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Strategic
Planning of
Sony
Corporatio
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 Report on strategic planning

Contents
Introduction...........................................................................................................................................2
Company Overview...............................................................................................................................2
1. Sony’s Strategic development by restructuring organization till 2005..........................................3
Implication of transformation 60’..........................................................................................................3
0Problems Faced by Sony..................................................................................................................3
Stringer Strategy in 2005 in three major sectors...................................................................................4
2. Current Strategic Analysis of Sony Corporation.............................................................................5
SWOT to analyse current strategies of Sony Corporation.....................................................................6
3. Strategic Direction for the future..................................................................................................8
Strategic planning of Sony Corporation for future................................................................................8
Conclusion...........................................................................................................................................10
Bibliography.........................................................................................................................................10

Introduction
The report entails the strategic direction of Sony containing the past, present and future. The re-
structural strategies implemented by Sony since 1995 till 2005 could not help Sony to turn figures
positive for them. This was followed by strategy laid by new CEO, Mr. Stringer, who was first non-
Japanese. He introduced the centralized strategy of all business units and focussed on three seprate
departments: electronics, gaming and pictures. The strategy helped Sony to turn dwindling fortune
and made some profits in certain products. The report also contains the current strategy of Sony
which is to be a world leader in electronics and entertainment, globalization in BRIC nations with
emerging economies, environmental management and maintain 5% profit margin. The current
strategy is analysed after studying the micro and macro factors with SWOT analysis. The later part of
report comprises the future strategic directions of Sony. The competitive advantages of Sony are
studied with the help of porter’s Five Forces.

Company Overview
Sony was founded in 1946 as Tokyo Tsuchn Kyogo by Masaru Ibuka and akio Morita (Morita) in
Japan. Sony started off manufacturing telecommunications and measuring equipment and went on
to manufacturer transistor radios tape recorders. Sony launched certain successful products such as

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Triniton TV, walkman, camcorder, CD player, digital Handy cam and portable CD player, equipment
and 3.5 inch floppy disks.

1. Sony’s Strategic development by restructuring organization till

2005
Sony Corporation faced a decline in the revenue in 1990’s and thus a concept of restructuring was
brought in by Norio Ohga in 1994. This even could not increase the graph of revenue resulted in loss
of 293.36bn Yen in 1995. This was followed by another restructuring plan which either resulted in
failure in 1996. In 1999, internet based restructuring changed life for Sony and enjoyed profit in
some products such as PlayStation but rest like Electronics, mobiles, telecommunication etc were in
loss. Continuous restructuring plan was followed by change in top management of Sony and Idei
became the CEO in 1999. He brought in changes in 2001by converting into a broadband network
solutions company. This idea brought company into profit and finally in 2003, Sony came up with
new restructuring plan called “Transformation 60” [ CITATION Per05 \l 2057 ].

Transformation 60’

Transformation 60’ is a 3 years restructuring plan which involved reduction in workforce by 13%.
Sony reduced cost and expenses by downsizing and consolidating manufacturing, distribution,
customer service facilities and also by streamlining procurement. This resulted in decrease in
expenses and achieved 10% profit in 2006. Sony followed this with convergence concept over varied
individual products. For instance, in business of television with gaming; music, games and movies;
and so on. To furnish the concept of convergence, Sony divided into 7 units: 3 business groups and 4
network companies.

Implication of transformation 60’

This implemented due to fall in sale of traditional TV and portable audio products. Japan suffered
loss due to significant decrease in the sales of TV and cathode-ray-tube –televisions. Portable
PlayStation, DVD and VHS were few products which witnessed high demand and resulted in profit.
Sony did not achieve the targets neither in revenues nor in sales which was expected in 2006
[ CITATION Per05 \l 2057 ].

Problems Faced by Sony

Stringer became CEO in 2005 and brought in cost cutting concept and reduced workforce in US by
9000. He also helped Sony to take over MGM. According to Stringer, It was better to be an outsider
so that he charged on problems easily. Stringer identified some of the problems company was facing
in 2005 which are as follows:

 Getting rid of silo culture in Sony,

 Gain profitability across businesses
 Making products in line with industry standard technologies
 Improving the competencies in software and services
 Reducing non-strategic assets of the company

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There were some other problems as well such as internal conflicts between different products units,
piracy problems and non compatible software problems and was not able to integrate separate
products like music and audio devices as apple did between IPods and ITunes.

Stringer Strategy in 2005 in three major sectors

In 2005, stringer concentrated on three sector; electronics, games and entertainment. Sony with
structural forms mixed with growth strategies to increase profit margins of 5% by 2007-08
[ CITATION Per05 \l 2057 ].

