Sony and its suppliers

Sony is a vast corporation that operates in a global scale. In order for it continue its operations around the globe requires a great amount of materials that is used in manufacturing the end-product. Being a multinational organization its suppliers come from all four corners of the globe. Due to this factor of being a large multi-national corporation Sony is in business with many suppliers. Due to this large number of reliance on suppliers, diminishes the bargaining power suppliers have over Sony. Simply put due to its vast operation the suppliers are not concentrated more or less decentralized.

Another factor for Sony to have an edge over its suppliers is the sheer size of Sony, being a multi-national compared to its suppliers. This organizational size gives Sony the upper hand over bargaining tactics when it comes to dealing with its suppliers. Sony uses its size to somewhat muscle in over its suppliers in order to secure reliable and fast supplies at a relatively low price.

Another reason Sony can dictate terms more freely to its suppliers is the fact that a big company such as Sony can run its suppliers out of business. This aggressive tactic was used by Sony since the introduction of the Playstation2. Sony made this move by making a huge investment in semiconductors. By cutting off its suppliers and co-developed with Toshiba a CPU called Emotion Engine , which was later put to use on the Playstation2. In the mean time its competitor, Nintendo, used a CPU developed by IBM for Game Cube, which was competing against Playstation2 back then. By producing the CPU in-house Sony was able to eventually reduce the manufacturing cost of Emotion Engine significantly by realizing economic of scale and economic of scope, which had the ripple effect of successfully reducing the price of the Playstation console. Nintendo on the other hand struggled with this price war against Sony simply because it did not have much control over (its suppliers) one