What recommendations would you make to Sony regarding (1) geographical balance, (2) product line policy, and (3) product standards?

Question

What will be an ideal response?

Answer 1

(1) Geographical Balance
The principal question here is whether Sony should continue to focus on Japan and/or take the lead in opening up the overseas markets of Europe and the United States.
Japan
+ Japan represents 98 percent of 1995 worldwide unit sales. Sony needs to recover its momentum, credibility, and market share in its domestic market.
+ Expected unit sales in 2000 in Japan (2 million units—Exhibit 4) exceed expected sales in Europe (600,000) and the United States (900,000) combined.
– Sales in the aftermarket in which Sony competes are expected to stagnate, with an increasing share of CNS unit sales in Japan coming from the OEM market (55 percent in 2000 versus 35 percent in 1996—Exhibit 4).
Overseas
+ Substantial untapped potential (See Exhibit TN–2).
+ Numerous competitors are expected to enter the OEM and aftermarket in both Europe and the United States (Exhibits 19 and 20).
+ Sony has strong brand recognition in overseas markets.
+ Sony needs to be one of the prime movers in order to capture the “low-hanging fruit” of consumer demand (i.e., less price sensitive consumers already predisposed to buy CNS).
+ The Exhibit 4 CNS car penetration forecasts for Europe and the United States are conservative, compared to the Japanese experience. Five years after launch, all-car penetration in Japan was 1.98 percent; the comparable forecast for Europe is 0.98 percent and for the United States is 0.89 percent.1
– Competitors could free ride on any Sony effort to build primary demand for CNS.
– Sony does not have the appropriate product line so it should delay.
– The Japanese experience shows how later entrants with the right product can do well.
(2) Product Line Policy
There are three principal product development options available to Sony for overseas markets.
Option 1: Launch the Handy Navigation System GPX-5
+ Portability and convenience may enable this CNS to appeal to a broader market.
+ Portability is a point of differentiation and reduces concern over theft in the United Sates.
+ This may address the auto safety and product liability issue.
– It is a flexible product, and could be marketed as a simple GPS or advanced hybrid model (for Japan).
– Five engineers are required for hardware modification.
– There will be a need to develop CD-ROM ($1 million and nine months each) for specific applications (e.g., outdoor sports).
Option 2: Modify the hybrid NVX-S1
+ It will provide turn-by-turn route guidance.
+ It can be upgraded to accommodate future traffic information technologies.
+ It is more suitable to Europe than the United States.
– Sony lags in turn-by-turn guidance technology.
– It requires reinvention of Etak’s digital map technology to provide route guidance ($100 million initial cost plus $30 million annually for two years, 50 engineers).
– The product price will have to be above $3,000.
– The NVX-S1 model has done well but is not cutting edge.
– One million units are needed to breakeven ($100 million/$100 unit contribution shown in Exhibit 6), which represents an infeasibly large share of the overseas market.
Option 3: Develop a new low-priced model for overseas markets
+ This would appeal to the broader market of consumers willing to pay less than $1,000.
+ It could stimulate primary demand, especially in the United States.
– It would have little appeal in Japan.
– It may drag down the pricing structure of the entire market prematurely.
– It is not adaptable to future advances in traffic information systems.
– It distracts from and is inconsistent with Sony’s brand image.
– It requires 60 engineers