Situation Analysis Sony’s Ability to Compete in the Tablet PC Market

Thomas Gibb, Matthew Wasserman, Collin Morstein, and Chase Jackson

4/29/2012

Company and Industry Analysis

Sony Corporation is a top global media conglomerate with deep roots in the consumer electronics, music, gaming, and content distribution industries. Sony’s mission: “To deliver, through a wide range of appealing products, the most compelling and exciting content and entertainment experiences to our customers around the world,” is being ever pursued through product invention and innovation between Sony and its 1,200 subsidiaries (Hoovers 2011). Sony’s most recent venture into the tablet PC industry aims to expand the Sony brand and global network, as well as take some of Apple’s share of the tablet pc market, which yielded sales of 60,000,000 units worldwide in 2011(Oliver 2012). Sony will continue to expand in the tablet pc market, which is expected to increase to 90,000,000 units sold in 2012, but the growth in this market will cause Sony’s other electronic device markets reduce in size (Oliver 2012). The rapidly growing tablet pc market can allow Sony to reverse recent net losses and boost sales of their tablet models in addition to their online content, music, and video games. Innovations to Sony electronic devices have helped the company use tablet pc’s to assist in marketing and increase the sales of other Sony Corporation products and services. Sony’s two first generation tablet PC’s, the Sony Tablet S and Sony Tablet P, will provide customers with another platform from which they can improve their communications and networkability.

Sony Corporation Provides Technology for Inspiration and Shared Experience Sony Corporation is a leading manufacturer of audio, video, communications, and information technology products for both consumer and professional markets. Despite the total net loss, 1.2 billion dollars, for fiscal year 2011, Sony recorded $87,000,000,000 in sales (Sony 2012). Sony continues to focus more resources on its Networked Products and Services segment. In 2010, after launching new services, such as Video On Demand and Music Unlimited, Sony experienced a significant increase in sales for other products in the segment. The following year, the fiscal year that ended March 2011, 20.8% of Sony Corporation’s total revenue came from the Networked Products and Services segment, which is greater than a 5% increase from the prior year (Sony 2012). Growth in the Networked Products and Services segment provides Sony with the opportunity to further increase revenues via content and content viewing hardware. Tablet pc’s are the next step towards Sony’s mission to contribute towards a fully networked world. According to Sony Electronics’ President, Phil Molyneux, “There will be a second generation, and many more to come, so I think were in a really great direction with consumers at the center of our thinking” (March 2012).

Tablets Make Up 46.5% of Sony Networked Products and Services Segment With the Network Products and Service segment composing nearly a quarter of Sony’s total revenue, the global tablet pc market will be a future cornerstone for the company’s financial well-being. A report from Forrester projected, “34% of adults in the U.S will become tablet owners in the next four years” (Forrester 2011) Similar projections have been made by Sony’s analysts and are being acted on. However, in order to funnel more resources towards tablet pc’s Sony must cut back in other segments. In early April 2012,

Sony’s new transformation plan was announced. The plan was developed to “revitalize its (Sony’s) electronics business.” The plan includes eliminating 10,000 jobs, 6% of Sony’s global workforce. The eliminated jobs created openings for positions that would contribute to improving Sony’s first generation of tablet pc’s and effectively increase the company’s market share in the tablet industry. The change was necessary in order for Sony to remain a top contender in their markets. “Sony has been hammered by competition from Samsung in television sets, Apple in digital media players and computers, and even Microsoft in game consoles” (Wall Street Journal 2012). Much focus was directed to strengthening mobile business, targeting 22.3 billions of sales dollars, and “significant profitability improvement” in fiscal 2014 (Billboard 2012). Sony’s new tablets will create several more interactions between Sony Corporation and its consumers, which will increase sales in audio, video, online gaming, and online content. Sony’s ability to generate and distribute content to its consumers will allow it (Sony) to contend and succeed in the tablet pc industry. Sony Aims to Grow Rapidly, with Android, in the Tablet PC Market More tablet pc’s will continue appearing on the market in 2013 that possess qualities of traditional personal computers which will create a surge in growth, similar to that of smart phones in recent years(Oliver 2012).

Figure 1. Tablet Sales Worldwide, 2010-2012, adapted from “Tablet PC Sales 2012,” by

Emarketer.com, 2012.

