Market Analysis Of Sony playstation in terms of Economics

1. PROJECT NAME - SONY PLAYSTATION
SUBJECT- ECONOMICS
BY-AVIK SHOUTAY
ROLL NO- M14B010
MBA – B
ISBR

2. INTRODUCTION
TO EXPLORE AND FURTHER UNDERSTANDING OF SONY PLAYSTATION
IN MARKET IN GLOBAL SCALE
FACTORS AFFECTING ITS SALES AND DEVELOPMENT

3. HISTORY OF PLAYSTATION
PlayStation was the brainchild of Ken Kutaragi, a Sony executive who had just come out of his
hardware engineering division at that time and would later be dubbed as "The Father of the
PlayStation.”
The console's origins date back to 1988 where it was originally a joint project
between Nintendo and Sony to create a CD-ROM for the Super Famicom. Although Nintendo
denied the existence of the Sony deal as late as March 1991.
The original PlayStation released on December 3, 1994 was the first of the ubiquitous PlayStation
series of console and hand-held game devices. It has included successor consoles and upgrades
including the Net Yaroze (a special black PlayStation with tools and instructions to program
PlayStation games and applications), "PSone" (a smaller version of the original) and
the PocketStation (a handheld which enhances PlayStation games and also acts as a memory
card). It was part of the fifth generation of video game consoles competing against the Sega
Saturn and the Nintendo 64. By December, 2003, the PlayStation and PSone had shipped a
combined total of 102.49 million units, becoming the first video game console to sell 120 million
units.

4. GENERATIONS OF PLAYSTATION
•Playstation – Launched On December 3,1994.
•Playstation 2 – Launched On March 4,2000.
•Playstation 3 – Launched On November 11, 2006.
•Playstation 4 – Launched On Feburary 22, 2014.

5. ON SONY’S PLAYSTATION
Factors of production.
Determinants of demand and supply.
Market structure of Sony’s gaming industry.
Briefly covers the price elasticity of demand and the production costs &
factors on Sony’s playstation.

6. FACTORS OF PRODUCTION
The 4 factors of production affecting in general are : land ,
labor , capital and entrepreneurship.

7. LAND
FOXCONN
A Taiwanese multinational electronics contract manufacturing
company engaged by Sony to manufacture the Playstation, it is
headquartered in Tucheng, New Taipei , Taiwan.

8. LABOUR
The people who work :
The workers inside Sony’s HQ designed and made improvements to the
design.
Sony has over 100,000 employees engaging is a wide array of work from
administration to management.

9. CAPITAL
TOOLS , TOOLS , TOOLS !!!!
Capital is distinctive in the facts that although they are a good,
they only indirectly satisfy human wants and needs. Capital
consists of many things like buildings, machinery, transportation
and infrastructure. Eg : Processing Chips, High End Graphic Cards

10. Entrepreneurship
Brains of the company :
Like in every successful company, their management teams consisting of competent and
able individuals who make good use of the other 3 resources to maximize profit and
productivity. People such as Kazuo Hirai, CEO of Sony does this well.

11. When cost of production decrease…
The advancement in technology in producing the playstation has
made a change in supply in causing supply to increase caused by
the reduction of the cost of production for Sony.

12. Effect on Demand
If Sony decides to lower prices in view of lower production
costs….

13. DETERMINANTS OF DEMAND AND SUPPLY

14. PRICE
When the price of playstation falls, the consumers
respond by increasing the quantity of playstation
demanded.

15. Change of price of product substitues
The XBOX and Wii are substitutes of playstation. When
these consoles falls in price, the demand for playstation
decreases.

16. Expectation of price fall
When the price of playstation is expected to fall in future,
the demand for its games also decreases, as consumers
will want to buy them later.

17. Increase in consumer income
Playstation games are a normal good. So an increase in
consumer’s income increases the demand for playstation
games.

18. DISCOVERY OF NEW PRODUCT
“New game console enters the market, which is a
substitute for playstation.”
The new game console decreases the demand for
playstation consoles. Consumers decrease their demand
for playstation games too because a playstation game is
useless without a playstation console . For eg: PS4 gets
priority instead of PS3 . XBOX one.

19. Preference Changes
Today, people rather choose the PC instead of choosing
console gaming because their preferences had changed.
This actually causes a decrease in demand.

20. FOPS DECREASE
“ Programmers who write code for playstation games
become for costly to hire ”
The increase in cost of programmers decreases the supply
of playstation games , as they increase the cost of fops of
the playstation.

