Strategy Analysis of Sony Corporation - Example

Strategy Analysis of Sony Corporation Strategy Analysis of Sony Corporation The purpose of this paper is to understand and evaluate Sony’s strategic planning and the entire process. For this purpose we plan to make use of some evaluation tools for insight into the Sony’s strategic direction. We will critically evaluate Sony’s strategic planning with the help of these tools within the context of its competitions, environmental factors, organizational structure, coordination and control system. Next, we will briefly discuss the process of change management and innovation and its implementation at Sony followed by an analysis of Sony’s culture and its impacts on the organizational strategy. Introduction Sony Corporation has been a pioneer in electronic goods successfully during the past several decades. Making use of their innovation and strengths, Sony has been one of the top multibillion and multinational electronic company. The product range of Sony varies from transistor radio, the VTR, the Trinitron and a lot more. Companies like Sony have set examples for many other companies in the market in the same industry to benchmark their strategic planning process. But, due to the recent recession and slowdown of the international business market, the appreciation of yen and the decline of the Japanese stock market have made the management of Sony realize to re-evaluate their business strategies and approach. This paper critically evaluates how different factors affect and contribute in the strategic planning process of the case company. Sony Corporation Sony is an international firm with major business in the area of movies, electronics, video games and finance. This is a Japan based firm and is considered to be one of the largest media multinational with revenue of $89.6 billion in fiscal year 2010-2011 (Sony, 2010). Sony is a well reputed and famous brand of consumer electronic items and the key products include Cyber shot digital cameras, Bravia LCD TVs and VAIO computers. According to the (Sony Global - News Release, 2010), these products constitute around 65% of operating and sales revenue for the company. The three largest markets for Sony are Europe, Japan and USA with operating revenue of 26%, 24.5% and 22.3% respectively. Sony is a leader in innovation and is still among the top 10 most innovative firms of the world according to (ZDNet, 2013) Sony has led the industry with its high quality products and innovative technologies. Sony has proved that the company is capable of capturing imaginations and improving people’s lives by making use of the cutting edge technologies. Business Strategy The core business strategy of Sony is to be the leading provider of consumer electronics and entertainment in the whole world. In order to achieve that, Sony constantly tries to retain their market share in developed markets by using their innovative technologies. Not only this, they have constant attempts of entering into the emerging markets by introducing their new products in order to not only increase their sales but also gain a larger market share. Sony’s SWOT Analysis Strengths Ability of producing innovative Products Sony’s innovation in its product range has become an inseparable part of their organizational culture. Beginning with the first ever magnetic tape and a tape recorder back in late 50s, to transistor radios in 95 and the world’s first transistor TV set to a lot more. Ability to succeed in different markets Sony has successfully made a mark in various markets. The company has undoubtedly made an impact in the PC, video games and television markets. Fast Growth Sony has been ranked among the top 10 fastest growing companies worldwide for the year 08/09 (GUILHAMET, 1995, p.145) M2M Monitoring Technology Sony has an advanced set of service solutions making use of the famous machine to machine (M2M) monitoring technology remotely. This service enables to continuously monitor and manage the various components of the production cycle in a cost-effective way. Weaknesses Expensive Products According to different surveys the products by Sony are 20-30% higher in price as compared to the same goods from different manufacturers. Due to this, many people in the developing nations cannot afford the products. As a result of which Sony loses quite a number of potential customers of developing nations. Inefficient Supply chain There have been attempts by Sony to reduce the gaps between technological companies like Apple and Amazon, which make use of internet services. The reason behind this strategy is to let them improve their electronics like digital music players. But, due to heavy operating costs the supply chain of Sony is not efficient enough because of which Sony is missing am important market segment and unable to reduce the gap. Opportunities Complementary Products and Services It can be considered an important opportunity for Sony to sell their complementary products in already saturated markets like Japan and USA whereas standard products in emerging markets like India, China and Latin America. Innovative Design In order to differentiate their products