Fueled by the introduction and advancement of the Apple IPad, consumer demand for tablet pc’s is reaching new levels. Figure 1 shows in 2012, global tablet pc sales are expected to be greater than eighty million, which will be an increase of 87% from the previous year. Since 2010, global tablet pc sales have increased over 200% and are still increasing (Emarketer 2010). Sony maintains the advantage of having millions of consumers around the globe that are loyal to their brand and are eager for new Sony tablets. “Apple controls approximately 62% of the total tablet pc market share in the U.S”, which is the greatest of any company producing tablets. Samsung is the second closest with 9% of U.S market share (Hachman 2012). Sony has the potential consumer-base to dethrone Apple as the leader in the U.S tablet pc market. Sony’s partnership with Android, Google, should assist Sony in becoming a top contender in the tablet market. Much like Apple in the tablet market, Android controls slightly over half of the market share in the smart phone market. Phil Molyneux characterized Android as a company that is quickly expanding and growing, which will be necessary if Sony wishes to compete with Apple and Apple IOS (Hachman 2012). Android’s worldwide awareness and ease of use make it a perfect operating system for Sony to incorporate in its products and succeed in the tablet industry. Sony Integrates Products with Tablets, Not Straying From the Company Mission Sony Corporation has kept the customer’s best interest in mind and developed a networked group of products that communicate information, transfer data, and operate on the user-friendly Android 3.2 operating system. Several of Sony’s electronic devices, including televisions, video gaming systems, and mp3 players contain 3G or 4G wireless internet capabilities. The capacity to wirelessly connect to the World Wide Web yields competitive value and increases networkability across the whole Sony Corporation product line. Inner-brand cross-product connectivity creates user-friendly environments where consumers can easily take any online content, much of which Sony owns, and share it between devices. Sony’s tablets take this idea a step further by supplying users with the Google Play Store on the Android Operating System. Once connected to the Google Play Store, users can search for, purchase, and enjoy online content with a few swipes of a finger. Sony’s biggest advantage in the tablet pc market is their tablet’s capacity to play Sony PlayStation video games. Sony also developed a remote controller to create a more satisfying tablet gaming experience. While increasing revenue by selling tablets, audio content, and video content, Sony is also able to operate in the, somewhat, monopolistic market for tablet gaming. Presently, no other tablet pc competitors offer tablet pc gaming technologies comparative to Sony’s. Sony has nothing to worry about, however, because they own the exclusive rights to all of their video gaming content, which represents the remainder of their Networked Products and Services not including tablet pc sales. Fortunately, Sony can maintain and pursue their original mission statement while competing in the tablet pc industry. The Entire Tablet Industry Reached an Estimated USD 35.3 billion in 2011 The most recent sales numbers indicate that there were 60 million tablets shipped in 2011

and a predicted 119 million to be sold in 2012 (Pettey, 2012).

The value of the Tablet Industry is derived from the devices ability to web browse, email,

and social networking capabilities, play games, listen to music, watch video wireless and

on-the-go. Market research performed by ReportLinker states that “ease of use, long

battery life, mobility, ability to multi-task, instant on/off and substantial breadth of

applications coupled with the long range of available prices," are characteristics of tablets

that have driven the value of the industry up (ReportLinker, 2012).

Mobile content consumption will likely cause consumers to migrate from traditional

computers to the tablet devices (Morgan Stanley, 2011). In fact, “consumers are spending

20% less time on traditional PCs in 2010 as compared to 2008, likely due to the rising

adoption of mobile computing devices such as tablets and smartphones,” according to a

market research performed by Morgan Stanley. As a result of the attractiveness of the

tablet’s media consumption capabilities, coupled with the increased amount of time spent

on tablets, this will lead to further growth of the tablet industry as a whole. It is estimated

that, “29% of tablet purchases will cannibalize PC sales in 2011, leading to a 3 percentage

point reduction in PC market growth in 2011, or a 5% reduction in PC units over the next

three years” (Morgan Stanley, 2011). Again, the considerably large size of the tablet industry

can be contributed to the growing amount of capabilities and ease of use of tablet PCs.

Hardware Plus Content is Trendy in the Industry When it comes to tablets, users want a sleek looking device, but also the ability to access

large amounts of content with a touch of a button. Successful tablets can, “gain access to

application stores that already contain hundreds of thousands of smartphone applications

and a growing list of tablet-optimized applications” (Morgan Stanley, 2011). Apple leads

the way with more than 60,000 iPad-optimized applications that can be found in the Apple-

owned App Store"(Morgan Stanley, 2011). The same Morgan Stanley research defines

tablet media content, stating, “content is robust, offering a considerable selection of music,

movies, TV shows, books, and magazines that can be accessed with the click of a button.

Application marketplaces offer a wide array of options that significantly enhance the tablet

computing experience beyond traditional desktop computing.”

