Managing the Nation

Would Sony's PS3 delay break the barriers of Rivalry?

Is Sony’s PS3 delay harmful? Would it give a better chance to its competitors Microsoft and Nintendo? Would it increase rivalry and decrease Sony’s PS3 shares? Emphasizing on this and referring to the Article “Sony’s Delay of Game” and relating it to Porter’s framework we find the following:
“Price cuts are quickly and easily matched by rivals, and once they are matched they lower revenues for all firms unless industry price elasticity of demand is very great” according to this statement in Porter’s framework we find that Intensity of rivalry among existing competitors does occur. Relating this to the article we find that Sony’s share prices fell by 1.8% in Tokyo Trading since it gave a better chance to its rivals Microsoft and Nintendo to increase their market share which is 70% acquired by Sony PS.

• Competitors are numerous or are roughly equal in size and power: I believe 3 competitors could refer to numerous since this could eliminate monopoly or oligopoly. Although Microsoft is the biggest in size, but its gamming department is somehow equal to Nintendo’s and Sony’s PS size. Microsoft’s gamming department doesn’t produce games per se, but they research and develop to arrive to a better game support performance that’s compatible with computer games manufactures. As for the power I believe Sony’s PS is the greatest with 70% market share in the gamming industry.
• Industry growth is slow: “Slow industry growth turns competition into a market share game for firms seeking expansion” Which totally contradicts our article since the industry growth is fast. And as was stated in the article “not everybody thinks being late is a huge liability” a period of 3 month would still keep Sony’s PS at the lead.
• The product or service lacks differentiation or switching costs: Referring to the article “When completed, the PS3 will play all PlayStation games, old and new, as well as high-definition movies. It will let users surf the Internet via a broadband connection and sport a 60-gigabyte hard drive to store downloaded games or music, a wireless antenna to link to other Sony gizmos, and a tiny camera for chatting with friends over a video hookup.” All of this proves that Sony’s PS has maintained huge differentiation and low switching costs not only because of the technology but for its loyal customers.
• Capacity is normally augmented in large increments: “He said he plans to prepare 1 million PS3 consoles for the worldwide launch and have enough capacity to roll out another 5 million through the end of March, 2007” For the first Sony would offer 6 million consoles which means 0.01 console to each individual on earth. I believe for the first year this is a big number! Accordingly the supply is being offered in large increments which would urge other competitors to cut prices.
• Exit barriers are high: Obviously “Strategic Interrelationships” is one of the most competitive disadvantages in Sony’s core business. Since the PS business unit is highly correlated to Sony’s image as a whole this causes the firm to perceive high strategic importance to being in the business.

In conclusion I believe this delay won’t affect Sony’s PS manufacture since it has a competitive advantage that eliminates any rivalry at least for the Short Term.

posted by Managing_the_Nation @ 3:37 AM