21. MARKET STRUCTURE

22. ON VIDEO CONSOLE’S MARKET STRUCTURE
SONY PS2, PS3, PS4
XBOX , XBOX 360, XBOX ONE
NINTENDO’S WII

23. TYPE
THEY BELONG IN THE OBLIGOPOLY MARKET.
1. HIGH BARRIERS TO ENTRY.
2.SMALL NUMBER OF LARGE SELLERS
3. PRODUCT DIFFERENTIATION.

24. HIGH BARRIERS TO ENTRY
HIGH TO ENTER MARKET
HIGH ECONOMICSOF SALES MEANS IT WILL BE EFFICIENT TO ENTER THE MARKET ONLY
WITH A HUGE AMOUNT OF OUTPUT LEVEL.
HOWEVER, IT IS NOT WISE TO ENETER THE MARKET BY THIS WAY, AS IT IS NOT CERTAIN
CONSUMERS WILL BUY.
THEY MIGHT ALSO FACE CLOSURE SHOULD ANY OF THE 3 MAJOR FIRMS AS DISCUSSED TRY
TO PUT THEM DOWN.

25. SMALL NUMBER OF DOMINANT SELLERS
THERE ARE ONLY A HANDFUL OF NOTICEABLE SELLERS THAT
ARE LARGE ENOUGH TO BE NAMED AS DOMINANT, USUALLY 5
AT BEST. IN THIS CASE ONLY 3 ARE LISTED ( PLAYSTATION, XBOX,
NINTENDO)

26. STARTEGIES THAT THIS FIRM ADOPTS
MARKETING AND RETAINING EXISTING CUSTOMERS INTO BUYING THEIR PRODUCT.
BUNDLE CONSOLE SYSTEMS TO COMPLIMENTARY ACCESSORIES AND SOFTWARES TO
BULID UP CUSTOMER LOYALITY TO THE BRAND.
CHANGE THEIR PRICES TO BEAT THE PRICES OF THEIR RIVALS.

27. ELASTICITY OF DEMAND
“ THE DEMAND OF PLAYSTATION IS ELSATIC”
CONSIDERED A LUXURY PRODUCT.
GAMERS USUALLY NEVER GIVE UP GAMING.
PRODUCT HAS BEEN IN THE MARKET SINCE 1994 AND RUNNING FAST AND
SMOOTH IN 2014 WITH PS4 POWERING UP SALES ALL OVER THE WORLD.
HAS VERY CLOSE SUBSTITUTES.

28. COSTS OF PRODUCTION AND FACTORS
BEFORE THE INVENTION OF THE 65NM CELL PROCESSOR, THE
PLAYSTATION’S PRODUCT COSTS WERE HIGHER = HIGHER PRODUCTION
COST THAN TODAY.
SOME OF THE FACTORS AFFECTING THE COSTS OF PRODUCTION ARE:-
CONTRACT COSTS TO ENGAGE FACTORIES IN PRODUCING CONSOLES.
TRANSPORTATION COSTS AND FEES.
SALARIES OF WORKERS ON CONSOLE ITSELF.
CHANGES IN COMPLIEMENTS IN PRODUCTION.

29. INCOME ELASTICITY
Its target market is high middle class and elite class people thus
the income of lower middle-class and lower-class people an
increase in income will rise the demand of the product.

30. CROSS ELASTICITY
CHANGE IN DEMAND OF ONE GOOD DUE TO CHANGE IN PRICE OF ANOTHER
GOOD
AS IN HIG END GADGETS PRICE DOESN’T MATTER. MOST CURRENT OWNERS
OF SUCH GADGETS TEND TO HAVE PURCHASE A CONSOLE PREVIOUSLY, THE
CUSTOMER HAS POTENTIALLY DEVELOPED AN ATTITUDE TOWARDS IT.
HERE, AN ATTITUDE BECOMES ON EVALUATING JUDGMENT.

31. COST REDUCTION TECHNIQUE
SONY PALNS TO JUST MANUFACTURE ITS UNITS FROM FOXCONN, TAIWAN.
ECONOMICS OF SCALE- WHEN MORE UNITS OF A GOOD OR A SERVICE CAN
BE PRODUCED ON A LARGER SCALE, YET WITH (ON AVERAGE) LESS INPUT
COSTS, ECONOMIES OF SCALE (ES) ARE SAID TO BE ACHIEVED.
ALTERNATIVELY, THIS MEANS THAT AS A COMPANY GROWS AND
PRODUCTION UNITS INCREASE, A COMPANY WILL HAVE A BETTER CHANCE
TO DECREASE ITS COSTS. ACCORDING TO THEORY, ECONOMIC GROWTH
MAY BE ACHIEVED WHEN ECONOMIES OF SCALE ARE REALIZED.

32. THANK YOU