If a tablet enters the market without the ability to access all facets of media content, it is

destined to fail. This “current trend” is a result of the Apple iPad paving the way with

breakthrough technology and accessible content, including vertical-integration. The iPad is

so influential that competitors wait to see what Apple comes out with before releasing any

technology of their own (Pettey, 2012).The effect of the trend is felt mostly by Apple’s

competitors. In response, competitors such as Samsung and Sony are trying to develop at

“platform ecosystem” by creating large stores of available content (Pettey, 2012).

Both Samsung and Sony utilize the Google Android operating systems as a platform to

access the content ecosystem. Morgan Stanley market research suggests that, “Android has

the best shot at competing with Apple in the tablet market; we also think that Motorola

Mobility and Samsung Electronics are the best-positioned Android tablet vendors in the

near term.” Tablet produces will need to be lean and adapt to industry trends in order to

compete with the Apple iPad.

The Tablet Industry is Growing Rapidly and Cannibalizing the PC Industry The tablet PC is a relatively new device and is currently experience a period of large sales

growth. Gartner research shows that, “worldwide media tablet sales to end users are

forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60

million units” (Pettey, 2012). A 98% sales growth from one year to another is substantial

and, naturally, tablet producers see an excellent opportunity ahead.

The increase in tablet sales is cannibalizing PC sales. In fact, one study industry analysis

states that 1 of 3 tablet sales will cannibalize a PC sale. In other words, “a would-be PC

buyer chooses a tablet instead of a PC” (Cathers, 2011). The cause of the growth of the

industry and obsolescence of PC is, again, due to the capabilities tablets possess. A study

shows that, “those somewhat or extremely interested in purchasing a tablet will not need

to purchase a PC after a tablet purchase" (Morgan Stanley, 2011) Individuals are now more

likely than ever to purchase a tablet PC to suit their computing needs. This switch, from

traditional computing to tablet computing, signals large growth in the PC market.

The effect of the industry growth is will likely cause an increase in tablet producers, as well

as a continued downturn in PC sales. Market research performed by Morgan Stanley states,

“competition is poised to heat up significantly in 2012 with the launch of an onslaught of

Android 3.0 tablets from tier-1 vendors (and many more from tier-2+ vendors), the

Blackberry Playbook, and, to a lesser extent, Windows 7 tablets and Hewlett-Packard

webOS tablets later in the year.” Other companies have witnessed the profitability of some

tablet manufacturers and want to a “piece of the pie.”

In order to gain any share of the market, producers must hardware and software that is

able to compete with the likes of the iPad and Samsung Galaxy. With the continued success

of tablet sales, studies show that 26.5 million PC’s will not get sold this year, a 7% decrease

(Cathers, 2011). As a result, “the lost PC sales would translate into some $18 billion in lost

revenues for the PC makers. With the exception of Apple, what PC makers might lose in PC

sales is unlikely to be recouped in media tablet sales in 2012” (Cathers, 2011).

Apple Holds Majority of Market Share, Competition Increased in 2011 In 2010, the Apple was responsible for 15 of the 16 million of all tablets shipped. The iPad

continued to be at the top of the pack in 2011, with 65% of the total market share (Morgan

Stanley, 2011). The reason for the iPad’s sales dominance is due to its superior technology

and user experience, including applications and available content. The iPad also leverages

its, “first-mover advantage, large installed base of iPad optimized applications (more than

60,000) and content, and overall user experience driven by vertical integration” (Morgan

Stanley, 2011).

The iPad has paved the way in the tablet industry and its competitors are looking to steal

some the iPad’s market share. In an interview conducted by the Wall Street Journal,

Carolina Milanesi said, “Despite PC vendors and phone manufacturers wanting a piece of

the pie and launching themselves into the media tablet market, so far, we have seen very

limited success outside of Apple with its iPad" (Sherr, 2012). The result of the immense

success of the iPad has been a signal for entry for competitors. The Wall Street Journal

reports that, “Apple Inc. faces new competition in the market for tablet computers, but

analysts said the second-generation iPad unveiled Wednesday will help the company stay

ahead of rivals” (With new iPad, apple tries to stay ahead of wave of tablet rivals, 2011).

The article goes on to document the recent of new competitors entering the market saying,

“Apple was first to market with a tablet last year, but there's no shortage of companies

coming out with competitive products. The consulting firm PRTM counts 102 announced

tablets from 64 different companies” (With new iPad, apple tries to stay ahead of wave of

tablet rivals, 2011). Regardless of all the new found competition, iPad is expected to retain

80% of the total market share. Tablets utilizing the Android operating system are second to

the iPad, in terms of sales, making up about 31.9% of tablet sales in 2012 (Sherr, 2012).

