Sony Reader Report 1
Team 2: Alex Antounian, Sonia Read, Isabel
Menendez, Houachua Vue
The VRINE Model:
VRINE got its name base on four elements, which are Valuable, Rare, Inimitable and
non- substitutable, and Exploitable. The VRINE model is developed to help a product build its
growth. With the four elements given, there are then three categories to those elements that help
break down each different part about the product. These elements are test, competition
implication and performance implication. Valuable identifies the consumers’ wants and needs as
well as the focus of the company’s potential of growth. Rare is to help define the availability of
a product and whether it is easily purchased through many retailers or if they are hard to come
by. Inimitable and non- substitutable is a compare and contrast ven- diagram of the company’s
product versus other similar products. It provides information about the features of the product
that other similar products don’t have. Exploitable is to help expand upon existing features and
continue to upgrade them as well as developing new similar products. These four elements are
used by many well- known companies such as Sony, Amazon, and Barnes and Nobles.
When in the process of developing new ideas, firms tend to use a structure to help guide
them to reaching their goals. For example, our group is working with the Sony eReader device.
Our mission is to develop “a wide range of innovative products and multimedia services that
challenge the way consumers’ access and enjoy digital entertainment. By ensuring synergy
between businesses within the organization, Sony is constantly striving to create exciting new
worlds of entertainment that can be experienced on a variety of different products.” Our vision
is “to create exciting new digital entertainment experiences for consumers by bringing together
cutting-edge products with latest generation content and services.”
The first variable of the VRINE model determines how valuable the product is in order to
meet its market demand or to protect its stakeholders from any downfalls market. Through
product testing, the end results are that consumers trend are now showing a rise in more material
being read through eBooks. With this device, Sony has met their consumers’ demand therefore
there is potential to grow and generate more revenue. Another factor that can evaluate a product
on its performance in the market is its rarity. The Sony ereader device is not scarce to consumers
demand. This item can be purchase directly through the Sony store as well as online. The
performance implication is that there are many competitors producing similar devices.
In order to predict whether a product or service can obtain or build a sustainable
competitive advantage in the market, the organization must also determine whether its features
are inimitable and non-substitutable. A firm can have an upper advantage on its competitors if its
products can not be reproduced or imitated by others in the market. Unfortunately this is rather
difficult to achieve in the electronics industry where competition is always a tough factor to beat.
In the case of the Sony eReader, its competitors have also created similar products to compete in
the market. Amazon has created the Kindle as well as the Nook has been introduced by Barnes &
Noble.
Even though competitive implication shows that Sony’s competitors have created similar
products to the eReader such as the Kindle and Nook, there are features of the eReader that
makes the device stand out from its competitors. These features include a full touch anti-glare
screen, adjustable content brightness, translation dictionary, expandable memory as well as it
supports epub open format. These are performance implications that make the eReader a superior
device over the Kindle and Nook. This allows the firm to hold a higher competitive advantage in
the industry.
A product can have an overwhelming affect on the market when it is first introduced to
its consumers, but the only way for the organization to fully absorb its product’s potential is to
make sure that it is exploitable. By having a successful product that is exploitable, it allows the
company to explore other areas in which it may obtain a growth in revenue. The Sony eReader is
a device that has features as well as an appearance that can be exploited. As we know,
technology is always a growing industry and consumers are always looking for the next
phenomena in electronic devices. His allows the eReader an endless amount of potential to
expand on its capabilities. Because of this, there is no implication that Sony has any limitations
on the eReader. This can be shown through Sony’s ability to create different models to meet
consumer requirements. Through the development of the eReader, Sony has also release other
models of its device such as the Pocket Edition, Touch Edition, and Daily Edition.
Pestel Model:
Internal Environment:
A helpful way for an organization to develop strategic planning to further growth, success
and leadership in a market, it must develop an internal analysis. There are four parts to internal
environment that we will focus on strengths, weaknesses, capabilities, and relationships. Our
strength for the firm is that we are a strong brand, top of the line, diverse company (music,
movies, and etc) and most importantly Sony’s has been in the industry for a very long time
therefore they are familiar with any problems that might arise. Our weaknesses are our
competitors. One of our biggest competitors is Apple because they carry very high quality and
the reputation that Apple has is to be known to be the best in terms of technology. Another part
of internal environment is capabilities. The capabilities to research and develop new ideas
allows Sony to have the man power to support its research development. This company to
explore other aspect of other company as well as create new devices. Last but not least,
relationships is important because communication is key. Building a strong connection with
your consumers and paying attention to their wants and needs will benefit the company in the
long run. Also it is imperative that organization build strong alliances with other companies. By
doing so, its network will lead itself to greater potential.
