Porter's Five Forces Model and Porter's Value Chain

CORPORATION

Porter’s Competitive Strategy ModelsFive Forces Model and Value Chain are two of the competitive strategy models contributed by Michael E Porter of Harvard University Professor ‘s of Harvard Business School. The two models was created in 1979.

Porter five forces analysis is a framework for industry analysis and business strategy development.

In Porter's value chains, Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales and Service are categorized as primary activities. Secondary activities include Procurement, Human Resource management, Technological Development and Infrastructure.(Porter 1985, pp. 11–15).

Organisation Chosen: Sony

Company Overview and HistorySony Corporation has history over the past 60 years in development, design, manufacture, sales of electronic equipment and devices as well of game console and software. Sony has now expanded their business horizon to marketing, manufacturing, television product as well as entertainment industry in motion picture and recorded music.

The pass 20 years Sony has become inventor and making profit. They have produce power megaphone, first magnetic tape recorder prototype called G-Type, first transistor radio, produce the smallest transistor radio in commercial production at the time, videotape format, color TV system, Walkman, world first CD player, Discman, cameras, camcoders, Vaio series PC, PlayStation, from home audio, media to robots.

Porter’s Five Forces Model for SONY

Intensity of competitive

rivalry

Threat of New Entrants

Threat of substitute

products or services

Bargaining power of customers

(buyers)

Bargaining power of suppliers

Intensity of competitive rivalry• Since Sony’s market segment includes Electronic, Game,

Pictures, Financial Services and Joint Ventures. For the past 5 years, among Sony’s existing and potential competitors like Samsung, Apple, Foxcon and Hitachi.

• Within Electronic segment has lost much of their market in audio. MP3 players and iPods have replace Sony’s Walkman. Blu-Ray competes directly with HD-DVD technology, while Blu-Ray offer crisper picture and more storage capacity, this technology is twice expensive than HD-DVD. PlayStation sales has problem with cost, even though it offers superior graphic, Nintendo and newer version of android games witness faster sales then Play Station.

• Sony leads market with Bravia line of LCD TV. They hold competitive cost over the rest of LCD market.

• Segment analysis indicate that Sony will suffer loss in profit. The rivalry will not show any weakening sign in near future.

• Sony needed to focus on technological innovation, high end design and product differentiation from the rivalry. Sony also need to reduce cost and keeping the price low like the achievement they have gain in producing LCD market. Sony should improve loyalty amongst customer as customer purchase is not uniformly across Sony products.

HIGH

Threat of New Entrants• Profitable markets that yield high return will attract new

firms. However, not many company will seek to compete with Sony because of the cost will be too high to compete with the electronics giants that already exist.

• A small player will also require strong relation with suppliers and efficient manufacturing processes otherwise they could not produce at low cost.

• Sony is currently the 4th rank in ‘The 100 Most Loved Companies’ by APCO worldwide and it is also one of the top 10 Best Global Green Brands that consumers associate with environmental conservation and sustainable business practices. This may attract consumer to be loyal to Sony brands and attract new buyer of those who support green product. This is a competitive threat for new industries to attract customer loyalty to establish brands.

• Patent right and government regulation keeps the threat of new entries low.

LOW

Threat of substitute products or services

• Although Sony has tries to differentiate their products through modern design, high quality graphic and superior technology, they still have threat of substitute product like iPod over Sony Walkman, iPad or Android or Tablet Game over Sony PlayStation, and HD DVD over Blu-Ray.• Substitution like music download or

streaming cause an effect on Sony recording music industry.• Since the price is high consumer switching

to other products which is close to the substitute.• Sony need to think about competitors and

customer loyalty too, so people can choose Sony over other substitute.

HIGH

Bargaining power of customers (buyers)

• Customer have a choice of electronics product that they want to choose. • Beside Sony there are plenty of

electronic business that are doing the same product as Sony like LCD, PlayStation, Music Recording, Tablets and also Notebook. Therefore customer bargaining power are very high.