Sony Holds a Small Percentage of the Market Share in the Tablet Industry, but Newly

Released Tablets are Poised for Success

Tablets using the Google Android operating system occupy 54% of the tablet market share

and Sony tablets make up about 1% of those tablets (Graziano, 2012). Sony’s extremely small

market share is due to late entry into the marketplace. According to a PC industry analysis

firms are trying to compete with the iPad based on product differentiation. Sony Corp.

launched two new media tablets on September 1, 2011” (Cathers, 2011) Sony released

their tablets nearly two years after Apple released the iPad.

Although, Sony’s tablets entered late they possess differentiating and trendy capabilities,

including, “tablets that can run games created for PlayStation, and have applications that

connect to Sony’s Music Unlimited and Video Unlimited content stores. We note Sony’s

effort to push hardware plus content, which is similar to Apple’s strategy." With ability to

access Sony’s content stores, the tablets market share is likely to increase in the coming

years.

Sony is currently a small player in the growing tablet market. A closer look at Sony’s main

competitors will reveal the factors for success in the tablet industry. Specifically, Apple and

Sony control a large portion of the market share and are Sony’s most formidable

competitors. Through a detailed competitive analysis, Sony will learn why their

competitor’s tablets control the marketplace.

Competitive Analysis

Sony’s entrance into the tablet market will be held in comparison to of the most relevant

and formidable competitors in the tablet market, Apple and Samsung. Both organizations

have a strong market share of the tablet industry and are shaping the industries future.

Apple, a highly focused computer company, is essentially the pioneer of tablets and

leverages their software prowess and media content to be successful in tablets. In stark

comparison Samsung is similar to Sony as being a large conglomerate with different

divisions; they leverage their diverse resources into making multiple tablets meeting a

range of consumer needs.

Apple is in the Business of Personal Computing Experience

Apples mission is "Apple is committed to bringing the best personal computing experience

to students, educators, creative professionals and consumers around the world through its

innovative hardware, software and Internet offerings." (Apple). With that in mind Apple

created the world renowned “Macbook” laptops and line of small consumer electronics, the

iPod, iPhone, and recent iPad. This line of computing has been designed to make the

experience easy. They have now expanded from the making of personal computers to

tablets, small electronics, telecommunications, application development and content

management.

Apple has a Small Segment of the Computer Industry Compared to Sony

Currently the market for personal computers in the United States is 414.6 million for personal computers including tablet computers shipped during 2011 year, up 14.8% from the year earlier. (Caufeild)

Table 1: Apples global and domestic market share for 2011

Global Domestic

Units 13.4 Million 21.97 Million

Percent 3.1% 5.2%

Note: Market Date Adopted from Caufeild, B. (2012, March 08). Forbes Technology. Retrieved April

28, 2012

As the data suggests Apple’s strength is not in its global sales, Apple actually ranks in the

lower 40% of market share. This is attributed to two reasons; first they have less than 118

Apple retail stores internationally. (Apple Corporation) One of the largest reasons for

Apples success was because of the customer service available to customers of Apple

products at their genius bars. Second is Apples price on their products, their cheapest

laptop is priced at $1,000 while many PC counterparts can be as low as $400. (Caufeild)

This is why you see extremely wealthy countries such as Western Europe and emerging

markets, China, having the bulk of their retail stores there.

Sony currently has 130 retail stores globally, 28 in the U.S. Sony can use these stores to

create a more service oriented product to complement its tablets. Additionally Sony can

capitalize on a global tablet market by offering cheaper but still quality products because

international consumers can afford them.

Figure 1: [Data used from] "Ipad -- How Big, How Fast?." Black Book - Apple: Ios - Powering The Mobility Revolution (2010): 57-63. Business Source Complete. Web. 25 Apr. 2012.

In Quarter 4 of 2011 Apples sold 4.9 million PC units, 35.1 Million iPhones and 15.4 million

iPad units. If we were to count the total 20.3 million units sold as all PCs, Apple’s market

share would rise higher, placing it first in the rankings. (Cathers) For 2011 the Company,

had a 88% unit growth over the year-ago quarter for iPhones a 151% unit increase for iPad

and a 7% unit increase over the year-ago quarter for Mac Books.

9%

28%

63%

Q4 Apple Computer Sales

PC

iPad

iPhone

Table 2 shows Sony in comparison sold 9.6 million VAIO PC’s, an annual increase of 1.9

million units, while tablet figures are still unavailable. This means that Sony has a strong

share of the PC market and needs to use the VAIO name as a means of expanding their

tablet market.