External Environment
Political Factors:
Sony is one of the top selling brands in electronic and technologic devices. They have
been around for many years and throughout the technology era they have built up a reputation in
the technology industry. In regards to political aspects and Sony Corporation; the government
holds the power to change any policies and regulations which may affect Sony at the time. The
credit crunch and the recession may become reduced, therefore resulting in better trades for Sony
Corporation. Therefore, Sony must develop new ideas and techniques on how to stay ahead of its
competitors.
The laws which can affect Sony Corporation would consist of new international policies.
Internationally the Government may change or increase trading restrictions which would
definitely change the way Sony works, because it needs to trade since it doesn’t only have
business within U.S territories. The government has also the power to change minimum wage
tax.
Economic Factors:
Currently the state of our economy is not in a good position right now. The economic
growth has significantly shrunk. Sony Corporation must be aware of the restrictions the
government has made due to this situation.
They are an international company and the exchange rates can be different depending on
whichever country they decide to trade with. If the exchange rate in different countries has
changed, Sony would need to adjust their product prices accordingly to these rates. When doing
so, they can decide if it’s worth selling the product at that price or not. Overall, Sony focuses on
keeping up with the high demand that exists today for technologic products of great quality and
service.
Socio cultural Factors:
Sony has already gained a lot of reputation because of the quality products and services
they provide. A mass majority of companies have improved their technology and competition is
becoming more and more aggressive. Sony must ensure that they stay ahead of technology and
up to date with consumer’s lifestyles which revolves around technology products and
entertainment. For instance, electronic reading devices are transforming the concept of a book
(Sony E reader). Demands for these types of devices are increasing rapidly, since they are both
convenient and efficient.
Technological Factors
Sony Corporation depends on technology so that it may provide efficient productivity of
work internationally. They use upgraded and new technology to increase their productivity level
and stay ahead of competitors. Throughout the years technology has changed and keeps
evolving; simple tasks such as going to a bookstore to pick out a book are decreasing by the
minute. Now a days, readers purchase their books online, rent them, order electronic books (ebooks) or purchase reading devices which allows readers to download many books into one
device. Technology has become a key aspect of our everyday lives and Sony’s goal is to keep up
with its velocity.
Environmental Factors:
Recently Society has taken an interest in recycling. Companies everywhere are “going
green” and adopting strategies and techniques that are environmentally friendly. It not only is a
benefit for the environment and the world, but it also improves a company’s image and brand.
Sony Corporation is one of the few companies that offer a service which properly
disposes the vacuum tube televisions that consumers are now replacing with a LCD or Plasma.
These LCD and Plasma TVs are energy efficient. Being environmentally friendly is a big deal
for the technology industry and Sony has done a great job satisfying the consumers in the “going
green” strategy. The Sony E reader allows readers to reduce the usage of paper by being able to
upload a wide variety of e-books into one device.
Legal Factors:
New technology and products are being created and developed. For example the Sony E
reader which allows readers to download books on the device; Sony needs to make sure that
when books are added to the device their not breaking any copyright laws. That is why Sony
needs to be aware of patents and the patent law. Sony Corporation has a direct relation with the
government in their legal department which allows them to make sure that all of their ideas are
safe and secured.
In addition to that, Sony also has to understand different country or state laws because
they are not only selling products within the US. They also need to be aware of the copyright
laws when they are dealing with E-Readers.
Five Forces Model:
This model was created to determine the basic structure of an industry; where it stands in the
market. Michael Porter designed this framework based on the effects of rivalry, threat of entry, supplier
power, buyer power, and threat of substitutes, as external forces of an industry to determine a company’s
level of competitiveness. Moreover, we will apply Porter’s five forces model to the Sony e-reader’s
market in order to determine where it stands, and the basic structure of the industry.
RIVALRY
Right now the e-reader industry is at a booming point. The market is growing as new firms are
entering with new products and innovations, thus the level of competitiveness gets more intense.
