A Corporate Entrepreneurship Analysis of Sony - Essay Example

? A Corporate Entrepreneurship Analysis of Sony (Insert Corporate Entrepreneurship Analysis of Sony Introduction Corporate entrepreneurship is a term that is used to describe entrepreneurial behavior inside mid-sized and large organizations that have established themselves in a market (Morris and Kuratko, 2002; 2011). The universal synonym for corporate entrepreneurship is intra-preneurship (Chang, 1998). The term can be defined alternatively as the development of internal markets and relatively small and independent units designed to create internal ventures and expand innovative staff services, technologies and methods within an organization (Pinchot, 1985). It has been established that successful companies have one thing in common and that is an entrepreneurial style of management (Katz & Shepherd, 2004). Stevenson and Gumbert (1985) attribute the sustenance of a high level of performance by big companies such as Sony and Hewlett Packard to their entrepreneurial behaviour. Company overview Sony corporation is a Japanese multinational conglomerate that originated in the wake of World War II. The company made history after it built Japan’s first tape recorder and named it the Type-G. In 1958, the company changed its name from Tokyo Telecommunications Engineering Company to the present day Sony. The Sony Corporation has diversified its operating scope to cover almost all the areas of the entertainment and the telecommunications sectors. Sony Corporation is the parent company of the Sony Group. As the parent company of the group, its main task is to make strategic business plans for the group through research and development, designing, and marketing of products. As pointed out earlier, Sony Corporation has diversified its scope in to most entertainment and telecommunication sectors. The company has done this through its subsidiaries. One such example of the subsidiaries is the Sony Chemical and Information device Corporation which is responsible for manufacturing as well as the engineering and research and development for the mass production of products (Sony Corporation, 2012). According to the fortune 500 2012 list of companies, Sony Corporation is ranked 87th (CNN, 2012). The Sony group not only focuses on electronics, gaming, and entertainment, it also offers financial services. The subsidiary company that is responsible for the financial services business of the Sony group is the Sony Financial Holdings. With its headquarters in Tokyo, Japan, the company controls the operations of Sony Life, Sony Assurance, Sony bank, and Sony Bank holdings. This subsidiary is the most profitable of all of Sony’s subsidiaries accounting for about 50% of Sony’s global earnings (Sony Corporation, 2012). The company was enjoying high profit returns up until early 2000’s when it started experiencing financial difficulties. These financial difficulties were due to several reasons. The first reason was the global financial crisis. The crisis made it difficult for the company to procure materials for manufacturing, cope with debt and maintain its work force. Secondly, the company’s milk cow, the play station, started to face steep competition from rivals Microsoft with their X-box gaming model. With the sales of the play station reducing, the company’s profits suffered similarly. The last main cause of the company’s decline in profits was due to natural disasters. Japan has been victim to natural disasters, mainly earthquakes. The company’s headquarters in Tokyo, Japan, was hit by the devastating earthquake and therefore it became financially challenging for the company to make a comeback. The company however made a comeback in December 2011. Though the market capitalization of the company had dropped by over 50%, its net worth had increased from $17.6 billion in March 2002, to $35.6 billion in December 2011. This comeback can be attributed to the entrepreneurial behaviour of the company in promoting innovation and creativity that has enabled the company to realize and take advantage of opportunities whenever they arose. The Frameworks for Analysis Corporate entrepreneurship can be analysed using several framework models. The first model of corporate entrepreneurship is the domain model of corporate entrepreneurship. This model was developed by Guth and Ginsberg (1990) and it was targeting to fit corporate entrepreneurship in to the management of firms. According to this model, corporate entrepreneurship consists of two process outcomes which are internal innovation and renewal. However, the domain model is a rather general model since it does not distinguish between causes and effects of the two entrepreneurial phenomena constituting corporate entrepreneurship domain. The second model of analysis is the strategic integration framework (Covin and Slevin, 1991). This is a conceptual model of entrepreneurship where a firm's entrepreneurial behaviouris built on three-level variables: organizational, entrepreneurial employees’ and environmental levels (Covin andSlevin, 1991). The model is a general theoretical framework that depicts the causes and consequences of organizational-level entrepreneurial behaviour. The third framework that helps in