Sony can make use of their user-friendly applications, attractive visual appearance and innovative materials for their products New Technologies Making use of the new technologies in the field of electronics can really be an opportunity for Sony. For example 3D TV technologies that use the technique of splitting a single image by mirrors, unlike the usual applications which make use of 2 cameras to produce the 3D effect. Threats New Entrants The shift in technology from analogue to digital has made it easier for the new companies to enter the market. The reason is that concentrated semiconductors have replaced complicated functionality and it is now easier to develop and manufacture if compared to older technologies. Emerging Markets Political instability and uncertain economic conditions in emerging markets like Russia, China and India are more of a threat instead of the developed American or European markets. Analysis of Organizational Design and Structure With continuous success and growth in the market, Sony has developed the strategic business unit (SBU) multi-divisional structure in order to assist the implementation of its diversification strategy. Sony’s corporate level strategy (SBU) consists of 3 levels which include the corporate headquarters, Strategic Business units and the SBU divisions. (MALLIN, 2006, p256) Sony is divided broadly into 6 SBUs, each of them are further divided into smaller business units called divisions. The 6 SBUs are: electronics, video games, music, pictures, finance services and communications network. Each division within the SBU is related with each other in terms of markets, shared products or both. Sony’s headquarters manages strategic and financial controls over its SBU. The advantage of the SBU structure at Sony is that it allows the company to manage the diversifications demands effectively. However, there is also a drawback to this kind of structure at Sony. If there is a need for coordination between the different SBUs, issues arise due to the SBU structure and the teams are not comfortable in cooperating with each other for a common task. In order to promote the cooperation between different SBUs, Sony should establish associated roles in each division; increase the frequency of contact between the different SBU Managers. In order to ensure the implementation of a successful organizational structure, the performance of the divisional managers should be evaluated on a regular basis in terms of their cooperation in inter-divisional efforts. The reward system at Sony should also include the overall performance of the company instead of only emphasizing on the individual divisions’ performance. This would help them to overcome the communication issues that arise due to their strategic business units’ implementation. In order to successfully manage and operate global operations, Sony ensures that there should be a match between the organizational structure and their international business strategies. For this purpose, Sony uses the worldwide product divisional structure for international operations. This allows the company to achieve the economies of scale and economies of scope on an international level. Sony makes use of outsourcing when pursuing economies of scale which allows the company to control the cost effectively. However, there are also challenges faced by Sony in their global strategy like there is a difficulty faced in cases which require immediate response to local needs due to their worldwide structure combination. Analysis of the Technological Resources Sony has been the pioneer in various areas of product development like the Trinitron, the Betamax, the Walkman, the Compact Disc, the Camcorder, the Minidisc, the PlayStation (PS) and the robot dog Aibo. Some of these creations from Sony have created their own markets worldwide. Sony has been also involved in patents for its revolutionary innovations including Walkman and video tape “beta video format” From a technological perspective, Sony is quite advanced in producing high quality consumer electronics as compared to its competitors. For example, the PS2 by Sony offers the consumers a substantial jump in versatility and performance with its new set of features like graphics synthesizer and emotion energy, hence making it possible for efforts like clothes fluttering with the wind and facial expressions. Sony has also marked itself in the picture quality and TV design. In short, Sony has the key strength to make use of modern technologies in its products which makes it different from its competitors. As a result, not only premium quality innovative products are produced but also there is a tremendous growth in terms of sales and revenues. Sony’s PEST Analysis Political Tariff reduction in European Market The imports and exports of Sony Corporation will be affected directly due to reduction in tariff in European countries. Hence, there would be a need to modify the price as a result of this policy. Emerging markets The uncertainty in legal and regulatory factors like political instability and potential conflicts of developing nations may affect business. Economic Products The products of Sony are relatively expensive so a lot of people in developing nations cannot afford to buy them Uncertainty The economic situation in the developing nations may get worse which would directly affect future earnings. Foreign Exchange The fluctuations in the rate f foreign exchange can have an effect on revenue since a larger portion of Sony’s sales is in currencies other than yen. Social Customer Preferences In today’s competitive global markets, there are some regions where customers’ preferences and needs are becoming similar.