Sony's Ups and Downs - Case Study Example

?International Business Table of Contents Table of Contents 2 Introduction 3 2. Sony Corporation 3 3. Sony going Global 4 4. Challenges faced by Sony 8 5. Organization Structure 9 6. Joint Venture with Sony Ericson 11 7. Strategic management 11 8. Conclusion 11 9. Recommendations 12 Reference List 13 1. Introduction “It’s a Sony!” this is the particular expression people give when they look around in their host’s household. This expression was rather a slogan for the advertisement of Sony long ago. The name Sony is one of the most established brands on electronic entertainment devices. Be it television or radio or video recorder or walkman. Sony Corporation is headquartered in Tokyo. It is a global player and has extended in many countries serving millions of customers across the globe. It is the leading manufacturer and the marketer of audio, communications, video and information technology for the customers and for the professional market all over the world. They have also diversified in the financial sector by giving financial services like insurance and banking to their customers. It always gave emphasis on the strategy that they are implementing for the success of their business. The success of Sony was possible through an exceptional vision “To experience the joy of advancing and applying technology for the benefit of the public" (Hill, 2011). Sony saw its success globally due to the influence that it had on the Japanese habits and culture and penetrated the global market by operating in “the Japanese way”. 2. Sony Corporation In 1946, the Japanese electrical engineers Masaru Ibuka and Akio Morita created their company Sony Corporation with only 20 employees in Tokyo. Now in 2013 the number of employees has gone up to 1,68,300. The figure makes it clear that even a small company can have its first product placed successfully in the Japanese market. The sale of electronic goods then heated up the market and thus Sony started to expand its business globally after their success in Japanese market (Hill C., 2010). The two founders in 1953 went for a three months long business tour to Europe and America where they signed agreement with the US companies and European companies and thus they penetrated into the American and European market. Later it has expanded its business to Africa and India. Sony has served both the market with their expanding business units and their products (Sony Corporation, 2013c). 3. Sony going Global Sony expanded globally with the following aim and strategies: a) Visionary Leadership: They expanded internationally with the aim to lead one vision and make a group which is flexible and efficient enough to capture the global market by learning their local customers. b) Organizational process: They wanted to spread the awareness of their products through the Global Information Systems and Communication. They even set the Research and Development Team for their long term survival so that they can develop their products as the market requires. c) Organizational Culture: Sony formed a multicultural organisation and thus it made it easy for the employees to work in such a friendly environment with no pressure for the following a particular culture. They standardized their products uniquely. d) Customized products: They even customized the products according to the customer need and this unique strategy gave them a bigger platform in the bigger market. Example: Sony laptop keyboards contain the currency signs which are different for the different countries. 3.1. Strategies undertaken by Sony Strategies that are taken in the global context are the plan of the company to position their products positively in the markets so that they stay ahead of their competitors. Sony Corporation thus made different strategies for the different markets so that they can position their products to the customers. Their corporate strategy is to lead as the global provider of electronics and entertainment. In 2008 the company came up with new strategies whose main aim was to refresh their previous three years plan. The main areas are the following: a) Strengthening of the core business i.e. the electronic business units. For the next three years Sony invested around 1.8 trillion yen for strengthening their core business. b) Enhance the network initiatives by adapting new strategy of combining the inbuilt technological strength with the expertise of the external personnel from different parts of the world. c) Control the international growth. 3.2 Environmental scanning techniques Environmental scanning includes the analysis of the political, economic, social and technological environment. It also includes the analysis of risk, competitor’s action, acquisition and merger and also the changes in the strategic investment. The SWOT analysis of the company shows what difficulties and opportunities are faced by the company in the current market. 