The strategies Stringer used for Sony are:

 Products and Markets

 Reducing Cost
 Focussing resources on high-growth business
 New organizational structure

Products and Markets

Sony introduced portable audio and video devices and PlayStation 3 to enhance its market share in
computer entertainment market. Stringer integrated the separate products strategy in which he
wanted to build up brand Image “SONY”. With this concept, company introduced new audio and
video products on which music and games can be played at anytime anywhere. Sony Pictures
Entertainment (SPE) was digitalized MGM library and brought in products UMD and Blue-ray disc.
Sony Ericsson also came up with walkman mobile which shoots up financial position of Sony in 2005.

Reducing Cost

Sony Corporation reduced cost by downsizing business categories, products models and
manufacturing units, non- useful assets and disposal of shares and non-core assets. This
restructuring rose some financial drawback In early period of implementation but was targeted to be
recovered by 2008.

Focussing resources on high-growth business

Sony started concentrating on products which have high growth opportunities like HD products,
semi-conductors, and mobile products, which were based on customer based high technology. Along
with such products, Sony decided to develop software with the help of software development group.
Sony established these units in China and the USA.

New organizational Structure (2005)

Stringer decided to consolidate company into centralized structure and break down silo walls. This
approach was done by restructuring Sony into 5 main business groups. These groups are: The
Electronics business Group, The Games Business Group, The Entertainment Business group and The

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Sony Financial Holdings Group. This restructure plan was formulated to centralized working of all
departments such as marketing, finance, sales, technology, procurement and planning etc.

Restructuring Electronics

According to the case study given, the electronics Business group was an important business group
of Sony. Ryoji Chibachi, CEO Electronics, focussed on products, product development technology and
organization to implement Strategy in this group. Customers views were kept the basis in
implementing strategy.

Sony Integrated internally sourced components with key products to enhance technology. Sony
looked to develop new designs from the standard design and products and focussed on time to
develop these designs. In production, Sony focussed on Key supplier’s procurement. Sony developed
its market on electronics product such as DVD recorders and portable audio. Sony, centralised
television manufacturing with using internally sourced components with centralized engineering to
raise its growth graph in 2006.

Stringer, after entering into Televion with such hit, decided to sell chips in collaboration of IBM and
Toshiba, which will be used in TV’s, portable video recorders and others which will make Sony lead in
Electronics market. Sony made cell chips and PlayStation 3 was the first product where Sony used
cell chips and was a great success.

2. Current Strategic Analysis of Sony Corporation

Mission of the current strategy of Sony

Sony wants to be a leader in electronics, gaming, television, music and Video and audio products.

Current Corporate Strategy of Sony FY2008-FY2010

“Sony wants to be a leading Global Provider of networked Consumer electronics and

entertainment” [ CITATION Son08 \l 2057 ]. In particular, Sony is targeting to enhance core
businesses, developing network and growing on international opportunities to grow further.

Capitalize on growth in BRIC countries and other emerging markets

Sony is looking forward to develop in these countries with innovation, collaboration and integration
not just with in the different business groups such as gaming, electronics, and picture segments but
within the whole Sony Corporation.

Environmental Initiatives- Green Management 2010

It is a strategy to maintain the ecological and environmental issues such as to reduce global
warming, recycling resources, and apt management of chemical substances.

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Current Financial Strategies of Sony in 2010

Sony to maintain growth has identified 5 % operating margin as a baseline of profitability[ CITATION
Son08 \l 2057 ]. Sony is targeting to analyse the capital investments and potential acquisitions across
Sony group to ensure maximum utilization of resources. Moving ahead, Sony is looking forward to
provide shareholder value with maintaining the profit margin.

To move ahead in industry, Sony will cater both hardware and content, continuing to cater
premium products with high class contents and pre and post services to fulfil the customers’ needs
and expectations.

These strategies are laid down after analysing the market and figuring out Sony’s competitive
advantage with the help of SWOT

SWOT to analyse current strategies of Sony Corporation

Analysis of macro and micro environment of Sony

It will provide the in-depth analysis of Sony in above mentioned market and also analysis of micro
and macro environmental factors affecting the growth of Sony. This will also discover the
opportunities and possibilities for Sony to grow in its market. This will be followed by Porter’s Five
forces to understand the competitive factors in the industry.

Strengths

 Sony is known for its innovation and creativity.

