Structural or Transformational Change - Saving Sony - Assignment Example

? Saving Sony: Case Study Analysis [Supervisor Saving Sony: Case Study Analysis The paper attempts to provide a detailed analysis of the performance of Sony Corporation under the leadership of Howard Stringer as a Chief Operating Officer. The paper evaluates different types of changes that have been occurred within Sony after the company had reported financial losses and the internal and external forces that made Sony to change to restructure their business. The paper also proposes change theories and models which would help Sony to implement changes which are needed to be competitive in the market. Lastly, the paper would evaluate the resistance which would likely be faced by employees and recommendations are provided to tackle those resistances from change. Ans1) Sony Corporation had various changes in its structure under the leadership of Howard Stringer. Some of the changes are outline below: Structural or Transformational Change The transformational change is considered to be the change in which the company focuses on improving the profitability by reducing the cost for the organization (Ayars, 2009). The structural change is the change which is used in making decisions for the company. The first major change that Sony Corporation made during its history was to hire Howard Stringer as the Chief Operating Officer for the company. Howard Stringer was a non-Japanese CEO who was appointed by the company to make remedial changes within Sony Corporation. Howard Stringer narrowed the focus of the company by targeting to increase sales through five units namely Electronics, digital imaging, portable audio, DVD recorders and Televisions. Howard Stringer considered that the company should focus on manufacturing those products in which it has competitive advantage. The company had a structural change in a way that it has designated the power for making decisions to the electronic division of the company. The electronic division had been the great source of income and had been generating revenues for the company since its birth. This division also had a major percentage of revenues and the company totally depends on its products to perform well in the market. The decision making authority were designated to this unit because it understands the major shift in the market and because of the presence of highly competent people in the unit (Chang, 2008). Change in Production unit: Howard Stringer made an enormous change to the company when he took a decision to close down 11 plants which had lain off 10,000 employees. This change was made due to the fact that the company was incurring losses from those units and the cost had been exceeded without any gain in profitability. In order to become efficient in its production, Howard Stringer evaluated all the manufacturing plants with their respective costs and their power for generating revenues. The one that had higher cost associated with respect to its profitability was the one to be closed down. The company had to perform better than its competitors and reducing the costs for the company could only be the reason for Howard Stringer to match with their rivals. Sony had a plan to focus on its electronic products which had always been the stronger point for the company. The objective was to put more investment in Research and Development on the electronics division which could provide fruitful results and could provide profitability for the company. Change in nature of the product: Due to heavy losses from different products, the company analyzed the market trend and products from its various competitors. It came to a conclusion that the more a product is user friendly to the people, the more profitability it attracts, the company started to manufacture products which were easy to use and needed less guidance for the instruction (Riis et al., 2008). Sony realized that products from Apple Inc. had a same taste of making products which were easily handled by customers mostly the youth. They come to know that the more complex and difficult that a company makes a product for its customers, the more it prevent customers from buying a particular product. Howard Stringer came to a conclusion that a user friendly product is used by every person from a smaller age to an adult which creates an opportunity for the company to target a bigger market for different age group. A complex product prevents different users in buying a particular product because it needs a high level of technical skills and ability (Knight et al., 2011). Uniform Software development: The company decided that all the departments of different units must be integrated as to have a unique and similar settings and culture. Previously, the various units of the company had different departments of Human Resources, Finance and Marketing. But since the inclusion of Howard Stringer as the Chief Operating Officer for Sony Corporation, he merged all the departments of different units and made to work as a single department for each unit. The software that had been utilized by different department were also made similar to all the other departments so as the various products of Sony should support one another. This also helped the company to speed up the decision making process as there would be no delays regarding the software and the sharing of information. Subsystem Change: Howard String made a great contribution towards the company