HIGH

Bargaining power of suppliers

• The company that support and supplies parts for Sony.• There are a lot of company that

sells electronic parts which Sony can choose from. These companies rival with others to propose with lower price of parts. Therefore the bargaining power is very low. LOW

Porter’s Value Chain for Sony

Sony is committed to conducting its operation socially and environmentally responsible manner to supply product out of the premises into the hands of customer.

Primary activities1. Inbound logistic

• Getting raw materials into receiving should be done in effective and efficient manner to receive more raw material to increase productivity in production sector.

• The raw material should be as safe as possible to environment to make Sony as respectable environmental productivity to gain customer trust and interest.

• Sony should also ensure that they have a warehouse in the production sector to avoid shortage of raw material.

2. Operations• If the planning is followed in inbound logistic, the operation

can be increase.• Mass production should be implement and on continuous

basis to produce more product.• Improvement must be done from time to time to eliminate

waste of process, waste of time and waste of cost to add value to final product.

3. Outbound logistic• By creating a warehouse in production area, Sony can

increase production and place extra amount of finished good to be delivered to customer.

4. Marketing & Sales• Increase sales by delivering and sharing corporate value• Using attractive and utilize new information technology to

increase popularity and increase sales.• Make a difference and do Customer focus by targeting

lower middle income to high income customer.• Improve and be excellence in rebranding and

management

Primary activities

4. After Sales Services• Warrantees and guarantees should be attend in fast and

efficient manners• Sony should have a repair center and authorized

distributors for service.• By setting up online help and call centers, Sony can help

increase customer trust in purchasing Sony products because they knew that Sony will provide excellent after sales service.

Primary activities

Support Activities1. Procurement

• According to Sony.net May 2003, Sony management policies is concerning dealing with supplier categorize under headings of “Fair Procurement”. This policies are heading for equal chance of business to suppliers. Also to increase good relationship amongst suppliers.

• Sony strictly meet expectation of customer by adheres to laws, regulations and standards from countries that they are making business with. By meeting the expectation it gives advantages on dealing authorities while gaining trust from suppliers as a reputable company.

• Sony should improves on zero defect from the planning to ensure parts provide by suppliers is easy progress of supply parts.

2.Technological Development• With the founders' doctrine of "Do what has never been done before" and "Always stay one step ahead“, this

means Sony needed use new technologies in order to support value chain activities. With the help of jig or custom-made tool used to control the location and/or motion of another tool will help to increase productivity and support to delivering product to customer.

Primary activities

Porter’s Value ChainSupport Activities (Continues)

3. Human resource management• Sony could start by being the most likable company to work with, by

creating happy, safe and positive environment to work with while reducing high turn over.

• Training program should be improved, to make a skill workers and are ready mentally and physically for their responsibilities in the company.

• Attraction benefits, career and advancement opportunities keeps employee stays thus reduce the turn over or to transfer knowledge to new employee.

4. Firm Infrastructure• Legal should follow compliance and regulations of the country or state to

ensure the products is safe and follow standards it ease the process of delivering product to the customer.

• Quality management to be installed to ensure quality and safety of product, employee and customer. Thus to increase customer interest in Sony product.

References• http://www.sony.net/SonyInfo/CorporateInfo/

• http://www.sony.net/SonyInfo/csr/SonyEnvironment/ourvision/

• http://www.sony.com.my/article/239931/section/overview

• http://www.rankingthebrands.com/Brand-detail.aspx?brandID=127

• http://www.sony-asia.com/microsite/eco/?referer=http%253A%252F%252Fwww.sony.com.my%252Fproductcategory%252Ftelevision-projector

• http://www.sony.net/SonyInfo/csr_report/sourcing/supplychain/

• http://www.ukessays.com/essays/business-strategy/the-greatest-insight-into-that-sony-strategy.php

• http://www.ask.com/wiki/Porter_five_forces_analysis?o=2802&qsrc=999&ad=doubleDown&an=apn&ap=ask.com

• http://www.ask.com/wiki/Value_chain?o=2802&qsrc=999&ad=doubleDown&an=apn&ap=ask.com

• http://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2012/reports/Sony.pdf

• http://university-essays.tripod.com/porters_5_forces_analysis.html

• http://en.wikipedia.org/wiki/List_of_the_largest_information_technology_companies