Management Decision



Management Decision

Sony's PlayStation story started with Nintendo Co. that wanted to incorporate CD-ROM (Sony's technology) into their gaming system. Sony agreed to create the PlayStation, a system that would allow playing games from a CD-ROM drive. However, the two companies couldn't agree with the conditions and the deal was cancelled. In 1993, Sony Computer Entertainment, a division of Sony was created, following the break-up of a joint development team formed by Sony and Nintendo Co. Sony decided to develop its own standalone video game system. Sony's PlayStation, a novice to the gaming industry outstripped two established big names - Nintendo and Sega.

Analysis of the External Environment

This section looks at the Sony's external environment through the components of remote environment. The external environment analysis if followed by the assessment of forces shaping the gaming industry using the Porter's industry model.

Analysis of the Remote Environment

The remote environment analysis describes opportunities and threats that originate beyond Sony's operating position but influence Company's strategic decision making. It is also important to remember that the case analysis describes factors as of the date of the case (1998).

Economic Factor

North American and European economic boom, sharp growth of the market and bright outlook for the future are causing consumers to spend and invest more into new technologies. Also, markets favour and focus on the companies that are developing and selling new technologies. The economy growth has contributed to consumers' higher disposable income and increased spending power which translates as an opportunity for Sony.

Demographic and Social Factor

Threat: In the Sony's major target markets, the population is aging. Technology and entertainment products are attracting primarily younger generations, which translate to a threat for Sony. Opportunity: Consumers' interest in the digital entertainment and new hip lifestyles is increasing. Also, interest of female population in technology is growing rapidly.

Industry Analysis

Important ...