3.2.1 PEST Analysis of Sony Political: Sony is operating globally and every country it is working in has their rules and regulations that are set by their government. Thus before entering in the new markets or continuing in the existing market Sony has to obey the rules and regulations of the government to continue their business. There is always a chance of change in the rules which can be a risk to the company and thus has to be aware of the changing rules and regulations. Sony should remain updated with the tax rates and the trade and fiscal policies and the entry requirements so as to avoid any problem regarding any political issue. Economic: The major economic changes that influence the working of the company are the boom or the recession, changes in the interest rates and the exchange rates, fluctuations in the stock market and changes in the credit availability. Sony gets affected by these factors either negatively or positively in some cases. Thus Sony must analyse the economic situation of the country it is working in. The company must also give emphasis on the material and labour requirement, inflation and most importantly analyse the time of entry. When the economic condition of a country is good, then Sony’s competitors will also enjoy the same situation. Thus to survive in the market Sony has to work competitively. The reduction in the disposable income of the individual during the recession has a negative effect on the sale of the electronic goods of Sony worldwide. The changes in the current exchange rates from 2007 onwards have a negative effect on sales of Sony and it stripped away billions of yen. Social: Before penetrating into a market companies should have the knowledge about the demographics and the life style of the target market so that they can place their product successfully (Burnes, 2009). The companies should also concentrate on the religious priorities of the target market so that they do not hurt the sentiments of their customers. Consumption patterns, taste and preferences, income level are examined by the companies. Sony has its own brand image worldwide and thus it does not face any problem with their reputation but if the company ignores the above factors then it can face failure in the business. The price of Sony products is the highest as compared to their competitors. Thus the lower income group fails to buy it knowing that it is reliable. Technological: Sony which has been the market leader for six decades, is now been dominated by the existence of Samsung and Apple by their respective products. For Sony, the technological factor is the most crucial factor which if not looked upon seriously can threat their existence. Sony thus spends a lot for the Research and Development team to bring in innovation in their products and become better than their competitors. Sony ensures the availability of the original products to the markets worldwide to keep its brand image. But Sony is also affected by the existence of the fake products with their brand name which only affect their reputation but also affect their sales (Sony Corporation, 2013f). 3.2.2 SWOT Analysis of Sony Strength: Sony has created a reliable supplier management system. They always select those suppliers that obey the laws and maintain good financial statement. They give emphasis on the exchange of information with the suppliers through E-commerce during the procurement process. It has already created a good sales network worldwide and has registered it in around 200 countries. They are famous for the types of customer service they provide to their customers. Their products have high quality and they even maintain good relation after sales with the customers and maintain their database. Sony owns a number of foreign and Japanese patents and has got the license for using a number of patents of others (Sony Corporation, 2013g). Weakness: Sony has numerous product lines that serve to a number of parts of the entertainment chain. The “empire building strategy” of the company not only affected the innovation and operation of the company but also damaged their competitiveness in the market segments. The product lines have no connections among themselves and thus do not give cost advantages. The product prices are too high for the lower income to buy their products thus Sony failed to attract these sections. With the expansion of their business to different countries Sony has become prone to exchange rate risks and that is out of their control. Opportunities: The stock prices of Sony is undervalued and it declined by 50% in 2011, that attracted new set of investors and also the existing investors to invest more. The tough competition which Sony received from Apple and Google can result in expansion of the electronic and software industry. Threats: The Earthquake that hit Japan has adversely affected the operation Sony by increasing the restoration cost more than the insurance policies. It caused shortage in energy supply that lead to reduction or even suspension of production. At that time the product quality was degraded which took place due to the replacement of the parts that are used as the components. It also reduced the overall demand of the products. It affected their sales. Sony faced serious competition from their competitors and should overcome it by specialising in products. Their business is also threatened by the existence of the fake products that are sold under their brand. They are very much dependent on the external business partners which can bring many problems. They may get defective and inferior quality of software components (Sony Corporation, 2013f). 4. Challenges faced by Sony 1) Sony has been successful in its business but they have also faced with severe challenges. Sony has lost at round $3.1 billion in 2011 due to the severe earthquake. In 2010, they also lost around $439 million mostly due to the earthquake and also due to computer hacks that compromised the customer database and forced the shutdown of the PlayStation Network game. To bring down the structural costs the chairman of the company initiated layoffs, closed down factories and even terminated some of the long term managers (Sony Corporation, 2013g). 2) The exchange rate changes during 2007 have affected the sales of the company. It has also affected the investors and even stopped investing (Sony Corporation, 2013g). 