Business Report:

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Content Page
Executive Summary 3
1.0 Introduction 4

2.0 Business Description and Corporation Strategy 5

2.1 Key Figures 5
2.2 Correlation between Organisation Strategy and Organisation Structure

3.0 Organisational Structure 6

3.1 Structure of Sony in 1999 6
3.2 Structure of Sony in 2003 6

4.0 Problems and Responses 7

4.1 Rapid Evolution of Technology 7
4.2 Market Competition 8
4.3 Differences in National Culture 8

5.0 Appendices 9
6.0 References 10

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Executive Summary
Due to external environmental consequences such as the Asian financial crisis,
ever-increasing competition, as well as internal market problems such as poor
performance, Sony's earnings have been significantly diminished since 1998.
Consequently, the management had to implement any turnaround strategy to
respond to these concerns. According to the transformation plan revealed in
March 1999, the group's organization was fragmented and more decentralized to
take advantage of more growth prospects in the 21st century. Also, the company
introduced a "unified dispersed" management style to ensure that the
corporation performs more effectively and can withstand a dramatic transition in
the environment. Sony has made a significant number of changes to respond to
the changes in the market; sadly, the speed of the latter has met the aspirations
of the management. As a result, Sony had to accelerate the change process and
launched another turnaround plan dubbed "Transformation 60" in 2003. The
transition in 2003 saw a greater pull to formalize the technostructure, but it can
be seen that there is a mixture of system bureaucracy and divisional sized types.
Convergences in the three markets have seen that control is more focused on top
management. The changes in technology, market competitiveness, and
discrepancies in organizational culture, particularly following the acquisition of
Stringer, were Sony's key concerns. Organizational transformation and investment
plans were among the methods for dealing with technical transition. The business
competition pushed Sony to negotiate with large alliances, joint ventures, and
mergers with other firms for outsourcing purposes.

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Introduction
Sony started in the aftermath of World War II. In 1946, Masaru Ibuka opened up
an electronics store in Shirokiya, a department store in Tokyo's Nihonbashi
district. The business began with a capital of 190,000 yen and a total of eight
workers.

Business Description and Corporation Strategy

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2.1 Key Figures
Sales held at a largely floating pace until 2007. Sadly, the management and the
owners are unhappy with the earnings, and since 1998 the profits have been
decreased almost every year this may have been the catalyst for Sony's
restructuring.
2.2 Correlation between Organisation Strategy and Organisation Structure
The plan and organizational structure are interrelated, and there is also a
question as to whether the strategy or structure comes first (Lynch, 2006). It is
therefore important to consider Sony's business strategy before considering the
organization and transformation of Sony. Also, an important aspect of Sony's
analysis of behavior is an appreciation of the essence of Sony's corporate policy as
a whole (Mullins, 2010).

Organizational Structure

3.1 Structure of Sony in 1999

Sony, as a world-class participant in a varied high-tech industry, was threatened
by fierce competition in the late 1990s (Sony, 1999). The restructuring was also

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necessary for Sony to succeed in a competitive market. The company unveiled a
turnaround strategy for the corporation in March 1999 to take advantage of more
growth opportunities in the new century and the Internet period (Sony, 1999).
The composition of the institution is defined by its age and scale, its technological
framework, its strength, and its environment (Mintzberg, 1979). Furthermore,
concerning the environment, the diversity of the environment can largely decide
the composition of the organization and specifically influence the operational
roles of the objective-searching operations through the structured structure for
the accomplishment of goals and objectives (Mullins, 2007; Mintzberg, 1979). In
this complex setting, various mechanisms would be used in a single department
to solve different facets of Sony's condition.
3.2 Structure of Sony in 2003
And yet in 1999, Sony reorganized the organization, using the "unified dispersed"
concept as a means of the Value Development Model, into a more divisional sized
and decentralized shape. Transformation 60 saw some improvements in the
organization's architectural system, with it being more centralized, management-
wise, and financial-wise. It was aimed at refining the corporate roles for executing
operational plans and restructuring marketing strategies in productive niches. The
aims are to generate more profit margins, reduce annual costs, and outsourcing
components (Sony, 2003).

Problems and Responses

4.1 Rapid Evolution of Technology

The rapid development of technology, as pointed out by Idei (Ravi, 2005), has
influenced Sony's communications, entertainment, insurance, and finance
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industries. Constant technical advances have also driven the organization to adapt
to consumer demand. The answers offered by the company along with its
underlying reasoning are as follows:

Investments: Sony has invested heavily in R&D, capital equipment, and

infrastructure to satisfy demands and increase profitability. 'Inspiration
Technologies and Common Knowledge' and 'Creating New Meaning' are Sony's
R&D missions (Sony, 2011). The business claims that technology is capable of
connecting 'inspiration' and 'shared memory' for generating new values and
capturing consumer emotions (ibid.). Investment plans are related to Sony's top
management capabilities.

