4Walkman (1) Developed for internal purpose Launched in 1979 Playback function, cheap components, headphonesCommercialization not obvious:engineers did not believe in the projectuncertainty of customer requirementright time to lauch the product?
5Walkman (2) Launch: Accelerating the market acceptance Managing expectationsSign of youthInitially, complementary product to the cassette tapeBecame a dominant productIncremental Innovation embedded in a technology pushCompetence enhancing
7Discman First CD produced in 1982 (in collaboration with Philips) First CD portable music player worldwide launched in 1984 First moverDiscman CD Walkman (strong brand image)Complementary productMore incremental innovation
8Mini-Disc (1)1980’s: working on improving the CD, they developed the digital audio tape and the recordable cdPhilips: Digital Compact Cassette (DCC) compatible with cassette players1992: Sony Mini-DiscNot with compatible existing systemsUse of complementary assets from Sony18 software and 32 hardware agreements before the launch of the Mini-DiscAudio quality a bit inferior to the CD
9Mini-disc (2) Standard War: DCC had superior quality and compatibility Consumers: wait and see who the winner would bePhilips: discontinued DCC in 1996 (old cassettes were cheaper)1999: competition with MP3 players slow growth for MD2000: format considered to be a failure by industry analystsAustralian company (Xitel): card allowing the transfer of MP3 to MD saved the MD
10Mini-disc (3)2001: Sony exploited the MP3 opportunity and launched the NetMD and the Hi-MDallowed the transfer of MP3 to MD in an easy and rapid wayNowadays: Sony still produces MD players with Hi-MD formats allowing up to 45 CD’s to be uploaded onto one Hi-MD with an upload speed of one CD per 40 seconds
11Mini-disc (4)Strategy based on Porter’s values: Sony wanted to create the new technology coming after the audio cassette, not to be an imitator of the next technologyDominant design: use of well-established Walkman standard shift concentration from design to cost quite rapidlyAppopriability regime: aggressive patenting policy to contain imitatorsComplementary assets: used a lot of complementary assets it had in-house, which helped to reduce the lengths of the projects and the costs
12Mini-disc (5)Creative destruction strategy: achieved growth through the cannibalisation of audio cassetteS-curve: knew better than any other company that the cassette had reached its limits since Sony invented it
13Mini-disc (6) Sony made a few mistakes: It didn’t understand that the MD didn’t need to be prerecorded in the eyes of the consumer and that the industry saw it as an enemy of CDIt didn’t understand the growth of computer-based music in the early 1990’s with the rise of MP3 music.Only a small portion of new technology leads to new product and only few new product are successful… Before arriving at maturity, the MD was already “old fashion” due to the arrival of the MP3…
14MP3 player (1)1996: Audio Highway released the first portable MP3 player which had a capacity of 32 Mbytes (6 songs) and was based on flash memory3 leaders: Apple (iPod), Microsoft (Zune), Sony (Walkman)Market share in 2006: Sony 10% and Apple 75%Goal of Sony: capture a market share of 20% with its Walkman.Difficult task: make customers switch from iPod to Walkman switching costs due to the use of iTunes
15MP3 player (2) Porter 5 forces Competitive rivalry within the industry Numerous competitors, all electronics companiesIncreasingly mature industryFixed costs not so highLow exit barriers (some companies try and discontinue the MP3 activity)Low differentiation but dominant design emerged with the Ipod
16MP3 player (3) Porter 5 forces Threat of entry Low barriers to entry Strong retaliation possibilities of MP3 titans (Apple)Access to supply and distribution channels quite easyNo legislation on MP3 manufacturingVery low switching costs for the customers (except for iTunes)
17MP3 player (4) Porter 5 forces Threat of substitutes The price/performance ratio of the main players is quite high but doesn’t turn customers offExtra-industry influences: mobile phones industry integrating MP3 players into mobiles but most players are both active in the MP3 player and mobile phones industries
18MP3 player (5) Porter 5 forces Power of buyers Unconcentrated buyers (media stores, electronics retailers)Low switching costs but dominance of Apple in the marketNo backward vertical integrationPower of suppliersConcentrated suppliers (few CPU or hard disk manufacturers)High switching costs because of high volume contracts with suppliersSandisk producing hard disks becomes increasingly important on the MP3 player market
19ConclusionAlthough Sony created the market for portable music with the Walkman, it missed the shift to digital music-players. ”The youth-in-motion” brand has been overthrown by the more dynamic and cool iPod…
20Does the FUTURE look bright for Sony? Coming next…Does the FUTURE look bright for Sony?