Sony Case Study
C A S E 1 3 Sony Corporation: Car Navigation Systems
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n April 1996, Masao Morita, president of the Sony Personal and Mobile Communication Company, a division of the Sony Corporation, pondered how to recover Sony’s initial leadership in car navigation systems in Japan. As the first company to launch a reasonably priced (around $2,000) after-market model in 1993, Sony could claim to have created the world’s largest car navigation systems market in Japan. Since the late 1980s, Sony led a group of 40 companies in establishing an industry standard (called NaviKen) which enabled consumers to benefit from mutually compatible digital map software while manufacturers reduced their risk by sharing development costs. Sony’s efforts grew the Japanese market from 58,000 units in 1992 to 160,000 in 1993. Sony held a 60 percent market share in 1993. Exhibit 1 reports unit sales of car navigation systems in Japan through 1995 and forecasts from 1996 through 2005. Market growth fueled intense competition in Japan, leading to many new product launches and lower prices. The average retail price per unit decreased from $4,000 in 1990 to $2,500 in 1995.1 Ironically, competitors not in the NaviKen group were able to introduce new and improved products more often and more rapidly by developing or acquiring proprietary digital map technologies. Increasingly sophisticated consumers sought out differentiated products with the latest features. In contrast, NaviKen member companies, including
Sony, lost time while trying to agree on standard software upgrades. Sony’s unit sales increased, but at a slower growth rate than the market; Sony’s market share fell from 60 percent in 1993 to 23 percent in 1994 and 17 percent in 1995, and was estimated to drop to 15 percent in 1996. Exhibit 2 summarized the major competitors’ market shares. Exhibit 3 compares sales performance of NaviKen and non-NaviKen companies. In Europe and the United States, Sony was also the first to launch car
31
I
n April 1996, Masao Morita, president of the Sony Personal and Mobile Communication Company, a division of the Sony Corporation, pondered how to recover Sony’s initial leadership in car navigation systems in Japan. As the first company to launch a reasonably priced (around $2,000) after-market model in 1993, Sony could claim to have created the world’s largest car navigation systems market in Japan. Since the late 1980s, Sony led a group of 40 companies in establishing an industry standard (called NaviKen) which enabled consumers to benefit from mutually compatible digital map software while manufacturers reduced their risk by sharing development costs. Sony’s efforts grew the Japanese market from 58,000 units in 1992 to 160,000 in 1993. Sony held a 60 percent market share in 1993. Exhibit 1 reports unit sales of car navigation systems in Japan through 1995 and forecasts from 1996 through 2005. Market growth fueled intense competition in Japan, leading to many new product launches and lower prices. The average retail price per unit decreased from $4,000 in 1990 to $2,500 in 1995.1 Ironically, competitors not in the NaviKen group were able to introduce new and improved products more often and more rapidly by developing or acquiring proprietary digital map technologies. Increasingly sophisticated consumers sought out differentiated products with the latest features. In contrast, NaviKen member companies, including
Sony, lost time while trying to agree on standard software upgrades. Sony’s unit sales increased, but at a slower growth rate than the market; Sony’s market share fell from 60 percent in 1993 to 23 percent in 1994 and 17 percent in 1995, and was estimated to drop to 15 percent in 1996. Exhibit 2 summarized the major competitors’ market shares. Exhibit 3 compares sales performance of NaviKen and non-NaviKen companies. In Europe and the United States, Sony was also the first to launch car