“Localization challenge”

A Japanese multinational company that is passionate about technology and wants to inspire and fulfill the curiosity of their customers, Sony's mission is to move you emotionally and they deliver on their promise with innovation and uniqueness in the field of entertainment. Founded by Akio Morita and Masaru Ibuka in Tokyo, Japan where their main headquarters is. Sony has been successfully dominating in the entertainment industry with their amazing products like PlayStation or Sony TVs. But Sony’s very first consumer product was interestingly an electric rice cooker and the business revolved around fixing radios and other electronics. Sony Corporation of America is the headquarters located in New York and Sony's main business in the U.S. includes Sony Mobile Communications (USA) Inc., Sony Entertainment LLC, Sony Pictures Environment Inc., Sony Music Publishing LLC, and Sony Music Entertainment.

In 2017, Sony recorded annual sales of approximately $70 billion for the year ended on March 31, 2017, and the above graph shows where their revenue comes from and clearly most of it is from PlayStation. Since Sony carries a huge portfolio of products ranging from something as small as a Walkman or smartphone to something as big as 65-inch OLED TVs. From selling cameras to creating digital content like films, Tv shows etc. Since it would be extremely difficult to focus on just Sony as a whole, this paper would talk about Sony Interactive Entertainment LLC which is responsible for keeping PlayStation at the top of its game to increase sales and help the company grow. The San Mateo, California office acts as headquarters for all North American operations including SIE LLC.

Sony Interactive Entertainment LLC includes the PlayStation products and services and also oversees Worldwide Studios. Worldwide Studios creates exclusive games just for PlayStation. Hit games like God of War or Uncharted etc. are all results of this studio. PlayStation by itself has a revenue of about $18 billion in 2017.

· PlayStation products follow the timeline mentioned above and additionally have online services like PlayStation Vue, Music, and PlayStation Plus for online gaming. The latest installment is 4k capable PlayStation 4 pro and a slimmer version of PlayStation 4 released in 2016. Tangible resources include assets like physical property and cash and Sony Corporation’s total assets(quarterly) is $178.8 billion as of September 2018.

· Sony has been pursuing environmental initiatives since the early 90s and in 2010 Sony announced "Road to Zero" global environmental plan. In accordance with this plan, Sony strives to attain a sustainable society by decreasing their environmental footprint to zero throughout the product lifecycle. Furthermore, they are focusing on four environmental perspectives: Climate changes, resources, and recycling, chemical substances and biodiversity. Opportunities can come pouring by addressing environmental issues. For example, the adoption of the Paris Agreement at the 2015 United Nations Climate Change Conference will definitely increase social awareness and therefore the demand for energy efficient products will increase. This would attract more customers while creating a social awareness.

· Political

· Sony Corporation is the parent company of Sony Interactive Entertainment and therefore because of the fact that the company is operating in more than a dozen countries it exposes itself to different political risk. Political stability is the biggest market opportunity for Sony. The stability would result in the decrease of political blockades in macro-environment and these would lead to the availability of opportunities for expansion. Furthermore, government support for data security would help the growth because Sony has a major online portfolio and PlayStation needs data security to keep their customers and provide them with a safe exposure free experience. Additionally, government support for online business helps and allows Sony to enhance its online maneuvers like expanding online services for PlayStation which they have by introducing PlayStation network or PlayStation Vue as tv services and even Music services.

· Economic

· There is always an opportunity for growth with the development of the economy and Sony can take advantage of this. The higher the growth rate higher the increase in Sony's revenues. With the growing market, stability is just as important and stability of these developed markets provides Sony an opportunity with a decreased risk based on the market. Recently, there has been an increase in disposable income and this would also mean an opportunity to increase revenues by marketing PlayStation more aggressively.

