Strategic Business Analysis - Book Report/Review Example

Executive Summary. In management, strategy is a unified, comprehensive, and integrated plan….designed to ensure that the basic objectives of the enterprise are achieved. This study has been done with respect to Sony, the current market leader of the electronics market. Using the PESTLE framework to see the position of Sony vis-à-vis environmental factors we see that the company is affected by political, economic socio-cultural, technological and legal factors. This is so because like any other business it doest operate in isolation. It is part of the mega-environment. The SWOT analysis reveals the position of Sony with respect to the competitors and those forces outlined under the PESTLE framework. An analysis shows that, the company with it current global position, investment in technology, research, human know-how and goodwill the company is better place to faced the above challenges. The five forces framework went further to confirm these strengths with respect to Sony’s value chain. In all, being successful involves turning threats into opportunities and opportunities into strength Table of Contents 1.1 Introduction……………………………………………………… 1.1.1 Sony…………………………………………………………. 1.2 Sony and the SWOT or TOWS Metric………………………….. 1.3 SONY and the PESTLE Framework…………………………….. 1.3.A Environment……………………………………………………. 1.3.B Political…………………………………………………………. 1.3.C Economic……………………………………………………….. 1.3.D Legal & Social………………………………………………….. 1.3.E Technological…………………………………………………… 1.4 SONY Distinctive Capabilities and Porters five forces framework 1.5 Conclusion………………………………………………………… List of Figures Figure 1 The Swot Analysis…………………………………………… Figure 2 The Pestle Framework……………………………………….. Figure 3 Distinctive Capabilities………………………………………. Figure 4 Porters five forces framework………………………………… Course Title: Strategic Business Analysis Analytical and critical Evaluation of the impact of the Current Business Environment The case of SONY By: November, 2007 1.1 Introduction Strategy To almost anyone you turn to, strategy is a course of action, it is a plan or a way of doing things unique to a particular organisation or identical to other organisations. It is some sort of consciously intended guidelines to deal with a situation1. In management, however “strategy is a unified, comprehensive, and integrated plan….designed to ensure that the basic objectives of the enterprise are achieved”2.As the quest for market segmentation, market shares continue organisation are constantly developing new strategies, new product. Strategy in the respect of an organisation is to what personality is to an individual. We hear of companies talking of entering a new market, launching a new product, doing market restructuring and positioning, closing a line of business. These are all intended strategies. Today, strategy is not only common to business, but has become universal field. The concept has readily been use and quite common in the military, anthropology and by sociologist. The military refers to it as the “grand strategy”, the Anthropologist, “the culture” and the sociologist “the ideology”3. Strategy is war. We see battle words everywhere in business: Japan bashing, corporate raiders, hostile takeovers, cola wars. Strategy is all about war. With the advent of events, ordinary business executive fancy themselves as warriors. Aggressively attacking weak companies, and defending market shares4. 1.1.1 Sony Sony is a current market leader in the electronics business. The headquarter is in Japan and as at 31st of March 2007, it had about 163000 employees. The Sony Group is primarily focused on the Electronics (such as AV/IT products & components), Game (such as PlayStation), Entertainment (such as motion pictures and music), and Financial Services (such as insurance and banking) sectors. Not only do we represent a wide range of businesses, but we remain globally unique. Our aim is to fully leverage this uniqueness in aggressively carrying out our convergence strategy so that we can continue to emotionally touch and excite our customers5. Upon this background, this paper is aim at carrying a strategic analysis of Sony using the SWOT, PESTLE, Porters competitive framework. Upon this background, suitable recommendations will be made. 1.2 Sony and the SWOT or TOWS Metric 2 Sony PLC and SWOT Analysis Strengths Better Value, in the form of lower prices. Continuous product improvement and wider brands. Superior Locations Better physical appearance of the products due to aesthetic features. Good will, larger market share Maximizations of the four Ps of Marketing at all front. High capital and a pool of reserves, and cheap credit facility offered to some items. The Employees, 163000, and many stores around the world. cheaper, better products and providing more choice Most of its brand are millions sellers. Best overall benefits package in the industry charitable giving and community-based education programmes Management is dynamic with a clear vision. Long term relationship with suppliers and partners Cost Leader, effective use of integrated marketing concept Opportunities A pool of cheap credit facilities The US is an open economy welcoming all sorts of businesses. Is still the land of opportunity? China is a big trading partner with a growing market, an alternative and better source of cheaper items through outsourcing The impact of has not been felt in all the states. Many small groceries stores are closing down. The growing pool of technology. The heavy investment on Research and Development (R&D) government Fall of the US Dollars, will mean cheaper operational cost within the US. The world becoming a global village an indication of weakening trade barriers Inferior product and product position of competitors Threats Increase in Anti Environmental campaign over the last 5 years Loyalty of some consumers to old established competitors The likelihood of terror attack of some SONY locations in the US, and the world at large. Natural disaster such as the hurricanes, tornadoes, tsunamis, are now on the rise Exclusive rights enjoyed by competitors with some suppliers Difficulties finding their own suppliers, or owning their own farms. The rapid fall of the value of the US dollar Weaknesses Some dissatisfied customers Sole right to some products by competitors Key Niche players The lack and absence of unique product with total differentiation from those of competitors. The lack of ownership of exclusive patents. Dropped and sold of many products that have not delivered reasonable profits Some markets in Europe