Years ago Sony decided to exploit its capabilities in the design and manufacture of electronic hardware for consumer and professional use by emphasising their role as platforms to exploit complementary software (music, movies and games). Thus it acquired music recording and movie making businesses to provide complementary sources of revenue and profits. However, it licenses third party software developers to produce games compatible with PlayStation consoles. Discuss the likely reasoning behind this apparent difference of strategy.
What will be an ideal response?What will be an ideal response?
Several reasons could figure in Sony’s strategy. There may be internal doubts whether the earlier
acquisitions has proved as valuable strategically as its instigators believed at the time. More
probably, the parallels appear to be inexact, with no software houses being considered as pre-
eminent in their field as Columbia was. Thus acquisitive entry would not be practical on an adequate
scale. Moreover, although software development is costly, it is well-below the costs of producing
Hollywood-style ‘blockbuster’ movies. This means that new entrants are more numerous and some
may grow exponentially on the back of a single successful product. So could Sony pick the future
winners? Why would it want compete with others when it can license their products on the
PlayStation platform with far lower investment or risk? Moreover, Sony can exploit its major
capabilities in setting technical standards and brand management to ensure that its standards capture
a dominant share of popular licensed software and thus licence income.
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