· Social

· Online gaming is massive, and this creates another opportunity for Sony by selling their gaming products with some online function. New games like Fortnite or classics like FIFA and Call of duty have increased popularity because of major online features and therefore more of this would help increase the revenue. Also showing social benefits of gaming and developing games that would help customers socially can help increase revenues. Games with team building opportunities and making more multiplayer games that can be accessed offline

· Technological

· Sony Interactive Entertainment highly depends on technology and with growing technology, Sony can grow as a business too. One such example would be introducing PlayStation Move plus VR because virtual reality has been trending for a while and soon Sony should take advantage of Augmented Reality (AR) because it has been trending too. Also allowing PlayStation to be connected to a smart home could be the next step towards the future. And Handheld popularity is increasing, and it is projected that by 2020 most games will be played on smartphones. Sony can finally come out with a new version of PlayStation Vita. Research and Development activity never slows down, and it can be as bad of a threat as a blessing. Sony should not stop R&D investment and instead use it to gain a competitive advantage.

· Environmental

· Sony could increase emphasis on environmentally friendly products and sustainability. This would help Sony attract more customer base. They should also consider increasing recycling and making it available to their customers. The way Apple offers to recycle old products for the new one. And if they already have such a program, they should market it better because it isn't easy to find. Although they do advertise the energy saving features of PlayStation in a great manner. Also, they are already taking initiatives to decrease the CO2 emission by using renewable sources of energy.

· Legal

· Decreasing environmental impacts comes with a cost and the increase in the regulations on e-waste is an initial threat because it requires a larger investment, but they can turn it into opportunity by attracting environmental customers. Moreover, Sony can strengthen its brand image by making their products better and environmentally friendly and gain an environmental reputation.

· After performing the PESTEL analysis of Sony Interactive Entertainment LLC. It seems like Sony has more opportunities than threats. Improving product innovation to become more environmentally friendly could make a huge difference and they could gain a competitive advantage through this. Sony could additionally focus on a handheld console or mobile gaming to take advantage of the new generation based on the increased usage of mobile gaming.

· Competitive rivalry(competition) (strong)

· This part of porters 5 forces analysis helps us understand how the competition affects the revenue of Sony Interactive Entertainment. The rivalry amongst existing players in the electronics industry is already high. The following are the external factors:

a) Low switching cost

b) Low to moderate competition (Nintendo and Microsoft are the main ones)

c) Aggressive investment in innovation and marketing

There is less competition in the gaming part of the electronic industry but at the same time, the switching cost is low because all the consoles have to be priced around the same price and therefore one mistake can result into losing customers. It is easier to switch from PlayStation to Xbox because of the fact that most of the games are similar. One way that PlayStation is great at retaining customers is with the help of their amazing only for PlayStation games. Moreover, since the risk of losing a customer is so high this results in firms investing a lot in innovation and marketing.

· The threat of new entrants (weak)

· Sony Interactive Entertainment should not underestimate the potential growth of new entrants. Although it is hard to penetrate the gaming console market segment because of the domination of these 3 main players. It is still a possibility and the following external factors would be responsible for the threat of new entrants:

a) The high cost of brand development

b) Cost of doing business

c) Low switching cost

d) Innovation

New entrants can easily attract customers and create a customer base by taking advantage of low switching cost but that is the only card they have in their pockets after matching the console level that Sony, Microsoft, and Nintendo provide. Moreover, brand development is expensive, and this would easily be a barrier for the new entrants because they would have to find a massive amount of funding to compete with the giants.

· The threat of substitutes (moderate)

· Because of the fact that there is less competition, there are fewer products that could replace PlayStation and so the threat of substitutes is low but not irrelevant because the other available products like Xbox or Nintendo and moreover the biggest substitution PC is available. Sony should consider the following factors:

a) Low switching cost (Gaming consoles)

b) High switching cost (PC)

c) Low variety of substitutes

d) Low availability of substitutes

Pc is expensive to switch but also long-lasting and still highly preferred because of the external expenses being low and great connectivity. Moreover, motion gaming was also a big thing in the past and this is where both Xbox and PlayStation failed to dominate in a Nintendo Wii era and they failed to provide a better substitution. Furthermore, PlayStation came out with VR to welcome a new era, but VR is not so popular in general and Oculus Rift is a major competition here and the only substitution.