Table 2: Comparison of Sony and Apple PC Growth

Sony Apple

2011 Q4 Sales (Units) 9.6 million 4.9million 2011 Growth (%) 20% 7% Sony should integrate features on its tablet, S and P, to work with its highly successful VAIO

personal computers, such as calendars, music, application, and documents. Similar to the

way Apple uses its moderately successful MacBook as a selling point for the iPad because

they highlight how the iPad will integrate functions between the two.

Apples Tablet Industry is Growing

For 2011 there was a 151% increase in the sales of iPads, so there is a clear demand for iPads. Research from Morgan Stanley’s assessment on tablets also suggests overall tablet demand is still underappreciated, by their analysts estimates shipments could reach 100 million by 2012. This means that Sony will have a difficult time obtaining a sizable market share of the tablet industry. Sony has only begun to enter the market and while Apple holds 68.9% of the tablet industry.

Table 3: reprinted from Morgan Stanley. (2011). Tablet Demand. New York: Morgan Stanley.

According to IDC's Worldwide Quarterly PC Tracker which gathers PC market data in 55 countries by vendor, form factor, brand, processor brand and speed, sales channel and user segment. The research includes historical and forecast trend analysis as well as price band and installed base data. This PC tracker includes Desktop, Notebook, Ultra Portable, but does not include handhelds such as the iPad. This April the world reached its billionth mark for personal computer sales and estimates it will be at 2 billion in 2015.

The projected PC growth is an important opportunity for selling more VAIO tablets in the coming years. Coupled with the proposed integration of tablet and PC applications this can mean higher tablet sales.

The iPad fits Apples Mission Creating a light, “clean” computing device is directly in line with Apples mission to “create an easy to use computer for students, educators, creative professionals and consumers around the world” The definition of tablet computing is a, mobile computer that is light and portable with touch screen interface. (Morgan Stanley) The iPad helps mitigate the shift into Smartphone’s because people are less reliant on PC's to accomplish tasks like email and directions. But the fallacy of smart phones is that they don’t have raw computing power, tablets attempt to bridge that gap. Therefore tablets are means of creating a powerful computing tool that is light, clean and mobile. Sony needs to create its own mission and image of “bridging” the gap in computing. Sony will need focus on its Make.Believe image of uniting communications effort across their products. This focused effort will display to customers how Sony’s image reflects the value of what tablet computing is and how Sony integrates it into their business.

Samsung Produces More Patents than Sony

Samsung has spent more on research and development than Sony over the past decade

translating into more advanced technology. Samsung and Sony are both multinational

conglomerates, with multiple subsidiaries ranging from industrial ship building to life

insurance, but Samsung continually produces more patents. A firm’s knowledge base is the

foundation of the firms’ innovation thus; it is ultimately linked to a firm’s success in the

consumer electronics industry.

Figure 2: Joo, S. H. (2010). Samsungs Catch Up to Sony . Journel of Asia Pacific Economy, 271-287.

This has shifted Samsung’s electronics division into the flagship of their company and

industry with consumer electronics such as, LCD and LED screens, mobile phones, semi-

conductors, and televisions. Samsung’s 3-D panel television division made a record

$246,511,423 while Sony lost $1 billion for 2011 from its high end television department.

(Joo)

Samsung Controls a Small Share of Personal Computers but Large Share of the Tablet Market

Samsung's global market share in personal computers currently stands at 1.7 % which

translates to roughly 1.428 million units for quarter 4 2011. However Samsung’s emergent

tablet market has sold about 2 million units of the Galaxy Note equipped with a 5.3-inch

screen and a stylus since sales began in October, and “good sales” of its Galaxy tab.

(Krishnamoorthy) Data suggests that in February of 2011 Apples tablet market share was

reduced from 96% to 75% largely in part to the rapid sales of galaxy tablet and popularity

of android operating systems. (Krishnamoorthy)

The research shows that a company with similar size and scope of Sony does not need to

have a firm foundation in personal computers to be successful in the tablet market. Rather

the success of Samsung’s tablets seems to be poised toward easy operating systems and

unique features.

Samsung’s Tablet Industry is Success Comes with Legal Issues

0

500

1000

1500

2000

2500

3000

3500

Patents

Years

Sony Vs. Samsung Patents

Samsung Total

Sony Total

Samsung has obtained 16% of Tablet market share 3rd for all tablet competitors from 2011

to 2012. (Grabham) Additionally in the coming months and year there is high growth

potential of their market share because of their new Galaxy 10.1 tablet. This rapid growth

can cause issues for Sony in emerging into the tablet market since market share is rapidly

eroding from Samsung’s success.

