STRATEGIC ANALYSIS ON SONY CORPORATION

November 2010

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Completed By Woo Gim Chuan Marcus

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SUBJECT About Sony: History, Culture & Products Internal Analysis: Resources Value Chain Analysis Summary of Stren ths & !ea"ness Core Com#etencies *+ternal Analysis: P*S,Analysis of Industry Analysis of Com#etiti.e /orces 0 Porters1 /i.e /orces Analysis Sta"eholders 2ana ement Product -ife Cycles 0 3C4 2atri+, 2ar"etin & Customer Se mentation Com#etitors Analysis Summary of 5##ortunities & ,hreats !hat can Sony do to o.ercome its 9ea"nesses: !hat can Sony achie.e by e+#loitin its stren ths: !hat strate ic actions should Sony ta"e to su##ort its business% le.el differentiation strate y: Can Sony sustain its success: !hat are Sony1s success factors: !hat are the reasons that contributed to Sony1s decline: !hat are Sony1s future challen es and 9hat can it do to o.ercome them: !hat can Sony do to o.ercome threats: !hat is Sony1s cor#orate%le.el strate y and ho9 does it hel# create .alues: Sony1s International Cor#orate%-e.el Strate y: 2odes of *ntry, 3enefits and Challen es Additional ;uestions to stimulate the brain before e+am<<<

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SONY CORPORATION About Sony Sony is a multinational con lomerate cor#oration and the 9orld=s lar est media con lomerate 9ith re.enue of >S?'2 billion @as of fiscal 2))$AB Its #rinci#al business o#erations include Sony Cor#oration @Sony *lectronics in the >BSBA, Sony Pictures *ntertainment, Sony Com#uter *ntertainment, Sony 324 2usic *ntertainment, Sony *ricsson and Sony /inancial Holdin sB Sony is also a leadin manufacturer of electronics, .ideo, communications, .ideo ame consoles and information technolo y #roducts for the consumer and #rofessional mar"etsB ,hese ma"e Sony one of the most com#rehensi.e entertainment com#anies in the 9orldB ,he com#any=s slo an is CSonyB -i"e no otherDB History and Culture ,he current Sony Cor#oration has a uni;ue culture 9hich is firmly rooted in her history es#ecially in relationshi# to her t9o founders, 2asaru Ibu"a and A"io 2oritaB Ibu"a and 2orita 9ere both dedicated electrical en ineers and eniuses abo.e their business talentsB 3oth a.e insi hts and .isions in 9hat the com#any should ma"e and ho9 it should be madeB Ibu"a, es#ecially, a.e constant ad.ice and su estions to the en ineers in.ol.ed in #roEects from the earlier on transistor radios to !al"mansB ,his created the umbrella strate y in 9hich Sony o#erates under 9here the to# mana ement, es#ecially Ibu"a, 2orita and no9 Forio 5h a a.e the eneral direction in 9hich the lo9er en ineers acti.ely learned, de.elo#ed and im#ro.ed on the .isionGideaB ,herefore, althou h there is a #lanned direction, the actual #roduct de.elo#ment throu h launchin is emer ent 9ith reat fle+ibilityB Althou h the research and de.elo#ment section of Sony differs reatly from other com#anies 9ith its reat fle+ibility, Sony, in its essence is still a traditional Ha#anese com#any in many 9aysB ,here is life%time em#loyment, 9ith stron norms and .alues 9hich in turn create strate ies throu h their actionsB Status is i.en @the crystal a9ardA instead of bonuses @not si nificant amountA for su#erior achie.ementB ,here is also the stron seniority system such as the mentor and a##rentice relationshi# that is ty#ical of a Ha#anese firmB All this can be classified as the cultural school in 9hich strate y formation is of collecti.e beha.iourB Collecti.e .ision and stress on human resource, 9hich is ty#ical of many Ha#anese, can be clearly seen in the mission statement I2ana ement PoliciesIB Sony Produ ts Sony has a .ariety of #roducts ran in from electronic de.ices, ames and entertainmentB 3riefly, Sony1s #roducts can be cate oriJed in the follo9in maEor #roduct cate ories:
,ele.ision and ProEectors Home .ideo Home Audio Home ,heatre system Ki ital Photo ra#hy Hand cam .ideo camera Com#uter Peri#heral Portable Audio 4ame In%Car entertainment 2obile #hones Stora e and Recordin media 3atteries and Char er 5ther Accessories

INTERNA! ANA!YSIS Sony, 9hich is the 9orld1s lar est consumer%electronics com#any, has become a consumer%electronics com#any since 1(6&B At the threshold of the much antici#ated 9orld of Ctotal di ital con.er enceD, the electronics ma"er turned media and communications iant seems to ha.e it all 0 ne+t eneration Internet%a9are ad ets and com#ellin content to #um# throu h them, a .ibrant culture of inno.ation resultin from cuttin %ed e research and de.elo#ment @R&KA as 9ell as a 9orld%class mar"etin acumen that has made Sony a lobal me abrandB ,hus, 9hat are the #ossible core com#etencies to ensure that there is ;uantum lea# to success in a 9orld of di it con.er ence: ,he internal analysis on the com#any belo9 9ill ans9er the ;uestionB a" A ountin# Ratio Analysis Sony1s 2))2 o#eratin #rofit mar in accountin ratio is merely )B)18 @)B)67 in year 2))1A, return on stoc"holders1 e;uity reflects a miserable )B))& @)B))' in year 2))1A and return on total asset re.eals only )B))2 @same as year 2))1AB ,he hi h rate of in.estment also does not re#resent corres#ondin ro9th in #rofitabilityB T$ese %oor results &ay indi ate t$at t$e o&%any $ad not been &ana#ed ertain as%e ts o' t$e o%erations (ell and t$us is unable to a $ie)e e)en a)era#e returns* ,he debt%to%asset ratio1 in the last 2 years 9as hi h and increasin moderately tooB As a matter of fact, in 2))2, it 9as )B'1, 9hich 9as com#arati.ely hi her than some consumer%electronics manufacturin com#aniesB Sony+s $i#$ debt,to,asset ratio s$o(s t$at t$e o&%any is $i#$ly le)era#ed -not $i#$ly li.uid" and t$us %ut itsel' in dan#er i' t$e o&%any+s reditors start to de&and re%ay&ent o' debt* b" /inan e Resour es Sony1s net sale of >S?7$ billion @$L abo.e the #re.ious yearA for 2))1 is an all% time hi h recordB Ho9e.er, the o#eratin income of >S?1B)1 billion earned in the same year re#resents a 6)L deduction com#ared to the #re.ious year1s fi ures * T$is $i#$li#$ts t$at Sony+s %ro'it &ar#in $as been eroded si#ni'i antly* In fact, based on the com#any1s annual re#orts, Sony1s net income had dro##ed drastically from M121B8$bn in the fiscal 1(((%2))) to M1&B'7bn in the fiscal 2)))%)1B Its net income in fiscal 2))1%)2 9as M17B$1bn, a further decline com#ared to 2)))%)1 resultsB ,he end of 2))2 sho9ed that Sony had a relati.ely hu e reser.e @cash and cash e;ui.alentsA of M&8$B8bnB Bein# a o&%any t$at is endo(ed (it$ a lar#e reser)e0 Sony $as t$e ne essary 'inan ial resour es to ontinue build an e1tensi)e international in'rastru ture t$at %ro)ides its &ultinational usto&ers (it$ t$e di)ersity t$at is re.uired* T$is is %robably a strate#i o&%etiti)e ad)anta#e t$at any ne( entrants to t$e &ar2et annot o''er*

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Or#anisational Resour es -Or#anisation 3esi#n/Stru ture"

Kebt%to%Asset N ,otal debt G ,otal asset

!ith continuin ro9th and success, Sony ado#ted the strate#i business unit -SBU" 'or& o' t$e &ultidi)isional stru ture to im#lement its related lin2ed di)ersi'i ation strate#y, Sony1s cor#orate%le.el strate y 0 the S3> form consists of $ le.els com#rises the cor#orate head;uarters, strate ic business units and S3> di.isionsB Sony is broadly di.ided into & S3>s @electronics, ame, music, #ictures, finance ser.ices and communication net9or"A, each further di.ided into smaller business units, and commonly named as di.isionsB ,he di.isions 9ithin each S3> are related in terms of shared #roducts or mar"ets or both, but the di.isions of each S3> ha.e little in common 9ith the di.isions of the other S3>sB Aty#ically, Sony1s head;uarters e+ercises financial and strate ic controls o.er its S3>B ,he S3> form of multidi.isional structure is a #ro#er match to Sony1s strate ies as it inherent benefits allo9s the com#any to mana e di.ersification1s many demands betterB Ho9e.er, there is a dra9bac" to the S3> structureB If coordination bet9een S3>s is needed @as is re;uired bet9een Sony1s S3>sA, #roblems arises because the S3> structure, similar to the com#etiti.e form, does not readily foster coo#eration across S3>sB >nli"e the di.isions included in the coo#erati.e structure, di.isions that are #art of the com#etiti.e structure do not share common cor#orate stren thsB As a result, they do not de.elo# inte ratin de.ices for useB ,o foster coo#eration bet9een S3>s, Sony could increase the fre;uency of direct contacts bet9een di.ision mana ers, establish liaison roles in each di.ision and form tem#orary 9or" teams or tas" forces around #roEects that also focus on e+tractin and sharin com#etencies that are embedded 9ithin se.eral di.isions 0 9or" teamsGtas" forces should also be made to re#ort to to# mana ementB ,o ensure that the .arious initiati.es mentioned early are successfully e+ecuted, Sony is also re;uired to e.aluate its di.isional mana ers1 #erformance on the basis of ho9 9ell they ha.e facilitated interdi.isional coo#erati.e effortsB Sony1s re9ard systems should also em#hasise on the o.erall com#any1s #erformance, besides the outcomes achie.ed by indi.idual di.isions to hel# o.ercome #roblems associated 9ith strate ic business unit formB Sony also ensures a #ro#er match bet9een its international strate ies and or anisational structure e+ists so the com#any could effecti.ely coordinate and control its lobal o#erationsB ,o this end, Sony uses the 9orld9ide #roduct di.isional structure to im#lement the lobal strate yB It allo9s the com#any to achie.e economies of sco#e and economies of scale on a lobal le.elB Sony #ursues economies of scale further by outsourcin as it allo9s the com#any to ha.e better cost controlB Ho9e.er, Sony faces challen es of the lobal strate yG9orld9ide structure combination such as difficulty in.ol.ed 9ith coordinatin decisionsGactions and the inability to ;uic"ly res#ond to local needs and #referencesB /ortunately, the solutions that are meant to hel# o.ercome #roblems associated 9ith strate ic business unit form are also a##licable to challen es of the lobal strate yG9orld9ide structure combinationB d" P$ysi al Resour es Kes#ite an already e+tensi.e domestic and international industrial infrastructure, Sony still continues to in.est hea.ily in infrastructures so that the com#any has sufficient ca#acity to meet the ro9in needs and demands of their customersB /or e+am#le, Sony ac;uired >BSB%based C3S records in 1(88 and Columbia Pictures in 1(8(B ,he t9o com#anies 9ere renamed to Sony 2usic *ntertainment and Sony Pictures *ntertainment res#ecti.ely and e.entually emer ed as t9o of the 9orld=s lar est content #roducersB Sony also in.ested substantially in the ame business and entered into the industry to ta"e on 7