 Caters Quality products to its customers such as PSP3
 The brand and image build up is very high due to past history.
 Improvement in the engineering from past experience and failures such as brought in
features to play audio and video files in gaming. For example, Sony MSX was not a successful
product but was a great lesson for engineers and then Sony produced many successful
products such as PSP3 etc.
 It caters customers of different industry such as electronics, gaming, music etc and produce
high quality products with varieties. Sony has high competitive spirit to be a leader in race
with big competitors like apple, Samsung, LG, Toshiba etc.
 Economies of scale and high variety in products such as gaming, TV etc.
 Sony entertains diversified client which reduces business risk.

Weaknesses

 Lack of innovation in PS3 as Sony focused on digital technology which can share videos just
on HD which is not common with consumers. Thus, Sony suffered a loss.
 Not able to manage certain products which faced loss due to high cost of products such as
play station 3. Sony recently decreased price by $100 to pocket some sale.

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 PS 3 also lack in range of video games as majorly video games are first-person shooter
games, which is liked by particular market. Sony has to increase the range of video games to
entertain more markets.
 Products are not able to attain sales as expected.
 The strategic direction is not properly directed.

Opportunities

 The improvement in technology and engineering has enabled Sony Corporation to improve
and work harder. For instance; Play station 3 has capabilities to be upgraded, storage and
back up options.
 Innovative and non- copied idea developed branding and gained reputation. Sony merged
with Sony Ericsson which integrated alluring features in mobile industry such as appealing
colours, user-friendly applications, and high quality with alluring design. Sony Reader is also
coming up which will direct world to read books electronically and have a large scope to
grow. Social networking,
 Improvement in the marketing approach by bringing in bundle pack selling approach helped
Sony Corporation to enhance customer base.
 They can reduce their products prices and attract customers.
 Global expansion in BRIC companies with other growing countries. Sony can expand in all
segments as its products cater what consumer demands.
 Alliance with FIFA to increase corporate value.

Threats

 Powerful competitors such as Microsoft, Apple, Toshiba, LG etc

 Fake products launched in market which ruined their reputation among their customers
 Sony could not formulate and manage their growth strategy which gave competitors
chances to supersede, for instance; gaming television electronic applications etc.
 Sony losing customers due to diversifying products in varied markets types for instance;
competition in console is being sold more such as Nintendo Wifi and Xbox360, customers
prefer Xbox and Nintendo more than PSP3
 Sony not able to maintain high profit margin due to unfavourable foreign exchange rate.
 Major impact of global downfall In the economies.

During the turnaround period, Stringer succeeded in bringing in a new restructural approach
which focussed on centralized working within all sectors and being innovative and diversified in
product range. This is an advantage of Sony over other competitors. Stringer focussed on
electronic market and strategically managed to provide biggest play station network to
customers. Sony strategy of alliances has made company to grow globally and must continue to
grow further with same approach. Reduction in prices of Sony’s product can be advantageous to
company and proper management of strategic approach can develop a firm base to grow in
future.

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3. Strategic Direction for the future

Strategic planning of Sony Corporation for future

Current strategy is a base to formulate future strategy depending upon the strengths and
opportunities for Sony in coming years. Strategy will be structured after considering new entrants,
substitutes, bargaining power or suppliers or buyers and intensity of competitors.

Threats of new entrants (LOW)

Sony has less threat of new entrants due to several reasons such as capital intensive requirements,
high intensive competition, short product life cycle, complex government policies and guidelines and
high switching cost involved. Sony strategies and new innovative ideas makes impossible for new
entrant to compete with the variety and economies of scale provided by Sony.

Sony signed MOU with Sony Ericsson which turned out to be a threat to new entrants in industry
( Butod, 2010). High technology in Sony products for instance, game console, Video equipments, and
mobile Phones is a major threat to new entrants itself. New entrants could not bear the high
production of products costs with such variety in products with high switching cost, which decreased
the competition.

Threat of Substitution (LOW)

Ingenuity in Sony products makes it difficult for entrants to substitutes Sony’s products such as
electronic products and handheld computers (Butod, 2009). Product-to-product substitution is very
low and Sony has developed good brand image and made users friendly to products which created
discomfort for consumers to switch to others.

Bargaining Power of Suppliers (LOW)

Sony has a big supply chain management as it deals in varied products in different countries. Thus
suppliers cannot threaten to raise price or decrease quality of products. Sony cut down the profiut
margins of suppliers as they are not powerful. Sony suppliers are not powerful thus negotiate on
certain issues such as high quality, fast delivery, and lower prices.

Electronic Arts (EA) makes big headline games for three giant electronic suppliers; Microsoft (MSFT),
Sony and Nintendo (Ehrenberg, R. , 2007). EA has brought in new innovative, electronic and high
quality sports games such as Sony’s Play Station 3. Sony pays high premium to EA for their products
and in return EA bargain for the premium to be paid for their products. This is how it reduces profit
of Sony which it makes in gaming industry (Ireland, et al, 2009). According to Richard Wilding at
Cranfield, manager of supply chain says, Sony assigns suppliers for each product it need. Quality of

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supplier makes it powerful and give edge for bargaining and especially in case of Sony as researched
based on facts.

