Can Sony Compete in the Global Mobile Market - Literature review Example

Can Sony Compete In The Global Mobile Market? Introduction The global phone market consists of various multinational phone manufacturing companies that operate across the national borders. The participants of the global phone market have different objectives that enable them to operate in the market. They engage in import and export trade for inputs and outputs, which are phones and other, associated electronics. They are also involved in the foreign direct investment in the market. The companies in the market maintain the profit making objective when undertaking their business activities and they encounter a more complex environment in this context the market is more complex than their domestic markets. There is complexity in terms of law, cultures and the involved societies (Cooke et al, 2012). The problems encountered Sony Ericsson Joint Venture since its formation Sony Ericsson joint venture was formed in 2001 when Sony Electronics Company joined with Sony phone manufacturing company, forming a joint venture where both companies had a 50 percent shareholding. The aim of the joint venture was to combine the expertise of Sony electronics with the technological leadership of Ericsson as well as to enjoy its large market share. It aimed at placing itself as the most innovative in the mobile phone industry. The failure to achieve this aim was due to a number of problems that the that the joint venture encountered and the first problem is the difference in company culture between the two companies. Sony was a company with a Japanese origin while Ericsson was a Swedish company. The joint venture encountered difficulty in understanding the management cultures that resulted from Ericsson and those that resulted from Sony. This caused trust issues based on characters between the managers of the two joint ventures. The cultural differences also resulted to delays in releasing the new phones at the time when the operations of the joint venture were starting. The delay was also caused by the reliance of technological partners who were from different cultural backgrounds. This resulted to failure of the company in achieving maximum earnings since the delay affected the sales level (Bengtsson, 2007). The supply chain for the joint venture as well ended up being inefficient and this caused an increase in the level of transaction costs, which are the costs involved in the exchange of property in the market as well as service and material costs. The joint venture therefore lacked a global matrix strategy that would combine the transactions of the two companies to ensure that they operate as a single unit therefore minimizing the possible transaction costs. It then ended up imposing prices that were above average and this resulted to their loss of market share and ended up making losses. Sony Ericsson also underwent various product line-ups that were not even and experienced difficulty trying to unify the two product lines. This happened at the start of the joint venture when both companies had different views on how they wanted to design their phones. (Collaboration in the Australian and Chinese Mobile Telecommunication Markets, 2014).This resulted to overlapping of the products by the two companies, which were expected to carry out their operations as a single entity. The problem with the supply system resulted to another problem of delaying the shipment of the phones. The joint venture experienced a problem of meeting schedules of deliveries and the efforts by the joint venture’s CEO to clear the situation were not sufficient. It experienced difficulties to the extent that it could not meet some segments’ market needs and these segments include the American market and other parts where unavailability of the mobile phones was reported. This therefore signified its poor performance in these regions (Hakkarainen, 2010). The joint venture also experienced the problem of profits’ downturn and slow rate of growth. This is as a result of the inefficient strategies that it was using in the market and that did not fit the operation in the global market. It lacked decision-making strategies that could facilitate its operations and therefore experienced various threats and weaknesses. The weaknesses include unstable supply and poor labour relations while the threats include strong competition from other operators in the market and regional disparities. This led to the joint venture’s failure of attaining a competitive advantage since they could not provide quality products that would enable them to win a large market share. They therefore ended up losing their customers to other companies like Samsung that would ensure timely delivery of the quality service mobile phones at fair prices. It therefore lacked the appropriate strategy of dealing with competition from the other phone-producing firms since it experienced internal pressures. These pressures resulted from the different views held by the management team. This also hindered it from conducting a market analysis to determine the preferences of different segments in the market. The internal pressures also prevented the joint venture from attaining a competitive advantage since it could not work as a single entity to determine its capabilities (Schonberger, 2008). Another problem that Sony Ericsson joint venture encountered is the problem of compatibility, which occurred at the point of implementation of the joint venture. This resulted from the problem of cultural difference and this resulted to difficulty in combining the operations of the two parties. Sony and Ericson continued holding their formational differences and this increased the complexity of their operations. This further resulted to lack of commitment, which hindered them from meeting the desired goals (Harrison, 2013). They also encountered difficulty in measuring the success of their performance and outcomes. It was difficult to decide whether the appropriate measure of measuring performance was financial performance, technological success or in terms of the share of the market attained. The joint venture also encountered the problem of not extending the distribution networks to new areas, as was the aim for joining. The two parties who are Sony and Erickson could not access the larger market shares they had desired and could not attain the desired cost reduction. It also failed to benefit from the companies in terms of merging their technologies to attain a better quality. It also failed to benefit from the core competencies of the two companies and failed to attain synergy. This is because the joint venture could not be able to efficiently pool the knowledge, resources and skills that resulted from the two companies and work together to