the understanding of corporate entrepreneurship is the interactive framework model (Hornsby et.al, 1993). The main focus of this model is establishing the main cause as to why individuals act intrapreneurially. The intrapreneurial behaviour is ignited by a precipitating event that acts as the motivating force for interaction between individual characteristics and organizational factors. In this model, the individual being part of the larger organization is the main focus of the analysis. The fourth model is the behavioural framework model ( Lumpkin and Dess, 1996). This model analyses corporate entrepreneurship on the basis of entrepreneurial orientation, a term that refers to the orientation of a firm to strategically capture specific entrepreneurial aspects of styles, methods, and practices of making decisions. Entrepreneurial orientation consists of five components that are inspired by an analysis of entrepreneurship. The five components are risk taking, innovativeness, pro-activeness, competitive aggressiveness, and autonomy. The fifth model that will be used to analyse the corporate entrepreneurship of Sony is the strategic entrepreneurship model (Ireland, Hitt, &Sirmon, 2003). Strategic entrepreneurship is the simultaneous seeking of opportunities and advantage for the attainment of superior firm performance. With reference to this case study, it is believed that large firms that are established such as Sony are more effective in the establishment of competitive advantage but are less able to identify new opportunities. This premise will be evaluated on Sony using the strategic entrepreneurship model. A Corporate Entrepreneurship Analysis of Sony The Domain Model The Sony Corporation operates in a very dynamic business field. The environment keeps changing and the company requires to adapt to the changes in order to survive in the market. Sony corporation has managed to succeed in its highly competitive field through innovative ventures. The innovative ventures have been as a result of the company’s high technology that has helped them to remain competitive in the market. Through technology, the company has managed to manufacture a brand phone of its own and in addition, an operating software of the phone as well. The company’s success can also be attributed to the political stability in the country’s which it operates in. According to Guth and Ginsberg (1990), strategic leadership is also a determinant of corporate entrepreneurship. The fact that Sony is a Japanese company has helped it achieve corporate entrepreneurship by virtue of its leaders. Owing to their very demanding and discipline oriented culture, the Japanese are highly goal oriented (Kim and McIntoch, 1997). They are goal driven and therefore their main aim is achieving the goals of the company regardless of the barriers that are present in the company’s way. In addition to this, the company’s strategy has been to invest in products that other companies may not want to venture in to (Sony Electronics Inc., 2010). This strategy has certainly paid off because the company has managed to get a strong hold of the market. For example, the Sony Group invested in the play station series in the late 1990’s. The series has been the world’s best performing gaming gadget with sales sky rocketing. The only other corporation that has ventured in to the business is Microsoft with its X-box series. From this, it is evident that the organizational strategy and leadership of the company have contributed to the company’s success. Organizational performance in terms of how effective and efficient a company is in satisfying the stakeholders is also a determinant of corporate entrepreneurship. Sony Corporation’s products have proved to be efficient and effective in satisfying the wants and needs of their major stake holders; the consumers. Through this high performance, the company has been motivated to venture more in to new innovations and strategically renewing their established innovations. This is the main reason why the company has ventured in to many businesses because the level of satisfaction of the consumer wants and efficiency is very high. The Interactive Framework Model The interactive framework model looks at the individual as an integral part of the organization (Hornsby, et.al., 1993). According to this model, corporate entrepreneurship is as a result of organizational characteristics being a major influence of the corporate entrepreneurship behaviour of an individual. Sony was founded in 1946 by Masaru Ibuka before he was later joined by Akio Morita (Sony Electronics Inc. 2010). From the very founding of the company, it is evident to see that the company highly values the input of individuals in terms of corporate entrepreneurship. Having evolved in to its various subsidiaries, Sony Corp has had to limit the individual input in some of its operational fields, mainly the Sony Financial holdings. The reason for this is because of how sensitive matters pertaining to the banking industry are. However, the other fields that the company operates in have supported heavily the individual input as part of corporate entrepreneurship. The organizational characteristics of the Sony Corporation have favoured the growth of corporate