Bargaining Power of Buyers (HIGH)

As internat has provided platform to buy products which has increased powers of buyers and thus
increased bargaining powers. In electronics industry and gaming industry, Sony has nos. of
competitors which allows customers to enjoy more variety and be flexible in choices without
compromising with quality at cheaper rate. Customers who purchase more have more power of
bargaining. Companies providing lot of rebates, pre and post delivery services, offers make
customers more powerful. Companies to catch more customers do this and believe in their feedback
thus can increase customer base which in return make customers powerful.

Intensity of Rivalry (HIGH)

Sony is one of the leading manufacturers of electronic products. Sony enjoys almost 80% of the
handheld computer market share in US and Microsoft almost around 20%. Sony enjoys market share
of around 60% in hardware sector (2010) and other rivals shares around 7% and Handspring which
also uses Sony’s system which consume big market share of 14% 9Butod, 2010).

With the change in technology and growing competition, Sony Corporation can collaborate with
other companies to reduce competition such as merger with Ericsson, VAIO etc. This will increase
the revenue, market share and diminishes rivalry [ CITATION Gam11 \l 2057 ].

Audio: Sony’s walkman was not a great success and was superseded by the MP3 players and IPods.
Sony’s cassettes and CD players even could not earn profit for company, Sony’s revenue increased by
9.4% in 2008 in comparison to 13.4 in 2004 [ CITATION Gam11 \l 2057 ].

Video: Sony has come up with Blu-ray technology which is given tough competition with HD-DVD
technology of Toshiba.

Television: Sony covers 23% of TV market. Sony is the highest seller of LCD sets as it produces LCD
panels on its own and rest pay for their mark-ups [ CITATION Gam11 \l 2057 ].

After going through the market with the help of Porter’s Five Forces, it is easy to formulate future
strategy in respective segments and some of the future strategies which Sony can implement to
grow further in different sections: Sony is known for its innovation and should continue with the
product differentiation strategy. Sony in cameras will continue with DSLR strategy and should bring
in ultra -compact cameras with interchangeable lenses. In Television sector, Sony will forward for the
Global Social media audit to benchmark current situation of product knowledge and awareness at
Mobile World Congress. Social media will be integrated with the current PR campaign started by
Burson-Marsteller. Sony must develop a blogger engagement strategy using audit results and should
develop a central hub for the global blogger involvement. Sony is providing biggest online play
station network, Sony PlayStation Network. This network will be found on all the Sony electronic
products and will be a new strategy to crack market of online networking platforms. Sony must plan
to provide end user casual gaming with VAIO and lot more interesting features online anytime and
anywhere[ CITATION Fut09 \l 2057 ].

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Sony VAIO must integrate individual markets with regional page, enhancing the importance of the
message conveyed and leveraging facebook’s targeting abilities to develop individual and
independent communications to each market respectively [ CITATION MEC10 \l 2057 ].

To continue with product differentiation strategy overall, Sony must apply proper management of
innovation and maintain 5 leadership roles that facilitate the innovation process.

Conclusion
We feel that Sony Corporation must focus on the several key aspects to continue to develop and
succeed. Sony is able to provide quality product with innovations in different sectors such as
Entertainment, Music, and Electronics. Sony must continue with product differentiation and mergers
to grow overseas, and become a learning organization.

Sony has made several strategic moves such as developing DSLR strategy with ultra compact
cameras, Blu-ray and biggest play station network to consumers, has provided competitive edge to
company.

Stringers re-structural strategy in 2005 was a drastic change in the strategy of Sony. Sony focussed
on three major sectors; electronics, games and entertainment with growth strategies was the
changing phase in Sony Strategic history resulted in profit o FY 5% in 2007-2008. Sony in future
needs to be innovative and be product differentiated to expand its boundaries in all three sectors.

One persistent element of both competitive advantage and risk is Stringer. If he divest his leadership
position, the reaction of both the market and consumers would be uncertain. Given his position
within the organization as well as the history of the company when he was gone, Sony must find a
way to learn as an organization. This will allow the company to withstand a departure by Stringer.

Based on the activities of the organization, we feel that the financial performance of this year will be
strong. This financial year will allow sony to overcome their weaknesses and makes them strengths
and convert their threat into their opportunities. For this reason, we feel that they will continue to
succeed and will continue to outperform their performance.

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