Sony, a highly-technologically driven multinational Japanese corporation, is amongst the leading companies in producing and selling electronics worldwide. Its quality electronic products associated with laptops, mobiles, cameras, video game consoles have enabled them to achieve a significant advantage over its competitors in the aggressively ever-changing technological market. Play Station, Sony’s best invention, is one of its prominent electronic devices which have taken Sony to new heights due to its mass consumption and fierce consumer loyalty. As a result, the success of the new Sony Play Station 3 prompted us to focus on how it tends to survive in the market over the next few years. (2011-2013). The current and future environmental scan of Sony Play Station 3 will help us identify several upcoming challenges the cooperation must address in order to maintain their success. Lastly, the geographic area we are focusing on is the impact of Play Station 3 in UAE and how the market for gamers in the Middle East continues to grow.
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The structure of this report will begin with the designing of the product market structure along with the relevant market where Sony Play Station 3 and its competitors are serving its customers. In addition, we will analyze the external and internal environmental trends that can affect the continuity of the brand. Also, we will focus on other important issues which are likely to arise in the future and shift the focus of segmentation, primary and selective demand, SWOT and competitive analysis.
Unquestionably, the 7th generation video game consoles like Play station 3 with a cult following has not only provided Sony with tremendous economic benefits but also an image of being a company that continuous to utilize the improving technology and create such astonishing machines which are being used worldwide. The non-portable and the portable gaming industry are dominated by fierce competitors who adapt successful marketing strategies to divert focus of potential customers from one boundary to another. The relevant market, for non-portable game consoles, in which Sony Play station 3 strives to operate with continuous success along with other recognizable brands offer game console devices with similar features and experiences. We tend to focus on the impact of Sony Play station 3 in the present and the future non-portable gaming console relevant market of United Arab Emirates, next three years (2011-2013), and what strategies it will have to undertake in order to achieve sustainability and ensure long-term survival. Baldwin (2010) reports, “Tim Stokes, Sales and Marketing Director for PlayStation Division, estimated that gaming in the Middle East is worth up to $1 billion or “two per cent of the global market” of $45 billion in total international sales”. Therefore, it is interesting to see know the Middle East market’s contribution to the success of gaming devices and it prompted us to focus on this underrated UAE market that continuous to be a hot prospect in this gaming field. Furthermore, identifying the relevant market for Sony Play Station 3 considers two important factors which are “degree of substitutability” and “managerial perspective” will be applied to understand the product market structure.
As showcased earlier, our product market structure simplifies the understanding of which product category Play Station 3 and its competitors fall. Even though this market has many other competitors; however, it is being dominated by few due to their fierce mass loyalty. In other words, non-portable game console is a consolidated industry with few dominant market leaders with large market shares and worldwide presence. The first layer which deals with the customer needs mainly is the machines that can support video games. These machines, which are video game supporting devices, are applicable for all types of video games ranging from Arcade to family oriented games.
It is then broken down into the second important layer, product class, which is the video gaming console and the personal computer devices where we experience the interactive games. The impact of the improving technology in both personal computers and video game console devices has highly increased the degree of substitutability between the two. This degree of substitutability between PC’s and portable/non-portable game consoles in the UAE market is currently very high as both devices are being upgraded to provide similar graphical experiences. In short, the PC’s are also doing a very successful job in competing with the 7th generation video game consoles and in taking some of the customer’s who enjoy playing games suitable with a keyboard and more importantly the mouse. Understanding the degree of substitutability between the game consoles and PC devices is present due to several factors. These factors can range from the perceived benefits, in terms of convenience and price, to the features the superior device has to offer that is compatible with the both games and customer’s requirements.
Moreover, in the third layer, product form, the video game consoles are then separated on the basis of being portable (handheld) and non-portable devices. The degree of substitutability is not likely to be present between the two at current stage in UAE since handheld devices to not provide the same thrilling experience as compared to a game being played on a bigger screen. Also, the portable game console devices with two main devices, PSP and Nintendo 3DS, tend to target a different type of target market which are mainly children. For a hardcore gamer, a big screen experience and competing via social networking is an essential tool which can only be excitingly through the non-portable gaming consoles. However, in the later stage of the report, we will emphasize on the importance of size being now considered as a huge factor in the decision making process and how the movement towards portable video game console devices is on an incline. In short, we will emphasize more on the switching between the boundaries of the relevant market in the implications phase to justify the reasoning of the increased degree of substitutability between the non-portable and portable devices in the coming years.