entrepreneurship in the company. First of all, the management has been offering support to the individuals within the company that have designed new technologies, software or equipment. This support has been in the form of financial incentives, and non-financial incentives, which include promotions and personal development in knowledge. The company has encouraged work discretion among its employees by clearly defining the organizational boundaries. This way, employees are able to make decisions that are within their range of authority. The employees also have their role to play according to this model of analysis in the attainment of corporate entrepreneurship. First of all, they need to be willing to take risks. The Sony Corporation has been able to create a task force that is willing to take risks through the risk itself as a company has taken in the business ventures. Through this risks, the employees gain the knowledge of assessing a risk situation and how to approach it for the achievement of optimal results. The company has also aroused the desire for autonomy among the employees through task delegation. The company has been delegating tasks to employees and promoting autonomy through this. This delegation of tasks has enabled the individuals within the company to develop a need for achievement and an internal locus of control all for the purpose of being goal oriented. Through these organizational and individual characteristics, the company has been able to create precipitating events that prompt the individuals within the organization to act intraprenerially, develop feasible business plans and because the resources are readily available and the individuals have the ability to overcome barriers, idea implementation has been a less challenging ordeal for them. The Strategic Integration Framework Model This is a conceptual model of entrepreneurship where a firm's entrepreneurial behaviour is built on three-level variables: organizational, entrepreneurial employees’ and environmental levels (Covin and Slevin, 1991). The model is a general theoretical framework that depicts the causes and consequences of organizational-level entrepreneurial behaviour; it evaluates how the organization as a whole elicits corporate entrepreneurship (Burns, 2008).As noted earlier, Sony Corporation is a very large company with many subsidiaries. For this framework model analysis, will narrow down its focus to Sony Electronics. The vision of Sony Electronics is to create exciting new digital entertainment experiences for consumers by bringing together cutting-edge products with latest generation content and services (Sony Europe Limited, 2012). Through its mission, the company has committed itself to developing a wide range of innovative products and multimedia services that challenge the way consumers access and enjoy digital entertainment. By ensuring synergy between businesses within the organisation, Sony is constantly striving to create exciting new worlds of entertainment that can be experienced on a variety of different products. The main objective of Sony is to strengthen its all-important electronics business and maintain market leadership in high profile areas such as televisions, digital imaging, home video equipment and portable audio. For the company to achieve this, it is pursuing three other subsidiary objectives which are, the customer view point initiative which emphasizes to the staff on the importance of viewing Sony, its products and services from the perspective of a customer; reinforcing Sony’s cutting edge in the areas targeted for maximum investment of resources; and the Genba initiative which aims to strength the frontline operations such as design locations, manufacturing activities and sales offices(Sony Europe Limited, 2012). The organization has also achieved success through its main organizational structure. The structure that has been adopted by the company is a functional structure. This kind of structure aims at dividing an organization in to task groups and these task groups are given specific tasks to perform (Daft, et.al, 2010). This kind of structure is best suited for a company that is aiming at creating homogenous products as is the case for Sony. However, this structure has been inefficient because it has made the company to be inflexible and slow to react because there is a lack of communication between the functional groups. Sony has been successful in its field because it has incorporated corporate entrepreneurship in their company structure, values and objectives. This incorporation has enhanced the organizational performance and made the company to be a success story. The Behavioural Framework Model This model analyses the corporate entrepreneurship of an organization on the basis of five components which are risk-taking, innovativeness, pro-activeness, competitive aggressiveness, and autonomy. Sony Corporation has attained corporate entrepreneurship because of its risk taking nature. The company has exemplified this nature on many platforms. Considering that the company initially started as a telecommunications company with a capital of $530, it would be right to conclude that the company has achieved its success because of the risks that it has taken. The company has ventured in to the banking industry through its subsidiary, Sony Financial Holdings. This was a risk because the company had majored its operations in the entertainment business. Another risk innovation that the company undertook was the play station series. Before this innovation, no company had dared to invest and venture in the gaming industry but Sony corporation did. One of the main reasons why the company has been a major success is its innovativeness. If anything, this has been Sony’s major catalyst of success. Recently, the company unveiled the first ever 3D television. Through this innovation, the company was able to seize the opportunity that had presented itself and tap in to the market resources. The company has however been facing steep competition from rivals Samsung and LG. The pro-active nature of the company through aggressive competition has helped the company to remain competitive in the market and to retain its market share while attracting new customers in to its market scope. As prior mentioned, the company has adopted a functional organizational structure. This has helped the company and its subsidiaries to be fully autonomous in their operations. The subsidiaries make decisions that are relevant to the situation that they are currently facing in their field without having to consult the headquarters for advice. This has helped the company to make informed decisions because of the close relation that they have with their market and an understanding of the trends in the market. The Strategic Entrepreneurship Model Strategic entrepreneurship refers to the simultaneous seeking of opportunities and advantage for the attainment of superior firm performance (Ireland, Hitt, &Sirmon, 2003). This model seeks to dismiss the premise that established and big organizations and firms are more efficient in creating competitive advantage but are less able in identifying new opportunities in the market while small organizations are more efficient in the identification of new opportunities but less capable of attaining competitive advantage over their competitors. However, Ireland, Hitt, and Sirmon, (2003), believe that an organization can be able to attain competitive advantage and at the same time be able to identify a new opportunity in the market through strategic entrepreneurship. Sony has been able to vindicate itself as a one dimension corporation; it has been able to simultaneously achieve competitive advantage and identify opportunities in the market. The Sony Financial holdings has used its originality to attain competitive advantage in its three businesses. This originality has been coupled with the seizing of opportunities in the insurance and banking fields through its three businesses namely, life insurance, non-life insurance, and banking. Sony Electronics has also been able to create competitive advantage at the same time identifying opportunities. The best possible example is the play station unveiling. The play station series was unveiled in the late 1990’s. The company realised that there was a need for a gaming device in the market. This was the opportunity that they took advantage of. The company then gained competitive advantage over its competitors on several grounds. First of all, Sony provided the pay station series at a cheaper price as compared to that of the X-box series by Microsoft. Secondly, the play station series was a more compatible gaming device since it gave the consumer the option of choice, for example, between a NTSC and Pal play station. Though the company has been able to attain strategic entrepreneurship, it has had its failings on some parts; it has only been able to maintain competitive advantage. The main hindrance to it being strategically entrepreneurial is the fact that the electronic industry is highly competitive. Therefore if one company realises a certain opportunity in the market, it will be difficult to explore the opportunity on its own because all the other companies will want to take advantage of the opportunity. Conclusion From the above company analysis, corporate entrepreneurship is an aspect that highly determines the success or failure of a company. This is because it is pertinent of all the individuals that work in a company and also the organization itself as a legal person and as a whole unit. It is necessary for the top management to create favourable rules and regulations that do not restrict the creativity of individuals but rather provoke and support it. Organizations also need to ensure that they maintain a well-motivated task force if they are to attain corporate entrepreneurship. It is also key to note that the values, vision, mission, and beliefs of a company contribute a great deal to corporate entrepreneurship. From the case study, Sony’s vision and mission give room for creativity and innovations hence promoting corporate entrepreneurship. It is therefore essential for a company’s vision and mission to be flexible in that it allows creativity and some extent of autonomy rather being rigid and restrictive. References Burns, P. (2008). Corporate Entrepreneurship. 2nd Edition. New York: Palgrave Brown, T.E., Davidsson, P. and Wiklund, J. 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