Emphasis on Product Differentiation to Maximize Profits
Compared to other mainstream models of major digital photo frame companies, the price tags of the three S-Frame digital photo frames launched by Sony are most similar to the three digital photo frames released by Philips: the 7FF2FPA, 7FF2CM,I and 9FF2CMI. The Sony DPF-D70 sells at US$139.99, the Philips 7FF2FPA at US$149.95; the Sony DPF-V700 sells at US$189.99, the Philips 7FF2FPA at US$179.95; and the Sony DPF-V900 sells at US$249.99, with the Philips 9FF2CMI at US$249.00. It can be seen that Sony and Philips are positioning themselves in the medium to high price range of the digital photo frame market.
Also, Sony displays an obvious difference compared to other companies in terms of product functions. The main difference lies in Sony's use of the BIONZ image processor for its three S-Frame digital photo frames, which enables the S-Frame digital photo frames with auto touchup functions. Furthermore, the DPF-V700 and DPF-V900 both feature HDMI output and wireless-enabled functionality and may be connected to BRAVIA LCD TVs and compatible HDTVs of other brands. Slideshows are thereby made possible on large displays. One can also receive and play back images on Bluetooth-equipped camera phones.
Sony has differentiated the design of its digital photo frame products by means the BIONZ image processor, HDMI output, and Bluetooth technologies, while at the same time positioning its products in the medium to high price range. At the present stage, Sony is apparently aiming to maximize profits in the digital photo frame market.
Complementary Products Expected to Buoy Up Digital Photo Frame Sales
Using core products to spur the growth of complementary application products has been the strategy favored by Sony when planning its competition approach. The release of the Memory Stick eight years ago complemented the growth of application products like Sony digital still cameras, digital camcorders, digital photo printers, and digital photo frames. Today, Sony is using the BRAVIA LCD TV as a core product to complement and stimulate the growth of Sony digital still cameras, digital camcorders, notebook PCs, TV phones, camera phones, home theater systems, Internet video links, game consoles, and digital photo frames. When Sony launched the S-Frame brand of digital photo frames, it was not merely releasing a single product, but a product that could be used in combination with core products and even other complementary products. Such is the synergy created by the strategic thinking behind the Sony family products.
Distribution Control and Pre-order Serve as Timely Adjustments to Sales Strategy
The sale of Sony S-Frame digital photo frames is presently based on the SonyStyle exclusive model and pre-order mechanism. This means consumers can only place orders in the US SonyStyle.com website and at the 57 Sony Style retail stores located throughout the United States. By adopting a distribution control strategy, Sony can learn the demand and preferences of consumers towards S-Frame digital photo frames, so that Sony can make timely adjustments to its future sales strategy.
Outsourcing and Cost Reduction as Means of Attaining Profit Target
Price competition in the digital photo frame market is fierce. In order for Sony to effectively lower production costs of its S-Frame digital photo frames, the company adopts an outsourcing production model. On the other hand, Taiwanese makers receive more than 60% of the digital photo frame OEM orders worldwide. Moreover, as regards key digital photo frame components TFT-LCD modules and controller ICs, Taiwanese companies are competitive in terms of prices and technology. Therefore, the manufacturing of Sony S-Frame digital photo frames has been outsourced to Taiwanese maker Lite-On. Sony has outsourced production to Lite-On mainly because Sony and Lite-On have had several years of cooperation in the manufacturing of DVD players. In addition, as the first Taiwanese company to supply modules to European brand Philips, CPT supplies TFT-LCD modules for use in Sony digital photo frames. Having supplied Philips with seven-inch 800 RGB ?480 pixel TFT-LCD modules and nine-inch 800 RGB ?80 pixel TFT-LCD modules, CPT has become internationally renowned for the quality of its display modules for use in digital photo frames. Jeilin Technology provides Sony with controller ICs, not only because Jeilin's controller IC technology has been widely recognized, but because its prices are highly competitive.
Taiwanese companies have engaged in the manufacturing of digital photo frames for a longer period than companies in other regions. And with their competitive edges in TFT-LCD modules and controller ICs, which account for a substantial share in the overall production cost of digital photo frames, Taiwanese companies have formed a solid cluster of the digital photo frame industry supply chain. Therefore, it is no surprise that Sony has chosen Taiwanese companies as the suppliers of components for its S-Frame digital photo frames.
It can be seen that Sony's competitive strategy for S-Frame digital photo frames consists of lowering costs by outsourcing and distinguishing the value of S-Frame products by incorporating the BIONZ image processing technology as well as HDMI output and Bluetooth technology. Furthermore, Sony differentiates the S-Frame digital photo frames by positioning them in a higher price range compared with the products of other brands. In doing so Sony expects to attain the profit target set for the S-Frame digital photo frames.
Appendix
Research Scope
This report analyzes new coverage on the three Sony S-Frame digital photo frames as well as their functionality and pricing. "Mainstream models of other major digital photo frame companies" in this report refer to the 42 digital photo frame models launched by Philips, Kodak, Ceiva Logic, Pandigital, Westinghouse, and Smartparts. For further details, please refer to the MIC report published in February 2008, titled "Digital Photo Frame Product Development and Worldwide Market Size Forecast for 2008-2012".
Pricing and Competitiveness of Mainstream Models of Major Digital Photo Frame Companies
Regression analysis was employed in creating a pricing and competitiveness positioning map factoring in the display specifications and prices of Sony's three digital photo frames products, as well as the display specifications and prices of the 42 digital photo frame models launched by the six companies mentioned in the February 2008 MIC report titled "Digital Photo Frame Product Development and Worldwide Market Size Forecast for 2008-2012".