Lastly, Sony Play Station 3 along with its current competitors comes in the last layer, brand specification, under the Sony category that dominates the non-portable game consoles in the relevant market. As mentioned earlier, our report is limited down to the dominance of non-portable gaming devices, and the focus being PS3, and their implications in the coming years. This report will give a detailed analysis of how Sony PS3 can be chosen based on various rational and emotional aspects. Determining the degree of substitutability between the 7th generation gaming consoles that are Sony Play station 3 and X-box 360 is very challenging due to the amazing features they both offer and hence making it difficult for buyers to recognize which one is better. Moreover, this degree of substitutability is supported with the concepts of Primary and more importantly Secondary Demand that aids in the decision making of current and future customers in which console to choose. In addition, the micro and macro environmental trends were carefully taken into account to ensure what steps has already been taken to establish a competitive advantage; moreover, the steps Sony Play station 3 will have to consider over the next years in order to stay competitive in its relevant market.
In short, our managerial focus is analyzing the successful non-portable devices which belong to these cult brands that are Sony Play Station, Microsoft X-Box and Nintendo. In addition, the managerial focus is highly dependent on the future market of UAE and how Sony Play Station 3 should utilize this market to its maximum potential and understand its current and potential competitor’s position in the coming years. Furthermore, the relevant market with respect to the non-portable game console devices in which Play Station 3, X-box 360 and Nintendo Wii compete may be saturated with these prominent leaders; however, our research primarily focuses on Play Station 3 and we will try to place its position in the relevant market in the current and next two years.
Macro environment
Political legal
Copyright laws
Counterfeit or copied video games and software are prohibited in several countries including the UAE. Different authorities in the UAE are collaborating with one another, foreign governments and with organizations such as Microsoft to capture counterfeit goods of different kinds including video games and software (Oct 19, 2010, Dubai Customs foils…). The customs inspectors take specialized courses in combating commercial fraud which enables them to uncover any attempts to threaten the national security of the UAE (Oct 19, 2010, Dubai Customs foils…). According to the IPR -Intellectual Property Rights- department at Dubai customs there were three seizures of counterfeited CDs in 2010 compared to five seizures in 2009 (Oct 19, 2010, Dubai Customs foils…). In the years to come these laws are going to be more effective due to advances in technologies and the more experienced customs staff and inspectors.
Economical
The GDP growth in 2009 was – 2.7% compared to 2.6 % in 2010 (Central Intelligence Agency, (2011)). The economy is expected to rebound slowly and the challenges faced include dependence on oil, expatriates and greater inflation, the inflation rate in 2010 was 2.2% (Central Intelligence Agency, (2011)). In the next few years the UAE is planning to increase diversification and improve education and private sector employment for the UAE nationals (Central Intelligence Agency, (2011)). The economic crisis had a negative effect on income which is considered to be a main determinant when buying a game console since the price of the consoles can be high. The economic crisis is expected to be reduced in the next few years, the GDP increased from 2009 to 2010, and following that income may rise and more customers become able to purchase game consoles.
Sociocultural
Statistics from the ESA -Entertainment Software Association- show that in the United States 25% of game players are less than 18 years old, 49% in the age group 18 – 49 and 26% 50 and older ((2010). Essential Facts about…). Also, 64% of the gamers play video games with other persons which is a higher number than in 2008 and 2009 ((2010). Essential Facts about…). Parents participate with their children in playing video games as 48% play video games with their children ((2010). Essential Facts about…). The reason for this participation includes fun for the whole family and socializing with the children ((2010). Essential Facts about…). We can relate these statistics to the demographics in the UAE as 78.7% of the population is in the age group 15 – 64. The percentage of video gamers differs of course but in the UAE most of the gamers will probably fall in the age group 15 – 30.Video games and video game consoles in particular are becoming more users friendly and as in the Nintendo Wii there are games that target the whole family and children. In the future more video games and technologies like the ones that exist in the Nintendo Wii are going to be introduced. These video games will appeal to a wide range of demographics of both genders.
