MANAGERIALECONOMICS

SONY VAIO

SUBMITTED TO : SURTA MEHTA

SUBMITTED BY : 1. NIRALI MEHTA 2. HARSH DESAI 3. SANJAY THACKER

FLOW OF PRESENTATION Introduction of sony Products of sony Introduction of sony vaio Factors of production Impact on production by change in factors Determinants of Demand Affect on demand by change in determinants Price elasticity of demand Price elasticity of supply

Income elasticity of demand Advertisement elasticity of demand cross elasticity of demand Market structure Opportunity cost Government policy Foreign trade policy Import duty Impact by government policy Impact on technological change Impact of Recession How is differentiation done?

Introduction of Sony Sony company founded in the year 1945. It’s Headquarter in Tokyo, Japan. Producer of Electronic and IT products In 2004, 72nd rank in forbs ranks of largest

company in the world Sony company is a co-developer of CD, DVD,

and super audio CD. Sony music entertainment is a second largest

company in the world.

Products of Sony laptop Mobile phones Television & Projectors Digital Camera & interchangeable lens Camera Video Camera Tablets & Notebook Portable audio Play station 1 and 2

Introduction of Sony Vaio

Sony Vaio launched in 2004-05. Available in i3, i5 and i7 processor in 2nd and 3rd

both generation Available in the price range of Rs. 24000 to

200000 Recently Sony launched ultra-book.

Factors of production Land : in north America,

Fifty seven manufacturing sites. Four engineering locations.Headquarter is in Japan.

Labor : More than 168200 workers (like engineers)

are working in many departments of the company.

Cont.

Machinery :

Require high latest digital technology.

Human resource :

Intelligent train workers

IT Experts

Capital

Impact on production by price of factor fluctuates

If the Prices of the factors is increase cost of the product is increase and selling price is also going to increase

There is a increasing in price so demand is going to decrease.

For Ex., Increase in wages of labor

New machinery purchase

Cont.

If the Prices of the factors is decrease cost of the product is decrease and selling price is also going to decrease

There is a decreasing in price so demand is going to increase.

For Ex., Increase in wages of labor

Impact on production by supply of factor fluctuates If there is a shortage of any factor on that time the

production will decrease. So shortage of the product in market arises. So that the supplier of the product take the benefit of that by increase the price of product.

For Ex.,

spare part of computer or labor’s shortage decrease the production.

Determinants of demand

Market price Income of Consumer Number of Consumer Prices of related goods Tastes of Consumer Expectations Technology Complimentary goods

Affect the demand by changes in determinants

Market Prices : If price of ultra book increase in market then the demand will decrease.

Income of Consumer : if Income of consumer is increase then he spend more, and so the demand of Product will increase.

Cont.

Number of Consumer : if number of consumer is increase demand will increase.

Price of related goods : if related good is available in market at low price then consumer shifted for buying that product and decrease the demand of our product.

Cont.

Taste of consumer : if taste of consumer change they stop buying the product and shifted to other product, and demand will decrease.

Expectation of Consumer : if the product is not up to the expectation of consumer they will not buy the product. and demand will decrease.

Cont.

Technology : If technology will change and consumers are not satisfied with our products technology on that time demand of our product will decrease.

Complimentary goods : A complimentary good is a good with cross elasticity of demand. If software price will increase demand of the hardware will decrease.

Price elasticity of Demand Price of Sony Vaio ultra-book laptop is

Rs.90,000.

We estimate that the demand of that laptop was 5000 units in India.

If the Price of the laptop is increase by Rs.5000 so the consumers preference was not changed equally.

Cont.

In our estimate the demand of the laptop at 95000 is 4950 units.

Price Elasticity Demand=

(Q2-Q1)/[(Q2+Q1)/2]/ (P2-P1)/[(P2+P1)/2]

=0.01/0.054

=0.185 So in that case the demand is inelastic because

it is less than 1.

Cont.

But if the Price was reached at Rs.120,000 so that most of the customers switch in other brand so that in our estimate the demand was 2500 units.

So that in this case the Demand is Elastic because it is more than 1

Cont.

Price 90000 95000 100000 105000 110000 120000

Demand

(Units)

5000 4950 4800 4165 3200 2500

2000 2500 3000 3500 4000 4500 5000 55000

20000

40000

60000

80000

100000

120000

140000

Pri

ce

Demand

Demand Curve

Price Elasticity of Supply

Cont.

Supply of Sony Vaio Ultra-book laptop is price elastic.

At the price of Rs.90000 the supply of ultra-book laptop estimated was 5500 units.

