The current strategy of Sony - Essay Example

? DIB CHAMOUN DR.DANY AOUN section: B300b ID: 09 1229 10-05 Case Study on Sony Q1. Define the current strategy of Sony. The current strategy of Sony is intended to transform the company “into a more innovative, integrated, and agile global company with its next generation leadership firmly in place” (Gupta 8). As such, improving the company’s profitability and strengthening its competitiveness is delivered through stronger coordination among the different businesses. This is done through the creation of cross-functional teams that provide the software and the logistical needs of the businesses. As such, it can be said that Sony aims to become the leading global provider of networked consumer electronics and entertainment which is to be attained by strengthening its core businesses, enhancing network initiatives; and leveraging international growth opportunities to build for the future and drive further growth and profits for the company (“Sony Group Corporate Strategy Update FY2008—FY2010”). Since innovation is at the heart of Sony’s business model, Sony intends to enrich its strengths with external expertise by accelerating the efficiency of R&D, as well as by enabling the company to effectively respond to rapidly changing customer needs and preferences in the network era. Thus, through the creation of new user experiences, strengthening core businesses, driving innovation, and minimizing the environmental impact of its operations, Sony strives to achieve not only sales volume, but also sustainable and profitable growth (“Sony realigns business strategy, announces job losses and puts PlayStation at the centre of ‘One Sony’”). Furthermore, Sony believes that the key to achieving such goals lies on accelerating and aligning its business operations (“Sony Recharges Business Strategy”). In this light, two business groups were formed during the formation of this strategy: the Network Products and Services Group and the New Consumer Products Group (Kato). The Network Products and Services Group is comprised of Sony Computer Entertainment, personal computers, mobile products including the Walkman, and Sony Media and Software Services. Through this group, Sony aims to bring new technologies to the market and increase the pace of innovation. Along with the introduction of new technologies, Sony also created digital services that tie together all of its products, thus, sustaining profitability and maintaining a cohesive corporate culture. On the other hand, the New Consumer Products Group is composed of television, digital imaging, home audio, and the video business. Through this Group, Sony targets to achieve profitability and growth through product innovation, as well as to improve efficiency and speed of operations. In between these two groups are two teams that help in software development and render logistical support. The first is called Common Software Technology Team. It develops and implements integrated technology and software solutions. The second one is called Manufacturing/Logistics/Procurement team that ensures efficient supply chain solutions for the aforementioned business groups. With this, a brief look at the financial report of Sony in 2008 reveals that there is a substantial increase in terms of its net income as driven by the increase in sales. Thus, such figure can be attributed to the growth in sales. Summarizing all the gathered information, it can be claimed that the strategy of Sony banks primarily on the internal alignment and reorganization of its primary business units in order to increase production efficiency while minimizing costs. Q2. Evaluate the strategy being adopted by Sony to regain lost market share. Reference to the material presented in book Strategy for Business, which theory/concept that the current strategy of Sony was based on. You need to critically justify your argument  The business strategy of Sony, which banks on strengthening the coordination among its core business through the creation of cross-functional teams, can be seen as an application of the dynamic capabilities approach toward enhancing the efficiency of a company. At this point, attention must be first given on the nature of the aforementioned framework. This is to be followed by an exploration of Sony’s current business strategy. From a theoretical point-of-view, the dynamic capabilities approach measures the capacity of the company to be timely, responsive, flexible, and rapid in terms of both product innovation and integration of internal and external competencies. Thus, this approach displays the exploitation of existing internal and external company-specific competences to address changing environment, which in effect, provides competitive advantage. Specifically, this approach emphasizes on the development of management capabilities and on the creation of copy proof organizational, functional, and technological skills. Therefore, it bolsters the connectedness and integration of business facets such as R&D, product and process development, technological transfer, human resources, and organizational learning. Furthermore, the attainment of the dynamic capabilities of a company rests on five areas. The first is ‘factors of production’ that involves essential company inputs such as land, labor, capital, and public knowledge. The second is ‘resources’ which are assets that are difficult to imitate, trade secrets, tacit knowledge, engineering experience, and specialized production facilities. The third is ‘routines and competencies’ which involve the integration of company-specific assets, activities, and processes. The fourth is ‘core competencies’ which define the core business. The last is ‘products’ whose sales performance depends on the competences of the company. Moving further, the dynamic capabilities approach can be clearly seen in the case of Sony. Firstly, the realignment of the entire business operations as imbibed in the ‘One Sony’ slogan implies the company’s emphasis on reinforcing its core competencies through the direct manipulation of its factors of production (“Sony Group Corporate Strategy Update FY2008 - FY2010”). In this regard, the realignment decision is part of the company’s plan of accelerating its on-going process of business selection and focus by reconfiguring its business portfolio. Thus, Sony has announced some major sells and integrations within its primary business model, leading to job cuts of around 10,000 people. With this, it can be further claimed that the realignment entails not only the concentration of investments in core and new business areas, but also the restructuring of its corporate structure, subsidiaries, and company organizations in order to achieve operational efficiencies (Kato). Such a goal can only be attained through a solid coordination between supply and operations. As such, ensuring operational excellence between the two business units is vital. In addition to this, the realignment of the major business operations of Sony also means the increasing of network and wireless connectivity across its major products categories and the building of a service platform that provides seamless user experience across key hardware and software devices. This strategic move is reinforced by the unique position of Sony in the electronics and entertainment areas. From a business strategy perspective, it can be asserted that Sony followed a cost minimization strategy as evidenced by the re-structuring of the company’s value chain through: (1) the consolidation of certain business groups; (2) the cutting down of workforce, and (3) the integration of process and technologies. Secondly, Sony’s strategic move to revitalize and grow the electronics business is clear manifestation of dynamic capability (Carbajo n.d.). This, as explained in the case, is to be done by expanding its personal computers, Blu-Ray disc-related products, and semiconductor businesses into “trillion Yen businesses”. Furthermore, Sony also banks on the enhancement of significant digital imaging technologies such as image sensors, signal processing techniques, and high quality lenses (Carbajo). Through this approach, Sony intends to not only capture the end consumers of their digital cameras, but also broadcast and professional personalities. Also, the improvement of the major operations of the television business hints at the capability of the company to implement a variety of cost reduction measures to regain its profitability. This is primarily evidenced by the improvement in design engineering efficiency and the reduction of product models in order to reduce fix business costs. However, it is crucial to note that Sony still maintains high quality in its television products through the enhancement of both image and audio quality of Bravia. Thirdly, Sony’s openness to innovation reinforces its flexibility and responsiveness as regards the changing of consumer tastes and the innovations that happen in science and technology (Vivek). The technological expansion, in this regard, is seen not only internally but also externally. By combining Sony’s inherent technological strengths with the expertise of third-party suppliers, the company is able to uphold innovation. Through this effort, the company is able to accelerate its R&D efficiency and enable it to uniquely provide products that suit the tastes of the market. From the perspective of marketing, Sony’s openness to innovation entails a more in-depth look at both its current and emerging customers. Not only is it important for Sony to understand the behavior of its customers toward buying its products, the company must also link such purchase behaviors with their lifestyle, as well as the images they associate with the Sony brand. As such, a more intensive consumer study considers, in greater detail and analysis, the way of life of its customers. With this, Sony can be regarded as an innovator as reinforced by the aforementioned changes in its primary business operations. The broadening of its product categories to suit the changing tastes and preferences of its target markets can also hint at this assertion. Fourthly, Sony’s commitment to new business creation highlights its critical understanding of the competitive landscape (Kikkawa). The new businesses that Sony looks into are comprised of: (1) the medical peripheral business that includes medical printers, monitors, cameras, and recorders; (2) the life science industry to leverage the company’s experience in technologies such as semi-conductor lasers, image sensors, and micro-fabrication; and (3) the promotion of the “4K” technology which delivers more than four times the resolution of Full HD. Lastly, Sony’s look at emerging markets reasserts its global competency. In this regard, Sony claims to hold the largest share of consumers in countries like India and Mexico which comes from the sales of electronic products. The company plans to expand its sales numbers by tapping the BRIC countries, an acronym that stands for Brazil, Russia, India and China. With Sony’s plan of business expansion, the company aims to accelerate this move through the collaboration and integration of the entire Sony Group— Network Products and Services Group and the New Consumer Products Group. As such, Sony aims to hit 60% of global sales coming from these emerging markets. In the end, it can be claimed that Sony’s emphasis on bolstering the relationship