established #layers li"e Fintendo and Se a directlyB Sony dominated the mar"et subse;uentlyB In 2))1, Sony 9ent into a Eoint .enture 9ith S9edish telecommunications com#any *ricsson to form Sony *ricsson to manufacture mobile #hones as 9ell as launched Sony 3an" @an Internet%based ban" for middle%class Ha#anese in.estorsAB 3y 2))$, Sony o9ns 77 manufacturin #lants after shuttin do9n 17 9orld9ideB In addition, Sony has 12 home% ro9n manufacturin based #lants in Ha#anB It also has radio factories in #laces such as Shannon @IrelandAB 5n this note, it an be dedu ed t$at t$e %$ysi al resour es t$at Sony %ossesses are li2ely to #enerate )alue, reatin# o&%etiti)e ad)anta#e ($i $ is t$e o&%any+s stren#t$* e" Te $nolo#i al Resour es Sony 9as first in many areas such as the ,rinitron, the !al"man, the 3etama+, the Camcorder, the Com#act Kisc, the 2iniKisc, the .enerable PlayStation @PSA and the robot do AiboB Some of these Sony1s technolo ical creations ha.e created ne9 mar"ets of their o9nB Sony also #atents its re.olutionary inno.ations that include the trademar" O!al"man1 and .ideo ta#e Obeta .ideo format1B ,echnolo ically, Sony is more ad.anced in #roducin consumer%electronics #roducts than its com#etitorsB /or instance, its PS2 offers a substantial Eum# in #erformance and .ersatility, 9ith ne9 features li"e C*motion *ner yD and 4ra#hics SynthesiJerD ma"in #ossible more com#le+ effects such as facial e+#ressions and clothes flutterin in the 9indB Sony also set industry standards for ,V desi n and #icture ;ualityB In s$ort0 Sony+s stren#t$ is also about t$e ability to le)era#e on te $nolo#ies (ell and a$ead o' its o&%etitors to reate inno)ati)e and $i#$ .uality %rodu ts 'or its usto&ers so as to in rease sales and re)enues* '" Hu&an Resour es 4ana#e&ent Sony1s official 9ebsite often stresses that the de.elo#ment and .itality of Sony=s em#loyees dri.es dynamic ro9th for SonyB So far, Sony is able to #ro.ide com#rehensi.e trainin #ro rammes 9orld9ide to train its em#loyees to e;ui# them 9ith su#erior "no9led e and s"illsB In addition, the com#any #ro.ide curriculums that are tailored to local needs for en ineers and mana ersB Sony also #ossesses the ability to identify hi h calibre mana ers to ta"e o.er to# mana ement #ositions so that the com#any 9ould continue to be 9ell mana ed and the inno.ation culture #roliferatedB ,he #ast and #resent C*5s all #ossessed the necessary #syche and mana erial ca#abilities to infuse inno.ation and creati.ityB Sony also built a frame9or" that #romotes re ular communication bet9een em#loyees and mana ers re ardin 9or" contributionsB ,his in turn hel#s establish the basis of a com#ensation system that fairly and satisfactorily e.aluates the contributions of each em#loyeeB Sony1s outstandin em#loyees are reco nised by recei.in a9ards @such as the crystal and 2PV a9ardsA from the to# mana ementB In Ha#an culture, recei.in a9ards directly from to# mana ement ele.ates an em#loyee1s status in the com#any and as such it is somethin that most staff sorts after * In s$ort0 Hu&an Resour es 4ana#e&ent0 %arti ularly t$e ability to &oti)ate and i&%ro)e %rodu ti)ity o' t$e sta''s is ertainly Sony+s stren#t$* &

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Inno)ation Resour es -Produ t 3e)elo%&ent" Inno.ation is one of the t9o central #illars of the Sony establishment 0 mar"etin is anotherB ,his #illar 9as #ut in #lace by the com#any=s founders, 9ho, throu h their com#lementary s"ills and enthusiastic leadershi#, set the foundations of a true culture of inno.ation at SonyB So far, throu h inno.ation, Sony had #roduced many re.olutionary #roducts that include the first ma netic ta#e and ta#e recorder in 1(7)P the transistor radio in 1(77P the 9orld1s first all%transistor ,V set in 1(&)P the 9orld1s first colour .ideo cassette recorder in 1('1P the !al"man #ersonal stereo in 1('(P the Com#act Kisc @CKA in 1(82P the first 8mm Camcorder in 1(87P the 2inidis" @2KA #layer in 1((2P the PlayStation ame system in 1((7P Ki ital 2a.ica camera in 1(('P Ki ital Versatile Kisc @KVKA #layer in 1((8P and the robot do Aibo as 9ell as Fet9or" !al"man di ital music #layer in 1(((D @SonyBcomGenGcor#orateAB ,hese inno.ations had created ne9 mar"ets of their o9nB T$e ability to ontinuously inno)ate and o&e u% (it$ re)olutionary inno)ations t$at boost sales and $el%s (iden %ro'it &ar#ins s$o(s t$at Sony %ossesses substantial .uality inno)ation resour es -in ludin# s ienti'i a%abilities" t$at are $ard to i&itate and )aluable*

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Re%utation Resour es In 1(((, QQQ said that CRe#utation is one of the si nificant intan ible resources for Sony that differentiates themsel.es from the com#etitors for them to char e a #remium #rice for their inno.ati.e #roducts and ;ualityBD 5n the same year, for the third year in a ro9, Sony 9as reco nised as one of the 9orld1s 1)) 3est 2ana ed Com#anies by QQQ ma aJineB In 2))2, Sony Cor#oration 9as #roclaimed as the 9orld1s lar est consumer%electronics com#any, a si nificant #layer in the media industry and the fastest% ro9in com#uter and communication e;ui#ment ma"erB Sony 9as ran"ed 21 in the QQQ list of !orld1s 1)) 2ost Valuable 3rands 9ith as estimated .alue of >S?16 billion 0 and the 1st amon its industry #eersB ,he com#any1s ta line for its electronic audio and .ideo #roducts CIt1s a SonyD sim#ly is a stam# of ;uality, cuttin %ed e technolo y and reliabilityB In s$ort0 t$e 5Sony6 brand is one o' t$e (orld+s &ost re o#nisable and trusted brands* Gi)en t$e %ositi)e %er e%tions o' Sony+s re%utation0 t$e brand na&e is ertainly t$e o&%any7s stren#t$*

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Ris2 4ana#e&ent In eneral, the ty#es of ris"s Sony faces include: @1A #ure ris"P @2A #rice ris"P and @$A credit ris"B /irstly, Sony #urchased insurance #olicies to miti ate #ure ris"B Secondly, Sony utilises se.eral deri.ati.e instruments such as forei n e+chan e for9ard contracts, forei n currency o#tion contracts, interest rate s9a# a reements and currency s9a# a reements to hed e the #otential do9nside ris" on the cash flo9 from the normal course of business that caused by mar"et fluctuationB Price ris" and credit ris" are bein miti ated this 9ayB So 'ar0 Sony+s $olisti a%%roa $ to ris2 &ana#e&ent e''e ti)ely is )ie(ed 'a)ourably by its sta2e$olders &ost o' t$e ti&e0 es%e ially t$e s$are$olders*

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Value Chain Analysis ,he .alue chain analysis is used to e.aluate the .alue of e.ery #rimary and su##ort acti.ity that is added to Sony1s #roducts or ser.icesB a" In,bound !o#isti s Sony en a es in a series of com#le+ in%bound lo istics acti.ities that the com#any either #ossess or #ro.ided by $rd #artiesB As the com#any e+#ands, Sony also be in to en a e $rd #arties such as /le+tronics and Solectron to manufacture some of its #roduct com#onents so that the com#any 9ill continue to #ossess sufficient 9a.e len th to en a e in its core businesses and core com#etenciesB ,o lo9er its cost of #roduction, Sony also restructured and shut do9n some manufacturin facilitiesB In fact, the com#any has shifted some of its #roduction #lants to lo9 cost countries such as China to ta"e ad.anta e on the chea#er labour costB T$e ability to &ana#e t$e o&%le1 and #eo#ra%$i ally dis%ersed in,bound lo#isti s a ti)ities is ertainly Sony+s stren#t$* b" O%erations Sony1s businesses s#an across different continentsB It #roduction em#ire alone is s#read from Asia to the >BS and to *uro#eB ,he details are as follo9s: @1A @2A @$A @6A Almost 7)L of the electronics se ment=s total annual #roduction durin the fiscal year 2))2 too" #lace in Ha#an @a##ro+imately &7L of the annual #roduction in Ha#an 9as destined for other re ionsAB China accounted for sli htly more than 1)L of total annual #roduction @a##ro+imately ')L of 9hich 9as destined for other re ionsAB Asia, e+cludin Ha#an and China, accounted for sli htly more than 1)L of total annual #roduction @a##ro+imately &)L destined for Ha#an, the >S and the *>AB ,he >BS and *uro#e to ether accounted for the remainin sli htly less than 27L of total annual #roduction @most of 9hich 9as destined for local distribution and saleAB

4enerally, Sony has been able to mana e its businesses 9ell and hence is able to achie.e successes 9ith some of its #roductsB /or instance, Sony 9as able to ma"e a ca#ture a siJable mar"et shares in the .ideo, PC and tele.ision mar"ets in Eust a fe9 years after enterin the mar"etsB 5n the other hand, com#any1s music business, ad.ertisin business and location% based entertainment business ha.e not been doin 9ellB In fact they had been ma"in lossesB Althou h #iracy is #artly res#onsible for the #oor #erformance, there are also challen es that Sony some9hat cannot find better solutions to address themB /or instance, the res#ecti.e business units 9ithin the or anisation are still not communicatin and coo#eratin @althou h there 9ere some im#ro.ementsA 9ith one another enou h and this has affected inter%o#erati.e syner y and #roducti.ityB Sony+s inability to address t$e inter,o%erati)e related issues is a ause o' on ern and t$ere'ore ould %ossibly be t$e o&%any+s (ea2ness* " Out,bound !o#isti s 8

Sony is 9ell connected to the distribution net9or"s that e.ery country #ossessesB In fact, to ensure that Sony1s #roducts and ser.ices are deli.ered and reached their destinations on time, Sony has in.ested hea.ily to automate #arts of the out%bound lo istics function to trac" sales orders, mo.ement of #roducts and #aymentsB In addition, Sony also allo9s its music and #ictures to be distributed throu h the broadband net9or"sB In 2))2, it 9as also re#orted in #rominent ma aJines such as Info!orld and PC 2a aJine that many customers felt that Sony1s #roducts and ser.ices 9ere amon the best in the 9orld and their staffs 9ere 9ell trained to handle the .arious o#erations and ser.icesB As su $0 t$e %ossession o' t$e a%ability to train e&%loyees and business %artners to &ana#e t$e o&%le1 and #eo#ra%$i ally dis%ersed out,bound lo#isti s a ti)ities to en$an e t$e )arious o%eration %roto ols is surely Sony+s stren#t$* d" 4ar2etin# and Sales Sony=s mar"etin strate y is to #osition itself as an inno.ator and a ma"er of hi h ;uality #roducts 9hich enable it to sell its #roducts at a #remium hi her than its com#etitorsB ,o achie.e these oals, the com#any1s inno.ations are commonly bac"ed by massi.e and Jealous mar"etin efforts 9hich ha.e had hel#ed to create se.eral successful sub%brands such as ,rintron, !al"man and !*4AB ,hese successes in turn further stren then the brand CSonyDB Sony is .ery sensiti.e to9ards its com#etitors1 actions and reactionsB ,o ensure that the com#any solidifies its ima e and re#utation as 9ell as achie.es the desired sales and re.enues tar ets, it has no ;ualms of incurrin e+orbitant e+#ensesB /or instance, the !al"man brand @2iniKisc formatA 9as re%launched in 2))) at an estimated cost of >S?$) million and it 9as su##orted by massi.e broadcast, #rint and on%line ad.ertisin , Internet and dealer e.ents and #romotions as 9ell as 4rass%roots #ublic%relations cam#ai ns to tar et the 4eneration R tar et mar"etB ,he re%launch 9as a reat successB Sony1s mar"etin shre9dness had to the FoB 1 brand ratin in the >nited States by Harris #oll @2)))AB Sony 9as also named as the 9orld=s 21 st most .aluable brand in the same yearB In short, Sony1s #ossession of a 9orld%class mar"etin acumen that has made Sony a lobal me a brand is certainly a stren th that is hard to imitate and .aluableB e" Ser)i e Sony has established many ser.ice related acti.ities that are desi ned to enhance customer satisfaction 0 that is the feelin that a #roduct or ser.ice has met the customer e+#ectationB ,hese acti.ities are mostly carried out at Sony ser.ice centres and call%in stations that are manned by friendly and "no9led eable customer ser.ice officesB At the ser.ice centres, e+chan es of defecti.e or bro"en merchandise are carried out s#eedilyB In order to meet customers1 e+#ectations, 9arranty and installations are #ro.ided by the com#anyB 4i.en that Sony is able to #ro.ide and mana e the ser.ice acti.ities 9ell, it hel#s in further enhancin the CSonyD brandB ,o better understand the acti.ities throu h 9hich Sony de.elo#s a com#etiti.e ad.anta e and creates shareholder .alue, the business system is se#arated into a series of .alue% eneratin (

