Value chain analysis was first established by Michael Poter in 1980s. According to him, every product or service within an organization goes through several stages where in every stage its value is improved. All organizations have various activities that are connected with one another towards attaining the overall objective of the entire organization. Based on the nature of the organization, the activities may range from purchasing of raw materials, manufacturing of products, distribution as well as marketing the products. All these activities form a chain through which products manufactured by any organization goes through before it reaches the final consumer. In all the stages, its value is altered in one way or the other. Since its establishment, the idea of value chain has been used by various business auditors in identifying and improving competitive advantage of businesses (Bellis 2007, para. 2-4). The method helps organizations improve the value of their products while at the same time reducing operations cost. Value chain analysis helps in identifying the key activities within an organization that helps in adding value to its products or services. It is these activities that help the organization maintain its competitive advantage.
When conducting value chain analysis of any organization, there are various activities within the organization that one ought to consider. These include inbound logistics within the organization. Inbound logistics comprise of all the activities associated with receiving raw materials from suppliers and handling them within the organization. One also has to consider operations within the organization. These are those related with production of goods and services (Buckley, Burton & Mirza1998, pp. 243-257). These operations can be broken down further based on the nature of the organization. There are outbound logistics which entails activities geared towards distributing the products and services to consumers. Marketing of products and services within the organization is another activity that one ought to consider. This is because it is one of the activities that help in identifying target consumers as well as their needs. It is also the one responsible of creating awareness of organization’s products among the target consumers. Some of the marketing activities include advertisement and sales promotion. This paper aims at conducting a value chain analysis on Sony PlayStation Gaming Company.
Value chain of Sony PlayStation
With improvement in technology, demand for software games has continued going up. This has led to competition within the gaming industry. In bid to attract more customers, every gaming company strives to improve the quality of its products. One of these companies is the Sony Computer Entertainment which has established PlayStation games. There are numerous activities involved in production of PlayStation games within the company (Chryssochoidis, Millar & Clegg 1997, p. 178). The company has a research and development team which is responsible of conducting research on the latest technology and how they can come up with games that use this technology. The team also conducts research on consumer response on its game products already in the market and look for areas that need to be improved. On identifying the various technological advances in the market, the company then embarks on production of games that best use this technology. The company concentrates on production of video games as well as hand held game consoles. It is not all the available game software in the market that can support its games. To ensure that their games are readily accepted in the market, Sony also manufacture and sell hardware and software that supports these games.
As a way of reducing operations cost, Sony Company does not manufacture its products by its own. Instead, the company has contracted other companies that collaborate with it in manufacturing the games, hardware and software to support the games. There are three companies that work together with sonny in production of its PlayStation games. These are Sony, ASUSTek and Foxconn. Initially, Sony relied on ASUSTek in production of its PlayStation three game. However, this proved to be costly making it also introduce Foxconn in its production (Daniels, Radebaugh & Sullivan 2007, pp. 342-373).
The companies supply chain
For companies to reach their final consumer, they have to come up with an effective supply chain. It is through the supply chain that products are distributed to consumers. Lack of companies to develop efficient supply chains leads to them having most of their produced goods not reaching the final consumer on time. For perishable goods, they end up expiring before reaching the final consumer. An effective supply chain facilitates in growth of the organization. This is because it helps in ensuring that it has produced the required amount of products. In its bid to reach its consumers, Sony Company sells its products direct. This is through use of sales stores. The company has numerous Sony Style retail stores across the world. These stores are operated by independent retailers and deal solely with Sony products. The retailers are also responsible of offering services to local consumers with respect on how to use the products as a way of after sales services to promote the products. Sony Company offer training to these retailers on how to use its products who in turn pass the idea to consumers (Gottfredson, Puryear & Phillips 2005, pp. 132-139).
Apart from Sony style retailers, the company also uses distributors to transfer its products to consumers. These distributors are responsible of storing and transferring products to consumers. In its distribution mechanism, the company use retail chain such as malls and departmental stores. For its software distribution, Sony uses discount stores and internet. Online distribution of consoles as well as games helps the company in avoiding use of middle men thus lowering its prices. It is one of the methods that has helped the company increase its profit margin. The method also saves the company from experiencing the overhead of manually recording and processing orders made by its vast range of consumers. Online distribution method helps the company improves its efficiency as well as offer competitive prices and quality services. One of the major aims of Sony is to reduce and control risks within its supply chain. As the company is huge, it is difficult to eliminate risks within its supply chain (Grant 2002, p. 42). As a result, the company has altered its supply chain to accommodate only for batch ordering. The company also evaluates demand forecasts to identify errors thus respond in advance. Gaming behavior and promotional pricing within the market is also analyzed to identify reasons that hamper expansion in its market share.
