Sony Car Navigation Systems - Questions

1. What are the pros and cons of Sony 1) focusing on only the Japan market, and b) expanding the marketing of its car navigation product to US and European markets? 2. What product adaptations are needed for the Japanese, European, and US markets? 3. Discuss the pros and cons of the three product choice options on page 12 of the case study. 4. What are the obstacles to- and potential drivers-of car navigator adoption in untapped markets?

1. What factors determine demand for CNS? How will demand vary by market? 2. How has the CNS category evolved so far? How will it evolve in the United States and Europe? 3. Assess Sonys strategy and current position in Japan. 4. What recommendations would you make to Sony regarding: geographical balance, product line policy, and product standards 5. Study question: (1) Make a list of factors you believe are most important in determining the rate at which technology improves and diffuses into the market. 6. How does diffusion depend on the continued evolution of the technology? (2) What are the obstacles to- and potential drivers-of car navigator adoption in untapped markets? 7. In what respect does Moore's framework help Sony frame strategic issues over the near term? 8. How does the framework help Sony segment events in distinct geographic markets? 9. Does the framework fail to address other key strategic priorities for Sony? If so, why? What does this tell you about the strength and weakness of using this Framework to forecast change in an immature product market?

Sony Car Navigation System Case Analysis. Car Navigation systems demand characterization in Japan, Europe and US. Car navigation systems (CNS) demand is mainly determined by different car driving environments and drivers preferences. Both factors vary across markets and determine CNSs most valuable features for each market. In 1996, Japan was the world largest CNS market with sales of 850,000 units. Several factors accounted for CNS strong popularity. First, a highly complicated Japanese road system which lacked road names and signs and where drivers highly depended on maps and landmarks to drive, made driving very difficult. A CNS equipped with an accurate map might be extremely valuable for drivers. This observation was reflected in consumer and dealer surveys (Exhibit 10), in which Japanese drivers stressed that a map display was essential for route guidance and that accuracy of map and mapmatching was the most important factor influencing their purchase decision. Second, Japanese mostly use cars for leisure driving on weekends, usually in unknown cities. Thus, a CNS equipped with points of interest and route guidance would add great value to Japanese drivers. Based on Japans demand drivers and Japanese high willingness to pay for car electronic devices (many drivers may invest more than $ 2,000 in car electronic devices), CNS enjoy a strong demand in Japan. With only 30,000 units sold in 1996, the European CNS market was in a very early stage. Although a complex road system, almost all roads had names and traffic signs so a simple voice guidance CNS system (without map display) may be sufficient for European drivers. Europeans frequently drive across borders, so multi-lingual guidance and multi road regulations would be valuable features for CNS in Europe. Currently, CNS in Europe was positionated as a high end product available on luxury vehicles such as BMW Series 7 and 5 and Mercedes S-class models. With only 20,000 units sold in 1996, the US market was on a very early stage as well. Due to a highly developed road system, a CNS may only be valuable if it provided sophisticate functions such as turn-byturn guidance and real time traffic. Unfavorable regulation and price sensitive consumers (most US drivers would not invest more than $ 1,000 in a CNS) fueled a weak CNS demand. CNS evolution until 1996. Expected evolution in US and Europe. In Japan, CNS have turned into a highly sophisticated and massive product. Evolution has been driven by continuous technological improvement. CNS evolved from a product that could only report the position of the driver to a product that provides best route destinations, turn-by-turn guidance and rich data base (phone numbers, landmarks and points of interest). This technological evolution was mostly driven by Sonys competitors such as Alpine, Pioneer and Matusushita which progressively introduced advanced products almost every 6 months. On the other hand, Naviken members ( including Sony) were struggling to coordinate standardized software updates and were unable to respond quickly to competition. In terms of expected market development from 1996 to 2000, the Japanese market was expected to grow from 850,000 units sold ($ 1,100 M) to 2,000,000 units ($ 2,000 M). Total car penetration was expected to increase from 3.32% to 12% . Average retail price was expected to decrease from $1,342 to $ 1,000.