acti.ities referred to as the .alue chainB ,he #rocesses of transferrin in#uts into finished #roducts and ser.ices @o#erationA seem to ha.e run into some #roblems that re;uire Sony1s immediate attentionB If the .arious o#eration%related issues mentioned abo.e are not ade;uately and ;uic"ly addressed, they may affect the o#erational efficiency and effecti.eness of the #rimary acti.ities @out%bound lo istics, mar"etin and sales as 9ell as ser.iceA do9nstreamB ,he lac" of inter%unit coordination and syner ies due to the com#any1s mi+ are di.erse businesses are #ro#erly the t9o rounds that ha.e affected o#eration efficiency and effecti.enessB Althou h Sony has re#orted that it has 9itnessed a dramatic increase in internal coo#eration bet9een the hard9are and soft9are mana ers, more 9or" need to be done and continuous sur.eillance is still re;uiredB ,he #ractice of ood net9or"in must e.entually become a culture of Sony for the com#any to sustain its com#etiti.e ad.anta eB ,he summary of stren ths and 9ea"nesses of AirAsia is a##ended in Table 8 belo9: Stren#t$s
!ith such hu e reser.es means that Sony is ca#able of eneratin internal funds to finance any e+#ansionB Possession of the necessary #hysical resources is li"ely to hel# Sony enerate .alue%creatin com#etiti.e ad.anta eB Ability to le.era e on technolo ies 9ell and ahead of its com#etitors to create inno.ati.e and hi h ;uality #roducts for its customers so as to increase sales and #rofit mar insB Ability to moti.ate and im#ro.e #roducti.ity of the staffsB Ability to inno.ate and come u# 9ith re.olutionary inno.ations that mesmerise customers into buyin themB Positi.e #erce#tions of Sony1s re#utation that hel# to boost sales and re.enuesB Ability to mana e the com#le+ and eo ra#hically dis#ersed in%bound and out%bound lo istics acti.ities 9ellB Possession of a 9orld%class mar"etin acumen that has made Sony a lobal me a brandB Possess ca#ability to train em#loyees and business #artners to mana e the com#le+ and eo ra#hically out%bound lo istics acti.ities to enhance o#erations #rotocolB

9ea2nesses
Sony1s hi h debt ratio @hi hly le.era edA could #ut itself in dan er if the com#any1s creditors start to demand re#ayment of debtB !ea"nesses of di.isional structure that include: @1A du#lication of functions at the different Ile.elsI that resulted in hi h cost in maintainin the mana ement structureP @2A com#etin business units allo9 office #olitics instead of sound strate ic thin"in to affect its .ie9 on such matters as allocation of com#any resourcesP and @$A Sony1s business units allo9 com#artmentalisation to settle in that lead to lac" in communication and coo#erationB ,his in turn runs the ris" of in incom#atibilities of its #roducts and ser.icesB

Table 8: Su&&ary o' Sony+s Stren#t$s and 9ea2ness

1)

Core Competencies ,he analysis on Sony1s resources as 9ell as #rimary and su##ort acti.ities are e.aluated usin the Resources%Com#etency 2odel as sho9n in Table ; belo9B
/un tional A ti)ities Ca%abilities Bundle o' Resour es in)ol)ed

Inbound -o istics 5#erations 5utbound -o istics 2ar"etin & Sales Ser.ices Infrastructure & /inance Human Resources ,echnolo y Procurement

Ability to conduct the .arious com#le+ in%bound lo istics acti.ities 9ell to facilitate smooth o#erations and #roductionsB ,he reli ious Jeal to inno.ate cou#led 9ith tacit "no9led e to build re.olutionary #roducts that mesmerise customers into buyin themB Possess the ca#ability to train em#loyees and associates to mana e and #erform the .ast and com#le+ out%bound lo istics acti.ities that enhance o#erations #rotocolB Possession of a 9orld%class mar"etin acumen and tacit "no9led e that has made Sony a lobal me a brandB Able to inte rate the .arious resources and functional acti.ities to meet the needs @inno.ati.e, ;uality and reliableA of lobal customersB Possess the necessary #hysical resources to hel# enerate .alue%creatin com#etiti.e ad.anta e as 9ell as a lar e reser.e that can be le.era ed to in.est in infrastructure to further lo9er costsB Able to le.era e on financial resources to #ro.ide com#etiti.e numeration #ac"a es and trainin that hel# to moti.ate and incenti.iseB Staff 9ho sho9s mana erial #otential is culti.ated to ta"e o.er leadershi# #ostsB Able to le.era e on technolo ies 9ell and ahead of its com#etitors to create inno.ati.e and hi h ;uality #roducts Possess #rocurement "no9%ho9 that leads to ;uality in#ut at lo9er costsB B

,echnolo y S Human S /inancial S Inno.ation S Infrastructure ,echnolo y S Human S /inancial S Inno.ation S Infrastructure ,echnolo y S Human S /inancial S Inno.ation S Infrastructure Human S /inancial S Inno.ation ,echnolo y S Human S /inancial S Inno.ation S Infrastructure Human S /inancial S Inno.ation S Infrastructure

Human S /inancial ,echnolo y S Human S /inancial S Inno.ation S #hysical ,echnolo y S Human S /inancial S Inno.ation

Table ;: Resour es,Co&%eten y 4odel used on Sony+s Resour es0 Pri&ary and Su%%ort A ti)ities

,o determine 9hether Sony has any core com#etencies @sustainable com#etiti.e ad.anta esA, the com#any1s ca#abilities are assessed based on the four criteria 0 .aluable, rare, difficult to imitate and non%substitutableB ,he e.aluation results so far re.ealed that three core com#etencies belo9: -8" -;" T$e reli#ious <eal to inno)ation ou%led (it$ ta it 2no(led#e to %rodu e re)olutionary %rodu ts by le)era#in# on stron# R=3 and ne( te $nolo#ies* Possession o' a (orld, lass &ar2etin# a u&en and ta it 2no(led#e to %lan and e1e ute &ar2etin# strate#ies/%lans e1tre&ely e''e ti)ely t$at #oes to build lastin# (ell,2no(n brands*

,he e.aluation conducted on Sony1s ca#abilities is a##ended in Table > belo9: 11

Ca%ability

?aluable

Rare

3i''i ult to i&itate

Non, substitutable

Co&%etiti)e onse.uen es

Per'or&an e i&%li ations

Ability to conduct the .arious com#le+ in% bound lo istics acti.ities 9ell to facilitate smooth o#erations and #roductionsB T$e reli#ious <eal to inno)ation ou%led (it$ ta it 2no(led#e to %rodu e re)olutionary %rodu ts by le)era#in# on stron# R=3 and ne( te $nolo#ies* Possess the ca#ability to train em#loyees and associates to mana e and #erform the .ast and com#le+ out%bound lo istics acti.ities that enhance o#erations #rotocolB Possession o' a (orld, lass &ar2etin# a u&en and ta it 2no(led#e to %lan and e1e ute &ar2etin# strate#ies/%lans e1tre&ely e''e ti)ely t$at #oes to build lastin# (ell,2no(n brands* Able to inte rate the .arious resources and functional acti.ities to meet the needs @inno.ati.e, ;uality and reliableA of lobal customersB Possess the necessary #hysical resources to hel# enerate .alue%creatin com#etiti.e ad.anta e as 9ell as a lar e reser.e that can be le.era ed to in.est in infrastructure to further lo9er costsB Able to le.era e on financial resources to #ro.ide com#etiti.e numeration #ac"a es and trainin that hel# to moti.ate and incenti.iseB Staff 9ho sho9s mana erial #otential is culti.ated to ta"e o.er leadershi# #ostsB Able to le.era e on technolo ies 9ell and ahead of its com#etitors to create inno.ati.e and hi h ;uality #roducts Possess #rocurement "no9%ho9 that leads to ;uality in#ut at lo9er costsB B

,em#orary Com#etiti.e Ad.anta e Sustainable Co&%etiti)e Ad)anta#e Com#etiti.e Parity Sustainable Co&%etiti)e Ad)anta#e Com#etiti.e Parity ,em#orary Com#etiti.e Ad.anta e

A.era e returns to Abo.e% a.era e returns Abo)e, a)era#e returns A.era e returns Abo)e, a)era#e returns A.era e returns A.era e returns to Abo.e% a.era e returns A.era e returns A.era e returns to Abo.e% a.era e returns A.era e returns

Com#etiti.e Parity

,em#orary Com#etiti.e Ad.anta e Com#etiti.e Parity

Table >: E)aluation o' Sony+s Ca%abilities

12

E@TERNA! ANA!YSIS PESTL Analysis a" Politi al 4o.ernment #olicies are im#ortant dri.es for the success of almost e.ery country in the 9orldB In the late 1(()s, there 9as increase #ri.atisation and dere ulation of the consumer%electronics as 9ell as media and technolo y industries loballyB It 9as noticeable that many countries established o#en trade a reements 9hile others had lo9ered the entry of forei n direct in.estmentsB Ho9e.er, as of mid%1(()s, o.ernments1 inter.ention and re ulation remained substantialB /or instance, bein a Ha#anese com#any, Sony 9as not allo9ed to set u# broadcast net9or"s in the >nited States due to the #olicies established by the o.ernmentB In some countries such as Russia, China, 3raJil and >"raine, the o.ernment also failed to ta"e effecti.e inter.entions to address the #iracy matter and thus caused mo.ie and music com#anies to lose billions of dollars a yearB b" E ono&i s -Global,Geo#ra%$i " ,he era of lobalisation in the 1(()s has the interconnectedness of the .arious mar"ets, thus leadin to emer ence of 9orld9ide #roduction mar"etsB Conse;uently, it allo9s a broader access to forei n #roducts for consumers and com#aniesB ,his hel#s fuel demand for consumer #roducts loballyB A study by the QQQ @2))2A confirmed that the >BSB, China, *uro#e and Asia 9ould continue to offer attracti.e conditions for the consumer oods, includin electronic industryB It estimated that the demand for inno.ati.e electronics and net9or" centric #roducts 9ill double by 2)1)B Althou h ra#id ro9th and increased trade and businesses may intensify com#etition @entrance of other com#etitorsA and e.en lead to Onon%standard1 com#etitors enter into the industry to com#lete, it can #resent o##ortunities for consumer%electronics com#anies li"e Sony to enlar e their mar"etsB ,he early 2)))s recession althou h 9as not as bad as many #redicted it 9ould be, nonetheless it still affects #eo#le1s buyin #o9erB 4lobally, Sony 9as se.erely affected by the slo9do9n in the I, industry durin 2)))%)1, 9hich led to a decline in the demand for its com#uter%related #roductsB As a result, in s#ite of a (B6L increase in re.enue in the fiscal 2)))%)1 @mainly due to the im#ro.ed sales of the PS ames consoleA Sony1s net income dro##ed si nificantly from M121B8$bn in the fiscal 1(((%2))) to M1&B'7bn in the fiscal 2)))%)1B Kes#ite the o##ortunities the era of lobalisation, the o.erall economic #ros#ect does not loo" #romisin in the near future as it is bein dam#ened by the im#act of recessionB ,his is li"ely to affect Sony1s sales and re.enues ne ati.elyB acro Environment

"

So io, ultural = 3e&o#ra%$i So io, ultural* A sur.ey by 4oldman Sachs re.ealed that &)L of Americans #layed .ideo ames and &1L of these ame%buffs 9ere adultsP 6$L 9ere 9omen and their a.era e a e 9as 28, im#lyin that this form of entertainment 9as no9 mainstreamB Similar trends 9ere obser.ed in *uro#e and Ha#an tooB In fact, it 9as stated that #rice and 1$