Marketing within the company
Marketing is one of the vital elements in value chain of any organization. This is because it is the method through which the organization informs its target customers about the availability of its products. A good marketing technique within a company helps it in reaching a wide range of market thus exploiting incumbent as well as potential consumers who may be willing to use its products. Based on nature of the target consumers, organizations use different marketing techniques. Some of the marketing mechanisms used include advertisement and product promotion (Hill & Jones 2007, pp. 125-133). Increase in demand for plays station games as well as supporting hardware and software has led to Sony Computer Entertainment Company using different marketing methods. One of the methods used by the company is newspaper advertisement. The company buys columns in newspapers published in all countries that it sells its products. Through this method, the company is able to reach some consumers though not in large numbers. Television advertisement is another method used by the company. As almost every household owns a televisio9n, the company views television advertisement as the best method of marketing its products. It runs a commercial advertisement of its products in all television stations.
The high demand for PlayStation games lies among the youths. Most of the youths are not fond of watching televisions of reading newspapers. This leads to organizations that deal in products mostly consumed by youths look for other methods to reach this target group. Currently, most of the youths spend their leisure time on internet. This has led to Sony embarking on using online advertisement in marketing its products. This media has helped the company increase its market share as well as profit margin (My Digital Life 2008, para. 1-3).
Strategies of adding value to its products
As a method of adding value to its products, Sony Company has embarked on collaborating with others companies in producing its products. Due to demand of PlayStations cross the world, producing all of its products within Japan would lead to some countries not getting the products. In return, its competitors would take this opportunity thus denying it a chance to expand its market share. One of the best examples is its acceptance of Foxconn to produce PlayStations (Pratt 2007, para. 3). This has helped the company manufacture PlayStations based on their demand in the market. The company has never experienced shortage of its products in the market. For many years, the company has not bee able to provide PlayStations that can be played online. Demand for online games has led to the company embark on production of PlayStations that can be played online. PlayStation 3 is one of the latest PlayStation games manufactured by the company which can be played online. It is possible for persons wishing to play the game to download and play it online. The games are accompanied by instructions on how to operate and play them making it easy for many people to use the product. Production of handheld devices which support PlayStation 3 games has helped the company reduce its production cost. This is by cutting on the expenses incurred in producing big hardware devices to use when playing the game.
To cater for different needs of its consumers, the company is also manufacturing customized software. This will help the company effectively address the various needs of people using the PlayStation games. The company conducts market analysis and develops its software based on individual needs of their customers. To create market awareness of its products, the company has realized that most of the youths spend their time in social networks such as facebook and twitter. This has made the company place its advertisements on these social networks (Robson 1998, p. 284). The undertaking has led to it attracting more potential consumers who were not aware of its products.
Strategies to enhance competitive advantage in the company
To enhance competitive advantage of a company, it requires the management to conduct market analysis as well as analysis of its competitors. Understanding the strength and weaknesses of competitors help one in coming up with strategies that capitalize on the weaknesses as well as mitigating chances of the competing firm using its strengths to stage competition. In its bid to increase its competitive advantage, Sony has embarked on production of PlayStation games that use the next-generation optical media. It has also concentrated on [production of video games consoles that support DVD playback functionalities. The company has also focused on using other marketing methods such as advertising its products through mobile phones. This will help it in reaching a wide group of people as mobile phones are common (Wild, Wild & Han 2010, p. 298). To enhance efficiency in its distribution process, Sony has gradually gotten rid of retail distributors and is currently focusing on improving its online distribution technique.
Advice for future development
As demand for online games continue increasing, the company needs to conduct market analysis. This will help it improve on its customized software to meet individual needs of its various customers. In so doing, the company will harness the numerous potential customers who have not yet started using its products. The company also needs to increase the number of collaboration with other companies in production of the devices, games and software. This will help it reach global market.
Value chain analysis acts as an important tool in determining the performance of any organization. Through it, organizations are able to determine their performance in the market, identify weaknesses and potentials of improving their performance. It is from value chain analysis that a company develops strategies aimed at improving its competitive advantage. This is after identifying consumer needs and weaknesses of their competitors. After realizing that there is high demand for online games, Sony has embarked on research and development of PlayStations that are played online. This is evidenced by production of PlayStation 3. The company has also identified the need for production of customized software and hand held devices to increase its market share. All these activities within the company have helped it increase its market share as well as competitive advantage.
Bellis, M., 2007. History of Sony PlayStation. Web.
Buckley, P., Burton, F. & Mirza, H., 1998. The Strategy and Organization of International Business. London: Macmillan.
Chryssochoidis, G., Millar, C. & Clegg, J., 1997. Internationalization Strategies. London: Palgrave.
Daniels, J. D., Radebaugh, L.H. & Sullivan, D. P., 2007. International Business Environments and Operations. London: Pearson.
Gottfredson, M., Puryear, R. & Phillips, S., 2005. Strategic Sourcing From Periphery to the Core. Harvard Business Review, 83(2), pp. 132-139.
Grant, R., 2002. Contemporary Strategy Analysis. London: Blackwell.
Hill, W. L. & Jones, R. G., 2007. Strategic Management: An Integrated Approach (7th Ed). New York: Houghton Mifflin Company.
My Digital Life, 2008. Sony Appointed Foxconn for PS3 Console Manufacturing. Web.
Pratt, B., 2007. The Evolution of Video Games. Web.
Robson, P., 1998. The Economics of International Integration. London: Routledge.
Wild, J. J., Wild, K. L. & Han, J. C., 2010. International Business: The Challenges of Globalization (5th Edition). London: Pearson.