III.

Situation Analysis
i. P.E.S.T.L.E ANALYSIS
Sony is one of the world's largest entertainment companies, and a prominent
manufacturer of consumer and professional electronic equipment. Sony Corporation, or
simply Sony, is a Japanese global conglomerate corporation that specializes in the
production and distribution of electronic products. They were able to maintain their
global success by addressing factors and underlying issues in the remote or macro-
environment of its business, as they believe that changes in the forces of macro-
environment can have a direct impact on Sony Corporation's profitability, operations,
and the company as a whole.
Sony Corporation's PESTLE Analysis is used as a tactical tool for studying the
organization's macro-environment. It explains how external forces influence
opportunities and threats in the different sectors particularly in electronic business unit
where Sony are engaged to. Also, PESTLE Analysis identifies such external factors in
the political, economic, social, technological, environmental, and legal aspects. These
aforementioned factors must be considered and assessed since they can provide
various opportunities to Sony and can influence strategic decision-making and improve
the profitability of Sony's business strategy.

PESTLE ANALYSIS OF SONY CORPORATION

POLITICAL FACTORS
Political factors are influential in predicting the aspects that can affect Sony
Corporation's long-term profitability in a given country or market. Sony is a multinational
corporation. Thus, changes in international law, trade restrictions, rules and regulations,
and government policies of a country could have a big impact on the business
operations. This section of PESTLE Analysis (Political) evaluates the government's
influence and activities on Sony's macro-environment. The following are the political
considerations for Sony:
 Political stability or Government stability
 Foreign trade policy
 Tax policy
 Government policy
 Labor law
 Level of Corruption
 Rules and regulations
 Global influences
 Wars and conflicts
 Intellectual property protection
  Wage legislation
 Mandatory employee benefits

ECONOMIC FACTORS
The performance of Sony is influenced by economic factors. As a result, it is
critical to determine the economic conditions that are crucial to the company. The
following economic external considerations must be taken into account by Sony:
 Economic stability
 Sharp fluctuations in currency markets
 Seasonality/weather issues
 Economic dynamics (unemployment, inflation, income)
 Favorable consumer spending trends
 High growth of developing markets
 Interest and exchange rates
 Market routes and distribution trends
 Overseas economies and trends

SOCIAL FACTORS
Social factors are crucial for Sony's development as it can affect the company's
overall image. Sony's business will alter when society trends evolve. As such, the
continuous compliance of Sony to the customer demands, customer preferences, social
lifestyle, and other social conditions laid the foundation for the established image of
Sony Corporation. Furthermore, the culture and manner of doing things in a society
have an impact on the culture of an organization.
The social variables that must be considered and are relevant to Sony
Corporation are as follows:
 Demographics
 Lifestyle trends
 Consumer views, attitudes, and opinions
 Population growth rate
 Cultural barriers
 Safety emphasis
 Cultural norms
 Health consciousness
 Income distribution
 Leisure interests
 Growth in demand
TECHNOLOGICAL FACTORS
We live in a world dominated by technological advancements and innovations.
Technology is constantly changing and has become an integral part of our life. It has
contributed to the progress and development of nations by providing novel ways to
accomplish works through numerous clever and inventive means. Because we live in a
world where technology trends must be kept up with, technologies in the industry and
commercial sector are highly essential to its success. Hence, businesses, particularly
Sony corporation, must conduct an industry-wide technology study and learn to address
the following technological factors:
 Increasing dependence on technologies
 Recent technological developments of competitors
 Research funding
 Global communications
 Consumer buying mechanisms/technology
 Innovation potential
 Automations
 Research & development activity
 International influences
 Copyright and patents
 Emerging technology

LEGAL FACTORS
Sony Corporation is required to comply with legislative standards that are
relevant to its environment. To avoid future complications, it is critical for a company to
properly consider legal factors. These factors include:
 Copyright, patent, and intellectual property law
 Data protection
 Employment law
 Product safety regulations
 Consumer protection law

ENVIRONMENTAL FACTORS
Environmental or ecological aspects are one of the most significant
considerations for a business, as different locations, countries, and states have varying
environmental regulations that must be met. Failure to satisfy these ecological trends
could have repercussions for Sony's entire operation. Most countries have various
environmental rules applicable to all enterprises operating within their borders. So, in
order for Sony to prevent any issues, they must be aware of, evaluate, and consider the
following factors:
 Waste and resource management in Consumer goods sector
 Business sustainability
 Climate change
 Weather/temperature within specific country
 Demand for environmentally friendly products
 Laws regulating environment pollution
 Environmental policies
 Workplace efficiency

ii. Porter’s Five Forces

In this section, we use Porter’s Five Forces to conduct an industry and

competition analysis for SONY Corporation. We discover that SONY faces low
threats of new entrants, low moderate supplier power, high buyer power, moderate
to high threat of substitutes, and very high internal rivalry and competition power.
SONY Corporation must manage all the possible challenges that may occur
and build effective barriers to safeguard its competitive edge by using Porter’s five
forces to identify and plan precautionary measures to avoid future threats to the
operation of the whole corporation.
1. The Threat of New Entrants
Entry is dividing the market demand amongst more sellers and decreases
each company’s share. The threat of new entrants for SONY is relatively
low. Due to the high level of competitive threat from existing competitors,
any new entrant would have to spend a large sum on marketing to bring a
 product with distinctly good quality to the market to compete with a brand
like SONY.