;uality of the #roducts 9ere the t9o most im#ortant considerations that influenced consumers1 decisions and of course this included 9ithout ha.in to com#romise on ;uality and ser.iceB In addition, increasin ly o.er the years, the more ad.enturous R% 4eneration is also loo"in to ma"e their #ossession of inno.ati.e #roduct increase furtherB ,his #resents an o##ortunity for all media and technolo y com#anies to increase their re.enues by offerin inno.ati.e #roducts and ser.ices at reasonable #ricesB 3e&o#ra%$i * 3ased on the QQQ1s records, the 9orld1s #o#ulation stood at close to 7 billion as of 2))2 and is e+#ected to increaseB ,he a.era e dis#osable income has also increased o.er the last $) yearsB !ith the e+#ected increase in the 9or"in #o#ulation lobally, it can be antici#ated that the dis#osable income 9ill continue to ro9thB ,his s#ells ood ne9s for all com#anies as they can loo" for9ard for more o##ortunities to im#ro.e their sales and re.enuesB d" Te $nolo#i al Fe9 ser.ices such as Internet ,ele#hony and the increase in the use of telecommunications ser.ices @such as online sho##in A #ro.ide Sony 9ith the o##ortunity to le.era e on ne9 technolo ies to increase their salesB In addition, e% commence and internet%based acti.ities @such as online ban"in and insurance #urchasesA are other areas 9here Sony can deri.ed ancillary re.enues fromB 3etter still, in some instances, technolo y ad.ancements also means ha.in o##ortunities to reduce o#eration costs such as sa.in s on commissions for sales a ents 9hen sales are done onlineB Sony also needs to be co nisant 9ith the fact that other electronic firms 9ould be able to co#y Sony=s technolo y in a much shorter time 9hile offerin more com#etiti.e #ricesB ,y#ically, a #roduct usually ta"es a fe9 years to de.elo# but the time is left to rea# the results and #rofits may be much lessB As seen in the V,R e+am#le, both the VHS and 3eta 9ere de.elo#ed by SonyB Ho9e.er, in a short time, 2atsushita came u# 9ith a com#etiti.e #roduct based on Sony=s technolo yB ,he mar in for technolo y ad.ancement is therefore diminishin B e" !e#al Intellectual #ro#erty and intellectual #ro#erty ri hts creation as 9ell as commercialisation and #rotection ha.e i.en Sony a si nificant source of com#arati.e ad.anta e of enter#risesB

16

Analysis o! "n#ustry Sony has a stron business case to su##ort its foray into the ame businessB 4oldman Sachs has #redicted the lobal sales of ames to be >S?1'B7 billion and consoles to be >S?8B' billion in the year 2))2B ,he former is e+#ected to e;ual the total bo+ office re.enues of the firm industry and e.entually catch u# e.en 9ith the saes of music CKsB ,he sales of ames are e+#ected to o.erta"e music CK sales in *uro#e in 2))7B 4i.en Sony1s stron #resence in the ames industry, this #resents .ast o##ortunities to enlar e the com#any1s mar"et sharesB ,he consumer%electronics businesses are closely lin"ed to economic acti.ities in the 9orldB As such, Sony needs to be co nisant 9ith the business cycle so that it can to ta"e full ad.anta e of such effects es#ecially 9hen there are chan es in discretionary income and consumer s#endin #atternsB As a matter of fact, the music and film com#anies are losin money as the lobal economy slo9do9n due to recession that hit many countries in 2))1B 4ro9in di ital #iracy also com#ounded the #roblems and these com#anies sa9 their #rofits further erodedB A##rehensions of terrorist attac"s and an unstable eo#olitical landsca#e are set to test the industry as 9ell as Sony1s resilience as a lobal cor#orationB /rom the Porter1s /i.e /orces analysis, it is also deduced that com#etition in the consumer electronics industry is intense and therefore 9ill not be attracti.eness @iBeB #rofitabilityA to #otential entrantsB Ho9e.er, the o.erall industry attracti.eness does not im#ly that e.ery com#any in the industry 9ill return the same #rofitabilityB If Sony is able to a##ly its core com#etencies, business model or net9or" 9ell, the com#any can still achie.e a #rofit abo.e the industry a.era eB A clear e+am#le of this is the airline industryB As an industry, #rofitability is lo9 and yet indi.idual com#anies, by a##lyin uni;ue business models, ha.e been able to ma"e a return in e+cess of the industry a.era eB 2o.in for9ard, there is still a sil.er linin in the loomy s"yB Kue to its recession%#roof nature and lucrati.e #ros#ects, the amin industry is the ne+t bi frontier for many entertainment com#anies, includin SonyB In addition, des#ite the economic slo9do9n, Sony=s Pictures business still mana ed to record 17L increase in sales and more than se.enfold increase in o#eratin income su est that firm business may be a defensi.e industryB

17

Analysis o! Competitive $orces - Porter%s $ive $orces Analysis a" T$reat o' Substitute Produ ts -!O9" ,he #ossibility threat of substitutes is moderately lo9P since there are fe9 substitutes from other industries @if anyAP and most of them are seemed to be obsolete or ha.e on foot out of the door, eB B di it camera in the #lace of film camera and fa+ machines in #lace of o.erni ht mail deli.eryB Consider that Sony has built a ood re#utation and stron customer loyalty, it effecti.ely #osition the com#any1s #roducts a ainst #roduct substitute to some e+tentP this is a sur#lus for the com#anyB Bar#ainin# Po(er o' Buyers -HIGH" ,he #o9er of buyer is hi h due to almost no s9itchin cost for customers to s9itch from one brand to anotherB ,he access to the internet also allo9s customers to ha.e all the information on #rices char ed by the different com#aniesB ,he #ossession of this information may cause #rice sensiti.e buyers to s9itch to buyin from com#anies that offer chea#er #ricesB 5n%line sho##in has also increased the bar ainin #o9er of buyersB Bar#ainin# Po(er o' Su%%liers -!O9" ,he su##liers do not ha.e an u##er hand @lo9 bar ainin #o9erA due to lar e number of su##liers and customersB 2oreo.er, Sony o#erates in bi lobal su##ly chain mana ement and its su##liers are not concentratedB Com#arati.ely, they are also much small in siJe and thus normally ha.e 9ea" bar ainin #o9erB Sony usually en a es in direct ne otiation 9ith its su##liers in order to secure reliable su##ly at lo9er #ricesB T$reat o' Ne( Entrants -!O9" ,hreat of ne9 entrants is lo9 as the entry into the industry re;uires hi h ca#ital, economies of scale, #roduct differentiation as 9ell as technolo y and inno.ation "no9% ho9B 2oreo.er, the industry is re ulated that e.ery #otential entrant is re;uired to obtain a##ro.al from the rele.ant authority of the #articular country before the com#any is allo9ed to be o#eratedB *.ery ne9 entrant that infrin ed into the bi #layers1 territories can e+#ect stron retaliation from themB ,herefore, it also ser.es as a deterrin effect to #otential entrantB Intensity o' Ri)alry -HIGH" Industry ri.alry is hi h due to relati.ely intense com#etition and hi h e+it costB ,he hi h intensity of ri.alry is also lar ely due to the numerous and e;ually balanced com#etitors in the mar"ets, enerally short #roduct life cycle as 9ell as hi h R&K, fi+ed and stora e costsB ,he industry ro9th is slo9 and thus further hei htens the intensity of com#etition

b"

"

d"

e"

/rom the analysis abo.e, it can be deduced that com#etition in the consumer electronics industry is intense and therefore 9ill not be attracti.eness @iBeB #rofitabilityA to #otential entrantsB Ho9e.er, the o.erall industry attracti.eness does not im#ly that e.ery com#any 9ill return the same #rofitabilityB If Sony is able to a##ly its core com#etencies, business model or net9or" 9ell, the com#any can still achie.e a #rofit abo.e the industry a.era eB A clear e+am#le of this is the airline industryB As an industry, #rofitability is lo9 and yet indi.idual com#anies, by a##lyin uni;ue business models, ha.e been able to ma"e a return in e+cess of the industry a.era eB 1&

Sta&ehol#er

ana'ement

,hrou h an established set of #ublic relation #rotocols, Sony uses a broad set of communication acti.ities that are em#loyed to create and maintain fa.ourable relationshi# 9ith the .arious sta"eholders that include em#loyees, shareholders, su##liers, media, educators, #otential in.estors, financial institutions, o.ernment a encies and officials as 9ell as society in eneralB Sta"eholders 9ho need any information concernin Sony, they could retrie.e them readily from the com#any1s 9ebsiteB In this 9ay Sony creates a common #latform @touch%#ointA 9here mutual relationshi# 9ith its sta"eholders is facilitated, includin ser.in the 9ishes and demands of its customersB Sony satisfies its customers by offerin inno.ati.e #roducts 9ithout ha.in to com#romise to ;uality and reliabilityB ,his hel#s to attract ne9 customers as 9ell as retain e+istin onesB In order to ensure that all s#ecific needs are met, Sony set u# sales and mar"etin offices in e.ery #lace that the com#any has businesses inB Sony1s C*5, Fobuyu"i Idei, also #layed a "ey role in for in a closer bet9een the com#any and its sta"eholdersB /or instance, he launched a Sony1s ima e cam#ai n, IKo you dream in Sony:I and hel#ed coin the term Idi ital dream "idsBI ,he #remise of the cam#ai n is to #ro.ide shareholders, customers, em#loyees and business #artners 9ho come into contact 9ith Sony 9ith the o##ortunities to create and fulfil their dreams to etherB All these efforts #robably e+#lain 9hy Sony has al9ays enEoyed stron su##ort from its sta"eholders and thus hel#ed #ro#el it to become a lobal me abrandB Sony1s resoundin success 9ith the PlayStation also s#ea"s 9ell of Sony1s ability to meet @or e.en e+ceedA the e+#ectations of its business #artners and customersB 59in to the dominant #osition of Se a and Finetendo in the console mar"et, ame de.elo#ers 9ere initially reluctant to su##ort Sony1s ne9 formatB Ho9e.er, Sony 9as undaunted and #ushed for9ard 9ith PlayStation and e.entually mana ed to con.ince the de.elo#ers of the system1s su#erior desi n and ca#abilitiesB 3y the year 2))), the PlayStation ained tremendous su##ort from customer 9orld%9ide and 9ent on to dominate the mar"et to become the 9orld1s lar est sellin ame console, 9ith ')L share and 8) million units soldB 3esides that, Sony also stri.es to build stron relationshi# 9ith the o.ernment a encies and officials as 9ell as societyB Since 1('&, Sony has had an *n.ironmental ConferenceB Sony=s #olicies address their effects on lobal 9armin , the en.ironment, and resourcesB ,hus far, Sony has ta"en ste#s to reduce the amount of reenhouse ases that its com#anies #roduced as 9ell as re ulatin the #roducts they et from their su##liers in a #rocess that they call I reen #rocurementIB In this 9ay the com#any establishes ood relationshi# 9ith the .arious o.ernment a encies and officials as 9ell as societies and ho#efully throu h these #ro%acti.e initiati.es maintain ood relationshi# can be maintained so as further reinforce Sony1s ood ima eB ,his #robably also e+#lain 9hy Sony is able to establish its businesses in the .arious #art of the 9orld readilyB In early Huly 2))2, Sony ran"ed 11th on the 4reen#eace chart I4uide to 4reener *lectronicsBI ,his chart raded maEor electronics com#anies on their en.ironmental 9or"B

1'

Pro#ucts Li!e Cycles Analysis ( )C*

atri+

,he mar"et ro9th a+is correlates 9ith the #roduct life cycle #aradi m and #redicates the cash re;uirement a #roduct needs relati.e to the ro9th of that mar"etB Reference to the 3C4 2atri+ a##ended in 3ia#ra& 8, the .ide% ame console #roduced by Sony is definitely in the OStar1 sector since the com#any1s business has achie.ed hi h ro9th rate as 9ell as ac;uired com#arati.ely lar er mar"et shareB

3ia#ra& 8: BCG 4atri1 Ho9e.er, althou h enerally OStars1 are leaders in hi h ro9th mar"ets and tend to enerate lar e amounts of cash, Sony must be mindful that they also use a lot of cash because of ro9th mar"et conditionsB In addition, Sony also needs to be a9are that mar"et ro9th is not the only factor or necessarily the most im#ortant factor 9hen assessin the attracti.eness of a mar"et as ro9th mar"ets attract ne9 entrantsB /or instance, if ca#acity e+ceeds demand, then a #articular mar"et may become a lo9 mar in one and therefore becomes unattracti.eB ,he #ositions of Sony1s e+istin #roducts are elaborated belo9: a" 3o# A #roduct becomes a do due to lo9 mar"et share and a lo9 ro9th rate and 9hen the #roduct neither #roduces nor uses u# bul"y amounts of cashB !al"man and CK #layers fall under this cate oryB Some analysts o#ined that Sony1s e+cessi.e focus on the maturin consumer electronics business @#rofit mar in belo9 1 #er cent in 2))20)$A, cou#led 9ith increasin com#etition in the consumer electronics industry 9as se.erely affectin its #rofitabilityB b" Auestion A #roduct becomes a ;uestion 9hen they ha.e a lo9er mar"et share and they do not enerate much #rofit or cashB Sony #roducts that fall under this cate ory include semiconductor, music #layer, VAI5 com#uter and CR,%,VB Kue to a ressi.e com#etition from its com#etitors such as Samsun Panasonic and 2atsushita, these #roducts could not ma"e as much sales as they e+#ected and their mar"et shares no9 ran e bet9een 1)%16L, com#arati.ely lo9er the com#etitorsB Star A star is 9hen hu e ;uantities of #rofit are #roduced because of the #o9erful mar"et share and hi h ro9th rateB Sony1s di it camera, -CK ,V, KVK #layer and #lay stations fall under this cate oryB ,heir mar"et shares ran e bet9een 27 to 6)L, 9ay ahead of its com#etitorsB 18

