The Internal and External Strategic Factors Affecting the Corporation - Research Paper Example

PESTEL Analysis

The global success registered by Sony is only possible because of the company’s ability to effectively address the macro-environment issues and its external factors. PESTEL analysis helps to uncover these external factors, that is, legal, political, technological, ecological, economic and sociocultural aspects. A PESTEL analysis would assist in identifying threats and opportunities in the gaming, consumer electronics and financial services segments. Moreover, sustainability of the company would depend on the effective consideration of the macro-environment factors

Political factors

Political factors include the level of influence of government activity on the remote environment of the business. For instance, in Sony’s case, external political factors such as political stability of Sony’s largest markets, favorable government support regarding online business and increased support from the government for better data security offer a myriad of opportunities. Political stability in Sony’s major markets offers major benefits in terms of decreased political barriers in the macro-environment, and it would be easier for the business to expand (Greenspan, 2017a).

Furthermore, the opportunities for growth tied to favorable governmental support for better data security are many. Better data security, with support from government legislation, leads to increased growth in businesses’ online operations. To improve on this, governments are increasing their efforts on promoting online business albeit for their own reasons such as increasing employment levels and better incomes for its citizens. Nonetheless, this external factor provides an opportunity for Sony whereby the company could expand its online services in the gaming products (Greenspan, 2017a). Better governments mean increased opportunities for Sony.

Economic Factors

The performance of the Sony business is contingent on economic trends. Sony must consider factors such as the economic stability of developing and developed markets, level of consumer’s disposable incomes, and the growth levels of the developing and the developed markets. All this offer growth opportunities for Sony Corporation. Developing markets have the highest growth rates, therefore, Sony can grow its revenues alongside the developing markets. More importantly is the economic stability of the developing and developed markets. Developed markets tend to be more stable and Sony can enhance its operations with the reduced risk of market-based threats (Greenspan, 2017a). Also, to consider is the level of disposable income. Increased disposable incomes equates to increased company revenues. Sony would be more inclined to aggressively market their products with the expectation that consumers are capable and willing to buy their products.

Socio-cultural Factors

Socio-cultural factors include consideration as to how social trends could impact the responses of Sony product consumers. Other socio-cultural factors include wealth distribution, level of openness towards leisure and the acceptance and adoption of online gaming. For instance, revenue generation opportunities could arise from enhanced wealth distribution and increased acceptance of online gaming as there would be expanded uptake of Sony products (Greenspan, 2017a). Furthermore, the more the society becomes open to leisure the better it would be for Sony’s bottom line. The company should expand its marketing strategies for entertainment and gaming products to reach its target audience and address their leisure needs.

Technological Factors

Sony largely depends on technology applied in its business and how it facilitates the consumption and use of its products. For increased opportunities Sony must address technological aspects such as better rate of research and development activities, the world’s increased dependence on digital technologies and the expanded adoption rate of mobile technologies. As the world shifts to digital technology, both the individual and the organization would have greater demand for products that apply this technology (Meyer, 2017). Furthermore, the integration of digital technologies and smart phones opens up new market frontiers for Sony corporation. The high adoption rate would be beneficial to Sony if it increases its level of innovation regarding mobile technologies to improve on its competitiveness which would translate to better revenues.

However, high rate of research and development activities acts as both a threat and opportunity for Sony. For example, other companies would enhance their research and development activities against Sony products. Nonetheless, Sony could also increase their research activities and grow its financial services, entertainment and gaming businesses. Increased research and development investment could translate to increased competitive advantage as a result of a differentiation generic strategy (Meyer, 2017)

Ecological Factors

The natural environment conditions have an effect on Sony and its market. Ecological factors and trends are significant to Sony’s remote environment. They include the increased emphasis on sustainability, setting up of recycling centers and consumers increased demand for goods that are environmentally friendly. All this offer growth opportunities. Improving on sustainability efforts leads to better brand image (Sony Corporation, 2010). Innovation would, additionally, make Sony’s products environmentally friendly. Such steps could attract a whole new segment of customers. Moreover, the presence of recycling facilities assists Sony to address the issue of product’s end-of-life. Taking advantage of such facilities would assist the business in implementing comprehensive recycling initiatives.

Legal Factors

Adhering to legal requirements is essential if a business is to survive. Examples of regulations include protection level of patents, product regulation and regulations of e-waste. Such regulations act as both threats and opportunities to the business. Patent protection would require cooperation and concerted efforts from both governments and intergovernmental organizations. Therefore, better government protection would see Sony grow its business without the risk associated with proprietary designs and information (Greenspan, 2017b).