have been difficult to penetrate 1.3 SONY and the PESTLE Framework Johnson et al (2006) states that the PESTEL framework is a framework that can be used to categorise the factors that influence the business environment of an organisation into six main types including: Political Influences, Economic influences, Technological influences, Social Influences, Environmental influences, and Legal influences. Figure 1 below presents a layout of the PESTEL framework according to Johnson et al (2006). Figure 2: LAYOUT OF THE PESTEL FRAMEWORK The PESTEL framework can only be used to evaluate the future impact of environmental factors and how this impact might be different from the past. Thus an understanding of how the factors in the above framework may drive change is only a starting point6.There is a need for an understanding of the key change drivers as explained below A) Environment The past two decades have witnessed a rapid change on the global climate. Today there is an increase call for organisations to pay more attention on their activities, be more socially responsible, environmental friendly, the need for recycling actions. These are major environmental problems affecting my client Sony. With rapid increase in drought, earthquakes and floods over the last two years, the management of Sony needs to remain more cautious. B) Political Under political the Sony will be affected by taxation, social and welfare policies. Consumer’s income is dependent on government taxation policies, it is evident that take home income might either increase or reduce depending on the taxation policies adopted by the government at anyone time. In addition, government spending is greatly affected by its taxation policy. What is the budget situation of the various countries Sony is operating in? Whats their position with the war on terror, Iran, and Iraq?. All these are potential threat C) Economic Under this factor, it is quite evident to deduce that, no business operates in isolation. Trends in the economy as a whole such as the falling dollar, the rising cost of debt, budget deficit, rising consumers income, Gross national product etc are factors that will affect Sony in one way or the other. A fall in government personal income taxes will mean increase in disposable income, directly this will mean more income to spend on Sony’s product. D) Legal & Social Factors The government of each country acts like a central referee to institute fare play. Laws on employment, health and safety and product safety laws will have potential impacts on the activities of Sony. This is so because, the product must be certified certified, and must abide at anyone to both local and global laws. This should not be neglected at any onetime. Under social factors, Sony future survival is dependent on the population, goods are not produced for fun and neither is Sony a charity. Changes in population, income will highly affect it activities subsequently. D) Technological Technology has traditionally been the major backbone and catalyst for innovation development, society’s advancement and countries economic growth. No wonder, companies, individuals and countries must constantly response to change and current technology if the pace of competition must be maintained, or pertinent problem solved7. My client is operating in a highly technological industry, and being a pace setter must champion new innovation. 1.4 SONY Distinctive Capabilities and Porters five forces framework In a competitive industry, fighting for market shares is unbridled and entry to the industry quite easy. In this industry, the prospect for long run profitability is slim. The weaker the forces collectively, the greater the opportunity of superior performance8. Capabilities in an organisation usually mean the skills embedded in a companys people, processes, and institutional knowledge. Distinctive competencies allow growth companies not only to make more money from existing businesses but also to extract greater value from new opportunities9. Figure 3 Distintive Capabilities Privilege Assets Growth enabling skills Sony existing knowledge and information of customers can be critical in managing sales. The name Sony is a strong brand name. Sony can extend its corporate reputation launch new product, quickly gain market share without threatening the credibility of the current business. Their existing network of suppliers and other stakeholders (Distribution network) can be used to increase sales of its existing product or reduced cost of a new product launch, and maximize when entering other markets. Maximizing this bundle of distinctive capabilities, Sony has the best chance to remain global winner10. Figure 4. Sony and Porters five forces framework As consumers keep changing taste and preferences, competition in the electronic industry is further made fierce. The quest for cost leadership and product differentiation continue. The electronic industry is characterised by price war, locations, segmentation and differentiation. Customers keep switching from one brand to the other as the major competitors strive to win their loyalty. In a competitive market, there is free entry and exit, thus making the threat of new entrants to be very high. This framework was originally developed by Porter as a way of assessing the profit potentials in an industry. It can help in identifying the sources of competition in an industry or sector”11. 1.5 Conclusion This study was initiated to analyse the impact of environmental factors on the activities of a business. While attention was paid to environmental factors, other components, priority was paid to key change drivers. In the course of the analysis there is evidence that Sony like any other company is not operating in isolation. It activities are affected by almost all the factors outlined in the index/ framework. However, withs it distinctive capabilities and market positioning, it will remain a global player in the electronics market. BILIOGRAPHY Charles W.L.Hill. (2007). International Business. Competing in the global Marketplace. McGraw Hill, International edition Krugman, P. R. and Obstfeld, M. (2006), International Economics: Theory and Policy, Pearson Mintzberg H et al (2003). The Strategy Process Concepts Contexts and Cases. Pearson Education, Pearson Education Ltd. Porter, M. E. (1998), The Competitive Advantage of Nations, The Free Press Porter, M. E. (2004), Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press . White. D.C., Stephen. C. & Baghai. A.M., (1999). Turning Capabilities into Advantages. The McKinsey Quarterly, No. 1, 1999 Read More