"

d"

Cas$ Co( Sony *ricsson !(8) from Sony 9al"man series is a cash co9B !e say a #roduct is a cash co9 9hen the #roduct sho9 si ns of that the return on assets is better than the mar"et ro9th rate, and ma"es more cash than they useB In case of Sony *ricsson !(8), it1s a #hone 9ith touch sensiti.e music controls and 8 i abytes of internal memoryB ,his means one can store u# to 8))) son sB Sony *ricsson !(8) hel#s to #osition Sony *ricsson as a mar"et leader in the music 9orldB ar&etin' , Customer Se'mentation

Sony in.ests a ressi.ely in mar"etin #redominantly throu h e+tensi.e ad.ertisements and #romotionsB ,hrou h ,V 9e ha.e seen different ad.ertisements of its #roducts such as Sony ,VB Sony also ad.ertises its #roducts by tar etin those fa.ourable tele.ision #ro rams li"e s#orts series as 9ell as its o9n channel called Sony channel ,VB Sony uses some e.ents to #romote its #roducts as 9ellB ,hrou h #osters and ne9s#a#ers li"e ,imes, Sony ad.ertises a 9ide ran e of #roducts it offers to its customersB In addition, Sony also ad.ertises its Playstation throu h the *n lish Premiere -ea ueB >nli"e other consumer%electronics com#anies, Sony #ositions itself as a lobal media and technolo y com#any that #ro.ides total entertainment #roducts and ser.ices @9ith com#romise to ;uality and reliabilityA for teena ers and adults in both de.elo#ed and emer in economiesB

1(

Competitors Analysis Sony starts facin increased com#etition not only from a stable set of ri.als @such as Phili#s, 2atsushita, ,oshiba, Shar#, -4 and Samsun A but also ne9 ad.ersaries as follo9s:
BUSINESS CATEGORY CO4PANY

Com#uter ma"ers net9or"%e;ui#ment ma"ers soft9are ma"ers media com#anies ame ma"ers #hoto ra#hic%e;ui#ment ma"ers mobile #hone ma"ers

HP, I32, Kell, A##le and Palm Cisco and $Com 2icrosoft and Sun 2icrosystems A5-%,ime !arner and Vi.endi >ni.ersal Fintendo Toda" and /uEi Fo"ia and 2otorola

,his com#le+, multidimensional com#etition is a bitter reality of the 9orld of di ital con.er ence, 9here boundaries bet9een traditional industry se ments ha.e disa##eared althou h ne9 o##ortunities o#en u#B Com#etition bet9een the com#anies is li"ely to be intense as most harbour rand broadband .isions and ha.e also sta"ed their futures on themB /ortunately, most of the com#etitors at this #oint in time do not #ossess com#letely the same tan ible and intan ible resources as that of SonyB !ith that, based on the com#etitor analysis frame9or" a##ended in 3ia#ra& > belo9, most of Sony1s com#etitors are concentrated in O;uadrant II, III and IV1B

Samsun -4 F*C A5-%,ime !arner Vi.endi >ni.ersal II III 2otorola Toda" /uEi Cisco $Com Fintendo Se a I I?

2atsushita ,oshiba Shar# Phili#s

A##le 2icrosoft Fo"ia Kell I32 Sun 2icrosystems Palm

3ia#ra& >: A /ra&e(or2 o' Co&%etitor Analysis ,echnically, any firm or com#etitors in O;uadrant I1 9ill use their similar resource #ortfolios to com#ete a ainst each otherB ,his lead to the conclusion that 2atsushita, ,oshiba, Shar# and Phili#s modelled in O;uadrant I1 are direct com#etitors of SonyB In contrast, the other com#etitors modelled in O;uadrant III1 share fe9 mar"ets althou h they all #ossess com#arable resourcesB As such, these com#anies do not directly #ose as stron ri.alry to Sony at this #oint in 2)

timeB Sony does need to monitor com#anies that modelled in O;uadrant II1 and O;uadrant IV1B ,he com#anies that modelled in O;uadrant II1 share a hi h de ree of mar"et commonality 9ith Sony and if they e.entually mana e to ac;uire similar e;uitable resources, they may become direct com#etitorsB Similarly, the com#anies modelled in O;uadrant IV1 may become direct com#etitors if they di.erse their businesses in Sony1s fortesB 2o.in for9ard, Sony must be co nisant 9ith the fact that com#etition is .ery intense in the ame console mar"etB Althou h PlayStation 2 ha.e mana ed to sell 9ell, Sony1s to# com#etitors li"e Fintendo and 2icrosoft in the amin industry are not lettin their uards do9nB 2icrosoft launched the Qbo+ in 2))1 and has mana ed to sell 1) million units by the year 2))$B ,hou h it is a far second in console mar"et share, nonetheless it #osts serious challen e to Sony1s forteB In the tele.ision mar"et, althou h Sony e+cels but still faces some stron com#etition, #articularly from Samsun , -4, Shar# and PanasonicB 2any of these same brands also a##ear in the KVK #layer mar"et that Sony is inB As their #roducts and features closely resemble that of Sony1s, the only 9ay customers can differentiate them from their com#etitors 9ould be on the #roduct #ricesB In order to maintain or increase mar"et shares, any of these com#anies may consider lo9erin #roduct #rices to achie.e their obEecti.esB Ho9e.er, if this ha##ens, the #rofit mar in of the remainin #layers 9ill be com#ressed and the 9ea" one may be dro.e out of the mar"et @also "no9n as the .icious cycleAB In order to cushion stiff com#etition, Sony should continue to set u# alliances 9ith the fello9 electronic manufacturersG com#etitor so that 9in%9in situation can be achie.ed to allo9 the com#any to continue to sustain its o#erationsB A short summary on the #ossible o##ortunities and threats are a##ended in the table belo9B /rom the analysis of Sony, it can be deduced that the o#eratin en.ironment is hi hly com#etiti.e and filled 9ith many uncertainties 0 9hich means that the com#any has to #re#are themsel.es 9ell durin ood timesB Ho9e.er, amidst the challen es, there are still many o##ortunities for Sony to e+#lore and e+#loit so that it continues to lead and be the most #rofitable media and technolo y com#any in the 9orldB O%%ortunities
4lobalisation trend #ro.ides o##ortunities such as entrance to ne9 mar"etsB Pri.atisation and dere ulation su ests more o##ortunities to e+#and mar"et and increase mar"et shareB Hi h ro9th .ideo% ame industry #ro.ides #resents the o##ortunity to increase business loballyB -ar er 9or"in a e #o#ulationP more dis#osable incomeB Fe9 ser.ices such as Internet ,ele#hony #ro.ide all media and technolo y com#anies 9ith the o##ortunity to le.era e on ne9 technolo ies to increase salesB ,echnolo y ad.ancements #ro.ide o##ortunities to reduce o#eration costsB

T$reats
>nfa.ourable o.ernment #oliciesB Prolon ed lobal recessionB PiracyB A ressi.e com#etition from es#ecially lo9%cost imitatorsB

com#etitors,

21

9HAT CAN SONY 3O TO O?ERCO4E ITS 9EABNESSESC Sony1s 9ea"nesses are #rimarily related to cost and or anisational structureB If Sony can o.ercome them, the com#any 9ill be able to ac;uire more #rofits that can be used to fund the .arious set%u#s and o#erations uni;ue to strate iesB Sony may ta"e the follo9in strate ic actions to hel# o.ercome its 9ea"nessesB a" Redu e Cost To In rease Pro'it 4ar#in = Re%ay 3ebts Sony1s hi h debt%to%e;uity ratio @hi hly le.era edA could #ut itself in dan er if the com#any1s creditors start to demand re#ayment of debt at the same timeB ,he hi hly le.era ed status also reflects unfa.ourably of Sony as it may ma"e it more difficult to ac;uire addition loansB Hence, Sony must build creditors1 confidence by a##risin them on its financial status #eriodically as 9ell as #ayin interests and debts u#on dueB In the lon run, Sony must stri.e to increase its re.enues 9ith lo9er cost of #roduction so as to achie.e hi her net #rofit mar in as this allo9s the com#any the fle+ibility to unload more debts to lo9er the debt%to%e;uity ratioB b" Create ProDe t,Based 9or2 Tea&s t$at Re%ort to To% 4ana#e&ent Sony1s business units o#erate almost autonomouslyB At times com#etin business units allo9 office #olitics instead of sound strate ic thin"in to affect its .ie9 on such matters such as allocation of com#any resources and coo#erationB ,o o.ercome this shortcomin , Sony may create #roEect%based 9or" teams that re#ort to the to# mana ementB " Centrally 4ana#e Sele ted Resour es >nder a di.isional structure, Sony faces du#lication of functions at the different Ile.elsI that resulted in hi h cost in maintainin the mana ement structureB Sony should mer e some resources administrati.e su##ort or office e;ui#ment and centrally mana e them to hel# reduce costs and or anisational com#le+ityB ,his allo9s Sony to utilise resources at their ma+imum #otentialB d" I&%ro)e Intera tion and Co&&uni ation It 9as deduced that enerally there is lac" of communication and coo#eration amon the Sony1s business units due to the com#artmentalisation, a disad.anta e that di.isional structure brin sB ,his runs the ris" of incom#atibilities of Sony1s #roducts and ser.icesB Hence, Sony to# mana ement should su##ort more o##ortunities for its business units to interact and coo#erate .ia social interactin acti.ities for staff to hel# to de.elo# camaraderie and team s#iritB ,o be successful, Sony1s business units must be 9ell mana ed by stron e+ecuti.e leadershi# 9hich understand each business unit as 9ell as is able to #ro.ide leadershi# to the business unit chiefs 9hen introduce ne9 strate ic directions and ma"e them #artner more effecti.ely #artner, across the business unitsB

22

9HAT CAN SONY ACHIE?E BY E@P!OITING ITS STRENGTHS 3y e+#loitin Sony1 stren ths, it hel#s reinforce the redefined ima e, brin s im#ro.ement to #roduct desi n and features, re.i.es matured sub%brands, ;uic"en #roduction of ne9 re.olutionary #roducts as 9ell as lo9ers costs and increases #rofitsB a" I&%rint Rede'ined 5Sony6 In Custo&ers+ 4ind Sony could le.era e on its mar"etin "no9%ho9 to better #romote the redefined CSonyD 0 Sony faces the dauntin tas" of sellin its broadband .ision and ne9 identityB Sony must first shed the Ccustomer%electronicsD ima e and e+#lain to users features of its ne9 #roductsB Secondly, Sony needs to be more coordinated in e+#lainin 9hat di ital con.er ence means and ho9 Sony1s rand .ision fit into itB ,hese #rocesses are .ital as the ne9 identity allo9s Sony to ain better com#etiti.e ad.anta e in futureB b" In or%orate Custo&er,Oriented /eatures To Inno)ati)e Produ ts *ncounterin the a ressi.e strate ies of its com#etitors that #ossess su#eriority in desi n and ha.e incor#orated customer%oriented features into their #roducts, Sony must do more li"e enca#sulatin the CcoolD factor in its #roductsB -e.era in on it su#erior inno.ation and mar"etin acumen, Sony should be able to mor#h its #roducts fairly ;uic"ly to meet the chan in consumers1 tasteG#referencesB ,his hel#s increase salesGre.enues and conse;uently allo9s Sony to chart its #ath bac" to #rofitableB " Re)italise 4atured Sub,Brands Sony could le.era e on its mar"etin "no9%ho9 to re.i.e its matured sub%brands by re%launchin ne9 #roducts or #roducts 9ith ne9 features usin the sub%brand labelsB d" In rease t$e Pa e o' Ne1t Generation Inno)ations Produ tion Sony could e+#loit its stron R&K and technolo ical "no9%ho9 to increase the #ace in #roducin the ne+t eneration inno.ations such as the #a#er thin ,V dis#lay and di ital cho#stic"s concurrentlyB 2aintainin this com#etiti.e ad.anta e is crucial in reinforcin the mechanism that fall under Sony1s strate iesB e"
Be 4ore Pro'it Oriented