Organizational restructuring: The company assumes that the current community

architecture will continue to win market share in addition to rising shareholder
value (Sony, 1999). In this Value Development Paradigm, the "unified dispersed"
management approach saw improvements in electronics processes, the creation
of Digital Network Solutions (DNS), changes in the makeup of the staff that could
eventually impact the productivity of workers, the introduction of a new value-
based performance assessment scheme and the division of headquarters into two
different roles (Ravi, 2005; Sony, 1999). Indeed, Sony's strategic advantage of the
model (Jayaranam & Luo, 2007). In such a rigid market, it is reasonable that steps
have been taken to capture any opportunity. Unfortunately, in 2001, the attacks
of 11 September triggered a consolidated decline in revenue, which impacted the
company's fiscal status (Sony, 2001b). This showed that the Value Production
Paradigm has loopholes, so Transformation 60 took place. Extreme cost-cutting
steps were taken, but by 2005, as a result of shareholder pressure, the top
management reshuffled to Howard Stringer as CEO (Ravi, 2005). This proves that
Sony's customers had started to lose trust in the former management team and
thus it was important for the company to revise its board of directors.

4.2 Market Competition

Sony's rivals include LG, Samsung, Sharp, Dell, and Canon. Each rival appeared to
have an edge over Sony in several products. Here are some of the moves that
Sony has taken to tackle uncertainty in the market:
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Partnership with Solectron Corporation in 2000 and off-shoring to China to help
outsourcing electronics output was a step towards helping the business achieve
volatility in demand, cost savings, quality improvisation, and customer loyalty
(Sony, 2003; Sony, 2000). Outsourcing could be helpful to the organization as a
whole, but it may ultimately lower the motivational level of workers, as there is a
potential to decrease the influence of management, and the failure rate is
between 40% and 70% (Purse, 2009). This clarifies the 'Sony Shock' (Ravi, 2005)
incident that occurred in 2003 despite the laborious phase of reforming the
organization. The cost-benefit consideration was not given much thought until the
outsourcing was carried out.

The purchase of Aiwa Co. In 2002, Ltd., as a wholly-owned subsidiary, benefited

the company's electronics market, in specific the audio and visual (AV) industry
(Sony, 2002). The takeover was part of Transformation 60. It helped drive the
systemic restructuring of Sony's electronics sector as well as the development of
synergies as a result of the merger.

4.3 Differences in National Culture

As Howard Stringer took over as CEO of Sony in 2005, the disparities in corporate
culture would be a big challenge he would have faced. Community applies to the
way we do things here" (Sanchez, 2004). As one of the few foreigners to be part
of the top management of a Japanese corporation, Stringer must decide whether
to enforce Western culture on a Japanese company. Azumi & Mcmillan (1975)
observed that both the U.S. and Japanese societies were strongly centralized and
that the policies and regulations of the organization were adhered to. While the
divisionalization form can be seen in Sony, the Headquarters still plays its role as
coordinator, which means that the decision-making process will eventually need
approval from the top management.

Appendices
Value Development Model refers to the integration of intangible assets and
monetary assets to generate incremental market value for customers, in
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particular investors (Qureshi, Briggs & Hlupic, 2006; Haksever, Chaganti & Cook,
2004).
2 The output assessment system is capable of representing Sony's actual capital
costs.
3 Until being named CEO of Sony Corporation, he was chairman and CEO of Sony
Corporation of America.

Appendix: 2 Dividend History of Sony

Payable Amount /Share

12/08/2009 $0.139
06/09/2009 $0.13073
12/08/2008 $0.21261
06/09/2008 $0.11916
12/10/2007 $0.11263
06/08/2007 $0.10236
12/08/2006 $0.09911
06/08/2006 $0.11042
12/08/2005 $0.11297
06/08/2005 $0.1196

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References
Azumi, K & Mcmillan, C (2004) ‘Culture and organization structure: a comparison
of Japanese and British organization’, International Studies of Management and
Organization. Vol. 5, no. 1, pp. 35-47. Available from: Business Source Premier.
[Accessed 16 January 2011]

Datamonitor (2010), Sony Corporation-Company Profile, pp4, 5 and 21,

Publication date: 12 Mar 2010

Elkington, J. & Masaki, T. (2004) CSR Report 2004, [online]. Available from:
http://www.sony.net/SonyInfo/csr/issues/report/2004/index.html [Accessed 5
January 2010]

Haksever, C, Chaganti, R & Cook, R (2004) ‘A model of value creation: a strategic

view’, Journal of Business Ethics. Vol. 49, no. 3, pp. 291-305. Available from:
Business Source Complete. [Accessed 27 December 2010]

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