If the price of the laptop is goes to Rs. 60000 so that the estimated supply of laptop was 3300 units.

This happens because the price of the laptop was decreased by some external factors so, that the profit margin was decreased.

So that the supplier of the product give less attention in this type of non-marginal product. And also survive in market is necessary for all the industry so that they shift their resources of production to the new type of high demanded laptop and earn the maximum profit.

Cont.

Price 90000 80000 70000 60000

Supply(In Units)

5500 5000 4200 3300P

rice

Supply

3000 3500 4000 4500 5000 5500 60000

100002000030000400005000060000700008000090000

100000

Supply Curve

Income Elasticity of Demand In our estimation if the income of the consumer is

increases

so that this will be minor effect on the demand of the product.

The Demand of the ultrabook was 5000 units at the price of Rs.90000

If the income of the Consumer was increased to Rs.80000

Cont.

from 65000 so this will Increase the demand to the 5200 units.

There is a minor effect on the demand because in our estimation if the income increases so the which consumer prefer low quality laptop were shift to the sony vaio laptop. But which consumers are with the sony vaio will go in next good brand and new model of laptop. Because for that customers sony vaio is in inferior goods. So that ultimately there will be minor effect on the demand of the ultra-book.

Cont.

Income 65000 80000

Demand 5000 5200

4950 5000 5050 5100 5150 5200 52500

10000

20000

30000

40000

50000

60000

70000

80000

90000Income Elasticity of Demand

Pri

ce

Demand

Advertisement Elasticity of demand

Advertisement elasticity of demand means change in demand related with the change in advertisement.

Advertisement elasticity of demand = % change in demand % change in advertisement

Cont.

In Sony Vaio, Kareena Kapoor is the brand ambassador.

They are spend Rs.90 Crore for marketing of sony vaio.

In our estimate the 30 to 40% demand are because of the advertisement.

Cont.

Cross Elasticity of Demand Cross elasticity of Demand means change in

demand of one product related with the change

in the price of the other substitute goods.

For Sony Vaio ultra-book the apple mac-book is

substitute goods.

The price of Apple mac-book pro is Rs.105000,

and the price of ultra-book is Rs.90000.

Cont.

So in that case if the price of the apple product goes down to Rs.85000 so the most of customer so Ultra-book switch to the apple product. And so that ultimately the demand of the ultra-book will decline.

For example suppose the quantity demanded was goes to 3500 from 5000 units because the price of the apple mac-book was goes to 85000 from 105000

Cont.

Pri

ce

Demand

Price of Apple Mac-book( in Rs.)

Demand of Sony Ultra-book( in Units)

105000 5000

85000 3500

34003600380040004200440046004800500052000

20000

40000

60000

80000

100000

120000

Cross Elasticity of Demand Curve

Market Structure of Sony Vaio In our estimate the Sony Vaio laptop cover the

Monopolistic Competition Market.

Monopolistic competition market their are many seller of the goods.

Each sellers products are different from the other sellers product.

Each seller may set price for their own product.

Cont.

In our estimate in the laptop market there are many seller of the laptop.

Sony vaio’s laptop was different from the other brands laptop.

The price of the laptop was set by the sony vaio.

So that in our estimate the sony vaio laptop come under the market of monopolistic competition.

Production Function of Sony Vaio

Production function is related with the labor for the production and unit produced by the firm.

Through production function curve we will find the per worker production and also easily find the productivity of new appointed worker.

Cont.

In Sony Vaio, production in unit and labour are increasing.

The labor in sony In sony vaio, production in unit and labour are increasing. Sony Vaio at 2010, 2011, 2012 was nearly 161000, 162800, and 168200.

The production of sony vaio at 2010, 2011, 2012 was nearly 355000, 510000, 700000 units.

Cont.

Year Labour Production (in unit)

2010 161000 355000

2011 162800 510000

2012 168200 700000

300000 400000 500000 600000 700000 800000156000

158000

160000

162000

164000

166000

168000

170000

Production Function Curve

1

Lab

ou

r

Production

2

3

1- 2010 year2- 2011 year3- 2012 year

Opportunity Cost of Sony Vaio

Opportunity cost means the cost which sacrifices by the firm for producing other goods.

For example, sony vaio produces the laptop but if he produces other product from the same investment so also earn the profit. So for the sony vaio the profit earned by other ways was opportunity cost because he sacrifices this type of all profit for production of laptop.

Cont.

Sony vaio was invest $80 billion for production of laptop.

If sony vaio invest this money to other product like car, medicine, etc. so also earn huge profit. So this profit was opportunity cost for sony vaio.

Cont.