However Samsung is locked in multiple legal spars over copyright of technology used in

their new Samsung Galaxy tab 10.1. Due to these legal’s actions the sales of units is being

banned in multiple countries. Sony has an opportunity to exploit the stagnation in global

tablet sales, by filling the galaxy tablet void. Currently Samsung’s lawyers are trying to

appeal the bans to open up 2 of the top 10 wealthiest countries.

Table 4: Countries where Galaxy 10.1 is or was banned

Germany Australia United States

Ban Status Ban removed in Feb 2012 Ban Upheld In litigation

Note: Krishnamoorthy, A. (2012, Februrary 28). Samsung Aims to have Higher Sales. Bloomberg

Businessweek.

Samsung Creates Multiple Tablets to Fit Company Vision Samsung has what is called “Vision 2020” in which it hopes “to contribute to a better world and a richer experience for all.” (Grabham) Samsung does this by having 3 different tablets released to cater to the need of a variety of customers. Their Galaxy tab is a “bridge” between Smartphone and tablet. Their Galaxy 7.8 is seen as a “Kindle Killer’ and Galaxy 10.1 are to accommodate the large screen and computing needs that many iPads users require.

Samsung has leveraged three key strengths: "New Technology," "Innovative Products," and "Creative Solutions" (Associated Press)in order to help dominate the market. Sony will need to either fill the void in tablet consumers’ appetites or create a product in order to rival existing competition as Samsung has done.

Samsung Aligns Corporate Strength with Tablets, Sony Should do the Same

Samsung’s most profitable sector for the last 4 years has been their smart phones. They reported a 4.45 billion net profit for the first quarter, up 81.29 percent from 2.78 trillion won in the prior-year quarter, and 26.17 percent higher than 4.0 trillion won in the preceding fourth quarter. (Caufeild) By entering the tablet market they have been able to integrate their most successful part of the business, smart phones, and utilize that. Samsung has already begun introducing larger screen tablets that can rival the iPads and utilizing the 3D screens from their smart phones and inputting them into the tablets.

Additionally Samsung has created the Social Hub, “the seamless integration of social media such as, twitter, facebook, and tumblr to be accessed easily through tablet or smartphone.” Sony can also utilize their most profitable sectors like media content and video gaming to integrate with their tablets. With the exception of Apple, in respect to music and video, there is no competition in the tablet industry. Sony can build on their exclusive media network to promote exclusive content.

SWOT Analysis

Strengths

Since Sony’s establishment as a consumer electronics company they have grown into a global

force for innovation, acquisition, and evolution. Sony has a large established infrastructure that

many of their competitors are still struggling to build. Their brand name, manufacturing

capabilities and content empire remain to by Sony’s greatest assets.

Sony’s most valuable strength is its brand recognition. After being in business for over half a

decade Sony has established one of the most recognizable electronics brands. They have

been pioneers of new technology such as VHS, Blue Ray, and the Sony Walkman. This

recognition means new products will be meet with easy customer acceptance, hopefully in

terms of their tablets.

Sony possesses a media empire. Sony owns Sony Media group known as 1 of the big 4 music

companies accounting for 25% of all mainstream music produced in North America. Some

analysts say that Sony has a larger marketplace for eBooks, music, and video than Amazon,

making a Tablet from Sony formidable enemy to the Kindle Fire business model.

Additionally Sony’s Play station branch can and is integrating their highly successful games

to be part of the online Sony community. This is a unique quality that Sony has over all

other tablet competition. No other manufacturer has in house gaming development.

Weaknesses

Sony released their tablet into the marketplace in September of 2011, with no prior

experience in the tablet PC field. As a result, Sony’s late entry into the tablet market could

prove to be a weakness. Also, the Sony’s weakened financial state will be another

weakness, as it relates to the success of their tablets.

Sony’s late entry into the tablet industry. Sony’s two tablets were released almost two years

after the iPad. As Sony enters the market, Apple already has a firm hold of the marketplace,

followed by Samsung and Motorola. Samsung and Motorola use the same Android

operating system as Sony, so surpassing the two companies will be difficult. Both Samsung

and Motorola have had time to build customer loyalty and adapt their products to customer

needs. Little is known about the capabilities of the Sony tablets, potentially causing

customers to be reluctant to purchase the device (Gizmag, 2012).

Sony is experience a decline in financial performance. Sony has been experiencing a decline

in annual revenue since 2008. Both operating and net profits have been steadily declining

as well. Specifically, the networked products and services division of the company, the

division responsible for tablet PC’s has, “recorded double-digit decline in revenues during

FY2010” (Datamonitor, 2011). With the decline in revenue, Sony will be less able to adapt

to the changing business environment. Due to their current financial state, Sony will be less

flexible, which could affect their ability to develop and promote their tablet PC’s

(Datamonitor, 2011).