3) Sony’s big mistake was that it failed to embrace the new technological innovation like digitalization which includes the shift towards the software industry (Sony Corporation, 2013d). 5. Organization Structure Organizational structure includes the activities like the task allocation, supervision and the coordination. This are made in order to achieve the organizational goals. It can be seen as the perspective through which an individual can understand the organization and its operation. Organizational structure provides the organization with the standard of operating procedure and the routine tests that are executed by the organization. It also determines the role of each individual in decision making and any work in the organization (McKenna, 2011). 5.1 Organizational Structure of Sony Sony Corporation has announced a corporate structure which aimed in reinforcing the headquarters, company functions and the Research and Developments for making the corporation more efficient and responsive to the external conditions. The structure has the main aim of clarifying the line of responsibility and the increase in independence (Sony Corporation, 2013b). The organizational structure of Sony is as follows: Figure 1 : Organizational Structure of Sony (Source: Sony Corporation, 2008) The Consumer A&V Products Company is reorganised under the new structure and build three companies: Home AV Company, Display Company and Personal AV Company. The information technology company is newly established to manage the business in the IT areas and personal computer (Sony Corporation, 2013e). The features of the new structures are as follows: 1) The new structure will promote effective operations that will better reflect the market changes. 2) Executive Board was established to reinforce the corporate strategy and headquarter. 3) Training is provided to the young talents who joined the organisation so that they can foster the future of the organisation. 4) New corporate Laboratories are established for the development of new business. 5) New groups and companies are established in order to enter into the IT and the telecommunication business (Hao and Misra, 2012). 6. Joint Venture with Sony Ericson Telefonaktiebolaget LM Ericsson and Sony Corporation announced on 28th August 2001, that they have decided to merge their cellular phone business worldwide after the final approval from the Boards of two companies and also after the regulatory approvals. They signed their Memorandum of Understanding and established the joint venture Sony Ericsson Mobile Communications. The joint venture took place in October 2001. The new venture started with the 3500 employees and targeted sales of USD 7.2 million (Sony Corporation, 2013a). 7. Strategic management Organisational development issues: IT system modernization program of Sony represents the opportunity for program organization and acquisition of the new talents for the improvement of the performance. The barriers are as follows: (1) poorly designed IT systems that fail to meet the requirements, (2) lack of training to the acquisition staff members (Bartlett and Beamish, 2010). Corporate culture of the business: The culture of Sony is very unique. The multicultural environment helps the workers to work for the organisation efficiently (Mullins, 2010). 8. Conclusion Sony Corporation has been a reputed brand name from decades though it has faced with challenges. The natural calamity which affected Japan in 2011 brought huge loss to the company. The disasters were however overcome by Sony and they have continued their business without any interruptions. They have created good relation with their suppliers and are quite dependable on them in terms of supply of electronic components. The company’ new organizational structure is strong enough to reinforce a new environment in the company. 9. Recommendations The following are the recommendations: 1) Sony should be using its technology for the advancement of its high-end business and the office equipments. 2) Sony should concentrate in diversification instead of manufacturing the easily imitated consumer products. 3) Sony should reduce the prices of their products and make reasonable price range so that the products can be purchased by the lower income group. Reference List Bartlett, C. A. and Beamish, P. W., 2010. Transnational business: Text and cases. New York: McGraw-Hill Education. Burnes, B., 2009. Managing change. London: Prentice Hall. Hao, T. and Misra, R., 2012. Sony Corporation. [pdf] Available at: [Accessed 14 August 2013]. Hill C. W., 2011.Global business today. New York: McGraw-Hill Higher Education. Hill, C., 2010. International business. New York: McGraw-Hill Higher Education. McKenna, E., 2011. Business psychology and organizational behavior. London: LEA. Mullins, L., 2010. Management and organizational behavior. London: FT Pitman. Sony Corporation, 2008. Sony Announces Organizational Structure For New Network Companies. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013a. Sony and Ericsson Complete Joint Venture Agreement. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013b. Sony Announces a New Corporate Structure. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013c. About Sony Group. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013d. Sony Corp Info. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013e. Organizational Structure. [online] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013f. News and Information. [pdf] Available at: [Accessed 14 August 2013]. Sony Corporation, 2013g. News and Information. [pdf] Available at: [Accessed 14 August 2013]. Read More