As a mature com#any, it should continue to be #rofit orientated and em#hasise on mar"et share, es#ecially 9here Sony=s mar"et in Ha#anB >sin its stren th in inno.ation and HR2, Sony can aim to deli.er ;uality and inno.ati.e #roducts to customers @achie.in differentiationAP at a le.el of costs that a##roach those of its com#etitors such as Samsun B ,o achie.e this, Sony can im#ose internal cost leadershi# throu h ac;uirin the core com#etency of cost%effecti.e ser.ice e+cellence that enshrined in a uni;ue and self%reinforcin system of or aniJational #rocesses and acti.itiesB
is shrin"in

,he actions discussed abo.e 9ill in turn brin reater su##ort to the com#any1s business% le.el differentiate strate y that focus #rimarily on achie.in differentiation throu h inno.ati.e and ;uality #roductsB 2$

9HAT STRATEGIC ACTIONS SONY SHOU!3 TABE TO SUPPORT ITS BUSINESS,!E?E! 3I//ERENTIATION STRATEGY ,he construct of differentiation strate y em#hasises on hi h ;uality offerin s, si nificant in.estments in inno.ation and staff de.elo#ment and brandin B In order to continue to meet these re;uisites, Sony may ado#t the strate ic actions as follo9s: a" 4aintain T$e !eader Position in Produ t Inno)ation = Auality Sony1s a##roach 0 doin 9hat others don1t 0 has #aid off, in the form of reat #roducts that #eo#le co.etB ,hrou hout its history, Sony inno.ations ha.e become #art of mainstream culture 9ith the ability to ca#ture the ima ination and enhance #eo#le1s li.esB In recent time @2))$A, Sony continues to fuel industry ro9th 9ith the sales of inno.ati.e and ;uality Sony #roducts such as VAI5 noteboo"s @that raise the bar in both form and functionA and di ital cameras @that allo9 #ictures to be ca#tured on a flo##y dis"AB Considerable inroads ha.e also been made in #rofessional broadcastin such as the #roduction of 3etacamB 2o.in for9ard, Sony should continue to maintain the mar"et leader #osition in #roduct inno.ation and ;uality throu h stron R&K, indi enous use of ne9 technolo ies and su#erior mar"etin acumenB b" In)est in Broadband Net(or2 Sony is a cor#oration 9ith con.er ence at its .ery heartB Kri.en by an inte rated business model, the com#any is 9ell #ositioned to brin ne9 benefits to consumers by combinin hard9are, soft9are, content and ser.icesB In the com#any1s .ie9, the Internet is an Ie%Play roundI 9ith ne9 9ays to enEoy Sony #roducts and it o#ens u# o##ortunities for Sony to #roduce ne9 re.olutionary #roducts in futureB 2o.in for9ard, Sony has #lanned to continue to in.est hea.ily in broadband net9or" so as to allo9 an entirely ne9 form of entertainment such as di itised mo.ies and music as 9ell as Internet content and ames to be accessed ubi;uitouslyB Sony too" an infant ste# recently by launchin SonyStyleBcom, a ne9 information rich e%commerce site desi ned to build a closer relationshi# bet9een Sony and its customersB " In)est in Internet,Enabled Produ ts Sony1s strate y is focused on four ate9ays to the net9or"ed 9orldB ,hey are the di ital tele.isions and set%to# bo+es, VAI5 #ersonal com#uters, mobile de.ices @such as the C-I* handheld de.ices and di ital #honesA and PlayStation2 ame consolesB ,o ensure that these #roducts #ossess internet%enabled ca#ability, Sony has de.elo#ed ne9 audio%.isual a##lications desi ned to #ersonalise technolo y that i.e consumers easy, ubi;uitous access to entertainment and information 0 no matter 9hether the content comes from cable, satellite, terrestrial, #ac"a ed media or the Internet 0 the com#any1s soft9are strate yB d" Rein'or e Brand ?alues = Pro&ote a 9orld Class Brand Chairman of the 3oard, Forio 5h a, once said: "... The most valuable asset of all is the four letters, S, O, N, Y. I tell them, make sure the basis of your actions is increasing the value of these four letters..." ,his underscores the stron em#hasis on the im#ortance of reinforcin the brand .alues at SonyB ,he com#any also embar"ed on the #roEect 26

dubbed O3ein Sony1 to hel# the .arious sta"eholders assimilate the brand .alues betterB Sony 9or"ed hard in this area and 9as rated the number one brand in the >BSB by the Harris #oll @2)))AB ,he #henomenal stren th of the Sony brand 9orld9ide is surely a testament to the com#any1s re#utation for #roducin inno.ati.e #roducts of e+ce#tional ;uality and .alueB Sony celebrates brand di.ersity to connect 9ith consumers across .arious lifestyle se mentsB /or instance the rand 2iniKisc format re%launch under the !al"man brand in 2))) 9as meant to communicate subtly that Sony is 9ell connected to the 9orld, the lifestyle that #eo#le #ursue, #articularly the R 4enerationB e" En oura#e 3rea&s Sony stri.es to create thin s 0 thins not essential, yet hard to li.e 9ithout 0 for e.ery "ind of ima ination 9ith its #roducts that stimulate the senses and refresh the s#irit and ideasB Sony describes #rofoundly on its 9ebsite We are not here to be logical or re!ictable. We"re here to ursue IN#INIT$ ossibilities. We allo% the &'I()T$ST min!s to interact freely, so the *N$+,$-T$. can emerge/ to em#hasise the as#iration of creatin thin s from ima eryB Sony1s to# mana ement "no9s that creati.ity is the com#any1s essence and thus they fre;uently ta"e chances in inno.ation 9or", aimin to e+ceed the e+#ectations of consumersB In order to succeed usin differentiation strate y, Sony must #ossess the ability to continuously #roduce inno.ati.e and ;uality #roducts that e+ceed customers1 e+#ectations and at costs that a##roach near its com#etitorsB

27

CAN SONY SUSTAIN ITS SUCCESSC ,he lar e and unta##ed mar"ets in some re ional areas cou#led 9ith Sony1s difficult to imitate resources and ca#abilities 9ould ensure its future successB a" Condu i)e En)iron&ent 'or Gro(t$ ,he maEor macro en.ironment factors su est a #romisin en.ironment for the ro9th of electronics and net9or" ser.ice businesses amidst lobal slo9do9nB Accordin to QQQ @2))2A, the !emogra hic fun!amentals of large o ulations that inclu!e rising mi!!le classes %ith increasing !is osable incomes as %ell as the !esire for innovative electronics an! net%ork centric ro!ucts, aint an e0tremely encouraging !eman! icture in the long run/B ,he QQQ @2))2A confirmed that the >BSB, China, *uro#e and Asia 9ould continue to offer attracti.e conditions for the consumer oods, includin electronic industryB It estimated that the demand for innovative electronics an! net%ork centric ro!ucts 9ill double by 2)1)B b" Stron# /inan e Resour e Althou h Sony had not been #rofitable, its 2))2 annual re#ort still sho9ed that the com#any #ossessed hu e cash and cash e;ui.alents balances of M&8$B8 billionB Sony1s lon %term financial status is stable accordin to credit ratin that the Standard & Poor=s Ratin s Ser.ices Com#any a9ardedB ,his is 9hy bet9een 1((8 and 2))2, ban"ers had #ro.ided funds to hel# the com#any in its Eoint .entures and in.estments des#ite lobal economic slo9do9n and terrorist threatsB Sony1s stron finance resource is .ital for ro9th and ready to 9restle any economic crisisB ,his in turn sustains successB " Obsession (it$ Inno)ation Culture 5ne of the most im#ortant re;uirements to sustain success in the electronic and net9or"ed ser.ice industries is to #ossess a enuine inno.ation cultureB >nli"e other electronics and net9or"ed ser.ice com#anies, Sony #reached inno.ation 9ith reli ious JealB /or e+am#le, Sony has relentlessly inno.ated and brou ht an array of trend%settin electronics #roducts such as !al"man, Com#act Kisc and PlayStation into the mar"etB All these inno.ations had created ne9 mar"ets of their o9nB ,o further inno.ate, the com#any 9as the first to launch the first entertainment robot, the do %li"e CAiboD, 9hich became a runa9ay successB /ollo9in the success, Sony en ineers are no9 9or"in on intelli ent humanoid robotsB !ith such as an obsession 9ith inno.ation, Sony is certainly #oised to sustain its successB d" 3is i%lined A%%roa $ Sony1s disci#lined a##roach has assisted the com#any to a.oid setbac"sB Sony 9as able to im#lement cost%focused o#erations in the media business fast that in turn allo9ed its ,V%series #roduction and mo.ie business to achie.e handsome #rofit mar insB ,he ability to ensure that the central obEecti.e of achie.in bi er cost ad.anta es than the com#any1s ri.als @by continuously im#lementin cost reduction measures alon its .alue chain more effecti.elyA allo9s Sony to achie.e continual successB 2&

e"

Pro(ess in 4ar2etin# Sony1s #ro9ess in mar"etin 9ill hel# sustain the com#any1s successB ,he com#any #ossess the tacit "no9led e and "no9%ho9 to accom#any #roduct launches 9ith hi hly effecti.e mar"etin and #ositionin efforts and this often earns Sony handsome #remiumsB Sony1s mar"etin shre9dness had led the com#any to ac;uire the FoB 1 brand ratin in the >nited States by Harris #oll @2)))AB Sony 9as also named as the 9orld=s 21st most .aluable brand in the same yearB In short, Sony1s #ossession of a 9orld% class mar"etin acumen that has made Sony a lobal me a brand is certainly a stren th that is hard to imitate and .aluableB

As the lobal electronics, media and net9or"ed ser.ice com#any that constantly lead inno.ation and create ne9 mar"ets, Sony is certainly 9ell #oised to sustain its successB 2o.in for9ard, in order to continue to ain mar"et share and sustain its com#etiti.e ad.anta es as an electronics, media and net9or"ed ser.ice com#any in the hi h demandin en.ironment, Sony must de.elo# ne9 9ays to mana e both customer relationshi#s and su##liers or #artners to o#timise customer loyalty, su##lier relationshi#s, and re.enueB

2'

9HAT ARE SONY+S SUCCESS /ACTORSC ,here are four success factors that hel#ed Sony1s ascent to lobal su#remacy in the consumer electronics sector and they are: a" ?isionary !eaders$i% Sony is a classic case to #ro.e the strate ic im#ortance of a .isionary leader in carryin a brand to diJJyin hei htsB Sony1s mana ement team alon 9ith the C*5 9as res#onsible to create an en.ironment that nurtured e+#erimentation and inno.ationB Sony 9as also one of the early Asian brands to reco niJe the im#ortance of brandin , 9hich 9as a ain su##orted and lead by the mana ement teamB b" Reli#ious Eealous to Inno)ation Inno.ation defined the brand character of SonyB Sony re9 to lobal #rominence due to its ability to constantly create #roducts before other com#anies could conce#tualise themB Sony also #ossesses the ability to sense the hidden consumer demand and create an entire #roduct cate ory throu h its inno.ati.e #roductsB /or instance, 9hen !al"man 9as introduced, there 9as no e+istin mar"et for #ortable music but it 9ent ahead to became a .ery successful inno.ationB Sony1s inno.ati.e culture 9ill hel# differentiate the com#any from its com#etitors for a .ery lon timeB " Pioneer Ad)anta#e 4i.en the inno.ati.e ed e, Sony emer ed as the #ioneer in almost e.ery sector that it 9as o#eratin inB 3ein the first mo.er @or in.entorA in many cases, Sony has a reat lee9ay in definin the rules of the ameB In addition, the brand ima e 9as enhanced e.ery time a com#etitor imitated Sony as it became an indirect 9ay to acce#t Sony1s leadershi# #ositionB d" Hu&an Ca%ital ,he reatest asset of Sony is of its human ca#ital, es#ecially its en ineers 9hich ma"e u# the R&K de#artmentB ,heir constant inno.ation is crucial for a consumer electronic
firm 9hich s#ecialises in audio%.isual e;ui#ment and aim to enerate hi her #rofit mar in to co.er the hi her cost needed for its #rimary and su##ort acti.itiesB Subsidiaries are 9ell established in many #arts of the 9orld 9hich i.e Sony hands%on "no9led e of the local mar"etB 3ein an international cor#oration, Sony also has ood access to talents and brin s them into the com#anyB