meet the goals. It could also not be able to achieve risk sharing for the risks that are prevalent in the global market for mobile phones and could also not attain control over the supply chain (Singh, 2011). Whether taking over the joint venture will enable Sony to achieve competitive advantage Sony’s decision to take over Sony Ericsson joint venture, by buying the shares held by Erickson is aimed at ensuring that the problems experienced in the operation of the joint venture are eliminated. The first problem that will be eliminated by this decision is the problem that is majorly affects the joint venture and which results to all the other problems that are encountered. This is the problem of cultural difference. It Sony takes over the joint venture, it will ensure that the existing management is not based by cultural differences that result to different management decisions for the same entity (Needle, 2004). It will also ensure that decision-making process is made easy and quicker since fewer parties will need to be consulted in times of making the decisions. It will also be able to ensure that teamwork is achieved and all the employees work towards the achievement of the set goals. The taking over will also ensure that the other problems associated with cultural differences are eliminated. These include compatibility and commitment. This will ensure that the combination of activities from both companies is made easy, ensuring the absence of any opposing party and enhancing that all activities are aimed at achievement of goals. It will also ease the ability of measuring performance and the outcome achieved (Williamson et al, 2013). The take- over will also ensure that the inefficiency in the supply chain is eliminated and that Sony attains an efficient supply chain that ensures that the company is able to meet the needs of its customers. It will also be able to ensure timely delivery to the customers and will also be able to use the most efficient technology. This will further ensure that the company operates at minimal transaction costs and therefore being able to sell the mobile phones at affordable prices and at the same time being able to achieve higher sales level (Temporal, 2010). It will as a result of the higher sales level, be able to attain higher profitability and will also be able to achieve a greater market share. With elimination of these problems, the company will be able to work towards the attainment of a competitive advantage. The first step towards the attainment of this will be to develop strategies that will enable it to develop strategies that will be suitable to survive the competition in the market. Competition is the rivalry that hinders companies in the global market to fail to attain competitive advantage. With elimination of the problems, Sony will be able to analyze the operation of other firms in the global phone market and will be able to know the issues such as the number of existing firms in the mobile phones industry, cost structures and other factors that are likely to enable it to perform better than the competitors are (Czinkota, 2007). The next step will require the company to design its brand in the best way possible and utilizing the resources available. Prior to this, the company will need to conduct a market research and analysis, in order to determine the kind of mobile phones that the consumer want an the specifications that they want on these phones. It will then conduct an analysis to determine what the market want, and has not yet been achieved by the competitors. Using this information, the company will therefore be able to make decision concerning what material will be required to meet the market requirement (Luo, 2002). It will then need to conduct a research to determine the appropriate supplier of the material and will need to establish the best technology to use to meet this specification. It will need to determine whether the available technology will be appropriate or whether a new technology will be required. It will then be required to decide on whether to purchase or outsource the required technology and this will depend on the cost that will be involved in both alternatives. Depending of the preferred alternative, the company will then be required to design its brand in a way that the demands of the market will be met. The next step will involve marketing the brand to various sections of the market using the most effective medium (Doole & Lowe, 2008). The company will therefore be able to attain competitive advantage if it is able to deliver and utilize a special capability or to use a special material in meeting the market demand. This will require innovativeness and will require that its product is differentiated from those of the competitors and that it appears to unique (Harrigan, 2003). The company will need to use a special material or technology that the competitors do not have access to. Thus will enable the company to meet the demand of the market in a way that other competitors have not been able to meet. Sustainable competitive advantage will therefore be achieved by how valuable the special resource or the capability of producing the product is. The type of the resource should be one that is value adding and that has the ability of making the produced product unique. It should be also rare in that it should not be readily accessible by the competitors. The resource or the production method should be unique and should not be easy to imitate in the face of competitors. Conclusion In conclusion, Sony Ericsson encountered many problems when operating as a joint venture in the global mobile phone market. These problems are based on a major problem of cultural differences that exist between the two parties to the joint venture. To eliminate these problems therefore, the takeover of the joint venture by Sony will be appropriate and will lead to the attainment of a competitive advantage in the global mobile phone market. Reference list Harrison, A. L. (2013). Business environment in a global context. Needle, D. (2010). Business in context: An introduction to business and its environment. Andover: South-Western Cengage Learning. Needle, D. (2004). Business in context: An introduction to business and its environment. London: Thomson. Harrigan, K. R. (2003). Joint ventures, alliances, and corporate strategy. Washington, D.C: Beard Books. Cooke, ., Parrilli, M. D., & Curbelo, J. L. (2012). Innovation, global change and territorial resilience. Cheltenham: Edward Elgar. Temporal, P. (2010). Advanced brand management: Managing brands in a changing world. Singapore: John Wiley & Sons (Asia. 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Multinational enterprises in emerging markets. Copenhagen [u.a.: Copenhagen Business School Press. Read More