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SONY’S 1 LOSS st
• REASONS:
– Unrelated diversification
– Innovation dearth
– Lack of brand evolution
RESTRUCTURING EFFORTS
• 8 restructuring efforts in 13 years
• GOALS
– Creating a market-responsive company
– To clarify the scalar chains of the company
• RESULT
– Loss of ¥ 293.36b in 1995
2 EFFORT - 1996
nd
• RESULT
– In 1999-2000, Net Income fell to ¥121.83b
• REASON
– Lack of consolidation of business groups
4 EFFORT - 2000
th
• RESULT
– Net Income dropped to ¥16.75b from ¥121.83b
• REASON
– Dot com burst
5 EFFORT - 2001
th
• RESULT
– Operating Profit declined by 40.3% in 2001-02
• REASON
– Major and sudden shift in BUSINESS FOCUS
6 EFFORT - 2003
th
• GOALS
– Identify the 5 main challenges facing the company
– Organizational Structure re-design
• RESULT
– Net Profit increased to ¥ 123b
• REASON
– Sony BRAVIA sales
– Reduction in Product & Design redundancies
– Focus on core competency
8 EFFORT - 2007
th
• RESULT
– Estimated 6-fold increase in profits
– SONY shares rose to 5 year high
– Sales increased by 13%
– Operation Income of ED increased by 77%
• REASONS
– Sony BRAVIA sales
– JV with SAMSUNG
– New Product design and introduction
2008 – TURBULENT TIMES
• SIGNS
– 72% decline in Net Profits in 2nd Quarter of 2008-09
– Annual profit decline by 59%
– Annual operating loss of ¥ 260b in 2009
• REASONS
– Strengthening Yen leading to declining Exports
– Heavy losses in PS3
– Failure of OLED TV in the US
– Economic Slowdown in the US
9 REORGANIZATION - 2009
th
• MEASURES
– Infusing young blood into Top-management
– Reducing the number of suppliers from 2500 to 1200
– Increasing R&D spending
– Sony NETWORK
CORE COMPETENCIES
• Economies of Scale and Scope
– in manufacturing and research and development arising from its numerous
facilities situated in Japan, the United States and other countries worldwide.
• Unique Quality Technology owing to heavy emphasis on research
– Sony Corporation’s commitment to research & development activities has
always been one of its top strategies to remain competitive in the market.
• Differentiated Products
– The continuous pursuit of research and development processes enables Sony
Corporation to produce a steady stream of originally differentiated products
which makes it difficult for competitors to find substitutes.
– Because of this differentiated approach, Sony Corporation is able to market
their products worldwide, which enables them in turn to maximize the
returns on research and development expenditures.
ANALYSIS OF MACRO ENVIRONMENT
POLITICAL TRENDS ECONOMIC TRENDS
•The cry for democracy and reforms
•Increased popular and local-level
assertiveness
•Greater public accountability
•Re-definition of the concepts of power and
politics
• Product Differentiation
• Capital Requirements
• Switching Costs
• Government Policy
BARGAINING POWER OF SUPPLIERS - LOW
• Big global supply chain management
(Suppliers are not concentrated)
• For example:
• Digital Camera in the place of Film Camera
Threat of New
Entrants
Threat of
Substitute
Products
RIVALRY AMONG EXISTING COMETITORS -
HIGH
• Numerous and rather equally balanced competitors
• Short product life-cycle
• High R & D costs
• Lack of differentiation or switching costs
• Imitation of technology
• Counterfeit products
• Low profit margins
• High exit barriers
BCG MATRIX OF SONY SUBSIDIARIES
RECOMMENDATIONS
REGAIN FOCUS ELEVATE BRANDING TO BOARD ROOM
•Operating in a number of unrelated businesses is often •Sony should revamp its R&D, design, and marketing
justified on the logic of scale and scope economies. departments.
•But from a brand perspective, such diversification will be •For innovation to make any brand sense, it has to reflect
more detrimental than helpful. consumer preferences. Innovation has to lead to products
•Sony, like Samsung, should conduct a due diligence to and services that would enhance the relationship between
evaluate the financial and brand worth of its different the brand and the consumer.
business units. •Sony needs to elevate the marketing function to the
•Before the unrelated business units erode the equity of the boardroom and enable marketing to take a lead of the
core Sony brand, it would benefit Sony to come out of such business and the strategy.
businesses. •Marketing and branding can no longer be relegated to a
•Regaining focus and investing in nurturing and enhancing its tactical level handled by marketing managers who hardly
core competence will be the first necessary step towards have an appreciation of the larger picture.
regaining brand leadership.