among its key business units in operations entails not only a solid collaboration with key retail partners, but also a religious review of both the internal and external environments of the company. Decision making that is marked by profit awareness is crucial since sales and operations should support Sony’s overall objective of maximizing its gross margin return on investment. However, it must be pointed out that such an initiative can be more effectively driven through a more unified vision of the company’s business operations. This, therefore, entails the upholding of the pleasant business environment that not only encourages innovation, but also maintains responsibility and sustainable development. Q3. Critically, discuss the feasibility of applying Porter’s Diamond Model on Sony case. Michael Porter’s Diamond Model purports that “the national home base of a company plays an important role in shaping the extent to which it is likely to achieve advantage on a global scale” (Recklies n.d.) This is because the home base of a company provides basic factors that support it in building advantages in global competition. In this sense, it can said that Porter’s Diamond Model hinges on the assumption that the comparative advantage of a company—although affected immensely by economic factors such as land, location, national resources, labor, and local population size—is ultimately shaped by ‘determinants’ or groups of interconnected firms, suppliers, related industries and institutions that arise within the company’s location (“Diamond Model and Clusters (Michael Porter)”). As such, these determinants grow on locations where enough resources amass and reach a critical threshold, thus, giving the company a competitive advantage. As further claimed by the same online material, these determinants often influence the level of competition in three ways: first, by increasing the productivity of the companies involved in the industry; second, by driving innovation in the industry; and third, by stimulating new businesses in the industry (“Diamond Model and Clusters (Michael Porter)”). At this point, it is crucial to delve further into each determinant to understand its characteristics. The first determinant is called Factor Conditions which can be exploited by companies in a given nation (“What is Michael Porter’s Diamond Model?”). These factor conditions can be grouped into human resources (qualification level, cost of labor and commitment), material resources (natural resources, vegetation, and space), knowledge resources, capital resources, and infrastructure. Aside from these, factor conditions may also include quality of research on universities, deregulation of labor markets, or liquidity of national stock markets (Recklies 1). As further stated by Porter, a company can create a competitive advantage out of these factor conditions if other companies cannot duplicate them (“Diamond Model and Clusters (Michael Porter)”). Furthermore, Porter pointed out that “these factors are not necessarily nature-made or inherited. They may develop and change. Political initiatives, technological progress or socio-cultural changes, for instance, may shape national factor conditions” (Recklies 2). The second determinant is called Demand Conditions which describes “the state of domestic demand for products and services produced within the country” (Recklies 2). Through this thinking, it can be said that the conditions of home demand influence the shaping of particular factor conditions since they have tremendous impact on the pace and direction of product innovation within a company. For example, if the local market for a product is larger and more demanding at home than in other foreign countries, local companies may be driven to increase their global competitiveness by ensuring growth, innovation, and quality improvements in its primary operations(“What is Michael Porter’s Diamond Model?”). The third determinant is called Related and Supported Activities which points at the existence or the non-existence of internationally competitive supplying and supporting industries. In this regard, “an internationally successful industry may lead to advantages in both supplying and supporting industries” (Recklies 2). These competitive supplying and supporting industries, in effect, foster innovation and internationalization among the competing companies. Aside from this, companies can also become more cost efficient in its primary and secondary operations. The fourth determinant is Firm Strategy, Structure, and Rivalry which is comprised of the conditions in a country that determine how companies are established, organized, and managed (Gabor). In the end, this determinant helps identify the intensity of domestic rivalry of a certain industry. In this sense, it can be claimed that the cultural aspects of a company play a vital role. In different nations, factors such as management structures and working environment are formed differently. This often provides advantages or disadvantages in an industry. For example, the corporate value of commitment among the workforce is regarded as crucial in concretizing solid corporate objectives. This is often honed through right structure of ownership and control among the employees. In the end, Porter argued that both the domestic rivalry and the search for competitive advantage within a nation can provide the companies with bases for achieving such advantage in more global scale. Having discussed the components of the Diamond Model, Sony can evaluate its global competitive advantage by analyzing its factor conditions; demand conditions; related and supported activities; and strategy, structure, and rivalry. Firstly, factor conditions