Strategic Analysis of Sony - Essay Example

?Issues in Global Business and Strategic Concepts Executive Summary The primary intention of the paper has been to report on the present condition ofSony Corporation which includes the performance of the company in different aspects concerning its supply chain management and marketing strategies as per the customers’ conveniences. The paper also recommends certain inputs which might be beneficial for the company in its future operational growth and expansion in the emerging market of India. The report portrays that the performance of the company from the past few years has not been quite impressive which has further affected its brand image as well as the trust and confidence of its investors in the global periphery. It has also been observed that poor performance of the company has been associated with some of its internal weaknesses such as uncontrollable expansion of product lines and lacuna in complying with ethical standards and consumer needs which has hampered its presence in all over the global market. Table of Contents Executive Summary 2 Introduction 4 Background Information 5 Company Overview 5 Case Statement 5 Strategic Analysis of Sony 7 Financial Perspective 7 Stock Performance of Sony Corporation 10 SWOT analysis of Sony Corporation 10 Strengths 11 Weaknesses 12 Opportunities 12 Threats 13 International Expansion Strategy 13 Industrial Analysis: Porter’s Five Forces Analysis 14 Bargaining Power of Customers 14 Bargaining Power of the Suppliers 15 Threat of New Entrants 15 Threat for Substitute Products 16 Intensity of the Competition 16 Strategic Theme 16 Conclusion 17 Recommendations 18 References 19 22 Introduction In the 21st century context, when operating in the international market context, organisations are witnessed to be obstructed by various issues such as cultural divergences, political differences, legal interventions and similar other factors which tend to affect both the reputation as well as the performance of the business in the targeted international market. In this regard, Sony Corporation can be identified as one of the most apparent examples. However, in recent times the performance of the company has fall drastically owing to certain issues that have been identified as related with its strategic operations in the international market. It has been learnt that the brand image of the company has weaken and sales of the company has declined considerably owing to the competitive forces underlying the international consumer electronics industry. To be precise, in its recent operations, the company has been witnessing various issues such as branding problem, legal interventions for hacking issues and fall in share price among others. These issues affected the trust of the investors on the future performance of the company owing to which its international growth, especially in developing nations such as India, where consumer buying behaviour is highly fluctuating, has been hampered significantly. Emphasising on the current status of Sony, this study will aim to present a portfolio report on the current strategic position of Sony by analysing all the elements of its business which shall be helpful for its further expansion and growth in the Indian market. The paper would further recommend the company with some strategies that would be helpful for it in its expansion to an emerging market. Background Information Company Overview Sony Corporation is one of the most familiar brand names in the world today. The company mainly manufactures audio, video and information technology products for consumers all over the world. It has been noted that the prime vision of the company is to manufacture and market products based on the preferences of the customers and enable them to enjoy a new digital entertainment experience. With this concern, the company has been operating to make certain that every product it offers should be of A-grade quality as per the industry standards (Sony, 2013). Critics have often argued that the success of the company is largely due to its innovative thinking and designing. Correspondingly, it can be observed that Sony works in four segments which include electronics, motion pictures, music and financial services among others. The company makes sure about the fact that both products as well as marketing activities of the company would certainly make a difference in the lifestyle of people and enable them to enjoy their life to the fullest. Apparently, some of the well known product sub-brands of the company include BRAVIA, VAIO and Play Station among others (Sony, 2013). Case Statement There are quite a few issues that are allied with the operations of Sony in the worldwide context. Reportedly, the shares of the company have declined in the recent times by 10%. This was observed as the record fall in the shares of the company in recent years which further illustrates a weakening financial position of the company in the current fiscal year, i.e. 2013. Such weakening of Sony’s financial position can also be illustrated with its profitability status wherein company has suffered record losses in the year 2011 (BBC, 2013). Furthermore, the company was also fined for a considerable amount of money owing to its avoidable play station data hacking allegation and the following lawsuit. It was further reported that the hacking was completely preventable but there was no positive attempt of the company in this regard which also raised certain ethical concerns. Based on these grounds, the company was also criticized by the Information Commissioner's Office (ICO) for not having up–to-date and advanced security software in its operations (BBC, 2013). The ICO’s further reported that owing to some technical faults, confidential information of the brand users was put to danger. Correspondingly, it was been analyzed that when the database was attacked, the security measures placed by the company were not up to the mark to restrict such initiatives. Hence, as a result, of the issue the company was fined ?250,000 ($396,100) considering the issue as a serious breach under the Data Protection Act (BBC, 2013). Undoubtedly, such issues are quite likely to hamper customer confidence and stakeholder integration for the brand in the emerging markets such as India, where consumers are less aware regarding technology products and thus shall be strongly persuaded by such negative information (Das, 2012). It is worth mentioning in this context that Sony should incorporate certain specific measure which shall redefine its brand image among the targeted consumers in the Indian market along with the consumers present in other market regions. Strategic Analysis of Sony Financial Perspective As mentioned in the above section, the financial performance of Sony had been witnessed as weakening in its recent affairs which can also be argued as a vital challenge for the company to grow in the emerging markets. Financial performance is one of the major aspects for any business. Correspondingly, it has been analyzed that Sony had to undergo immense fluctuations as can be apparently observed from the below chart. Source: (Morning Star, 2013; Sony, 2012) The table above depicts the current liquidity ratios of Sony has experienced substantial declination since the fiscal year 2008. Since the current ratio depicts the current assets of the company, it can be concluded that the assets acquired by Sony has also been decreasing since the year 2008 as depicted in the table, without any changes observed in the company liabilities. Along with the current ratio, the quick ratio of the company has also been declining which again can be considered as poor in context of the performance of the company. However, the table illustrates that cash ratio of the company has been quite stable and would be considered better for the company which should be considered as a vital aspect to support its growth in the emerging markets, especially in the short run scenario. In regard to financial leverage of the company, a constant increase in the figures can be observed. The reason depicted in this regard is that the leverage of the company is high owing to its low current ratio. It has also been noted in this regard that the higher leverage of the company would further increase the liquidity ratio of Sony and would affect the performance of the firm by a large extent in the emerging market. From an overall perspective, it can further be stated that Sony must decipher signs of its financial revival in order to enhance its performance in the global market periphery, especially in emerging markets like India (Minato-ku, 2013). However, in the past few years no significant recovery sign has been witnessed by Sony in terms of its profitability. The table below henceforth depicts that the sales of the company have declined considerably from the year 2009 and continued the same progression in the subsequent years which depicts that indeed the company had been suffering from decreased customer loyalty and brand value within the targeted market place. It has been learnt that this fall in the performance of the company is majorly a consequence of tough competition in the electronic industry. However, the operating income of the company has depicted certain signs of recovery after the introduction of the reconstruction plan that was helpful in reducing the manufacturing cost for the products of the company (Tang & et. al., 2012). Source: (Morning Star, 2013; Sony, 2012) The strategies which the company tends to practice in order to effectively utilize its resources to obtain maximum amount of profit can also be observed as a major issue when operating in emerging markets like India with scarcity of resources. The table below hereby presents the efficiency ratios of the company in the recent years. Source: (Morning Star, 2013; Sony, 2012) As can be observed from the table, the assets turnover ratio of Sony has shown a considerable decrease. Again since the sales revenue of the company has been on a declining phase, the increase in fixed turnover ratio of the company would be justified. However, the decrease in inventory turnover ratio will be justified from the fact that after the emergence of internet based activities in the supply chain of the company, only a minimal number of products of the company were sold from its inventory (Tang & et. al., 2012). This illustrates that Sony had not been effective enough in utilising is resources well witnessing a gap between the aggregate demand from its customer end and its predicted performance level at the supply end. Such circumstances in emerging markets like India necessitates better supply chain management and forecasting where wastage of resources shall inevitably hamper organisational profitability and sustenance. Stock Performance of Sony Corporation The stocks of company have not performed desirably from mid 2008 when the sales and profitability level of the company were observed to decrease substantially. Owing to the negative income of the company, the share price for the company has also been declining considerably hampering the investors’ confidence by a large extent (Tang & et. al., 2012). From the overall financial analysis of the company it can be affirmed that the company must immediately focus on increasing its sales in different regions of the world including India with due significance towards its supply chain management and branding strategies. It is worth mentioning in this context that in order to expand and grow in the future in emerging markets like India, where consumer buying behaviour is persuaded through aggressive branding strategies and effective supply chain management, the company must ensure competitive pricing strategies as well as higher degree of customer satisfaction in the light of the rapidly increasing competition from other global intruders (Corporate Catalyst India, 2013). To obtain a better understanding of the company’s strengths and weaknesses along with the opportunities and threats persisting within the global as well as Indian market, a SWOT analysis of Sony has been performed in the below section. SWOT analysis of Sony Corporation It has been analyzed from the discussion that Sony Corporation is a reliable and renowned brand all over the world including India. However, like other companies, Sony also has some negative as well as positive aspects in their operation. Fig: SWOT Analysis of Sony Strengths One of the biggest strength of Sony has been its workforce. The company possesses a set of talented employees to achieve the goals of the organization. Notably, irrespective of the financial conditions of the company, the strong brand image of Sony can be observed as less affected and thus, can be considered as one of its major strengths. Moreover, the research and development functions of the company have rendered it with considerable superiority in innovation and deliverance of high quality work. Another strength that can be identified with respect to Sony’s functioning in the recent years is its innovative strategies which must be utilised at a greater extent to expand and grow in the targeted emerging marketplace (Sony, 2012; Tang & et. al., 2012). Weaknesses One of the biggest weaknesses that have been detected about Sony is its operational complexities owing to its production and distribution of a large range of products. For this reason, the company has been lacking to focus on the development of its most promising and phenomenal products. Moreover, it has observed that the brand standing of the company is quite unclear as there owing to its distribution of various ranges of products that ultimately affects the performance of the business amid less aware customers, such as witnessed within the emerging markets of India. Furthermore, the company is also criticized for charging high prices on its offered products which are further observed to be unaffordable to the common people in emerging markets like India even though the brand renders a feel of superior economic class to its consumers (Sony, 2012; Bhasin, 2012). Opportunities Sony already possesses a strong brand name amid its customers all over the world which has recently been witnessed to fade owing to its poor performances. However, significant opportunities lay in the Indian market and other emerging markets where the company can focus on effective pricing strategies as well as innovation strategies to promote its brand image amid the targeted customers. Even though the marketplace in India has been rapidly changing owing to the inclusion and continuous expansion of Sony’s rival firms, there is ample scope for future expansion and growth for Sony in terms of increasing consumer purchase capacity and consequent demand (Corporate Catalyst India, 2013). Threats One of the prime threats for Sony can be identified in terms of tough competition it is facing in the emerging markets. There are various electronics companies in the market that produces products of quality standards that equals the quality and design of Sony’s products. Furthermore, the negative publicity and recent consumer related ethical issues have also affected the company by a large extent with respect to its brand image. It has also been noted that the lifecycle of the products offered by Sony survive for a lesser period of time as compared to the products offered by its rivals which affects its long-run efficiencies by a large extent (Tang & et. al., 2012). International Expansion Strategy With regards to the further expansion of Sony’s operations in the emerging market of India, it would need to have an efficient supply chain network. It has been noticed that the financial performance of the company is in an all time low owing to which it becomes highly essential to review its strategies and stabilize its performance not only from a short run but also from a long run perspective. The company manufactures its product in various regions of the world and intends to gather raw materials of high quality at a competitive price with a stable supply. In the process of its further expansion in the emerging market like India, the company would need to engage the best suppliers to obtain uninterrupted supply of materials throughout the entire distribution channel. Moreover, the company also needs to ensure that its supply chain should comply with all the rules and regulations of the business to maintain ethical viability and transparency within its value chain network. The company should also make sure that there should not be any illegal or unethical activities in the supply chain of the company that may harm the reputation of Sony in the long run to revitalise its brand image within emerging markets like India (Sony, 2013). Industrial Analysis: Porter’s Five Forces Analysis Fig: Porter’s Five Forces Analysis Bargaining Power of Customers In the current day perspective, the bargaining power of the customers for Sony is identified to be on the higher side. The reason depicted in this regard is that the tastes and preferences of the customers are changing rapidly within the market context of India with a lower degree of switching cost. Also there is a large variety of options available for the customers in the electronics industry of India as there are various companies in the market that manufactures products similar to that of Sony such as Hitachi, Samsung and LG among others. Hence, the bargaining power of the customers can be considered as quite high (Corporate Catalyst India, 2013; Bruce & Barringer, n.d.). Bargaining Power of the Suppliers As there are a lot of suppliers for the company worldwide, the bargaining power of the suppliers is observed to be quite low. The company chooses its own suppliers and approaches them to work according to its rules and regulations. Moreover, availability of adequate number of suppliers in the market that are eager to provide materials at a minimal price also lessens the overall bargaining power of the suppliers (Corporate Catalyst India, 2013; Bruce & Barringer, n.d.). Threat of New Entrants The threat for Sony in case of any new entrant in the emerging market of India is quite low. It has been learnt that electronic industry would require a vast capital to penetrate the industry imposing a barrier for any new entrant in the market. Furthermore, it has been noted that the need for constant innovation in the electronic industry is among the major barriers for a new entrants. However, in the Indian market and similar other emerging markets, Sony can be observed to face problems in terms of forward or backward integration which in turn is quite likely to give rise to its threat of new entrants (Corporate Catalyst India, 2013; Bruce & Barringer, n.d.). Threat for Substitute Products As mentioned earlier, substitute products availability is a major competitive concern for Sony in today’s market context. These products are available for the customers at a cheaper rate than that of Sony. Hence, there is always a threat for the company for the meagre switching cost its customer’s need to bear and the lower degree of customer loyalty in the Indian market (Corporate Catalyst India, 2013; Tang & et. al., 2012). Intensity of the Competition The competition for Sony in the global electronic industry is considerably high which has also affected the presence of the brand in the Indian marketplace. There are various electronic companies in the market that possesses a similar stature such as that of Sony. As the growth of the electronic market is quite low, the competition between these equally balanced companies has become too intense and severe. In order to mitigate this particular challenge, the Sony should focus on managing its supply chain with better efficiency as a differentiation strategy. This would not only assist the company to company to strengthen its brand image within the customers but also to obtain competitive advantages in terms of larger market share (Hoovers, 2013). Strategic Theme Reportedly, the company has been witnessing continuous declination in its profitability since the past few years. It has certainly been one of the biggest issues related to the company. The reason portrayed in regard to the constant fall in the performance of the company has been the problem of branding. It has been analyzed in this regard that there is no product of the company which has become a hit among the customers in the recent times. The company is also criticised to be over dependent on its brand name. However, due to the recent ethical issues centred to its brand name, customer loyalty for Sony has decreased considerably. Notably, availability of such wide ranging product line can also be argued as a major issue which has affected the brand image of Sony on the whole (Bhasin, 2012). Hence, to further expand and grow in the emerging market of India, it is essential for Sony to reconsider its branding strategies and also if needed, the company should retrench its diverse product lines into a controllable extent. To be precise, Sony will need to review its brand image and understand the aspect that are responsible for the under performance of its products in accordance with the customers’ tastes and preferences along with the strengths and weaknesses of its competitor brands. Moreover, there have also been certain problems related with the cost of the product owing to which it is necessary that the company follows a competitive pricing strategy with due concern towards the economic prospects of the targeted emerging marketplace (Corporate Catalyst India, 2013; Tang & et. al., 2012). Conclusion From the overall analysis, it can be apparently observed that Sony has been passing through a slump phase altogether. There are various mistakes that the company committed which in turn has considerably affected the overall performance of the company. The sales of the company have also been in declining substantially which has further been affecting the brand image of the company among its investors and consumers. All this aspects have certainly affected the brand image of the company within India as well. It has been noted that the company should emphasize on its expansion in the emerging markets and should also come up with products of different price range. Thus, it can be concluded that the company needs to revise its entire strategies at every dimension, including its supply chain along with promotional strategies in order to expand and grow within the target market of India. Recommendations In order to gain a competitive edge, Sony would need to come up with different strategies altogether. In regard to its decline in sales, it has been learnt that high price of the product of the company is a vital important reason. Comparatively, products price of Sony is much higher than that of the product offered by its competitors with similar features in the Indian market such as Hitachi and LG among others (Corporate Catalyst India, 2013). It can be recommended in this regard that the company must come up with products that target the middle income group of the society with both price and appearance. Subsequently, the company operates with a highly diversified product range that further hampers the efficiency of the company to control the customer needs and competitive forces. The company should therefore focus on retrenchment strategies and minimise its product line to a controllable margin that can further facilitate the organisation to perform its marketing strategies as per the convenience of the customers (Corporate Catalyst India, 2013). It has been analysed that demand for electronics products in India is quite impressive and provides ample opportunities for further growth and expansion. It is thus recommendable that the company should focus on redefining its promotional strategies with due significance towards the external market conditions currently prevailing in the Indian market. References BBC, 2013. Sony Fined Over 'Preventable' Play station Data Hack. Home. [Online] Available at: http://www.bbc.co.uk/news/technology-21160818 [Accessed April 23, 2013]. Bhasin, K., This Is the Biggest Problem with Sony's Brand. Business Insider. 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[Online] Available at: http://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2012/reports/Sony.pdf [Accessed April 23, 2013]. Read More