PROJECT NAME - SONY PLAYSTATIONSUBJECT- ECONOMICSBY-AVIK SHOUTAYROLL NO- M14B010MBA – BISBR

INTRODUCTION

TO EXPLORE AND FURTHER UNDERSTANDING OF SONY PLAYSTATION

IN MARKET IN GLOBAL SCALE

FACTORS AFFECTING ITS SALES AND DEVELOPMENT

HISTORY OF PLAYSTATIONPlayStation 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.

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.

ON SONY’S PLAYSTATIONFactors 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.

FACTORS OF PRODUCTION

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

LAND

FOXCONN

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

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.

CAPITALTOOLS , 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

EntrepreneurshipBrains 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.

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.

Effect on Demand

If Sony decides to lower prices in view of lower production costs….

DETERMINANTS OF DEMAND AND SUPPLY

PRICE

When the price of playstation falls, the consumers respond by increasing the quantity of playstationdemanded.

Change of price of product substitues

The XBOX and Wii are substitutes of playstation. When these consoles falls in price, the demand for playstationdecreases.

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.

Increase in consumer income

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

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.

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.

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.

MARKET STRUCTURE

ON VIDEO CONSOLE’S MARKET STRUCTURE

SONY PS2, PS3, PS4

XBOX , XBOX 360, XBOX ONE

NINTENDO’S WII

TYPE

THEY BELONG IN THE OBLIGOPOLY MARKET.

1. HIGH BARRIERS TO ENTRY.

2.SMALL NUMBER OF LARGE SELLERS

3. PRODUCT DIFFERENTIATION.

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.

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)

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.

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.

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.

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.

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.

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.

THANK YOU