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Evaluation of Sony Corporations strategy
Sony have successfully created an incredible brand name previously, however,
its legend seem to be falling apart recently. In fact, Sonys net profit for the !uly"
September #uarter for $%%& falling '() to *.+ billion ,en, compared to $-.. billion
,en for the same period last year (Benson, 8th Nov 2006). /he ma0or reasons for the
declining profit are affected by the critical strategic issues faced by Sony which
became a main drawback for them.
/he first strategic issue faced by Sony was the inefficient manufacturing
structures which decrease Sonys #uality that badly affects their reputation and caused
a decline in product competitiveness. DeWit & Meyer (2004: p192) argue that 1the
essence of most uni#uely !apanese management practice will be they productivity
improvement, /2C 3/otal 2uality Control4 activities, 2C 32uality Control4 circles, or
labour relation 5 can be reduced to one word6 7ai8en9. /hey also argue that 1the
implication of /2C or C:2C 3Company :ide 2uality Control4 in !apan have been
that these concepts have helped !apanese Companies generate a process"oriented way
of thinking and develop strategies that assure continuous improvement9 (p192).
;owever, in the case of Sony, they did not make any improvement or perform well in
7ai8en or implement an efficient manufacturing structure that ensure high product
#uality which affect their product #uality and caused a massive damage to the
company. <or e=ample, there is the recall of '.& million Sony >aptop batteries which
were liable to overheat and potentially burst into flames where Sony even failed to
fully study the problem (Forbes!o", 2
n#
$!tober 2006) and there are complaints
from !apans consumer about ?S@s new system (Wonov%!o", 1&
th
Nov 2006) which
will affect the compatibility and status of Sony badly.
/he failure of Sony in effectively implements 7ai8en or sustain an effective
manufacturing structure to ensure that they have high #uality products had damage
their strong brand name and reputation which caused them to lose their product
competitiveness and competitive advantages in the market. As 'ohnson et %( (200&:
p12&) argue, 1it is important to emphasi8e that if an organi8ation seeks to build
competitive advantage it must meet the needs and e=pectations of its customer9. /he
fact that Sonys product #ualities are unable to meet the needs and e=pectations of
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their customer had completely decreases the confident of the market and swipes away
its reputation. Fin(%y (2000: p29&) also argue that 1a good reputation is something
that all business would like to have but in some cases a good reputation is much more
valuable than in others9. Aeputation is one of the significant intangible resources
()o((is & Mont*o"ery, 1999) for Sony that differentiates themselves from the
competitors for them to charge a premium price for their e=cellent product and
#uality, as +ot(er & +e((er (2006) argue, good reputation can create a positive
pre0udice in the mind of the customer which make customer prefer the brand.
/herefore, the diminishing of Sonys reputation will create a negative pre0udice and
weaken their core competences which will directly affect their competitive advantages
and become a ma0or threat for Sony.
Besides than #uality and reputation issues, Sony are insufficient in responding
to the shift of market demand and losing of its competitive advantages. /he delays for
the European launch of ?S@ due to manufacturing problems (BB)!o,-, 6
th
.epte"ber 2006) caused Sony to become incapable of fulfilling the increasing market
demands which increase the stake for Sony as there are other strong competitors such
as Cicrosoft and Dintendo to have a head start in gaining market share and en0oy first
mover advantages. Besides, Sony also responds slower than others in the increasing
demand of ?lasma /Es and lost ground for key growing area. As Mint/ber* et %(
(1999: p96) suggest, 1first mover may gain advantages in building distribution
channels, in typing up speciali8ed suppliers or in gaining the attention of customer9
and 1the first product of a class to engage in mass advertising tends to impress itself
more deeply in peoples minds than the second, third or fourth9 /herefore, Sony lost
its competitive advantages and large proportion of the market shares in the game and
electronic industryF they are also unable to benefit from the first mover advantages
which left them behind of their competitors.

Currently, Sony are implementing emergent strategies from both 1inside out9 5
Aesources Based Eiew (0%"e( & 1r%h%(%#, 19902 B%rney, 1991) and 1outside in9 5
?ositioning view (1orter, 1980 %n# Mint/ber* et %(, 1998), or so called Carket Based
Eiew 3Fin(%y, 2000) to secure its current position. 'ohnson et %( (200&), Fin(%y
(2000), 3yn!h (2006) and 4ho"pson & .tri!-(%n# (2005) all suggested that an
integrated approach of the resources"based and positioning view can ma=imi8e the
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capabilities of organi8ation and sustaining more competitive advantages. 1enrose
(19&9), .e(/ni!- (19&6) and 0%t!h (1996) also suggested that competitive strategy
re#uires both the e=ploitation of e=isting internal and e=ternal firm"specific
capabilities and of developing new ones. In the changing business environment, Sony
needs to cope with the e=ternal changes and find the right ways to deal with it by their
own capabilities or resources. M%r-i#es (2004: p9) also agreed that 1unless
organi8ation take a holistic, big"picture approach in designing the activities of the
company, their efforts will backfire9.
As for 1inside out9, also called the competence"based view (0o#*son, 1998),
Sony has been green"lighting asset sales to free up cash so they can rebuild the
company around a tighter core of businesses. In Gecember, Sony sold part of its (')
stake in retailer Style>ife ;oldings to a group of investors (0%((, 50
th
'%n,%ry 2006).