Opportunities

Sony Corporation has the resources to increase revenues and extend its network in the

tablet pc industry. The tablet market is projected to continue expanding by millions of

consumers in the future. Tablets could serve as a virtual storefront in the hands of

consumers, increasing video, audio, and gaming content. In addition, Sony Corporation has

partnered with Android, the leading operating system in consumer preference over Apple’s

IOS.

Sony’s content can create a competitive advantage in a rapidly growing market. The

company owns exclusive rights to all of the Sony PlayStation video gaming content as well

as content owned by Sony Music. None of Sony’s competition in the tablet pc market has

produced tablets that have the gaming and content viewing capabilities of the two Sony

tablets. In the past year, PlayStation software sales have increased and become a revenue

leader in its segment. Sony has also added PlayMemories, a cloud date storage provider,

which allows Sony tablet users to store content, up to 5GB for free, online without using

storage space on the tablet’s memory card. Without the limits of data storage space

consumers will be able purchase more content for all of their Sony devices.

Google (Android)’s market growth will boost Sony’s network and sales. A study performed

by ComScore, in late 2011, revealed Google owned over 40% of the mobile operating

system industry’s market share. Users are beginning to prefer the Android OS to Apple’s

IOS for the first time since the IPAD was released. Sony’s vast inventory of available content

will be available to users via the Google Play Store and is purchasable by any online

payment method. Android has recently developed a newer format of its operating system,

Android 3.2, which increases user friendliness and increases operation speeds.

Threats

Sony must surpass its competitors by establishing strong relationships with customers and corporate partnerships for personal electronics in order to become the tablet market leader. Sony already is playing catch up with company trends in the tablet market, missing out on millions or billions dollars of revenue. While Apple already has a strong market position with a strong customer base, they also have contracts with corporations obtaining electronic tablet products over the upcoming years. Sony must do the same in order to establish themselves as a true tablet market competitor and/or leader.

Losing Possible Revenue to Competitors

Sony is already trailing behind the leaders of the tablet pc market, missing out on huge amounts of profits for their company. Sony must look in different areas of personal electronics to generate profits in new devices in order to sustain a financially stable business. There has been a steady line of quarterly losses in our company. There is a lot of money to be made in this new and rising tablet pc market. It would only be at our own detriment if we didn’t dedicate or invest more time and money to the new tablet pc market leader.

Figure1. Share of Industry Profits for Leading Mobile Companies. Adapted by businessinsider.com, 12/2011

This figure shows how some of these mobile device companies are making in profits, not sales, but profits. If Sony obtained a good portion of some of our competitor’s revenue, we would be greatly increasing our overall business position for future success, not just in the tablet pc market.

Form Corporate Partnerships for Tablet PCs

Currently Sony has no formal corporate relationships for companies purchasing tablet pcs, this huge market that is going untapped. If Sony doesn’t form these partnerships early, other companies will take Sony’s spot, along with our profits. Tablets are going to be on the cutting edge for companies to have reliable, fast, and mobile computing. Companies are adapting tablets because they enable their employees to do their work from anywhere and at any time. According to Morgan Stanley “As our survey shows, 21% of companies currently purchase tablets for employees, but a staggering 51% of companies expect to purchase tablets for employees over the coming year. In total, 67% of companies surveyed expect either to purchase tablets or provide support for employee-owned tablets over the coming year.” This shows Sony that there are corporate partnerships to be made, while forming a huge customer base to provide for. To miss out on these partnerships, is a huge threat for Sony becoming the leading electronics brand in the market.

With evaluating Sony’s SWOT analysis, you must consider the tablet market trends, and the new way people are using their PCs. To become the new market leader you must first evaluate the market as a whole, in order to surpass the competition and gain market share in the process.

Market Analysis

The new form of pc usage with tablets has opened a completely new market for Sony to

venture into. Sony is currently third in the tablet market, behind Apple, and Samsung. The

current market shape is based on the hardware, apps, user experience, and a shared

network for content consumption (cloud computing). With the result of consumers having

a high brand loyalty based on these features and services that certain brands of tablets

include in their purchases.

The New Tablet Market and Sony’s Position

The tablet market is fairly new to the pc market as the first tablet was released in April

2010 with the iPad by Apple. The market has grown exponentially since then (--and is still

expected to continue to grow--) as new companies have decided to enter the market with

their own tablets. Sony has just recently developed and released their own tablets within

the last year and a half, but they have already obtained the third position in the tablet

market. This was fairly easy for them to obtain as they are already a major competitor in

the personal electronics market. But they should have the goal of being the market leader

for tablets, which is the hard part moving forward.