For example,

Sony vaio invest $80 billion in other following business:

Industry Pharma In. Automobile In. Laptop In.

Profit (in $ billion)

$ 170 Million $ 180 Million $ 200 Million

From this table for sony vaio the opportunitycost was $ 180 million .

Government Policy Excise duty: complete exemption for local manufactures from excise duty. Imported computers subject to additional customs duty (levied in lieu of excise duty) equivalent to 7 per cent. VAT: computers have a concessional rate of 4 per cent (importance attached to the IT sector in India).

Laptops are covered under Information Technology Agreement-1(ITA-1) and have enjoyed exemption from basic customs duty on import

Foreign Trade Policy Export of electronic goods to be incentivized

under Focus Product Scheme. Expeditious clearance of approvals required from

DGFT shall be ensured. Exporters /Associations would be entitled to utilize

MAI & MDA Schemes for promoting Electronics and IT Hardware Manufacturing Industries exports.

Electronics Sector included for benefits under SHIS scheme.

Import duty Current Import duty is 14.7% on laptops in India.

So if there is a change in import duty in India it will affect on price of sony vaio and also in demand.

For ex. For current Import rate the demand is 500000 units If the Import duty rate Increase and

being 20% then the price of laptop will increase and so the demand will decrease and shift at 450000 Units.

Impact by Government Policy

If the government policy is change so ultimately this affect the sony vaio’s production, demand, supply and price also.

If the tax rate will increase so the cost prise and also ultimately the selling price would be increase. And so that the demand of the laptop was decrease. But supply of laptop was increases.

And if the tax rate will decreases so cost price and selling price will decrease and also demand was increases.

If the foreign policy will change also effect the demand and supply of laptop.

Impact of technological change

In the market if there is a change in technology so it will affect on demand of the current technology.

The people will demand new technology so if the company will not change their product according to the technological change so it will affect that product. And company may suffered from loss.

It’s a necessary for all the companies to change their products according to the technological change.

For Ex. Sony vaio is launched their product which is

called ultra-book duo 11. Sony’s new product include three different product in one –

ultra-book, notebook, and tabulate. It’s a totally new technology for market.

There is a two different type of affect on market by launching this product.

1. its affect on competitors market. Vaio have a new technological product and other competitor companies have not this type of product. Their demand is decrease.

if they are going to launch new product which have better technology on that time our demand will decrease.

2. Vaio have launched the new product which is more technological. It affects also on vaio’s other product.

After launching this product there is a decreasing in other products price and demand. Sony vaio model E14A’s price was decrease and demand is also going to decrease.

Before launch of ultra-book E14A’s price was 56000 and after launch its price will decrease and being 49000

Impact of Recession Recession was impact whole the market of sony vaio

laptop.

In the market, if their was a recession so that the unemployment was increase.

So that ultimately the labor wage rate was decrease according to the demand and supply rules. In the market the Demand of the laptop was decrease because of the shortage of money, so that the production was also decrease, so that the labor demand was decrease.

So in this way the demand of the labor was decrease and the supply of the labor was Increase, so that the exploitation of labor was done by the producer. This will affect the lifestyle of people. And this affect the development of nation.

So that the production cost of laptop was decrease, so the producer was interested in producing more number of laptop. So the supply of the laptop was increase but the demand was the laptop in the market was decrease.

Because of that the surplus of the laptop of sony vaio was made in the market.

This will decrease the cash flow of the sony vaio. Because of the surplus their major part of investment was blocked in the market.

Because of that they will face the financial crises and can’t perform better.

To come out from this situation the sony vaio was necessary to reduce the prices of laptop (decrease profit margin) to get money from the market.

How is differentiation done?

Sony vaio’s look is very different from other and also very attractive. So it is being attraction for all generation.

For Ex.

Sony vaio launched it’s product which is called ultra-book. It is a high price product which is a combination of laptop, notebook and tabulate. It helps the company for attract the high society and corporate people.

Ultra-book is a touch screen laptop which is totally different from other laptops.

Sony vaio is available in so many colors which is not provide by any other laptop company.

For Ex. :

Vaio’s E-Series laptop have so many colors which help the company for attract the young generation.

Sony Vaio have a all type of product for all customer. Like high range, low range, light waight, etc..

For ex.

Its lowest range product’s price is 24000 and highest product‘s price is 200000.

Threats from mobile phones and tabulate

Now days the mobile phones and tabulates are cover most of the features of laptops.

So which person who can not afford laptop and have little use of laptop he/she will buy mobile phones and tabulates instead of laptop.

So because of increasing in usage of mobile phone and tabulates it decrease the demand of laptop.