/his managing for value strategy which 1concerned with ma=imising long"term cash"
generating of an organi8ation9 ('ohnson et %(, 200&: p468) by disposal of assets to get
more funds and reinvest back into different business units such as AHG, production
and others can help Sony to strengthen its core competencies. As DeWit & Meyer
(2004: p526) suggest, 1the real sources of advantage are to be found in managements
ability to consolidate corporate"wide technologies and production skills into
competencies that empower individual businesses to adapt #uickly to changing
opportunities9.
Another strategy that Sony implement to boost its core competence is
miniaturi8ation (DeWit & Meyer, 2004). /o bring miniaturi8ation to its product, Sony
must ensure that technologists, engineers, and marketers have a shared understanding
of customer needs and of technological possibilities in order to become more
customer"orientated with the aim to increase competitive advantage, as well as create
more value added activities. Sony also implement a related diversification stategy
which involve adding businesses whose value chains possess competitively valuable
strategic fits with the value chain of the companys present business. Aelated
diversification among the different businesses provides Sony with sharper focus for
managing diversification and is a useful degree of strategic unity across the
companys various business activities 34ho"pson & .tri!-(%n#, 2005). 3yn!h (2000:
p61) also argue that 1it is the combination of resources that delivers competitive
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advantage, because such a combination takes years to develop and is therefore
difficult for others to copy9.
Besides, in order to regain Sonys competitive advantages, they appoint the
first foreign chairman, ;oward Stringer to head the company with the aim to secure
Sonys main ground and hope that an outsider will assist Sony to think outside the
bo=. As 0%"e( & 1r%h%(%# (1994) suggest, intellectual leadership are essential to
develop industry foresight, anticipating which trends are likely to emerge, so it is
important to build Sonys new core competence to shape the industry.
;owever, 1rie" %n# B,t(er (2001) have shown that the Aesources Based
Eiew, as currently constituted, contains a theory of sustainability but not a theory of
competitive advantage 3i.e., value creation4./hey argue that 1simply advising
practitioners to obtain rare and valuable resources in order to achieve competitive
advantages and, further that those resources should be hard to imitate and non"
substitutable is not very helpful in providing practical help9 ('ohnson et %(, 200&:
p1&&)
In the other hand, as for 1outside in9 which is the ?ositioning view,
Mint/ber* et %( (1998) argue that positioning is important and had develop the
?ositioning School. Sony also believes that the e=ternal business environment will
shift the strategy of the organi8ation. Fin(%y (20002 p11) suggest that 1organi8ation
alter itself and the products and services it offers in order to match the needs of
customers in its chosen marketplace which is a market"based approach, so called
because the organi8ation looks to the marketplace to see how it should act and how it
should evolve9 Besides, based on the environmental factors, Mint/ber* et %( (1998)
developed the environmental school which argue people in strategic management
must consider the range of decisional powers available, given the forces and demands
of the e=ternal conte=t. Sony insufficient in responding to the e=ternal market had
caused them to lost ground in key growing areas and their strategy must be able to
cope with the e=ternal environment.
(
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Coreover, 1orter (1991) strongly believe that making choices about how
organi8ation position their company in its competitive environment is what strategy is
all about and emphasi8e on the importance of positioning view. ;e argues that
organi8ation can sustain competitive advantages by implementing the generic
strategies by position themselves either being cost"leadership, differentiation or focus
(1orter, 198&). Sony had positioned themselves with a differentiation strategy which
seeks to provide products or services that offer benefit different from those
competitors and that are widely valued by buyers ('ohnson et %(, 200&). Sony are
rewarded with a premium price with its uni#ueness (DeWit & Meyer, 2004) that help
them to gain greater competitive advantages.
;owever, Bo7"%n & 8s!h (1996: p56) critics that 1a final criticism of
?orters approach stems from our e=perience of trying to use these concepts with top
management teams wrestling with the strategies of their organi8ation. In addition to
the lack of clarity surrounding the generic strategies, the generic strategies present an
essentially static approach to competition9. 0%"e( & 1r%h%(%# (1994) also argue that
1the traditional competitive strategy paradigm 3e.g. 1orter, 19804 with its focus on
product"market positioning, focuses only on the last few hundred yards of what may
be a skill"building marathon.9
(Removed)
.
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<inally, Sony is still in a critical position where they need to be e=tra caution
about all the potential crisis that they will be facing in the future. Fin(%y (2000: p4&1)
argue that 1crisis control relies on both pro"active and reactive control. It is pro"active
in that, although the precise form of the crisis will be unknown, broad elements of
many crisis situations will be, and these can be planned for through risk management
and particularly contingency planning. Crisis control is also reactive in that the
specifics of the situations must be dealt with as they unfold9. /hus, risk management
and crisis control are also essential for Sony to implement in order to stay alert and
increase their awareness to potential threats.
In conclusion, Sony must learn from their mistake and implement more
effective and efficient strategies if they want to get out from this current unfavarable
situation. Besides than their current strategies, alternatives strategies suggested above
should become another ma0or concern for Sony to ensure that they can effectively
rebuilt their poor reputation and regain more market share in the future.
3$*++ words4
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