when it enforced process of removing products from the product line that did not had a competitive edge in the market and were immersed in financial losses. The focus solely remained in increasing sales for the company by adding products that could contribute to the profit margin of the company and the removal of products that could be harmful for the competition (Thrun, 2003). Ans2) The internal and external forces which have aroused Sony to change its current structure have been listed below: Internal Forces: Low Profitability and High Cost: The company had been reporting low profits throughout the year and on the other hand their cost for producing a product was increasing. This provided an opportunity for the company to shut down their production units which were becoming the source for low profitability and higher cost and the inclusion of those products that could generate higher profitability and would incur low cost (Chang, 2008). Operating Efficiency: Operating efficiency indicates that how well the company performs while utilizing its resources effectively and generating them into profits (Reider, 2002). The operating efficiency of Sony was greatly decreasing because the company was not performing well to pay back all the loans and clear the debt. Due to which the company were not able to convert its revenues into its total assets which requires the need for the company to take actions and bring change. Key Decision making authority: Since many years the company were in a doubt to whom they would allow to make key strategic decision making for the company. The decision making had rested to the higher officials but as the electronic division was contributing towards the higher part of profitability for the company, it were more towards giving the authority to the electronics division to handle the key areas of Sony Corporation. Product Complexity: The increase in sales of Apple products realized the company to focus more on producing the product that are easy to use and should not be complex as customers would likely to resist the product. The idea was taken from Apple as they were introducing products which were user friendly and required less time to understand their functions. Previously, understanding the functions for a product would require more time and a specific target group. But as the need for easier product has arrived, it has become easy to target different age group with ease. This force made an immense change in the electronic industry and as well as in Sony because after that the company planned to come up with easy to use products (Rainey, 2005). External Forces: Fierce Competition: Sony had to face a tough competition from their rivals due to which they could not cope to the competitive environment because their products were not competitive enough to compete against their rivals. The sales of Sony walkman had been decreasing due to the entrance of Apple iPod in the market which had captured the greater market share which was a shock for Sony because they were the major player in the music business. Samsung and LG on the other hand were becoming a threat for Sony as they had entered the electronic business and were coming up with the new innovative products to engage customer traffic and to increase sales (Chang, 2008). Stock Performance: The performance of company’s stocks underperformed throughout the years due to which the company was forced to hire a professional to solve the actual reason for decline and to fix the problem. The share were down from $150 to $25 which showed a major decline and it was predicted that it would even narrow down if changes are not implemented soon enough (Chang, 2008). Diversification: Diversity is also the reason for making change in the company because all competitors of Sony in electronic divisions were diversifying their technology and making different product lines to strengthen their growth (Klier, 2008). Samsung and LG were moving to a more diversified line while Sony remained with few divisions to play with. The diversity helped its competitors to gain profitability from different units and to invest on those particular areas in which they are strong and wanted to gain market share (Chang, 2008). Ans3) Change Management Theory for Implementation of Change: The following change management model is the invention of Towers Perrin which has been utilized to implement change in Sony Corporation. Launch the project Team: Howard Stringer should develop a team that would be responsible for the entire change implementation. The assigned work of the team would be implement change within the company and to increase their profitability and investigate areas that are responsible for the higher cost. Howard Stringer should lead the team and should guide them through all the steps of the process. Howard Stringer should define the roles of a particular individual and develop a mission that would make easier for the team members to implement change (Higgs & Aitken, 2010). Analyze Change Needs: Sony in the leadership of Howard Stringer should determine should analyze the need for the change and highlight the broad factors which have forced the company to initiate a different approach to achieve success. Once the company finds out the problems and the need for restructuring the whole process, then the company would be able to focus to improve the setup within its reach. The task of the team would be to find the need for the change in the company