a. Economies of Scale
Economies of scale indicates the capability of companies to decrease
costs when increasing output, which new entrants cannot accomplish
without years of experience wherein SONY has already gained this
advantage. The increased in market size will allow Sony to achieve
both economies of scale (particularly in manufacturing operation) and
economies of scope. In addition, SONY can exploit core competencies
in international markets by resource and knowledge sharing which
generates synergy helping SONY to produce higher-quality
products/services at lower cost.

b. Product Differentiation
SONY is innovating new products and services to bring new potential
customers and to give existing customers a reason to buy SONY
BRAVIA TVs through its high definition and tagline “Color like no other”
which it has concentrated more on colors and the picture quality.

c. Capital Requirements
The capital requirements to enter are high as BRAVIA TVs are high-
end, expensive luxury goods in which SONY has raised the capital
required to innovate.

d. Access to Distribution Channel

Sony has been operating since 1946 resulting to an easy access to
distribution channel and logistics processes. SONY has a good
reputation and image making third-party companies to trust and give
loyalty to the company for its smooth transactions. In addition, the
relationships built in being partners to other third parties make SONY
accessible to distribution channels.

e. Government Regulations
The patent protection and government regulation keep the threat of
new entrants low that makes SONY’s share of the market to not drop
and continue to possess the customer loyalty.

2. The Power of Supplier

SONY holds a high level of control over its suppliers that makes the
bargaining power of SONY’s suppliers low to moderate and because of
the high financial clout that SONY has. Sony manufactures televisions and
 other products in myriad places around the world. Sony can move around
to the supplier who offers the best deal because of global supply chain
which means suppliers are not concentrated and suppliers are forced to
cut prices or find a new buyer. Sony has implemented some rules that the
suppliers must adhere to in order to ensure an accountable and
transparent supply chain. Thus, bargaining power of the suppliers overall
is low to moderate.

3. The Buyers’ Bargaining Power

Buyers have substantial power in purchasing what type and brand of
televisions they want to have. The ability of a potential buyer to gain
information is easy with online reviews of products which enables a buyer
to switch from one brand to another without high switching or transaction
costs. The transaction costs practically drop to zero especially when
consumers buy online, which is becoming increasingly popular due to the
CoVid-19 pandemic. In general, products in electronic industries are
undifferentiated that leaves price elasticity high and buyer power high.

4. The Threat of Substitute Product

The number of substitutes of SONY’s televisions and other products is
limited, nonetheless, the level of substitute products increases due to low
switching costs. SONY targets high-end customers with high-priced
product line through differentiating BRAVIA televisions with high quality
graphics and technology, on the other hand, consumer sees the price tag
first. The price elasticity of demand is high as increase in price of SONY
televisions will lead to consumers switching to substitutes.

5. The Power of Competition

The level of internal and competitive rivalry between existing competitors
are very high in the electronics and pictures industry.

INCOME STATISTICS OF SONY’S COMPETITORS

Samsung

KRW in Millions 2021 2020 2019 2018

Revenue 236806988 230400881 243771415 239575376
Gross Profit 92318692 83161332 111377004 110284715
Net Income 26090846 21505054 43890877 41344569

Philips

EUR in Millions 2021 2020 2019 2018

 Revenue 19535 19482 18121 17780
Gross Profit 8945 9107 8553 8180
Net Income 1188 1168 1090 1657

Panasonic

JPY in Millions 2021 2020 2019 2018

Revenue 6698794 7490601 8002733 7982164
Gross Profit 1974851 2151044 2266499 2339212
Net Income 165077 225707 284149 236040

TCL

AUD in Millions 2021 2020 2019 2018

Revenue 2886 3169 4166 3298
Gross Profit 2078 2085 2358 1983
Net Income 3303 -111 171 485

Hisense

CNY in Millions 2021 2020 2019 2018

Revenue 39314.72 34104.74 35128.28 32870.41
Gross Profit 6967.13 6061.68 5077.91 4500.4
Net Income 1195.47 556.07 392.4 966.53

LG Electronics

KRW in Millions 2021 2020 2019 2018

Revenue 24230124 23475567 24336571 27790216
Gross Profit 2642570 1868327 3085266 5365555
Net Income -89342 -2829705 -207239 1802756

In accordance to the income statistics of some of SONY’s competitors in electronics industry,

Samsung, LG, and Philips demonstrated stronger financial results over four years. Samsung recorded its
highest annual revenue in 2021 and held a 30.8 percent share of televisions sold in the global market. LG
Electronics announced its highest quarterly revenues as it continued to expand its market share for
home appliances, while Philips made a decent growth to its income statements in year 2021.
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Statement - Investing.com PH.
https://ph.investing.com/equities/samsung-electronics-co-ltd-income-statement
Pratap, A. (2017). Porter's Five Forces Analysis of SONY. Notesmatic.
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%20entrants%3A,industry%2C%20all%20are%20capital%20intensive
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