28

9HAT ARE THE REASONS THAT CONTRIBUTE3 TO SONY+S 3EC!INEC a" Unrelated 3i)ersi'i ation 2any !estern and Asian com#anies such as 42 2otor and Samsun that ha.e become lobal forces to rec"on 9ith started from trimmed to become bloated con lomeratesB 3ut these com#anies seem to ha.e learnt the im#ortance of focusin on core com#etence and trimmed do9n, channellin its resources around one or t9o dominant businessesB 3ut Sony still seems to ha.e stuc" u# in multi#le businessesB ,his sort of unrelated di.ersification not only drains the resources to a reat e+tent but also di.erts the brand focus from the core of the brandB b" Inno)ation 3eart$ ,he case of A##les1 iPod e+#lains this #oint .ery 9ellB !al"man made Sony the undis#uted leader in #ortable music #layer cate oryB As is the usual case, success breeds cor#orate com#lacency and Sony did not follo9 u# 9ith any outstandin and inno.ati.e #roduct line to sustain the initial successB A##le came out 9ith iPod that a##ealed to the youn er eneration 9orld9ideB ,his hel#s established A##le as the undis#uted leader in mobile music mar"et and #ossibly dented Sony1s brand re#utationB ,he inno.ation dearth is #robably the result of Sony1s lac" of consumer oriented inno.ationB " !a 2 o' Brand E)olution /or Sony to continue to be successful in the current ultra com#etiti.e lobalised mar"et #lace, it has to ma"e itself .ery rele.ant to the current customer se mentsB Har#in bac" on #ast laurels and e+#ectin the customers to still su##ort the brand due to its #ast lory 9ill be a ra.e mista"e as has turned out in Sony1s caseB Sony has not been .ery successful in e.ol.in as the brand for the ne9 masses of the t9enty first centuryB A##le, Samsun and a fe9 others ha.e hiEac"ed that from SonyB d" !a 2 o' Coo%eration
more beneficial for the com#any to coo#erate 9ith some of its com#etitors as o##osed to com#etin on conflictin soft9are that su##orts the systemB ,he ne9 entrants and e+istin com#etitors are much stron er than 2) years a o and in.ariably Sony1s stren th 9ill be 9ea"ened if the com#any 9ould to act aloneB

!ith Sony enterin mar"ets such as the V,R 9ith no standards, it mi ht be

e"

!a 2 o' Strate#y Product de.elo#ment, manufacturin and mar"etin are all 9ell established but the firm lac"s any formal lon %term directionB ,he ori inal mission statement of Sony is also outdated as it references to
!B!BIIB Its short%term strate y is also lac"in as there is little em#hasis on #rofit and accountability of R&K effortsB As s result, Sony althou h #ossess stron com#onents but is unable to coordinate in a coherent 9ay to achie.e its ma+imum #otentialB

2(

9HAT ARE SONY+S /UTURE CHA!!ENGES = 9HAT CAN IT 3O TO O?ERCO4E THE4C a" A $ie)in# Sea&less Coo%eration Bet(een Business Units ,he bi est challen e that Sony faces is achie.in total coo#eration bet9een its business units and buy%in of its net9or" .isionB ,here is little coo#eration bet9een the content #eo#le in the >BSB and the technical 9iJards in Ha#anB As such, the C*5, Idei, 9or"s tirelessly to achie.e or anisational inte ration by startin an initiati.e to brid e the hard9are and content businessesB He also carried out e+tensi.e reor anisation to chan e or anisational mindsetB In addition, to foster coo#eration bet9een S3>s, Sony could increase the fre;uency of direct contacts bet9een di.ision mana ers, establish liaison roles in each di.ision and form tem#orary 9or" teams or tas" forces around #roEects that also focus on e+tractin and sharin com#etencies that are embedded 9ithin se.eral di.isionsB ,o ensure that the .arious initiati.es mentioned early are successfully e+ecuted, Sony should also e.aluate its di.isional mana ers1 #erformance on the basis of ho9 9ell they ha.e facilitated interdi.isional coo#erati.e effortsB Sony1s re9ard systems should also em#hasise on the o.erall com#any1s #erformance, besides the outcomes achie.ed by indi.idual di.isions to hel# o.ercome #roblem associated 9ith strate ic business unit formB b" 3ile&&a: 9$at Sony S$ould 3o To Counter !o(,Cost I&itators -o9%cost imitators also #roduce Sony1s mainstream #roductsB ,o counter them, Sony tries to "ee# at the forefront of inno.ation by ma"in inno.ati.e interconnected di ital multimedia #roductsB Althou h this hel#s in miti atin the situation, it brin s another set of #roblemsB ,he content business, already #la ued by #iracy, is concerned about the im#lications these ne9 de.ices for its co#yri hted contentB ,he result of usin inno.ati.e interconnected di ital multimedia #roducts to counter lo9%cost imitators also #re.ents Sony in ma"in many de.ices that its com#etitors already #roducedB " 9innin# T$e Standards 9ar In the a e of di ital con.er ence, 9innin the standards 9ar is .ital as it can be a 9inner%ta"es%all situationB As such, there 9ill be fierce com#etitionsB Sony1s broadband dream can only be a reality if its o9n standards #re.ailedB ,o a.oid failure, Sony1s should e+#lore Eoint alliances for Eoint standard s#ecificationB d" Co&%etition )s Collaboration (it$ Con)entional = Non,Con)entional Co&%etitors ,he 9orld of di ital con.er ence means that Sony has to com#ete 9ith con.entional and non%con.entional ri.alriesB 5n one hand Sony has entered the terrains of these com#anies in the media, com#uter, amin and net9or"in mar"etsB 5n the other hand it has also 9itnessed these .ery #layers enter Sony1s traditional fortesB In the a e of con.er ence, it is unli"ely that a com#any can do e.erythin itself but to coo#erate selecti.ely 9ith its com#etitorsB ,he model that in.ol.es consumer%electronics com#anies in o#eratin manufacturin #lants also has to be ta"en by outsourcin that they can concentrate on their core businessesB Sony has already started outsourcin and collaboratin 9ith its com#etitors and it should e+#lore if it can do moreB T$e S our#e o' Pira y $)

e"

,he #roliferation of the Internet and di ital ad ets translated into easier #iracy of di itised co#yri hted contentB Kes#ite an increase in demand, lobal music sales #arado+ically fell by (L in 2))2B Ille al co#ies and sales 9ere estimated to cost mo.ie and music com#anies >S?' billion a yearB If this trend continues, Sony1s content di.isions may o out of businessB In order to sto# this trend, Sony teamed u# 9ith others to form an association to ur e the >BSB o.ernment to ste# u# anti#iracy measuresB '" Te $nolo#y Ado%tion Kes#ite elaborate #re#aration for the ne+t eneration of net9or"ed entertainment, the net9or"s themsel.es remain cons#icuously missin B 3y mid%2))$, not a sin le #roduct from Sony has incor#orated any of the ne+t% eneration featuresB ,here are no elaborate broadband net9or"s in #lace to su##ort the ne+t% eneration features and #roductsB In 2))2, about $)L of Sony1s !al"man sales are units that still used the traditional cassette ta#e, for 9hich the !al"man 9as first launched in 1('(B Sony, ha.in no relationshi#s 9ith telecom com#anies, can only 9ait 0 but not fore.erB Perha#s, Sony should form alliances 9ith some telecom com#anies and find 9ays to e+#edite #ro ressB #" 3e'inin# t$e Rede'ined 5Sony6 Sony still faces the dauntin tas" of sellin its broadband .ision and ne9 identity to the customers due to the com#le+ities of the di ital con.er ence industryB An e+am#le is Sony1s hi hly inno.ati.e #roduct Airboard, a combination of ,V and PC 9ith and -CK screenB Customers do not "no9 9hat it is, 9hether it is a PC or a ,V or somethin elseB Kealers do not "no9 ho9 to sell itB ,o accom#lish this u#hill tas", Sony must first shed the Ccustomer%electronicsD com#any ima e and e+#lain to its sta"eholders 9hat di ital con.er ence means and ho9 the com#any1s #roduct fit into itB Secondly, the com#any must con.ince its shareholders and em#loyees of Sony1s rand .ision throu h coordinated buy%in acti.itiesB

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9HAT CAN SONY 3O TO O?ERCO4E THREATS ,he threats that Sony faces include unfa.ourable o.ernment #olicies, #rolon ed lobal recession, scour e of #iracy and a ressi.e com#etitionB ,o o.ercome them, Sony may ta"e the actions as follo9s: a" Globalisation F A#ainst Un'a)ourable Go)ern&ent Poli ies
In the 1(()s, Sony, bein a Ha#anese com#any, 9as not allo9ed to set u# broadcast net9or"s in the >BSB Sony then tried to ma"e u# for it by in.estin in satellite broadcastin in Ha#an @throu h #artnershi#A and other countriesB 4i.en this constraint, Sony lobalised #roduction that in turn allo9ed the com#any in e+#loitin a shift in demand in international mar"etsB In short, Sony should continue to use lobalisation as a tool to miti ate unfa.ourable o.ernment #oliciesB

b"

!o(er Costs0 Generate E1tra Re)enues F A#ainst Prolon#ed Global Re ession

B ,o miti ate ne ati.e effects of #rolon ed lobal recessions, Sony should further lo9er costB ,o achie.e this, it should hasten the #ace in restructurin its music business and im#lementin the .arious cost%cuttin measuresB It should also e+#lore more lo9%cost locations 9here the com#any can mo.e its manufacturin #lants toB -astly, Sony could continue to outsource its #roduction #lantsB All these allo9 Sony to ac;uire a 9ider #rofit mar in and thus hel# fi ht a ainst slu ish demandB B A ainst a bac"dro# of #rolon ed lobal recess, intense com#etition as 9ell as the com#etitors are also able to co#y the #roducts in a much shorter time, Sony could use its stron R&K and technolo ical "no9%ho9 in non% consumer business @business sector and industriesA to enerate e+tra re.enuesP Sony could su##ly hi h technolo y e;ui#ment and #artsB In addition, Sony could also e+#and its #roduct ran e by offerin lo9er #riced so that it can also com#ete head%on 9ith lo9%cost imitatorsB ,his also hel#s Sony increase country mar"et sharesB

!o(er Cost

Generate E1tra Re)enues

"

9or2 (it$ !o al Go)ern&ents Colle ti)ely F A#ainst S our#e o' Pira y ,he #roliferation of the Internet and di ital ad ets translated into easier #iracy of di itised co#yri hted contentB Ille al co#ies and sales 9ere estimated to cost mo.ie and music com#anies >S?' billion a yearB If this trend continues, Sony1s content business may be badly affectedB ,o sto# this trend, Sony teamed u# 9ith A5-%,ime !arner and Viacom to ur e the >BSB o.ernment to ste# u# anti#iracy measuresB

d"

Inno)ation = Strate#i Allian es F A#ainst A##ressi)e Co&%etition Com#etitors, es#ecially lo9%cost imitators that also #roduce Sony1s mainstream #roducts are threatenin the com#any1s #rofitsB ,o counter a ressi.e com#etition, Sony must try to "ee# at the forefront of inno.ation by ma"in inno.ati.e and re.olutionary #roducts that include interconnected di ital multimedia #roductsB In the a e of con.er ence, it is unli"ely that a com#any can do e.erythin itselfB 2ore often than not, it has to coo#erate selecti.ely 9ith its com#etitorsB ,o ensure that the com#any 9ill not encounter a maEor setbac", Sony should 9or" to9ards Eoinin alliances 9ith its com#etitors, #articularly for Eoint standard s#ecificationB