Technological
Augmented reality
Augmented reality is a new technology that is very popular today and a technology that is still being developed (Wen, H., Jan 26, 2010). In video game consoles augmented reality can be seen in the play station eye toy where images from the real world such as the user and display it on a computer screen (Wen, H., Jan 26, 2010). Then the user is able to interact with virtual objects on the screen through software (Wen, H., Jan 26, 2010). The annual sales of augmented reality are expected to rise from approximately 1 million in 2209 to 732 million in 2014 (Wen, H., Jan 26, 2010). The technology still faces several limitations but developers and researchers are improving and developing the technology (Wen, H., Jan 26, 2010). The researchers are trying to integrate real world images with graphics instead of just displaying them on a computer screen ((n.d.), How Augmented Reality Will Work). This technology will create a feeling of the five senses and separate the users from computer generated graphics ((n.d.), How Augmented Reality Will Work).
Motion sensing game controllers
The Nintendo Wii was introduced with a motion sensor called the Wiimote which can track movement and positions (Sung, K., Feb 2011). The technology was simple and proved that well engineered technologies with appealing games can be very profitable (Sung, K., Feb 2011). The Nintendo Wii was cheaper than Xbox and PS3 and it was considered a success (Sung, K., Feb 2011). Following this success Nintendo introduced the Wii Motion Plus which is an attachment to the Wiimote that improves accuracy and response time (Sung, K., Feb 2011). Sony reacted to this success by releasing the Playstation Move which is a motion controller for the PS3. Sony’s motion controller was more accurate than Nintendo’s controller and acquired reputation quickly (Sung, K., Feb 2011). After that the Xbox released its Xbox Kinect system in 2010 which contains state of the art technologies (Sung, K., Feb 2011). The system is a USB accessory for the existing Xbox 360 instead of being a whole new game console (Sung, K., Feb 2011). This shows that video game consoles manufacturers are moving towards technologies and devices based on human computer interface (Sung, K., Feb 2011).
The next generation of video game consoles
Video game consoles can be categorized in seven generations depending on the technologies introduced with each console. PS3, Xbox 360 and Nintedo Wii are considered to be in the seventh generation (Miller, M., Apr 1, 2005). The next generation is predicted to be more powerful with increased graphical power which will increase the costs of making games for the consoles (Morris, C., 12 Jun 2009). The costs are expected to rise from 20 – 30 million to 60 million per game (Morris, C., 12 Jun 2009). The higher development costs of video games raise the cost of video game consoles manufacturing (Morris, C., 12 Jun 2009). Onlive is a company that is attempting to stream video games directly to the computer or TV through the users internet connection at home (Morris, C., 12 Jun 2009). The technology is early but promising and can increase the life cycle of the current game consoles (Morris, C., 12 Jun 2009). However, this technology can be present in the next generation consoles. The next generation is expected to arrive in 2011 or 2012 as mentioned by Yves Guillemont the CEO of Ubisoft -video game developer- (Yam , M., January 23, 2009).
Micro environment
Consumer Behavior
As mentioned earlier, Sony’s target market segment, of the Play Station 3, is gamers, particularly teens or adolescents; Teens and young adults are the main contributors to the high sales revenue being generated by the Sony Corporation through the gaming console.
A common purchasing ideology in the UAE, shared by most of its citizens, is having or owning the latest technology or releases of electronic equipment; this might have been an influencing factor in Sony’s decision of having “”significant stock inventory” be made available to local retailers, safeguarding against shortages that have frustrated retailers based in launch markets such as Japan and the United States” (Nov. 30, 2010, GITEX Showcases Convergence). Such preparations, although in 2006, suggest that the corporation viewed the UAE as a demanding market. Four years following the release of the PS3, sales of the console or its updates continues, with stock being replenished in major stores such as Carrefour and electronics stores such as Jacky’s. In 2008, it has been reported that “the UAE gaming console market has achieved Dhs17.78m sales from January to May…with 4.448 million units sold” and the PS3 dominating the UAE console market with 59% (Aug. 16, 2008, UAE Gaming Console Sales…).
