M4- Textbook case Study: Sony PlayStation 3

Group 4

Q. What can we learn from Sony’s strategic approach with regard to new product development?

Sony focuses on product development to make their products unique and differentiation to
separate themselves from competitors. Sony came into the market strong.
Sony launched PS3 in North America on November 17, 2006.
The Sony PlayStation 3 was a video gaming console, which was full of superior features. The
strategy at the core of the PS3 was an inclusion of IBM cell processor, and the company states
that “The cell outperforms many of the latest PC processors and delivers up to ten times the
performance of the typical home computer.” The other key component of Sony’s strategy was
its built in Blu-ray disc player, which provided a novel way to store a high-definition digital
content, including movies as well as video games. The decision to include both the Cell processor
and the Blue-ray Disc player in PS3, caused Sony to delay manufacturing and push back the initial
launch. Sony has a long history of product innovation, however its unwillingness to share
intellectual property made it lose out to a lot of its competitors even though those competitors
had "inferior technology." Examples of this are Sony's own version of VHS tapes or mp3's that
lost market share to competitors.

It seems where market strategy is important to stay true to your brand. Sony, PlayStation was
known for their lower prices, and being “king of content”. Sony PS1 came into the market $100
cheaper than the top competitor. That is comparable to $175 in 2021. “Sony continues many of
its major strategies — undercutting its competitors on price, courting (and then buying) third-
party developers, and putting games first — to this day” (Ravenscraft, 2019).
But, Sony PlayStation 3, was the most expensive console ever launched, though Sony lost
between $240 and $306 on each console sold. The PlayStation3 completely was off their market
brand. Where the PS3 went wrong was its price, and lack of games initially presented with the
new system. Xbox sold their premium console at $399, and their basic at $299, while PlayStation3
was set at $599. Also, the hype of the new console system was well above and beyond what they
could produce. They created product that did not live up to the hype in the eyes of
consumers. When Sony launched the European PlayStation 3 in March 2007, it faced the
different problem, lack of demand. To generate positive publicity, Sony gave a free high-
definition television valued more than $4,000 to the first 125 people to purchase a PS3 (Wesley,
David and Barczak, Gloria, 2013).

When Sony released the PlayStation 3, they tried to reduce costs by removing certain cables to
eliminate rumble feature. This made customers unhappy as they would have to then buy those
cables separately. These decisions were met with harsh criticism because consumers felt that
they were paying $200 more for a PS3 than an Xbox 360 and weren't really getting any additional
features. One of the keys to success of every console manufacturer was having a library of quality
game titles to offer consumers. But Sony only launched the PS3 with 15 game titles and most of
which could already be played on the Xbox 360 (Wesley, David and Barczak, Gloria, 2013). By
early 2007, returns exceeded sales, and stores became overstocked with unsold consoles,
because so many customers were disappointed by PS3.

Guy Longworth, was appointed the Senior VP of PlayStation Marketing in 2011 after the
PlayStation 3 disaster. He is quoted in a yahoo article, “I think the critical thing is to be authentic,
to be true to who you are and what your values are, more than ever,” Longworth continued. “Any
time you are not true to your values, not true to your identity, especially in an industry like ours
you’re going to get absolutely nailed” (Peterson, 2012).

We can learn from Sony, in an article, 5 Ps of Marketing. Commonly known as the 4Ps of
Marketing, Product, Price, Place (distribution) and Promotion is now considered the 5 Ps– adding
People. What we can also learn from Sony’s strategic approach is to keep it simple and any new
product when introduced in the world, should made sure that the product would function as a
new product without requiring the customers spend more on necessary components as video
cables. Another learning lesion is any video game industry should bring quality game titles to the
platform and finally focus on the organizational growth strategies of, 1) Market penetration, 2)
Market development 3) Product development and 4) Diversification.
For example, Sony should have retained their previous PS2 owners encouraging them to
gradually upgrade to PS3.

Sony learned their lesson with the PS3 mishap, that price was a powerful determinant for their
customers. They released their PS4 at $399, while Xbox was at $499. Their place was selling
through the holiday season (Which PS3 also missed the deadline) and using entertainment
related outlets for distribution. Sony uses promotion by releasing simple teasers and listening
and waiting to see what its competitors are doing before making final plans. Lastly, Sony knew
their People. They knew what their customers want for the coming years which is no usage
restrictions and streaming made affordable. Sony will continue to dominate the market if they
continue to stay true to their brand and their customers. Keeping content at the forefront of
their strategy, keeping costs competitive, and using the most up to date technology for
quality.

References:

Wesley, David and Barczak, Gloria (2013). The Launch of the Sony PlayStation 3 (Case 11, pp.
348-362). Marketing Management: Knowledge and Skills, by J. Paul Peter and James H. Donnelly,
11th ed., McGraw-Hill.

Meyer, P. (2017). Sony’s Generic Strategy & Intensive Growth Strategies - Panmore Institute.
[online] www.panmore.com. Available at: <http://panmore.com/sony-generic-strategy-
intensive-growth-strategies> [Accessed 17 March 2021].
Ravenscraft, Eric (2019, December 9). OneZero. “How the PlayStation Took Over the World”.
Sony PlayStation Owes Its Success to Its Games | OneZero (medium.com).

Infuse Five. 5 Ps of Marketing: How Sony beat Microsoft with Basic Marketing Mix Business Tool.
Sandra X. Retrieved March 17,2021. 5 Ps of Marketing: How Sony beat Microsoft with Basic
Marketing Mix Business Tool - Infuse Five

Yahoo Small Business. Sony’s Marketing Strategy: Greatness Awaits. Steve Peterson. Retrieved
March 17, 2021. Sony’s Marketing Strategy: Greatness Awaits - Business Resource Center
(yahoo.com)