Regulation of e-waste could be a threat since it would require additional effort and increased expenses to mitigate the environmental effects of electronic and gaming product waste. However, it could be an opportunity for Sony to improve its brand image by proactively enhancing and producing products with minimal impact to the environment. Increased government regulation means that companies have to spend more in compliance efforts. Sony, for instance, might need to increase its research and development expenditure in an effort to meet product safety requirements. Nonetheless, this same threat could be an opportunity as the company would need to continuously improve its products to be at par with compliance requirements and this would, in the long-run, improve their competitive advantage(Sony Corporation, 2010).

SWOT Analysis

Strengths

These are the internal strategic factors that promote profitability and growth. In Sony’s case, its strengths include diversification, popular and profitable products and a respectable brand. In Japan and other developed economies Sony boosts of being one of the strongest brands. This enables them to easily attract and retain customers. Furthermore, Sony’s diversified business from electronics, to gaming, entertainment and financial services reduce market-based risks and guarantees stability (Greenspan, 2017b). Its profitable products, like the PlayStation offer continuous profits despite the increased competition.

Weaknesses

These are the internal strategic aspects that limit the performance of a company. Sony’s barriers to business growth include the lack of a dominant mobile device, Sony’s products are easily imitated and the susceptibility of their networks and databases. The lack of a leading mobile device means they perform poorly in comparison to Samsung and Apple devices (Greenspan, 2017b). And as more people more into the online space, Sony must address their database and network vulnerabilities. Many customers are weary of the security of their data and as such may choose to stay away from using Sony products. Imitability of Sony products is a major concern. Its entertainment electronics bears the biggest brunt

Opportunities

They are external factors that increase profits and growth. Sony’s opportunities are found in electronics, entertainment, gaming and financial services and include product development, increased business diversification and better innovation. More diversification could boost growth. The company can expand on its current competencies and take advantage of opportunities. Furthermore, new products translate to new income streams. As the company rapidly innovates, it would lead to improved competitive advantage particularly considering the high level of competition in Sony’s market (Sony Corporation, 2010).

Threats

These are external strategic factors that have the potential of negatively impacting the business’ performance. Sony’s threats come from increased competition, cyber-attacks and piracy of their software. The increased reliance of Sony on Online databases and networks has led to increased incidences of cyber-attacks as hackers look to capitalize on customer information. The threat of increased competition means that other companies competing with Sony might adopt aggressive tactics. It will require more effort from Sony to counter such tactics leading to a diversion from their core business mandate. Another challenge is software piracy. Imitation of Sony’s software would diminish its profits from gaming and other related products. Therefore, company would spend resources to protect its software.

Conclusion

The success of Sony Corporation can be seen in its innovation and several decades of creating a multinational and multi-billion electronic based company. The company boasts of products such as transistor radios, the VTR, the Triton, among others. This Japanese company has been a trendsetter and could be used as a benchmark by other multinationals on how best to implement business strategies. However, the decrease in economic activity since the 2008 meltdown, the increase in value of the yen and the diminished growth of the Japanese stock exchange has pushed Sony back to the drawing table. Consequently, the paper has highlighted on the various strategic issues facing the company.

Summary

The SWOT analysis assists in identifying both the internal and external strategic factors affecting the Sony Corporation. A number of fundamental issues have been highlighted in the SWOT analysis. A significant weakness for Sony is its lack of a dominant mobile device which can compete favourably with its competitors like Samsung and Apple. It is also crucial that Sony addresses the vulnerabilities of its databases and networks if it is to effectively utilize the potential of online business. Additionally, there are other highlighted issues which could curtail Sony’s business performance. The company must address these issues while taking advantage of their strengths and opportunities to ensure longevity and increased performance of the corporation.

The PESTEL analysis helps in highlighting the bigger picture in which Sony operates. The analysis helps to categorize environmental influences as they have an effect on the internal operations of the company. The economic, political, technological, sociocultural, ecological and legal aspects could determine the supply and demand level of Sony’s products and the costs the company could incur while venturing into new markets or operating in existing ones. PESTEL analysis provides an insight into Sony’s strategic direction and how well the company would grow in emerging and developed economies. The analysis revealed a number of opportunities and threats that directly affect the financial service, gaming, electronic and entertainment segments. Addressing the threats and take advantage of the opportunities will assist the company create new income lines as well as improve on their bottom-line.