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Sony’s Strategy

September 6th, 2004 · No Comments

WSJ writes about how Ken Kutaragi, the creator of the PlayStation business, is helping remake the company’s electronics strategy:

Mr. Kutaragi’s vision was shaped by his success with the PlayStation, now a $7.5 billion-a-year business. It relies on data-processing and image-manipulating chips that only Sony makes. “Most of the intellectual creation in hardware will be concentrated in semiconductors,” says Mr. Kutaragi. “The product is just a cabinet, a costume.”

The success of Apple’s iPod is also a lesson. The iPod’s basic hardware, a hard disk for storing songs, is a commodity that any company can buy. But the look and feel created by Apple’s software, which makes it easy to build a music collection and play it in fun ways, is harder to match.

Sony’s struggle to remake itself mirrors that of other consumer-electronics makers. They all dread commoditization — the spread of standardized parts that makes it impossible for all but a handful of ruthlessly low-cost producers to survive. That is what happened in personal computers, with Dell Inc. the chief winner.

But Mr. Kutaragi’s strategy is a gamble. The first set of products produced under his reign — still available only in Japan — all take the radical step of marrying videogames with consumer electronics. That may confuse consumers. An early pet project of Mr. Kutaragi, a device that combines a videogame machine with a DVD recorder, has struggled in Japan, although Sony still plans to bring it to the U.S. Also, Microsoft and Intel are angling to control the software and semiconductors used in the living room.

Tags: Management

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