Consequently, the market is an oligopoly where a few companies are trying to fill the same market niche,
with fairly similar devices. The few major players who have dominated the field are: Amazon with the
Kindle and its various editions, Apple with the iPad, Barns & Noble with the Nook, and of course Sony
with its e-reader and various editions as well. Some other devices have tried to enter the market but have
not been as successful or recognized.
The degree of rivalry among these firms is extremely high. They have not only been competing in
prices, but also in their devices’ abilities. Some devices are recognized for “being the best tablet in the
market” but others focus more on “giving you the most natural reading experience”; product
differentiation is key in this competitive market. Another significant factor is that all of these companies
count on their strong brand identities; they have years of experience as well as loyal consumers.
THREAT OF ENTRY
To evaluate the threat of entry in the e-reader market, it is necessary to determine the degree to which
new competitors can enter the industry and intensify rivalry. This means that the threat of entry is
relatively high, since new firms are developing new devices to penetrate the booming market; which is
very promising. Furthermore, it is necessary to identify the existing barriers for new companies to enter
the market; this as well is at high levels. As above mentioned, innovation and brand identity are essential
in this competition, as well as technology. One example for this is the e-ink technology also known as
“electronic paper”, from which Amazon and Sony have benefited, being the pioneers of e-reader
generation. This helps Sony to successfully provide their costumers with “the most natural reading
experience” as they promise.
SUPPLIER POWER
Suppliers are empowered when they can control and dictate their own business conditions in their
dealings such as, scheduling, setting prices, and delivering between other things. In this case, suppliers
do not have much power hence supplier power is low. Suppliers are very dependable on the companies,
and are not very significant, thus replaceable. They are surely benefited from supplying the e-reader
market, and are entitled to impose certain payments regulations, which interests their profit.
BUYER POWER
The power a buyer has on a firm is determined by how much he or she is willing to pay for the
product and how available the product is to them. If only a few companies are offering e-reader devices,
those companies have a bigger chance of setting industry price; the buyer will have to pay whatever they
ask for if he or she wants the product. However, if e-readers are available form different sources, at
different price ranges, and bearing different abilities, then the buyer has a wider scope to choose from;
thus, the buyer can set industry prices. In this case buyer power is still low to moderate, since only a few
major competitors are in the market, which have really strong brand identities. Buyers are price sensitive
but at the moment have very little buyer power. Perhaps in a near future, consumers will be able to
bargain among alternative brands at their disposal.
THREAT OF SUBSTITUTES
A product can be substituted when a similar product is within reach and can satisfy the same needs
and demand as the first product. In the case of the e-reader the threat of substitution is moderate to high.
The level of substitution depends on the differentiation of the brand and the differences in abilities that
they offer. In the actual e-reader market we can see how some differences among the devices are minimal;
however other differences such as Internet connectivity, can be crucial to some consumers. As the market
grows on, new devices will emerge; if these are lower in prices and can perform or be as functional within
its purposes they could easily replace the original ones. Hence, e-readers would be easily substituted.
Charting and Value Curve
eReader Comparison Chart
There are many other electronic reading books out in the market that compete with the Sony
Reader. The main competitors of the Sony Reader are the Kindle from Amazon, the iPad, the Nook by
Barnes and Noble, and the Kobo from Borders. Based on this chart you can see the comparison of these
devices to the Sony Reader and where Sony’s value stands.
eReader
Amazon Kindle WiFi
Amazon Kindle
Amazon Kindle DX
Barnes & Noble
Nook
Barnes & Noble
Price
Screen
Size
Adj Font
Size
3G or
Wi-Fi
$139
6"
8
$189
$359
6"
9.7"
8
6
Wi-Fi
3G WiFi
3G
$149
$149
6"
6"
6
6
Wi-Fi
3G Wi-
Book Capacity and
Sources
Audio
Books
3500 Amazon
Yes
1500 Amazon
3500 Amazon
Yes
Yes
1500 BN
1500 BN
No
No
Nook 3G
Border Kobo
Sony Reader Touch
Sony Reader Daily
Sony Reader Pocket
Apple iPad
$149
$169
$249
$149
$499
6"
6"
7.1"
5"
9.7"
5
5
6
3
Adjusts
Fi
None
None
3G
None
Wi-Fi
1000 Borders
350 Reader Store
2000 Reader Store
500 Reader Store
1500 Apple iBooks
No
Yes
Yes
No
Yes
Based on this chart we can see that the Sony Reader is very competitive with other brands that are
currently out in the market with it. Their prices are really balanced with the other brands such as the
Kindle, Nook, and Kobo which are all priced in the range of $139-$359 with the Sony Reader’s range
being in the $149-$249 range which makes it much more affordable than the other competitors. This
competitive price range differs when it comes to the Apple iPad because the iPad is a little bit more
versatile in being able to do multiple tasks that the other eReaders cannot. A few things that Sony can
improve on though is having the availability of Wi-Fi and 3G like the other brands do. Another aspect
that Sony can excel in is the availability of books that consumers can purchase. Out of all the other
eReaders, Sony is the one that has the least available books that can be purchased through them and Sony
is pretty capable of accessing more books for their consumers to purchase.