The CNS European market was expected to grow across different segments. Luxury automakers such as BMW, Volvo and Jaguar, would offer expensive high end hybrid CNS models with maps, arrows and voice. In the after-market market, manufacturers will follow a similar strategy. On the other hand, VW and Audi would include basic CNS with simple GPS hardware and basic voice instructions at a low price of $ 400. In terms of expected market development from 1996 to 2000, the European market was expected to grow from 30,000 units sold ($ 60 M) to 600,000 units ($ 1,000 M). Total car penetration was expected to increase from 0.02% to 0.98% . Average retail price was expected to decrease from $ 2,000 to $ 1,000. The US CNS market expected evolution was strictly attached to price reductions. Market research revealed that few US consumers would pay over $ 1,000 for CNS. Also, most automakers needed price drops as low as $ 500 to include CNS in their vehicles. Thus, currently at an average retail price of $ 1,700, CNS would remain a high end product until prices drops below $1,000. In terms of expected market development from 1996 to 2000, the US market was expected to grow from 20,000 units sold ($ 34 M) to 900,000 units ($ 720 M). Total car penetration was expected to increase from 0.01% to 0.89%. Average retail price are expected to decrease from $ 1,700 to $ 800. Sonys current strategy and current position in Japan. Within the CNS market, Sony had focused its strategy on standardization. As with several products such as color TV, Walkman, video Camera and CD, Sony has followed its natural strategy of setting the standard. However, this time, Sony is not alone but with 40 other companies working on CNS standardization. Although, setting standards may have benefits for consumers (consumers can enjoy compatible digital maps) and for manufacturers (risk is reduced by sharing development costs), difficult coordination and lack of product differentiation among the Naviken consortium have proved to be a major obstacle for product development. Naviken companies were not been able to keep up with competitors, lagging technological features and losing market share. For instance, Sonys market share fell from 60% in 1993 to 17% in 1995. Recommendations to Sonys global strategy for 1996 to 2001. The Japanese, European and US market are very different in terms of stage of product life cycle, consumer preferences and price elasticity. Thus, Sony should adapt its strategy to each of these markets. Geographical focus. In Japan, Sony should focus on reestablishing its competitive position by focusing R&D in developing more sophisticated CNS capabilities. This strategy will improve Sonys position not only Japan but also in other markets since Sony will not be developing advance CNS features from scratch in new markets. Sony may also explore the possibility of partnership with Japanese automakers since the OEM market will play a significant role in Japanese and US markets in the near future.

Although currently in very early market stages, the US and European market are very interesting due to it market growth potential. Currently, Sony should try to position a CNS for early adopters (low price elasticity) to start leveraging network effects. However, due to general high price sensitiveness in these markets, Sony should improve its price point (leveraging previous development in Japan) to appeal to a broaden consumer population. Product choice. In Japan, Sony should needs to launch a new hybrid model with improved route guidance and route calculation functions and probably introduce the auto route re-calculation. Currently, competitors such as Matsushita CN-V700 or Fujitsu Ten E500NCU provide all these features at low price. In the US and Europe, Sony should introduce hybrid models that match the US and Europe data base needs. Multilanguage capability for the European market or real time traffic data for the US market are some of the localization features Sony need to account for when launching products in these markets. In all markets Sony need to leverage its strong brand equity and possible compatibility advantages with other Sony products such as auto radios or DVDs. Standard setting. In Japan, with the objective of developing a quick response to market needs, Sony should either modify the Naviken consortium or develop its own proprietary digital map technology. In the US and Europe, Sony should switch software vendors from Etak to Navitech, given the latter timing competitive advantage in turn-by-turn guidance technology in US and Europe.

Car-Navigation Systems The worldwide car navigation systems market is poised for explosive growth, driven by new technologies, installation of standard equipment in more car models and a downtrend in prices. Sony currently has a 7% share of this market worldwide. DVD-based digital systems are the latest to hit the market. These systems incorporate sophisticated technology, including web-access and advanced voice recognition. Currently, a major hurdle in popularizing these products is their cost, which ranges in upwards of $3000.8 Car-navigation technology, which has been around for some time in Japan and Europe, has yet to catch on in the United States. To date, 50,000 systems have been sold in the United States. However, these systems are not likely to gain popularity unless they become more economical. One of the key factors affecting the growth of this market is the navigation databases that underlie these systems. Current navigation databases lack accuracy and sufficient detail. Sony recently acquired Etak in an effort to develop an independent, proprietary database.

17729. SONY CORPORATION: CAR NAVIGATION SYSTEMS CASE STUDY 597032. This paper provides an analysis and a case solution to a Harvard Business School strategic marketing case study (597032) by John A. Quelch and Yoshinori Fujikawa on Sony Corp.s car navigation systems. Having pioneered the car navigation systems market in Japan in the early 1990s, Sony must now in 1996 figure out how to boost lagging sales and recapture lost market share in the highly competitive Japanese market while at the same time determine how to best tap the vast potential of the evolving European and newly emergent US market in the face of growing competition, rapid technological change, a lack of technical standards, and uncertain market conditions. Includes a statement of the problem, identification of central issues, and recommendations for action in terms of product line, geographical concentration, and standardization issues. KEYWORDS: globalization international marketing harvard business case study case solution marketing strategy strategic management sony car navigation system product innovation case study. Written 2006. 7 pages, 0 footnotes, 1 bibliographic source. 1,638 words.

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