The Growing Tablet Market

Accoirding the Infinite Reasearch “The market is only in its infancy, and new opportunities

and competitive advantages will abound as the space continues to develop.

Overall, Infinite Research expects that 147.2 million Tablet computers will ship in 2015, up

from 16.1 million units in 2010.” As shown in Chart 1.

Chart 1. Worldwide Tablet Shipment Forecast from 2010 and 2015

Note: Wordwide Shipment Forecast reprinted from “ Worldwide Tablet Computer Market

Research” by Infinite Research. 2010 by Infinite Research.

Chart 1 shows the projected amount of tablets shipped worldwide in 2015 compared with

the total amount of tablets shipped in 2010. There is projected to be over nine times the

amount of tablets shipped in 2015 than in 2010. This means that this market is and will

continue to grow exponentially in the near future. Sony should definetly try to grow their

tablet market share in the near future to obtain the best market position for their

companies future.

Tablets are Shifting the Way People Use PCs

Tablets have opened everyone to a new market, and with that, the way we use, collect, and

share information and applications in our daily lives. There has been a growing market for

tablets as content consumption has become the biggest use of pc and devices alike like

smartphones and tablets. Several Reasons are:

Social Networking

Watching Videos/ Music/ Media

E-mail/ messaging

Cloud computing

Tablets allow users to share information instantly and from any where. A study done by

Morgan Stanley states our analysis of personal computing usage suggests that computing

will increasingly migrate towards mobile devices, including tablets and smarpthones, over

time. Approximately 75% of total personal computer usage is spent consuming and sharing

content, as opposed to creating content Tablet users are spending less time on existing PCs.

Particularly for content-consumption and content-sharing activities such as browsing,

email, and social networking, 30% of tablet owners are reporting reductions in time spent

on existing PCs. Indeed, our analysis of total time spent on PCs (tablet owners and non-

tablet owners) suggests that consumers are spending 20% less time on traditional PCs in

2010 as compared to 2008, likely due to the rising adoption of mobile computing devices

such as tablets and smartphones. (Morgan Stanley, pg.8)

Users have also come acustom to having a cloud computing network integrated into their

devices. This feature also the user to access, save, and load any information they want

saved on a company server where they can remotely access the information any where at

any time, without the device. This is a great advantage over old technology, because now

even if you lose or damage your device, you can still obtain the information and contacts

through this feature basically backing up all the vital data you want.

Sony Tablets Must Add Value to its Tablet PCs The growing market of tablets is due to evolving way that people use, store, and share their

data with others. Sony tablets must include vital features for the users to feel they are

obtaining a great user experience without giving up other services or extra money for that

matter. None of these tablets are exactly cheap, and most of them have very similar

hardware specs, so you must innovate a service or feature to increase the value a Sony

tablet in the customers eyes. In the next section, a set of recommendations is provided that

will greatly add value to Sony’s tablets.

Recommendations

Evaluating the Sony’s market position in the tablet market, we recommend three strategies

to advance Sony’s position and add value to their tablet products:

1. Develop exclusive content

2. Create Corporate Tablet Market

3. Promote Products and Services

Develop Exclusive Content

Sony must develop more exclusive content for their customers in order to provide products

and services that are strictly on Sony products to stand out in today’s market. Sony has

already developed games that are only on their Sony Playstation gaming console. This gives

Sony’s customers added value to their products, while forcing competitor’s loyal customers

to switch over to Sony in order to obtain these exclusive Sony games. Sony also already

owns movies, music, and other electronic devices like PSP. All of these things you can

completely or partially include in features or services exclusively for Sony tablets.

Developing exclusive content will give Sony a competitive advantage over rival tablet pc

companies. This will also increase the value to potential and existing customers. Exclusive

content will give more incentives to keep a loyal customer base for the future as well.

Create Corporate Tablet Market

Sony must enter in the corporate tablet market in order to keep up with the market trend,

and gain the corporate revenues that come along with doing so. Corporations are now

purchasing their employees tablet pcs, instead of the traditional desktop pc. They are doing

this because tablets give employees the ability to work from any where at any time. This

increases the employee productivity causing the company to be more productive, and

making more money. Sony will miss out on a huge corporate market and possibly great

corporate partnerships if they don’t enter into this market soon. There is a huge potential

for long-term growth and sales in this market. Sony has to get in this corporate market

soon or the majority of companies will already acquire a tablet pc provider.

Promote Products and Services

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