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9HAT IS SONY+S CORPORATE,!E?E! STRATEGY = HO9 3OES IT HE!P CREATE ?A!UESC Sony1s cor#orate strate y uses related lin2ed di)ersi'i ation strate#y B ,he com#any1s re.enues distribution @see table belo9A sho9s that more than $)L of its re.enue comes from outside its dominant electronics businessB Sony1s businesses are also found to be related @or lin"edA to each other in some manners such as transfer of "no9led e and core com#etencies bet9een the business units to de.elo# and e+#loit economies of sco#eB
Ele troni s GHI Ga&es 8;I 4usi JI Pi tures JI Ot$ers JI

In at least 2 9ays, the related lin2ed di)ersi'i ation strate#y hel#s Sony create .alues as follo9s: a" A)oid 3u%li ation in Resour e Allo ation /irstly, because the e+#ense of de.elo#in a core com#etence has been incurred in one of the firm1s businesses, transferrin it to a second business eliminate the need for that second business to allocate resources to de.elo# itB /or e+am#le, Sony electronics business could transfer its com#etence in desi n and manufacturin to .ideo ame consoles and information%technolo y #roductsB In this 9ay Sony has a.oided du#lication in resource allocation 9hich in turn hel#s lo9er costB If Sony is able to sell its #roduct 9ith hi her #rices at a cost com#arable to its com#etitors, it 9ould translate to hi her #rofit mar inB ,his brin s .alue to the com#any and shareholdersB b" Allo( Business Units To Gain Co&%etiti)e Ad)anta#e Secondly, resource intan ibility is another source of .alue creation throu h cor#orate relatednessB As 9e "no9, intan ible resources are difficult for com#etitors to understand and imitateB In .ie9 of the difficulty, the business unit that recei.e a transferred cor#orate%le.el com#etence often ains com#etiti.e ad.anta e o.er its ri.als immediatelyB In this 9ay it hel#s create .alueB /or instance, in 1((7 Sony a##ointed Fobuyu"i Idei, a youn e+ecuti.e, to be C*5 of the cor#orationB He then outlined the transfer of cor#orate%le.el core com#etencies so that the com#any1s standalone #roducts could be transformed to bein net9or"%enabled de.icesB ,he .arious business units thus ained com#etiti.e ad.anta e from Idei1s "no9led e and foresi ht that are hard for others to understand and imitateB

SONY+S INTERNATIONA! CORPORATE,!E?E! STRATEGY $$

4O3ES O/ ENTRY0 BENE/ITS = CHA!!ENGES Introdu tion Sony uses #lobal strate#y to offer standardised #roducts across country mar"ets, 9ith com#etiti.e strate y bein dictated by the home officeB ,his allo9s the com#any to achie.e economies of scale and offers reater o##ortunities to ta"e inno.ations de.elo#ed at the cor#orate le.el or in one country and utilise them in other mar"etsB 4odes o' Entry Primarily Sony ado#ts multi#le modes of entry that include e+#ortin , formin Eoint .entures 9ith international #artners, ac;uirin a forei n firm and establishin a ne9 subsidiaryB It #articularly fa.ours Eoint .entures as the com#any has a .ery bad e+#erience after the ac;uisition of the mo.ie and music businesses in 1(88G8(B Sony nearly 9ent ban"ru#tB /rom that near%death incident on9ards, Sony has a.oided any mer ers and ac;uisitionsB 2oreo.er, the rationale for the mer er 9a.e in the late 1(()s 9as the con.er ence of content and distributionB In Sony1s #lan, it has intended to use its o9n net9or"ed de.ices as the distribution channels for its contentB ,his allo9s Sony to focus on de.elo#in its ne+t% eneration ad etsB Fonetheless, to ensure that the com#any has a stron footin in net9or"ed entertainment, Sony acti.ely en a es in ro9in itself lar er throu h strate ic alliancesB ,he de.elo#ment of the PlayStation itself 9as aided by alliances for ed bet9een hard9are desi ners and creati.e ame%soft9are de.elo#ers, the creation of the com#act disc 9ith Phili#s, mobile #hone business 9ith *ricsson, online distribution site 9ith >ni.ersal 2usic 4rou#, C-I* o#eratin system 9ith Palm Cor#oration, internet access 9ith A5- as 9ell as cell micro#rocessors 9ith I32 and HPB ,hese alliances ha.e #ro.ided Sony an alternati.e to 2icrosoft #roducts and thus hel#s "ee# the com#any1s licensin costs do9n 9hich in turn im#ro.e financial #erformanceB Bene'its ,hrou h international di.ersification, Sony has mana ed to e+tend some of its #roducts1 life cycles @eB B VCR and !al"manA, #ro.ide incenti.es for more inno.ation and #roduce abo.e%a.era e returnsB International e+#ansion also hel#s Sony to achie.e lo9er cost #roduction costs @as #ortions of its o#erations could be re%located to lo9%cost forei n locationsA, miti ate the ris" associated 9ith currency fluctuation as 9ell as lo9er economic and #olitic ris"sB In addition, international e+#ansion has allo9ed Sony to deri.e the follo9in benefits and in turn create .alues for its sta"eholder: a" In reased 4ar2et Si<e Increased mar"et siJe has allo9ed Sony to achie.e both economies of scale and economies of sco#eB In additional, it has allo9ed the com#any to #roduce .alue% creatin #rocesses in countries that are stron in science "no9led e and 9ith abundant talentsB

b"

Returns on In)est&ent $6

In.estin in international mar"ets has allo9ed Sony to enerate returns the com#any1s si nificant in.estments such as #lants, ca#ital e;ui#ment and R&KB " E ono&ies o' S ale and !earnin# 3y e+#andin the com#any1s mar"ets, Sony is able to enEoy economies of scale, #articularly in manufacturin o#erationsB Sony also is able to e+#loit core com#etencies in international mar"ets throu h resource and "no9led e sharin bet9een the business units and net9or" #artners across country bordersB ,his sharin of "no9led e enerates syner y, 9hich hel#s Sony to #roduce hi her%;uality #roductsGser.ices at lo9er costB In addition, 9or"in across international mar"ets has #ro.ided Sony 9ith ne9 learnin o##ortunitiesB d" !o ation Ad)anta#es Sony relocated some manufacturin #lants to countries that offer lo9er%cost labour to ta"e ad.anta e of locationB C$allen#es Ho9e.er, the benefits that Sony has enEoyed may be tem#ered by #olitical @eB B unable to et #ermit to establish a broadcast station in the >BSBA and economic @eB B #rolon ed recession in some countries in early 2)))sA ris"s and the #roblems of mana in a com#le+ international firm 9ith o#erations in multi#le countries @eB B lac" of coo#eration bet9een Sony1s di.isionsAB In addition, to achie.e efficient o#erations, Sony head;uarters ha.e to ensure that its business units share resources and facilitate coordination and coo#eration across country boundariesB 5n this note, Sony1s C*5 9or"ed relentlessly to achie.e or anisational inte rationB His efforts such as the establishment of the Fet9or" A##lication and Content Ser.ice Sector that aim at brid in the hard9are and content businesses and e+tensi.e reor anisation to chan e mindset had sho9ed #romisin resultsB Sony 9itnessed a dramatic increase in internal coo#erationB

$7

USING COOPERATI?E STRATEGIES AT SONY Sony uses $ means to ro9 0 internal de.elo#ments @#rimarily throu h inno.ationA, mer ers and ac;uisitions and coo#erati.e strate iesB 3y coo#eratin 9ith other com#anies, Sony is able to le.era e its core com#etencies to ro9 and im#ro.e its #erformance, thus creatin more .alue for its sta"e holdersB In #articular, strate ic alliance is a #rimary ty#e of coo#erati.e strate y that Sony uses it .ery often to create com#etiti.e ad.anta e, 9hich in turn hel#s enhance the com#any1s mar"et#lace successB /or instance, Sony1s cor#orate%le.el coo#erati.e strate y 9ith A5- in 2))1 see"s to le.era e on Internet technolo ies and ser.ices in 9ays that ma+imise customer .alue 9hile im#ro.in the com#any1s #osition relati.e to its ame console com#etitorsB Sony also en a es in a non%e;uity strate ic alliance 9ith a consortium of ( com#anies to #ush for the ado#tion of C3lu%RayD KVK recordin standard o.er a ri.al standard from F*C and ,oshibaB In addition, to accelerate the de.elo#ment of the ne+t% eneration Ccell micro#rocessorD technolo y, Sony enlists business%le.el coo#erati.e strate y @.ertical com#lementaryA and #artners 9ith I32 and ,oshibaB
Year 2id%1(()s 2id%1(()s 1((& 2))1 2))1 2))1 2))1 2))1 2))1 2))1 Co&%any Ru#ert 2urdoch1s Fe9s Cor# 4ames de.elo#ers Intel *ricsson >ni.ersal 2usic 4rou# Palm Cor#oration -inu+ America 5nline @A5-A I32 and ,oshiba Consortium of ( com#anies Business Satellite broadcastin PlayStation Foteboo"%PC 2obile communication 0 Sony *ricsson @Hoint VentureA 5nline%music distribution 0 PressPlay C-I* handheld com#uter 5#eratin system 0 de.ices e B CCoCoonD set%u# bo+ Internet ser.ices Fe+t% eneration Ccell micro#rocessorD technolo y C3lu%RayD KVK recordin standard @o.er a ri.al standard from F*C and ,oshibaA

Sony is li"ely to succeed in its alliances as the com#any has #ro.en itself to be acti.e in sol.in #roblems, bein trust9orthy and consistently #ursuin 9ays to combine #artners1 resources and ca#abilities to create .alueB /or instance, althou h Sony *ricsson 9as still ma"in losses as of 2))$, Sony and *ricsson ha.e both #led ed more resources into the .entureB Ha.in ne.er really been successful in ca#turin any substantial mar"et share, the Eoint .enture 9ith *ricsson allo9s Sony to im#ro.e the com#any1s ability to com#ete in an uncertain com#etiti.e en.ironmentB ,he Eoint .enture has allo9ed both com#anies to establish lon %term relationshi#s and transfer tacit "no9led eB ,he #robable reasons of Sony for strate ic alliances by mar"et are as follo9s:
4ar2et Slo9%Cycle /ast%Cycle 4ain access to a restricted mar"et Reason 2aintain mar"et stability @eB B establishin standards /orm an industry technolo y standard Share ris"y R&K e+#enses 5.ercome uncertainty 5.ercome trade barriers 2eet com#etiti.e challen es from other com#etitors Pool resources for .ery lar e ca#ital #roEects

Standard%Cycle

S#eed u# de.elo#ment of #roducts and ser.ices S#eed u# ne9 mar"et entry 2aintain mar"et leadershi# 4ain mar"et #o9er @reduce industry o.erca#acityA 4ain access to com#lementary resources *stablish better economies of scale -earn ne9 business techni;ues

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,here are 6 coo#erati.e strate y ris"s that Sony must be co nisant 9ithB /irstly, its #artners may e+hibit o##ortunistic beha.iourB An e+am#le of o##ortunistic beha.iour is an attem#t to ac;uire as much of Sony1s tacit "no9led e as #ossible 9ithout offerin much in returnB Secondly, its #artners may misre#resent or e+a erate its com#etencies to lure Sony into strate ic alliancesB ,hirdly, they may fail to brin #romised resources and ca#abilities to the alliancesB ,his may be caused by different cultures and lan ua esB -astly, Sony may ma"e in.estments that are s#ecific to the alliance 9hile its #artner does notB As a result, the out#ut from the alliance may be inferior, lea.in the alliance obEecti.es unfulfilledB ,here are 2 9ays in 9hich Sony can carry out coo#erati.e strate iesB /irstly, the com#any can de.elo# formal contracts 9ith its #otential #artners and #ut in #lace an effecti.e monitorin system to reduce ris"sB Ho9e.er, this a##roach is costly and can be stiflin B Secondly, the com#any may also ado#t less formal contracts and im#ose fe9er constraints on #artners1 beha.iourB Althou h this a##roach is less costly and #ro.ides more fle+ibility, Sony has to trust its #artners in e+ecutin the a reements #ro#erlyB 4i.en the challen es associated 9ith achie.in and maintainin su#erior #erformance and in li ht of its eneral success 9ith coo#erati.e relationshi#s, one mi ht e+#ect that Sony 9ill continue to use coo#erati.e strate ies as a #ath to9ard ro9th and enhanced #erformanceB

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