and area that needs to be covered in order for the company to mend those problems. Evaluation of Stakeholders would also be considered in this phase and they should be taken into confidence for implementing change in the organization (Kotter, 1996). The company would require evaluating the internal and external analysis of its environment by defining the strength, weaknesses, opportunities and threats of the company. This would indicate a full understanding of the areas in which the company is gaining a competitive advantage and having losses simultaneously. The strengths of the company would highlight the various areas in which Sony has a comparative advantage over it competitors and are more likely to gain profitability. The companies then devise strategy for those areas in order to make improvements in those particular divisions. The weakness of the company would indicate areas in which either the company is reporting losses or the company is incurring a higher cost. The team must be evaluating the structure of a particular division and the forces that enables the company in performing effectively (Dyer & Dyer, 2007). The opportunities would help the company in finding out new ways to attract customers whether it can be in a form of an organizational structure or it can be in a form of product innovation. The opportunities are always the winning combination for any company if they knew how to grab them and use effectively. Threats would determine the forces that could hamper the growth of the company. The company would be able to make strategies in order to effectively manage those (Cummings & Worley, 2009). Design the game plan: In this phase the company is required to plan a detailed strategy on the basis of needs that were highlighted in the previous section. The strategy would be based on the strengths of the company while making it more powerful than the rest of its competitors. Howard Stringer realized that the real strength of Sony lies in its electronic division which is the most profitable section of the company (Chang, 2008). The strategy should also be made on the basis of the weaknesses that a company has in its current setup in order to mend those weaknesses with a backup of powerful resources and experience. Similarly the opportunities and threats were identified; a detailed strategy would be needed to make the company invincible. Lastly, the problems that were identified in the structural processes and in the production of the various products would be entertained and the higher authorities should be included to plan a strategy that would be according to the company’s culture and ideas (McCalman & Paton, 2008). Execute the Plan: Once the strategy has been formed for the improvement of its processes and to restructure the company, the plan should be executed with perfection. Executing a plan is vital for the success of the whole change process because if the plans are not executed well then the point of developing the whole strategy is lost. In this phase the company must evaluate the satisfaction amongst employees if they are ready to accept the change because a dissatisfied employee is an unproductive employee which could have bad influence of the performance of the company (Fogg, 1996). Sustain the momentum: In this phase the company is required to continue the implementation of change and frequently it should take a feedback from its internal and external customers for their satisfaction (Bevington & Samson, 2012). (Source: Higgs and Aitken, 2010) Ans.4) De-motivation: The decision to lay off employees would have likely created resistance among workers because some of them must have been a part of the company since many years. This act might de-motivate and dissatisfy employees and might influence a negative publicity which can harm the goodwill of Sony Corporation. As a manger while dealing with this sort of situation, I would have provided them incentives so they could be satisfied if they are being laid off. It is better that the company should end the relationship on a high note instead of facing rivalries with their employees who could become a threat for the company in the future. The company could also provide them the opportunity to buy company’s shares for a lesser price in order to make them motivated (Pepitone & Bruce, 1999). Engineer’s conflict of interest: The resistance could be occurred from engineering staff members that could oppose the idea of having a uniform form of software development through the various product line of Sony. This idea could create doubts in the mind of engineers because each product requires different software and are unique in nature, by binding them into similar software can create a hurdle for a product in performing with such perfection as it would have performed previously. The normal functionality of a product can vary due to instalment of different software which could dismantle the effective performance of the product. As a manager, I would recommend engineers about various benefits that uniform software would have upon the image of the company. All products of Sony would then support each other and will become a perfect substitute and a complimentary good for one another (Keddy & Johnson, 2010). Change in nature of the product: If the nature of product is changed then it can be profitable for the company but in other hand it could also make a customer unhappy about the change in its product. As a manger, I would recommend the