.
Mix Target Positioning Release Time Xbox 360 Hard-core gamers Game machine 1 year before PS 3 Wii Mainstream gamers Family game machine Similar as PS 3 (but not much affected by losing first mover advantage with a separate target) Product 1.Less powerful with multi-media functions 2. Share top seller games with PS 3 Price Promotion Lower: $300 More developed than PS 3 in online media and commerce Lowest: $ 250 Least powerful hardware but simple and innovative for target 1. Most powerful hardware with multi-media functions 2. Blu-ray capability 3. Share top seller games with Xbox 360 Highest: $500- $600 1.inconsistent marketing position 2.advertising is too subtle and not able to explain products main appeal and value 3. Benefit of Blu-ray technology is not clearly conveyed 4. Unable to differentiate from Xbox 360 in promoting other hardware capabilities Place Shortage of supply due to outsourcing mismanagement PS 3 Hard-core gamers & Family Initial: family entertainment hub Later: game machine 1 year behind Xbox 360

Figure 2 While PS 3 aimed to target family, its befuddled marketing mix also pointed to hard-core gamers, causing problems for both segments (Figure 3):

Mix Target Positioning core gamers Release time Product Hard-core gamers

Problems Family Not appealing as they may find sufficient to perform digital tasks separately and less ready to adopt lifestyle of hub Later release allowed Microsoft to gain first mover advantages in niche market 1. Hardware capability perceived as similar with Xbox despite inclusion of Blue-ray 2. Additional costly features may not be valued by targets 3.Lack differentiation in software gave less incentive for higher prices 1. Blu-ray may attract families of movie buffs but combined features as a hub may not be desired by targets who can choose a stand-alone Blu-ray player unless PS 3 charges close or cheaper 2. Few suitable software impeding maximizing hardware utility, discouraging purchase

Confusion may discourage some neutral hard-

Promotion

1. Failed to highlight superiority over competitor, PS 3 is at great disadvantage with later release and higher price 2. Less developed online marketability injured reach and appeal to targets who are nowadays more internet-dependent

While targets require more information for decision making, Sony absolutely lacks communication in explaining product (e.g. Blu-ray tech) appeal

Price

High pricing forced target to choose Xbox 360 since: 1. Additional costly features were not viewed as must for a game console 2. Xbox 360 offered a much cheaper option with no major incapability

High pricing was a major barrier for target since: 1. Underlying values of hub were not fully conveyed 2. Inherently more price conscious in adopting new technology Traditional distribution of game console may not fit targets

Place

Hampered availability to target

Figure 3 In brief, above problems can be further generalized as following: 1. Product superiority does not lead to customer satisfaction (e.g. PS 3 may over carry functions that are not desired by customers when compared with pricing).

2. High tech products require greater customer education and more product information especially for family target 3. In adopting new technology, consumers differ in their timing and in sources of information they rely. (e.g. family may gradually get ready to adopt new technology as product moves through life cycle) 4. A distinguished position with clear and consistent marketing mix is critical for success Moreover, video game industry is highly cyclical and hi-tech driven competition only shortens life cycle, so it is important for Sony to take note. A review of PlayStations history unveils that each generation possessed an average cycle of 5 years (Figure 4), indicating PS 3 (as in the case of 2008) has come to the middle of the cycle. It implies that early adopters may already purchase consoles on the market, so new growth opportunities should come from early majority or complementary products to PS 3 console owners. Furthermore, PS 3 is competing in an oligopolistic industry (top four companies own 65% new product sales), which can gain maximum from advertisement by increasing its market share and total market demand.

Figure 4

Based on above learning, Figure 5 outlined some possible scenarios.

Primary target Scenario 1 Target Position Product focus Price Cut to match Xbox 360 Hard-core gamers who are price-conscious Multi-function game machine Console+ game titles Multi-function game machine Peripherals & game titles for PS 3 Chances to skim pricing 1.Console + Blu-ray 2.Software for family gaming Cut to match stand-alone Blu-ray Player Promotion 1. Substantially increase online marketability and clearly highlight superiority over Xbox 360 2. Promotion like bundleselling with popular software Place Redress outsourcing to ensure availability; enhance E-commerce Aggressive use of Ecommerce Highlight exclusivity of software to create differentiation 1.Clearly highlight benefits of Blu-ray, broadband access 2. Consider medias for consumer electronics, aggressively use social media 3.Leverage promotion of Blu-ray movies 1. Aggressive use of Ecommerce 2.Introduce in foreign markets by leveraging its global presence Scenario 2 PS 3 console owners Secondary target Scenario 3 Families with movie buffs or gamers Home entertainment hub

Figure 5

Q4: When bringing PS 4 to market, focus should be on gaming and hardcore gamers because: 1. Video game industry requires constant revolutionary technologies to stay competitive and to meet fickle demands of target. Strategic yet limited resources should be prioritized to technological advancement. 2. It takes time and efforts to educate families to adopt new technologies and by considering shorter life cycle, it is very likely that at the release of PS 4, this particular segment is not profitably sizable (Kotabe & Helsen, 2008). 3. Two segments require different configurations of marketing mix (e.g. hard-core gamers apparently require far more powerful capability in gaming), so Sony will inevitably forsake some core competencies and credits among hard-core gamers if it puts high stakes on families. It is theoretically not actionable. Also, unlike hard-core gamers, families are not stable as they are more price-sensitive especially in downturn (Kotabe & Helsen, 2008). Accordingly, at release of PS 4, Sony is suggested to configure marketing strategy as following Targeting: Primary target: hard-core gamers Secondary target (at later stage): families who also value entertainment experience empowered by PS 4 Position: Game console with revolutionary technology that can substantially elevate gaming experience Time of entry: Aim to be the first to market Product:

Hardware: incorporate revolutionary advances that can overthrow previous generation but should be careful not over carry features that are not desired by targets Software: push for popular and exclusive game titles that can substantially help to prompt console sales especially at the later stage Price: Tighten up pricing control: 1. Proactive speculation on competitors pricing to match level of market acceptance 2. Excluding features that lead to over-budget 3. Be prepared for pricing cut after release Promotion: 1. Clearly communicate hi-tech advances to hard-core gamers and even more to families 2. Scale up reach of communication and leverage online marketability Place: 1. Ensure enough supply 2. Utilize E-commerce besides traditional channels Supply chain: To ensure implementation of marketing strategy, Sony has to reconstruct supply chain including outsourcing strategy. Instead of merely pursuing cost-reduction, Sony should closely coordinate R&D, manufacturing and marketing activities on global basis to fully exploit strategic value of global outsourcing (Kotabe & Helsen, 2008). It also includes steps to carefully define strategic functions and keep those in house to retain proprietary advantages.

References Kotabe, M., Helsen, K. (2008). Global Marketing Management. New Jersey: John Wiley and Sons Inc.