may be seen as a guide toward assessing both the internal and external environments of Sony. As for the internal, its business model can be reviewed by highlighting on: (1) the key units that comprise the primary and secondary activities of the company; and (2) the kind of relationship that binds such activities together. As for first component, reviewing the business operations of Sony can shed light on the critical factors that influence both its inbound and outbound logistics, as well as its marketing and sales support. Also, other units can be taken into consideration such as its corporate structure, its technological capabilities, and its human resources. As for the second component, revisiting the kind of relationship that binds the significant operational units together can reinforce the fact that proper coordination among the businesses as regards manufacturing and technical support must be attained. Secondly, demand conditions can help Sony better understand its consumers, both domestically and internationally. This consumer review must not only involve a study of purchase behavior, but more importantly of lifestyle and attitudes in relation to different brands. Through demand conditions, Sony can embark on various ethnographic and psychographic studies of its current and emerging consumers in order to guide its product development team. Thirdly, related and supported activities can pave the way for assessing the strengths of suppliers in the industry where Sony is part of. Through the identification of supplying and supporting industries, Sony can assess the power of such industries in determining the prices of its products. In effect, it can help formulate the nature of operations of Sony. Lastly, firm strategy, structure and rivalry can guide in evaluating the strategic position of the company as a whole. By paying close attention to its business structure and the nature of its competitor, Sony can identify its strengths and weaknesses, as well as pinpoint its areas of threats and opportunities. Getting into this discussion is important as it may provide the strategic direction for the company. Q4. Summarize one of the chapters that were presented by the groups in the class. Remember, the chapter has to be OTHER than the one presented by your group. The report on “Dynamic Capabilities and Strategic Management” focuses on two ways toward attaining efficiency in a company. One is through strategizing which entails a look at the external environment. The second is through economizing which stresses on the company’s internal assets. With this, there are two major models used in economizing. The first approach banks on the internal competencies of a company by adopting a resource-based perspective. Building the long-term advantages of the company through this approach hinges on three things: first, on the identification of the unique resources of the company; second, on deciding which markets those resources can earn the highest rents; and third, on determining how the rents from such assets can be utilized. Thus, this theory aims to foster competitive advantage by developing new capabilities, by acquiring new skills, by managing knowledge, and by accumulating intangible assets. In the end, a company that has competitive advantage becomes profitable due to lower costs or higher product quality. The second approach used in evaluating the efficiency of a company underscores its dynamic capabilities. It is claimed that sustainability cannot be fully achieved by the mere acquisition of resources and capabilities since there is a need to be responsive, flexible, and rapid in creating product innovations and in re-deploying the internal and external competencies of the company. Process-wise, the approach integrates researches in areas such as the management of R&D, product and process development, technology transfer, human resources and organizational learning. In optimizing the dynamic capabilities of a company, it is crucial to identify its strategic distinctiveness. Being strategic, in this sense, means the company’s capacity to provide products and services that serve the needs of the customers in a unique and copy-proof manner. As such, the key factors that determine the strategic distinctiveness of a company are organized under three categories: processes, positions, and paths. Firstly, processes are comprised of operational routines and patterns of learning. Operational routines are static activities that guide in the effective and efficient integration of internal and external operations of a company while patterns of learning emerge from repetition and experimentation that enable the company to perform better and quicker. Secondly, positions refer to four things: technological assets which are protected by intellectual property law; complementary assets that help in producing new products; financial assets that include cash flow; and reputational assets that are intangible qualities of the company. Lastly, paths are the directions that the company strategically chooses to explore. This involves a look at the history of the company in terms of its operations in order to evaluate whether the major switch is worth the effort—financially, operationally, and technologically. Works Cited : Carbajo, Manuel. “Sony Corporation, new management, new strategy, job cuts and ad investment increase”. East Wind Blog. Eastwind.es, n.d. Web. 21 April. 2012 Kikkawa, Takeo. “Strategies of Japanese Corporations Facing Global Competition: The Cases of Sony and Toray”. Project ISS. Project.iss, n.d. Web. 21 April. 2012 Kato, Yumiko. “Sony Electronics' S&OP Journey.” CSCMP's Supply Chain Quarterly. 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