Having achieved such a success back in 2008, and without the existence of present statistics on its current sales rate, it is safe to assume that the UAE consumer market continues to grow in favor of the PS3 and by 2012 the UAE consumer market will still be into buying the PS3.
By 2013, though, with the forecasted advent of Sony’s new console, the PS4, there might be a decrease in the sales of the PS3. Yet, the release of the new console might not affect the sales in an entirely negative manner; with the introduction of the PS4 to the market, the price of a PS3 would decrease making it more affordable for consumers who were not able to purchase it when sales were at its peak. Also, the introduction of a new console into the market, according to Summers, “the previous system still has a lot of value because the new one is still going to be able to play your old games, and because the old one is still going to have new games released for it” (Summers, n.d.). Hence, this ensures that UAE sales of the PS3 are to continue, with a little depreciation, despite the introduction of the PS4.
However, the UAE consumer market may exhibit a low demand to no demand for the PS3 by 2014, depending on the release of the PS4. If released in late 2012/ early 2013, the new console would have a year to achieve its success and take control of the gaming console market, due to the promised advanced technology it is to offer and the improvement of the real life gaming experience that is being offered by the PS3. Hence, 2014 may be the year where the PS3 takes the bench in the UAE market.
Nature of Buying Decision
The PS3 targets hardcore gamers, who would want to feel as though they are part of the game. Hence, the specifications offered with the console, such as Hi-Definition gaming graphics which makes the games as realistic as possible, and so on. However, the PS3 does come with a hefty price tag, making it a hard choice for those who would want to purchase it since similar specifications can be found on other consoles that are much cheaper. This is the point of buyer motivation.
The PS3, most of the time, releases games that are considered to be exclusive to the consoles, hence maintaining the consoles uniqueness. Furthermore, other incentives are offered with the console, such as a Blu-Ray player, allowing the user to watch movies of outstanding graphical quality and clarity without having to purchase a separate player to indulge themselves in such an experience. Hence, Sony provides its gamers and consumers with a complete package with the PS3.
The United Arab Emirates houses some of the most hardcore gamers and currently marked itself as a major gaming market. Hence, since the console offers so much potential along with extras, such as those mentioned above, easily capture a purchaser’s attention in this country. Also, gamers in this country like to look for the unique gaming experience, and this is exactly what the PS3 offers. Moreover, elsewhere, the hefty price tag would have been a factor influencing the choice. Yet, the UAE’s rebound from the recession, along with the technology owning competitive nature of its citizens, helps maintain the current growth in sales of the PS3 as well as the sales for the next two years.
Loyalty Segments
Having previously released two consoles, the PS1 and PS2, which satisfied their consumers and entertained them beyond measure, Sony is able to secure their loyal ‘fans’. The PS3’s release into the market was already a guaranteed success due to the reputation earned by its predecessors in the gaming world. All that was needed to attract the attention of the consumers was a change in the console design, making it sleeker and easier on the eyes, and a slight change in the gaming experience previously offered, such as smoother interface, introduction of a complete operating system housing all the consumer needs, and better graphic drivers to make the games resemble reality.
Many of the people who purchased a PS3 in the UAE have previously owned, at least, the PS2. Moreover, since the PS2 has been a success in the UAE as well as the region, according to Yasuhide Yokota (Computer Gaming Major Sony…), the country has a large and loyal fan base, in turn assuring the PS3’s growth in sales within the next two years.
Competition
The PS3’s current market rivals, in the UAE, are Microsoft’s Xbox 360 and the Nintendo’s Wii, even though the latter does not pose as an obstacle since it does not come with half of what the PS3 has to offer to the UAE gamers. Gamers in the UAE seem to have two main interests when it comes to console gaming: Football/ Soccer and racing games. Hence, it is the Xbox 360 that is considered to be a threat to the PS3 since it offers almost all the unique gaming experience specifications, such as high resolution graphics and smooth real life play, as well as the most demanded games, for a cheaper price.
In addition, having mentioned the UAE’s consumer market’s tendency to constantly purchase newer technology and devices, another one of PS3’s competitors, although a product of the corporation, is to be the PS4, which is forecasted to be released on “Q4 of 2012 or Q1 of 2013” (Naik, 2011) as per the release timeline of the PS3 and its predecessors, even though no official release dates have been mentioned by Sony. Since the PS4 is to be an 8th generation console, it is going to offer advanced technology and better gaming experiences than the PS3 making it a target product for the country’s consumers.
