Sony Corporation: The Walkman Line Case Study Solution

Introduction

Sony Corporation is one of the largest electronics companies in the world, its first name was Tokyo Tsushin Kenkyujo or Tokyo Telecommunications Research Institute, in 1945. The company introduced its first few products that were developed only to reach at breakeven point where the company was able to pay salaries to its employees and cover its costs with profit earning.The company was not focusing on the strategy to manufacture these products and adopted conservative strategy initially. They were supplying few products, which were:  rice cooker, an electric cushion, a power megaphone and assorted electronic components and products primarily for government use.

The management adopted aggressive strategy while it decided to launch a new product for profit and the product was a magnetic tape recorder (Japan’s first) in 1950 and this product was considered to be successful.However, it was manufactured after an extensive research and development.Totsuko entered into an agreement with Western Electric for a non-exclusive patent license for the usage of the newly developed transistor. The company had a competitive edge of being the first ever company in the world to introduce the transistor radio in the market with low price and high volume. The company was listed on the over-the counter market on the Tokyo Stock Exchange in 1955. In 1958, the management decided to change its name to Sony and got itself listed on the exchange.

Sony started its product development processby manufacturing of a handmade model. On 1stof July 1979;Sony introduced its very first Sony Walkman, TPS-L2, to the Japanese market. The combination of a small play-only cassette player and lightweight headphones received recognition in the market and became successful. He created a completely new type of product: the personal sound system. Sony launched a second generation product, i.e. the WM-2, in February 1981. The WM-2 was the first product worldwide to use the Walkman name. The launch of the WM-2 marked the beginning of the Walkman series’ popularization. The WM-2  established both the personal sound system and the worldwide dominance of the Walkman series. The success of the WM-2 reflected the great focusthat Sony’s engineers placed on compactness, high performance and superior volume and sound quality.

Why does Sony’s Walkman line contain so many models? Which consequences does this have for cost calculations in a, classical versus a target costing approach?

Sony’s Walkman line models:

Sony had launched more than 30 models of walkman till now, which fell under seven categories that are: CD-Walkman, MiniDisc Walkman, network Walkman, ATRAC HDD, Walkman mp3, Walkman video mp3 and high resolution walkman.

Under the latest models thatare high resolution Walkman; there were three series having total of twenty two models. The reason behind introducing so many models was that they had different sizes capacity to store multimedia. Therefore, their prices were also different according to the size, volume, design, reliability and resolution.

Sony launched many models because of the market requirements, competitors’ strategies were challenging and the most important factor is that company was working in technological industry, which kept on changing rapidly. Throughout the period; Sony’s competitors were active and continued to intensify their challenge. Each firm in the same industry was influenced to become the world’s most leading player.

Consequences of classical versus target costing approach:

Target costing shows the impact of pricing and costing by considering marketing approach. It is used to forecast the cost which the company is expected to incur after determining the expected mark up on selling price. Therefore, it identifies the price, which customer is ready to pay for the value of the product. This approach is used when the company is willing to introduce a new product in the market and want answers for these questions:

  • What do the competitors offer?
  • What do the customers want?

What will customers pay?…………………………….

 

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