(SCHVANEVELDT, 2003, p45) Since electronic goods are standardized products hence cultural differences do not have an impact on the sales of Sony and they can sell anywhere without and significant modifications in their products. Technological Advanced technology Making use of advanced technology in order to gain sustainability and competitive advantage in the market is a key issue in today’s corporate world (GARUD, 2011, p97-99). Sony realizes that highly innovative products are not easy to copy and are useful in leading the market hence, the company invests more and more to improve its research and development. Analysis of Sony’s Organizational Culture As the company is growing more and more there is a path paved by the CEO and the top management for the diversity of the culture at international level. Each of the subsidiaries that operate under the umbrella of Sony works under their own cultural and traditional standards according to their region. There are both formal and informal kind of communication channel used among the employees of different levels to communicate with their seniors and subordinates. There exists a properly defined organizational hierarchy in terms of designations and there are well defined roles and responsibilities for every designation. The juniors are trained adequately and all the employees are evaluated for their performance on a regular basis. The usual fulfilment of day to day responsibilities within the organizational level is handled by the regional management of the subsidiary. Hence, overall the company’s culture is not a hindrance in its growth and sustainability rather has contributed effectively over the past years. Analysis of Innovation and Change Management at Sony Innovation is one of the key factors that have contributed to the sustainability and growth of the company. This is evident that the management at Sony Corporation has always paid special attention to the innovation processes. Every year around 6% of the sales revenue is budgeted for the research and development process of the company. Every engineer at Sony believed in innovative ideas for product designing, development and implementation. Not only the physical appearance of the products have been innovated and developed but also the core technologies and the underlying infrastructure have been paid special attention to. This is the reason why Sony is the pioneer of many products like the walkman, Play Station, Compact disc and many others. Innovation at Sony Corporation has been divided into two broad categories: Strategy innovation and Product Innovation which are related to process and product respectively. Strategy Innovation includes the flexibility of focus areas, strategically managing R&D activities, dynamic investment in R&D activities and creating new markets. The flexible focus areas for Sony are networked services and products, achieving competitive advantage through differentiated technologies, focus on 3D world and finding out emerging markets. Sony’s product innovation includes both radical and incremental innovations which are protected by patents. Sony maintains its old digital vision market so the new inventions are related highly to the mature products. It is due to this fact that Sony moves faster than its competitors because it is more fruitful to improve an already mature product instead of designing it from the scratch. An example of Sony’s incremental innovation can be that Sony pioneered the technology of miniaturization for the creation of an entirely new class of consumer electronics like radios, cassettes, CD players and recorders. Sony’s walkman is an example of radical innovation in order to access the previous non-consumers. Sony’s main product innovation challenges include retaining existing market share in the global market, continue leading the electric and electronic market and compete with companies like Apple, Sharp and Samsung etc. Bibliography BBC NEWS | Technology | Sony shows off 3D TV technology. 2013. BBC NEWS | Technology | Sony shows off 3D TV technology. [ONLINE] Available at: http://news.bbc.co.uk/2/hi/technology/8285187.stm. [Accessed 14 January 2013]. GARUD, R., GEHMAN, J., & KUMARASWAMY, A. (2011). Complexity Arrangements for Sustained Innovation: Lessons from 3M Corporation. Organization Studies. 32, 737-767. GUILHAMET, R., & FREEZE, K. J. (1995). Sony Corporation: the Walkman WM-109 : executive summary case study. Boston, Design Management Institute. MALLIN, C. A. (2006). International corporate governance: a case study approach. Cheltenham, UK, Edward Elgar Pub. SCHVANEVELDT, S. J. 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