Moreover, games are a major influence in the choice of consoles for the consumers in the UAE. Game manufacturers offer their services to all the consoles mentioned above, but these games could differ slightly, as with the case of the PS3 and the Xbox. Since the PS3 and Xbox fight over control, in the graphical aspects, such as real-life gaming experiences, the enabling of high definition game-play and use of surround sound, and other such characteristics that complete the advertised and highly anticipated gaming experience, Sony keeps their consumers through the introduction of exclusive gaming experiences such as the introduction of games that cannot be played other than on the PS3 and such, as well as creating games with titles in Arabic to accommodate and further satisfy the UAE’s market.
Porters’ 5 forces
Having laid out Porter’s strategy, in general, for the PS3, relating it to the console and the market of the UAE over a time frame of the next three years is as follows:
Threat of Substitutes: As mentioned above, computer games/ PC games pose as substitute to console gaming in general, and it is gaining popularity within the UAE. However, computer games do not offer the same gaming experience that the PS3 has to offer, and are only interesting when played online. This gives the PS3, as well as its console competitors, an advantage; interactive online and offline gaming experiences. Moving on towards the console competitors, the PS3 has been able to establish its place in the market due to offering more as a package, than the Xbox 360 and the Wii, for a price that is within the range of the other consoles, and shares the same life-span, which is an estimate of 10 years. Moreover, with the release of the Wii 2 (2012-2013) which is to have Hi-Def graphics, the price for that console will be higher than the PS3, in turn allowing future consumers and current ones to purchase or remain with the PS3 which offers the same, if not more, level of graphics.
Threat of New Entrants: Until the 3rd quarter of 2012, the competition for the PS3 remains the same: Microsoft’s Xbox 360 and Nintendo’s Wii. Furthermore, since Microsoft has released that the corporation has no intention of releasing a new console (Dumitrescu, 2009), the PS3 will maintain its current position in the UAE market. By the 4th quarter of 2012 or the 1st quarter of 2013, however, Sony is expected to release the PS4 (n.d., PS4 Release Date…), following the trend set by their previous console releases, which would pose as the PS3’s newest competitor, and by the end of 2013 it might relieve the PS3 of its domination of the UAE market.
The Intensity of Competitive Rivalry: Within a year (by 2012), the PS3 and the Xbox will definitely have games that exploit their graphical abilities to a great extent. However, since the PS3’s entire potential has not been wielded yet (n.d., PS4 Release Date…), the chances are that the UAE market is going to stay with the PS3 since the games released then will/ might require specifications more than what the Xbox 360 has to offer, specifications-wise. In addition, further development of the Playstation Eye will take place, maybe perfecting the flaws of interactive-reality gaming, which takes the Wii out of the equation. Despite the release of the PS4 by the end of 2012 and the beginning of 2013 though, the PS3 will remain to have a stronghold of the market, for then the price of the PS3 is going to decrease and the games offered by PS4 are going to be similar to those available for the PS3, allowing consumers to enjoy the same degree of gaming quality that the PS4 has to offer. However, through the course of the year, after the PS4 might have had its time to position it-self in the market, newer games, that might exceed the potentials offered by the PS3, will attract the consumers.
Bargaining Power of Buyers: This will remain the same over the next three years, for the market is controlled by the three console manufacturers. Until the release of the PS4 and Wii 2, the UAE market is to be the same as it is now. By 2013, when the new consoles are released onto the market, the prices of the PS3 and the Wii will depreciate, in turn forcing the Xbox 360’s prices to decrease as well. However, since Nintendo’s history shows that the introduction of new consoles is synonymous with the halting of production – games and gadgets – for previous ones, and Sony has done otherwise with the PS3’s predecessors (Summers, n.d.), then consumers will consider the PS3 as a safer investment.
Bargaining Power of Suppliers: Since the competition is set, and the games sold are similar if not the same for each of the consoles, then the UAE market would remain the same for the next three years, even with the release of new consoles.