company to start a marketing campaign that could spread awareness among its customers about their new design and telling them the new product would be more beneficial for all customers under different age group. A product’s promotion should be done in such a way that it should be convincing to the people who consider that the Sony products are never the same and that it must have decreased its quality. The company must give an impression that Sony has come up with better products and with better quality ever than before. This strategy would influence positive understanding of the product (Knight et al., 2011). Biasness for making decisions: By providing the authority for making key decisions to the electronic division, it might force other departments to raise the issue regarding the decisions. This can be the reason because other departments have also played its part in the creation of strategic position of the company. They would be discouraged if their view points are not taken seriously (Pepitone & Bruce, 1999). The other conflict might arise in the command chain because an electronic division would not be able to understand customers demand for digital imaging product. This might also make a delay in the decision making and would create biasness in making decisions because an electronic division would most likely make decision in its favour and would give more incentives to the unit who are associated with the electronic division and would account for more investment. As a manager, I would recommend the authority that are associated at a higher levels to make key strategic decisions for the company and its unit for the key areas instead of giving a particular division the authority of taking key decisions. However, each unit should be allowed to take their own decisions and they should all be made independent and responsible for their own act. If then the units does not work well under their own leadership, only then the company must enforce units and make them dependent on the leadership of other units. Efforts should be made to integrate all units which are the backbone of Sony Corporation and should be treated equally without discrimination but a profitable unit must have more powers than other units because of their vast operations (Klier, 2008). Shareholder’s Interest: The shareholders can be of greater concern because they could oppose to make great change in the company that would require 11 of their manufacturing plants to shut down. Shareholders are the investors that are directly affected by company’s performance and they would want to exactly sure of the plan which is being made by the higher authority of the company. As a manager, I would recommend Sony to provide the shareholders of the complete details and facts about the future of Sony. Financial information about for the next 2 years should be outlined by the financial department that would show the significance of making changes which are essentially required by the company at this time. The report should also contain the changes that would undergone for restructuring the company and reasons for those change for making shareholders certain about the move to make great change within the company (Kotter, 1996). List of References Ayars, P., 2009. The Art of Leading Transformational Change. 1st ed. Bloomington: AuthorHouse. Bevington, T. and Samson, D., 2012. Implementing Strategic Change: Managing Processes and Interfaces to Develop a Highly Productive Organization. 1st ed. London: Kogan Page Publishers. Chang, S.-J., 2008. Sony vs. Samsung: The Inside Story of the Electronics Giants' Battle for Global Supremacy. 1st ed. New York: John Wiley & Sons. Cummings, T. and Worley, C., 2009. Organization Development and Change. 1st ed. Mason: Cengage Learning. Dyer, W. and Dyer, J., 2007. Team Building: Proven Strategies for Improving Team Performance. 4th ed. San Francisco: John Wiley & Sons. Fogg, D., 1996. Implementing Your Strategic Plan: How to Turn "Intent" Into Effective Action For Sustainable Change. 1st ed. New York: AMACOM Div American Mgmt Assn. Higgs, M. and Aitken, P., 2010. Developing Change Leaders: The Principles and Practices of Change Leadership. 1st ed. Burlington: Routledge. Keddy, J. and Johnson, C., 2010. Managing Conflict at Work: Understanding and Resolving Conflict for Productive Working Relationship. 1st ed. London: Kogan Page Publishers. Klier, D., 2008. Managing Diversified Portfolios: What Multi-Business Firms Can Learn from Private Equity. 1st ed. Dortmund: Springer. Knight, W., Dewhurst, P. and Boothroyd, G., 2011. Product Design for Manufacture and Assembly, Third Edition. Third Edition ed. New York: CRC Press. Kotter, J., 1996. Leading Change. 1st ed. New York: Harvard Business Press. McCalman, J. and Paton, R., 2008. Change Management: A Guide to Effective Implementation. 1st ed. London: SAGE Publications Ltd. Pepitone, J. & Bruce, A., 1999. Motivating Employees. 1st ed. New York: McGraw-Hill Professional. Rainey, D., 2005. Product Innovation: Leading Change through Integrated Product Development. 1st ed. Cambridge: Cambridge University Press. Reider, R., 2002. Operational Review: Maximum Results at Efficient Costs. Third Edition ed. New Jersey: John Wiley & Sons. Riis, E., Hvam, L. and Mortensen, N., 2008. Product Customization. 1st ed. Berlin: Springer. Thrun, W., 2003. Maximizing Profit: How to Measure the Financial Impact of Manufacturing Decisions. 1st ed. New York: Productivity Press. Read More