Price Chart
Price
$600
$500
$400
$300
Price
$200
$100
$0
Amazon Amazon Amazon Barnes &Barnes & Border Sony
Sony
Sony
Kindle Kindle Kindle Noble Noble Kobo Reader Reader Reader
Wi-Fi
DX
Nook Nook 3G
Touch Daily Pocket
Apple
iPad
This next chart shows the competitive price analysis of all the eReaders. As you can see the
Apple iPad leads the market with prices followed by the Amazon Kindle. Ironically the Amazon Kindle
Wi-Fi version is the least expensive followed by the Sony Touch and Pocket Editions. Based on this
information we can see that the Sony Reader is very affordable and competitive which makes consumers
want to purchase this high quality piece of technology at such a low price. With a brand name like Sony
consumers are going to expect great reactions and results from what they purchase. Also with Amazon
and Apple being up there in price ranges shows that they may have what others eReaders do not which
make it acceptable for the prices to push up compared to other brands. However, Sony is catching up to
these big name brands as it has tripled sales within the past year, and this is without the availability of WiFi and as many books as the other eReaders that are out there. Once Sony overcomes this barrier along
with the addition of internet like the iPad it can potentially dominate the eReader industry.
Value Curve
Value Chart
12
10
Amazon Kindle
8
Barnes & Noble Nook
6
Border Kobo
4
Sony Reader
2
Apple iPad
0
Battery Life Response
User
Computer
Time
Experience Competitor
Price
This last chart is the most important one of the three because it shows how much value each
eReader has to provide to the consumer. Since Apple is currently the more popular one of out all the other
brands, it ranked higher than most of the other competitors except for the price category which is
understandable because it is so much more expensive than the others. One category that all of the brands
need to work on is the computer competitor category which may be the most important one of them all.
As technology is excelling every year, these eReaders need to fulfill and will eventually accomplish
computer competitors as eReaders will in the future, take over textbooks and laptops too as well.
However, it seems as though some of these eReaders success falls upon the loyalty of the consumer
because all of the brands seem to have the same user experience response which proves that consumers
stick to brands that they like, and as long as they keep buying these products the more these companies
will stay afloat.
Profit Pools:
In order to analyze a profit poll there are six steps that need to be followed. The first step is to define the
profit pool and the relevant value-chain activities. As learned above the Sony e-reader is one of the
pioneers in the e-reader market. There are currently three versions of it, but its main function is to provide
consumers with an electronic reading experience and storage for all e-books. There are two types of
relevant value-chain activities: the “virtual”, which consists on the e-book transactions, and the e-reader
or device production, which consists on the manufacturing and distributing of the device. However, for
many circumstances parts of this type of value-chain are outsourced to suppliers, yet Sony is one of the
“big guys” that can manage to integrate these activities into one same process within the business. This
entitles them to have all the activities in the value-chain analyzed under one profit pool.
The second step is to estimate the size of each profit-pool activity; in which we will give an
overview of the other four steps: estimating the size of the profit pool, estimating the distribution of
profits along the chain, verifying the values, graphing the profit pool, and finally evaluating the results.
After analyzing the information given in a few blogs and other references, I calculated that when you buy
an e-book through the e-reader 16.23% goes to the author, 46.74% goes to the publisher, 5.57% goes to
marketing, 3.57% goes to designing, editing, and typesetting, and 27.88% goes to the retailer. This is
something that will positively affect the e-reader industry in the long-run, since resources are being saved
and they are managing to produce and distribute effectively to a vast public.
Other interesting graphs: