Entrepreneurial Management and Leadership - Essay Example

Entrepreneurial management and leadership BY YOU YOUR SCHOOL INFO HERE HERE Entrepreneurial management and leadership Introduction Corporate entrepreneurship (CE) does not have a universally adopted definition (Gautam and Verma 1997). Baumol (1986) argues that CE activities in a corporate environment are the efforts to renew the organisation by constructing new groupings of resources which adjust relationships between the firm and the external environment. Zahra (1991) suggests that corporate entrepreneurship is actually creating a new business in existing firms as a means of enhancing profitability and to strengthen competitive advantages. In this context, CE should be defined as internal efforts to sustain competitive advantages through the process of innovation which serves to change the balance of competitive dominance in an established industry. This report aims to identify the corporate entrepreneurship behaviours at the Sony Corporation, a multi-national firm operating in the consumer electronics industry; a highly saturated competitive environment. Utilising a mixed methodology of secondary and primary research, this study undertakes a qualitative analysis of CE activities (or lack thereof) at the identified corporation to determine entrepreneurial behavioural impact on strategic initiatives, innovation, organisational structure and culture at the firm. A general qualitative analysis of the firm’s current competitive advantages and competitive market position is inclusive in the research. It is assumed that Sony Corporation, a company with a rich history of operations established in 1946, maintains significant entrepreneurial behaviour internally. Upon Sony’s establishment, the business only maintained $530 in available capital and maintained a workforce of only eight employees (Abiko 1966). With such a limited volume of available resources, Sony was able to convince Bell Labs to license the new innovation, the transistor, which ultimately led to Sony being a pioneering market entrant for launch of the first transistor radio. It is unlikely that Sony maintained limited entrepreneurial behaviours in its long history, an assumption based on a rich history of being a market innovator in many different product categories. This assumption will be tested utilising research on the firm. 2. Company background During the 1970s, Sony’s most important market, the United States, maintained a very negative perception regarding the quality of Japanese-made products. However, Sony continued to outperform many American-produced products in the consumer electronics industry which radically changed U.S. consumer perceptions of the made in Japan label (Lohr 1983). As a result of having a quality focus for manufacturing output and using innovation in the marketing function, Sony products were in high demand in its most prominent markets and were able to generate considerable profitability through above-market pricing structures that consumers accepted in exchange for superior electronics product quality. In 1979, Sony developed the Walkman, a portable music device that was unparalleled in the then-existing consumer electronics industry. The Walkman, a pioneering device, radically changed the methodology by which consumers listened to music. With this innovative invention and creative marketing, Sony managed to inject the concept of Japaneseness into the popular cultures of many foreign markets with an emphasis on the new personalisation of high quality consumer-centric technologies (duGay, Hall, Janes, Madsen, Mackay and Nequs 1997). With a growing reputation for superior electronics products, today Sony has developed many different business units both domestic and foreign. Today, Sony is structured to emphasise many different segments including Gaming and Communications, Imaging Products, Music, Financial Services and Consumer Home Entertainment Technologies. Sony is now a producer of cameras, televisions, gaming consoles, smartphones, semiconductors, medical equipment and even motion pictures. In recent years, however, Sony has faced considerable problems with sustaining competitive advantages that have influenced the firm’s current profitability position. In 2012, Sony reported a substantial loss totalling 67 billion Yen (Hirai 2012). This massive profit loss followed on the heels of yet another loss of 200 billion Yen in the year 2011. Examination of Sony’s 2011 Annual Report indicates that the 200 billion Yen loss is product of a need to change and reinvent the brand in order to “deliver new and exciting experiences to our customers around the world” (Sony 2012, p.4). Between 2008 and 2012, total sales revenues across the world decreased by a whopping 27 percent (Sony 2012). This occurred even despite a significant drop in the cost of sales related to operating strategy. Hence, Sony had begun to lose its competitive brand position in established multi-national markets for failing to successfully innovate against rising competitive forces such as Samsung and Sharp. Therefore, internal management recognition of the need to be more entrepreneurial would seem to illustrate that CE behaviours were, at least between 2010 and 2012, significantly lacking. 3. Assessment of corporate entrepreneurial intensity Sony does show evidence of corporate entrepreneurship especially as it pertains to innovation. Corporate executive leadership at the firm attributes responsibility for business failures to the external market environment which is dynamic, ever-changing and substantially competitive (Sony 2012). Hence, whilst main competitors continued to provide unique products with innovative features and benefits, Sony appears to have become complacent and unable to respond effectively with development and launch of innovative products. Dess, Lumpkin and McKee (1999) iterate that when global competition strengthens and markets become saturated, a legitimately entrepreneurial organisation must both differentiate and focus on innovation and internal reengineering. True corporate entrepreneurship is dependent on the firm’s capacity to improve structural processes and focus on achieving cost efficiency and develop strategic approaches to enhance total quality (Dess, et al. 1999). With the aforementioned in mind, it would appear that there is a sudden resurgence of CE behaviours at Sony leading to a new intensity in being entrepreneurial. Sony executives illustrate that in order to achieve competitive advantages and restore profitability to the firm, it must re-evaluate its core competencies by expanding the business into emerging markets, accelerate the pace of innovation and learn to better optimise resources (Sony). Ireland, Covin and Kuratko (2009) indicate that true corporate entrepreneurship involves building a team-based organisational design that facilitates knowledge exchanges and utilises human capital effectively by increasing the frequency and intensity of internal collaboration to achieve strategic objectives. Sony, as an intensive CE behaviour, has begun decentralising the business and building a consensus-based culture in which disparate management personnel now collaborate. According to the company’s annual report, the management team will now work collaboratively with the CEO to ensure successful implementation of all strategies dictated by the Chief Executive Officer. Sony had, traditionally, operated under a very centralised hierarchy of control in which decision-making is made at the top and disseminated vertically with minimal consultation with lower-level managers and support employees. Finch (2006) defines a successful manufacturing-based company as one that facilitates effective management of many different operational functions that includes technologies, strategy, supply chain, marketing and other internal department coordination. Sony’s CEO suddenly realising a need to become more involved in managerial decision-making to ensure proper managerial effectiveness throughout the company’s value chain indicates a substantial intensity of entrepreneurial behaviours. This is especially true in an organisation that had grown accustomed to Japanese-style management in which decision-making had always been hierarchically controlled with much power distance between executives and managers. Sharma and Chrisman (1999) support that Sony maintains a new intensity of CE behaviours, suggesting that legitimate corporate entrepreneurship involves reorganisation of internal resources in order to pursue new opportunities and enhance total organisational capacity. 4. Forms of corporate entrepreneurship used currently and in the past The company’s most prominent competitor, Samsung, has become a leader in the consumer smartphone market domestically and internationally. Samsung, with its Galaxy S-line smartphones, has created a substantial brand reputation in the marketing function that has built considerable consumer loyalty to this competitor in terms of quality and product functionality. Sony, a company that once experienced similar loyalty to its high quality cameras, is no longer able to attract the same volume of consumers to its cameras as Samsung has inserted very high quality cameras into its smartphones, thus acting as a market substitute for Sony’s camera business. As a result, Sony management decided that it would need to invest more financial and labour capital into the research and development process to produce smartphones (Sony 2012). Sony will, as a result of CE behaviours, “strive to reinforce technical differentiation and bolster sales in high growth market such as smartphones” (Sony 2012, p.14). According to the definition of corporate entrepreneurship provided by Dess, et al. (1999), Sony is working diligently to restructure in order to take advantage of opportunities in the external market by producing products once previously un-considered by the firm. Sony will be examining how better to utilise people-based and financially-based resources to develop innovations, differentiate the corporate marketing brand, and seize a new growth market opportunity, an element of CE as identified by Sharma and Chrisman (1999). If the company is to recapture its previous identity in the consumer market as an innovator and pioneer, Sony recognised through entrepreneurial evaluations that it would have to begin producing smartphones that could effectively compete with Samsung’s innovations. Kalyanaram and Gurumurthy (2008) strongly assert that first-to-market pioneers have much competitive advantage over later entrants. This is due to customer behavioural characteristics in which they begin developing attachments to the first-to-market product that usually sets the product category. Buyers then view the late entrant with negative evaluations in comparison to the pioneer (Kalyanaram and Gurumurthy). To enter this new market, however, Sony requires a restructuring of the organisation, a new resource allocation strategy, construction of a collaboration culture, and a new marketing strategy. Gaglio and Katz (2001) assert that true entrepreneurial creativity involves having a strong talent for identifying potential profitability in ideas. The top management team at Sony has illustrated genuine, current entrepreneurial behaviours by restructuring to develop smartphones with new and differentiated features over that of competition. Historically, Sony has illustrated entrepreneurial behaviours that has set a new vision for the enterprise. According to Hayton (2005) genuine entrepreneurs assert a new vision and champion this vision with support and leadership to gain commitment from followers. In 2005, the previous CEO of the firm, Howard Stringer, maintained an aim to improve collaboration between different business units that had historically worked in isolation in what were referred to as silos (Fackler 2006). Sony, as an internal and external marketing strategy, developed the Make Believe slogan which intended to unify the brand and the internal culture. Stringer began to iterate a new vision of a cohesive Sony that promoted a new type of team philosophy that the business had been accustomed to operating within. By championing this vision and breaking down layers of authority that once stifled ingenuity and creativity, the CEO illustrated entrepreneurial behaviours which brought the company long-run advantages in research, knowledge management, team orientation and cross-functional creativity. 5. Evaluation of organisational setting and identification of Sony’s corporate entrepreneurs As a Japanese firm, Sony had always maintained considerable power distance between employees and managers. However, it has been illustrated that a collaborative culture was necessary to achieve advantages and seize market opportunities. Upon appointment of Howard Stringer as the CEO, the first non-Japanese executive officer ever in the position, Sony was now utilising a more Western ideology that emphasised HR and cultural cohesiveness. This change enhanced entrepreneurial behaviour in the company, as it built new social and professional relationships internally and improved organisational culture. By taking disparate business units and diverse experts with a broad range of knowledge in a team structure, the company was able to innovate the PlayStation gaming line, an opportunity for a new growth market. As a result of injecting Western management ideology into Sony with emphasis on consultation and team-building, the PlayStation product now has improved Sony’s revenues by 65 percent whilst boasting a whopping 290 percent operating revenue increase (Parfitt 2014). Sony began utilising Western HR philosophy to reward employees for their dedication and creativity toward attainment of strategic goals, something quite different than the traditional Japanese-based power structure that once stifled innovation and entrepreneurial creativity. Howard Stringer served as a change agent who provides support for building new skill-sets and works as an advocate to address the many different needs of employees to build trust in the leader/member relationship (Dawson 2010). This is aligned with corporate entrepreneurship definition provided by Hayton (2005) in terms of championing a new vision and building a team-based design to achieve new competitive advantages. By breaking down layers of bureaucracy and giving employees new opportunities to communicate their ideas, and further providing support for this openness and flexibility, the firm showed strong dedication to improving entrepreneurial behaviour throughout the business model. 6. Identification of current challenges faced by Sony The main challenge with today’s Sony Corporation is an inability to recapture the brand loyalty that the firm had once achieved by being a quality-centric market pioneer that brought new products and experiences to global consumer audiences. Clever and creative marketing strategies, coupled with recurring competitive innovations, have given companies such as Sharp and Samsung much more consumer dedication. For example, Samsung has dedicated considerable marketing-related resources to effectively build a total brand management strategy that has created important connections with desired target consumer segments. Figure 1 illustrates how the firm has positioned itself competitively (in marketing) in terms of technological sophistication in connection with consumer lifestyle. Figure 1: Samsung creative marketing Source: Coloribus. (2008). Samsung Wireless Phones: Stylish print ad by Cheil Communications. [online] Available at: http://www.coloribus.com/adsarchive/prints/samsung-wireless-phones-stylish-11803405/ (accessed 12 May 2014). Hisrich and Peters (2002) offers that legitimate entrepreneurial behaviour involves having a willingness to devote ample effort and time to create something new that can produce value for the organisation. Management at Sony should be putting more resources and collaboration into repositioning the brand away from its rather stagnating brand identity to pursue new markets and build a wholly-contemporary brand personality. In an industry where it is becoming easy for competition to replicate competitor products, the only real asset to company that cannot be imitated is the marketing brand. Because Sony is no longer recognised for its pioneering reputation, the company can outperform such competition as Sharp and Samsung by creating new relationships with consumers. Through new resource allocation and a collaborative marketing team working in conjunction, entrepreneurial behaviours would rescue the languishing corporate brand image and inject more creativity and originality that would provide significant operational value. 7. Recommendations for an appropriate entrepreneurial strategy Based on all of the literature on corporate entrepreneurship and its defining characteristics (Ireland, et al. 2009; Hayton 2005; Dess, et al. 1999; Sharma and Chrisman 1999; Zahra 1991), there is a relevant and beneficial entrepreneurial strategy that is available for the firm’s intention of creating new value for itself and its important consumer constituents. Using the definition of CE which classifies entrepreneurial behaviour as creating new business within the established business in the pursuit of value creation, Sony should diversify its business outside of the consumer electronics market. Sainsbury’s, as one example, a dominant UK supermarket, launched a clothing line called Tu which catered to moderate resource youth buyers with contemporary fashion designs. At first, it was believed that a supermarket could never dominate a clothing market and demand was significantly low for the products. Through a complete rebranding strategy for Sainsbury’s, the clothing line now provides Sainsbury’s with millions of dollars of new revenue from interested consumers that now find quality in the fashion line. Sony should be conducting routine environmental analyses, part of corporate entrepreneurial behaviour (Hayton 2005), to identify growth market opportunities as a means of introducing a new product line under the Sony brand name. Research into potential growth markets returned results that the global male beauty and grooming market and Kuwaiti fast food industry are substantial growth markets. It is recommended that Sony conduct substantial market analyses for these two growth industries and determine an appropriate strategic initiative to position the business to develop a new business unit that can provide substantial revenues for the firm. To tap these two potential markets for diversification, Sony, as part of CE behaviours, must evaluate all aspects of the value chain to determine current and potential future capacity for manufacture of non-technology products, opportunities for foreign direct investment, new marketing strategies, product launch strategies, cost analyses, and other internal activities necessary to achieve growth opportunities. True entrepreneurial behaviour and leadership would require the firm to accept risk, another component of a genuine entrepreneur, to attempt this new strategy. It would require setting a new vision for this new business unit and gaining cultural commitment through the utilisation of contemporary HR strategies and cultural development theories. By using a more transformational leadership ideology that promotes creativity, ingenuity, and free expression of brainstormed ideas, a genuine Sony entrepreneurial spirit can be cross-pollinated to prepare the business to take on this risky growth venture in a completely new market in which Sony maintains no practical experience. Some entrepreneurs are also known to be thrill-seekers and, through attempting a new market diversification opportunity, it could motivate workers and managers that the firm is heading in a correct direction which would, theoretically, build more organisational commitment and job satisfaction. The potential human capital advantages stemming from the recommended entrepreneurial strategy could be limitless for securing competitive advantage in a new market and having a dedicated and committed culture willing to adapt to a radically new market environment. References Abiko, N. (1966). Pioneering firm upsets Japan hiring: pattern broken, The Christian Science Monitor, 26 March. Baumol, W.J. (1986). Entrepreneurship and a century of growth, Journal of Business Venturing, 1(2), pp.141-145. Dawson, P.M.B. (2010). Managing Change, Creativity and Innovation. Sage. Dess, G.G., Lumpkin, G. and McKee, J.E. (1999). Linking corporate entrepreneurship to strategy, structure and process: suggested research directions, Entrepreneurship: Theory and Practice, 23(3). duGay, P., Hall, S., Janes, L., Madsen, A.K., Mackay, H. and Nequs, K. (1997). Doing cultural studies: the story of the Sony Walkman. London: Sage. Fackler, M. (2006). Cutting Sony, a corporate octopus, back to a rational size, New York Times, 29 May. Finch, B. (2006). Operations Now: Profitability, processes, performance, 2nd edn. McGraw-Hill. Gaglio, C.M. and Katz, J.A. (2001). The psychological basis for opportunity identification: entrepreneurial alertness, Small Business Economics, 16, pp.95-111. Gautam, V. and Verma, V. (1997). Corporate entrepreneurship: changing perspectives, Journal of Entrepreneurship, 6(2), pp.233-247. Hayton, J.C. (2005). Promoting corporate entrepreneurship through human resource management practices: a review of empirical research, Human Resource Management Review, 15, pp.21-41. Hirai, K. (2012). Letter to Stakeholders: operating results in fiscal year 2011, Sony Corporation. [online] Available at: http://www.sony.net/SonyInfo/IR/financial/ar/2012/message/page02.html (accessed 13 May 2014). Hisrich, R.D. and Peters, M.P. (2002). Entrepreneurship. McGraw-Hill Irwin. Ireland, R.D., Covin, J.G. and Kuratko, D.F. (2009). Conceptualising corporate entrepreneurship strategy, Entrepreneurship: Theory and Practice, 33(1), pp.19-46. Kalyanaram, G. and Gurumurthy, R. (2008). Market entry strategies: Pioneers versus late arrivals. [online] Available at: http://www.wright.edu/~tdung/entry.pdf (accessed 14 May 2014). Lohr, S. (1983). Hard hit Sony girds for a fight in the American electronics market, The New York Times, 14 August, p.A8. [online] Available at: http://www.nytimes.com/1983/08/14/business/hard-hit-sony-girds-for-a-fight-in-the-american-electronics-market.html (accessed 12 May 2014). Parfitt, B. (2014). Playstation revenues up 65 percent following PS4 launch, Sony confirms Vaio sell-off, The Market for Computer and Video Games. [online] Available at: http://www.mcvuk.com/news/read/playstation-revenues-up-65-following-ps4-launch-confirms-vaio-sell-off/0127760 (accessed 15 May 2014). Sharma, D. and Chrisman, J.J. (1999). Towards a reconciliation of the definitional issues in the field of corporate entrepreneurship, Entrepreneurship: Theory and Practice, 23(3), pp.11-27. Sony. (2012). Sony: Annual Report 2012 – Business and CSR Review. [online] Available at: http://www.sony.net/SonyInfo/IR/financial/ar/2012/common/docs/EAR.pdf (accessed 14 May 2014). Zahra, S. (1991). Predictors and financial outcomes of corporate entrepreneurship: an explorative study, Journal of Business Venturing, 6, pp.259-284. Individual Learning Summary Upon reflection of the learning process regarding entrepreneurship in the corporate setting, I learned that hierarchy-driven models tend to impede communications and flexibility that is absolutely critical to foster an entrepreneurial environment. Firms need to be without boundaries if performance is to be improved and innovations developed appropriate to achievement of strategic objectives and building competitive advantages. The example of Sony with a historical management structure that believed in the integrity and relevancy of high levels of power distance brought the firm several years of financial losses and degradation of its once-original brand identity. It was only through the breakdown of these managerial layers that Sony managed to create a new entrepreneurial spirit that created new product market opportunities (such as the PlayStation gaming console). Management that had once been accustomed to working under a command-and-control hierarchy had to adopt flexibility, a new team-working ideology, and learn new resource allocation strategies to build human capital and competitive product advantages. Therefore, the main lesson I learned is that true corporate entrepreneurship depends on having an organisational structure that facilitates internal networking, opening the doors for unguarded communications, building a communities of practice philosophy, and role modelling these behaviours through change championing and iteration of a creative vision. In situations such as Sony, this meant taking a large risk in completely redeveloping the relationship between workers and managers to achieve innovation goals. Maier and Zenovia (2011) offer that mistakes in the entrepreneurial process are unavoidable, however the payoff for successes in a new strategic initiative is more frequent employee involvement and skills development. Sony was able, through CE efforts, to build a new cohesive culture absolutely committed to achieving new goals to regain competitive advantages even in the face of extreme risk and the opportunity to make errors that could have high costs. Hence, my main learning lesson is that in the event of a radical change in how a business operates internally, a cultural redevelopment, an entrepreneur must be willing to absorb the potential risk and stay dedicated to the new initiative. My second most important lesson is that true corporate entrepreneurship behaviours must be considerate of the external market in which a business competes. Covin and Miles (1999) iterate that genuine CE needs to illustrate evidence of being proactive in relation to new product introductions into an established market that could potentially serve to disrupt competitor activities. Genuine entrepreneurs are proactive in that they seek early implementation of new and innovative administrative systems and manufacturing technologies when the goal is to attain new growth opportunities in an unfamiliar market environment. Rather than learning from experience, a risk-centric entrepreneurial organisation begins conducting evaluations of capacity of the firm, its human capital capabilities, organisational structure design, and many other strategic factors along the value chain to ensure the firm can successfully launch a future product into a new market and develop important contingency plans. Mintzberg, Ahlstrand and Lampel (1998) believe that learning is emergent, with the past providing influence in determining a future rational strategy. Though this might be true, genuine entrepreneurship seems to be more considerate of potential, future organisational responsiveness through planning processes to ensure the firm is properly equipped to react once a new product innovation has been launched. Hence, I have found that a real entrepreneur thinks strongly about the future and works to proactively align activities and operations for a risky, but beneficial future initiative. In terms of personal skills, I would require two specific competencies to enact an entrepreneurial activity in a corporation. First, I would have to learn flexibility. A rigid and unyielding manager would miss opportunities for producing creativity that is absolutely critical in an environment that relies on innovation to stay competitive, especially in highly saturated markets like that of Sony. I could apply flexibility in the corporate environment by allowing for more consensus-based leadership, allowing employees to offer their unique ideas and then actually attempting to incorporate these suggestions into operational strategy. This would build a team environment and also trust in the leader/member relationship that is so critical in a corporate environment that requires divisional inter-dependency to be successful. Secondly, I would require development of the willingness to accept risk. I am a risk-averse person by nature which is not conducive to being a true corporate entrepreneur. I tend to focus on challenges and activities from a rational and scientific approach, wanting firm quantitative justification for the potential benefits or risks of a project before launching a new initiative. This could stifle legitimate entrepreneurial behaviour in the firm. I would apply a new risk-accepting activity by actively seeking new market opportunities, such as in the diversification recommendation offered in relation to the Sony Corporation. I could also illustrate a new risk-centric attitude by allowing employees to take a more active role in decision-making and then evaluate the outcomes of this decision. Though I like, personally, to maintain high levels of control over activities, by being more accommodating and open-minded, I would likely gain new perspectives on strategies and operations from members of the organisation who are likely quite capable and knowledgeable to provide these suggestions. Quality of the leader/member exchange is critical to gaining motivation and organisational commitment (Harris, Kacmar and Witt 2005). This is the nature of a true entrepreneur: promoting better communications, being supportive of worker creativity, and championing an HR-centric environment that maximises human capital development and building better worker competencies. Through this research effort, I found that true corporate entrepreneurship and leadership are critical competencies of a manager that improve internal and externally-related advantages for a firm. My main learning as it relates to becoming more risk-centric and flexible are critical attributes in CE and must be incorporated in a corporation that is absolutely dependent on innovation production and the outperformance of ever-evolving competitive forces. References Covin, J.G. and Miles, M.P. (1999). Corporate entrepreneurship and the pursuit of competitive advantage, Entrepreneurship: Theory and Practice, 23(3). Harris, J.K., Kacmar, K.M. and Witt, A.L. (2005). An examination of the curvilinear relationship between leader-member exchange and intent to turnover, Journal of Organisational Behavior, 26, pp.363-378 Maier, V. and Zenovia, C.P. (2011). Entrepreneurship versus intrapreneurship, Review of International Comparative Management, 12(5), pp.971-976. Mintzberg, H., Ahlstrand, B. and Lampel, J. (1998). Strategy safari: a guided tour through the wilds of strategic management. London: Prentice Hall. Read More