· Bargaining power of suppliers (moderate)

· Sony Interactive Entertainment highly depends on its supplier because the games are not always produced in Sony owned or funded studios. Bargaining power of suppliers is about how suppliers can influence the accessibility of the materials that firms. The following are the external factors:

a) The medium size of the overall supply

b) Medium to low size of individual suppliers

The size of their suppliers’ communes to their limited influence in the entertainment and gaming industry. Moreover, suppliers own or directly control very less amount of distribution and sale of their goods and services.

· Bargaining power of buyers (customers)(strong)

· The following are the external factors that cause the strong intensity of the bargaining power of customers:

a) Low switching cost

b) Medium frequency of buying

c) High quality of information available to the customers

The information available on the internet helps customers gain an advantage over the company as it helps them evaluate any product before deciding to buy one. Implementing aggressive marketing with help them keep their customers and gain more because customers are smarter when it comes to making switching decision. So, the marketing can help customers see and realize the switching cost. The smaller their customer base the more bargaining power of customers so Sony should have a bigger customer base.

· Sony's operations could be negatively affected if appropriate steps are not taken in order to achieve the goal of being environmental. These risks involve mainly new laws or regulations that could stimulate an increase in carbon taxes or even impose more strict energy saving standards on products. Another major risk for concern here is market change risk. This could happen because of consumers evolved mindset and perceptions about the environment. Sony recognizes that a crippled solution to such risk would affect their financial and social status in the world. Sony has shown that they are trying to stay on the top of the game by collecting laws and regulations information of all the countries it conducts business in for the products to comply with these regulations.

· Another major risk in the world of Sony Interactive Entertainment is cyber-attack. It has happened before, and it has happened to a lot of different companies and this wasn't the first attack on a major company and this surely won't be the last one. And cybersecurity is a major financial risk even more so when the company doesn't have coverage for cyber-attacks being highly dependent on online activities. The cyber-attack made the PlayStation network vulnerable because of the fact that personal information of everyone on this network was leaked.

· Macalisters Blonay character profiling

· After an analysis of the company, in my opinion, Sony falls more towards Bold creative and Empathic ends of the Blonay's character profile triangle. This is because the company is constantly taking risk into becoming the best, risks such as introducing VR even though the market demand is not very elevated. Additionally, Innovation is required in the technology for the company to continuously thrive at being an environmental company. Sony as mentioned before having taken a number of steps to become an environmentally friendly company, but this doesn't mean they want to sacrifice their profits and therefore it is more toward bold creative than empathic. Although it's understandable that because the company is profit driven it could be towards self-disciplined but the main mission of "Kando" or moving emotionally also suggests that the company still wants their customers to have a great and emotional experience and as a proud customer I can agree that I have been moved emotionally.

· Sony is for profit and it definitely is highly depended on the company profits to grow and as mentioned earlier about 22% of its profits come from Sony Interactive Entertainment which includes the PlayStation family. One of the services PlayStations Vue is like a tv streaming service, but it is not as famous as Netflix, Amazon Prime or Hulu and this would be an area they need to work on. For example, they could make the app available on tv and give discounts to everyone with the subscription of PlayStation Plus which allows customers to play games online amongst other features. Although Sony wants to keep its profits increased, they do care about the environment and always want to keep their customers happy by allowing them to enjoy environmentally healthy products.

· Sony’s supply chain is across the entire globe and they have their own electronic manufacturing facilities in Japan, South Korea, China, Malaysia, The UK, Mexico, Thailand. The following is a map of all the electronic manufacturing facilities at Sony.

Sony has established a supply chain code of conduct to take responsibility against issues that include but not limited to human rights, health and security, labor conditions, environmental protection and this code of conduct is followed not only at their production site but also with their suppliers. At Sony, Sony Global Manufacturing and Operations Corporation (SGMO), take the lead in promoting this established code of conduct throughout all Sony owned companies including Sony Interactive Entertainment. The SGMO is responsible for implementing all the policies and taking actions against any inadequate conduct. The main headquarters for Sony Corporation is located in Minato, Tokyo, Japan but the head office for Sony Interactive Entertainment is in San Mateo, California and this shows how culturally diverse the company needs to be in order to achieve success in every part of the world they are.

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