Stakeholder’s analysis
PS3 Customer Implications
PlayStation 4 is expected to have great demand if prices are reasonably high compared to the price of ps3 in an effort to provide as many customers as possible with the opportunity to purchase PlayStation 4. By launching play station 4, consumers will by buying more PS4s than Xbox 360s and Wiis as a result Sony will lead the market for coming years.
PS3 Environment Implications
These are the plans for the next 3 years regarding the Environment in UAE.
Sony’s Environmental Plan “Road to Zero”
Green Management 2013
Green Management 2013
Environmental Management Structure
Campaigns and advertisements boosting these plans and events will enhance Sony’s image in UAE as the brand appears as an environmentally friendly product as a result as the demand for the brand increases demand for ps3 will also rise.
These CSR and environment protection activities are costly and will put on a rise to the price of Sony products and therefore the increase in cost will be pushed to the price of ps4 when launched.
PS3 Community Implications:
Sony is expecting to have a positive impact in the coming 3 years through CSR activities by powering its products and business activities globally. PS3’s indulgence in CSR activates is likely to enhance its image in the long run as it will be perceived as a device which not only is entertaining but also environmental friendly.
PS3 Distribution Channel Implications
Distribution cost will fall in the coming years, consumers will have more pleasant shopping experience more specialized stores and sales people who know exactly what the customers are looking for. Consumers will also start seeing Sony Retailer Network logo in Ads and POS displays. The more enhanced shopping experience will also increase the demand for Sony and therefore result in higher prices in the coming years.
Implications over the next three Years
Unfortunately, the boundaries of the Product market structure have already been broken due to several technological and socio-cultural factors. The increased substitutability is happening because of the demographics in UAE have evolved and are always looking for the devices that can offer the best gaming experience.
The first implication which is likely to increase over the next years is the emphasis on improving gaming portable devices such as Nintendo 3DS which was introduced in UAE in the first quarter of 2011. The owners of Nintendo 3DS understood the new socio-cultural trends ,which is currently enjoying the 3d technology, and created this device for users who want the 3d experience in a smaller screen without the usage of any glasses. Nintendo 3DS being the first ones to provide the gaming experience in 3d had created an enormous amount of buzz in the market; hence, the same idea is now being applied by other companies. Sony Play station 3 owners are yet to utilize this 3d technology; however, in order to compete in this portable gaming industry, Sony will introduce Sony NGP (PSP 2) in early 2012 that will provide an unbelievable gaming experience in small screens. “UAE Distributers will vigorously promote NGP towards the launch as the next generation portable entertainment platform and deploy various measures to further expand the portable gaming market”. (Stuart, 2011). Sony’s strategy of introducing NGP can provide them with a competitive edge in the portable gaming market; however, only time will tell if they had succeeded.
Secondly, the surprising success of portable PC devices like iPad and iPad 2 in the UAE market have created a very unique set of games with a large fan following. The games in the iPad are relatively easier to play and can be very addictive. Moreover, Blackberry that has been a global phenomenon with mass consumption in the Middle East market are introducing its own graphic tablet, with its own official set of games, by the name of “Blackberry playbook in the end of 2011” and hence making the portable gaming devices industry more demanding and competitive. (Shuey, 2010). In short, the games in these graphic tablets like iPad and Blackberry which are more motion and movement oriented has solidified their position as a serious competitor in the portable gaming industry for PC’s.
Thirdly, the improving features of the non-portable personal computers is another major threat which are designed for hard-core gamers who want enormous storage capacity features along with its incredible graphical experience. A perfect example of such computers which provide similar graphical experiences to PS3 and Xbox is Dell’s Alienware. Alienware might have been launched by Dell in 2008; however, it can support all playstation3 and xbox 360 games making their presence highly competitive in the market. Moreover, it is being upgraded and reintroduced on frequent basis unlike Playstation 3 which takes longer time for its next version to launch. The usage of mouse and keyboards makes the PC industry still a fierce competitor as games will always require fast and accurate hand movements that can only be used on PC’s. In addition, PC’s are also very economical due to the latest games which can be downloaded on the internet for free as opposed to PS3 games which can be very costly and can take months to arrive. Also, the restrictions of certain popular games with high sexual and violent content are banned by the UAE government; therefore, the PC gamers can enjoy the internet service and can quickly download and play
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