Strategy Being Adopted by Sony to Regain Lost Market Share - Case Study Example

Strategy Being Adopted By Sony to Regain Lost Market Share Sony Corporation has been faced with serious financial problems several times in its history. However, this is one of the corporations that have managed to withstand various crises, since its establishment in 1946. There was an initial attempt to restructure in 1983, several attempts in the 1990s, and in 2003 and 2005. These were meant to achieve various objectives, but the key purpose to adjust itself to face emerging challenges and remain relevant amidst ever increasing competition. However, in spite of the multiple attempts, problems have persisted and it has never been a smooth ride for the giant Japanese Corporation (Chang, 2008). The corporation has been hugely successful in the initial years, and experienced an immense growth. However, intense competition in the mid-90s forced the company to re-evaluate its structure in order to remain competitive and relevant. In 1994, the corporation started restructuring to with the aim of improving financial performance and competitiveness in the industry. This did not yield much result. In 2000, the corporation decided to restructure its top management. This was in a bid to create better administrative structures, as well as initiating new talents and skills into the management. However, this too failed to put the giant corporation into a growth track and thus another restructuring was needed. This time the company acquired a non-Japanese CEO, who came in and initiated numerous reforms in the year 2005. During the period between 2000 and 2001, there was a significant slowdown in the IT industry, on which the corporation has based its products. This resulted to a major decline in computer sales, and the company had to take action to counter this decline in sales. With this, the company started in investing in broadband networks solutions. The restructuring initiated by the new CEO from 2005 were partially successful. By the end of the financial years in 2007 and 2008, the efforts were beginning to bear fruits as evidenced by an increase in profits. However, the profits dipped again in the year 2008, and this time, the company was in a deep financial crisis. The February 2009 report showed that it had made a loss of ¥ 98.9 billion. This was staggering, although it could partly be explained by the onset of the global economic recession especially in the United States. A new restructuring process was then initiated. This time round, the reorganisation led to the formation of two business groups: The Networked Products and Services Group, and the New Consumer Products Group. Sony aimed to achieve environmentally conscious products, as well as development of new markets. It also wanted to have a leaner organisation which would be easier to manage and highly responsive to the market and consumer needs. In addition, the management aimed at increasing profitability, accelerating the rate of growth and innovation, as well as optimizing business process. This was the lifeline that would stir the company to awaken and compete effectively in the current competitive environment. Although there were restructuring efforts, Sony still remained much bloated, with far too many employees. The step taken of laying down five per cent of the employees was in the positive direction, but it was not sufficient since the Corporation is remarkably big. The reason why many companies have risen to be bigger than Sony, within a extremely short time, is their lean structure and efficient management system. This is what has propelled start-ups like Google and Apple. In addition, traditional Japanese corporations such as Toyota have been remarkably successful for a long time, based on their efficient and lean structures that they have maintained. The way to success for the Company was to break itself into multiple units that can be managed efficiently. This is of primary importance because the corporation product mix is so diverse, that many products are totally different from each other. These could easily be managed independently and allow a room for innovation. However, the management still kept a tight grip of the whole process. The troubles facing Sony were also aggravated by the lack of adopting new technologies and lack of interdepartmental involvement. The corporation was not dynamic enough to embrace the Internet and web based technologies, an area where new firms capitalized in and reaped immense profits. It was almost too late when Sony started to embrace these fully. In another field, the company kept it products distinct from each other, when the competitors were merging their products to ensure competitiveness. They kept the mobile phones separated from cameras while the whole world was going for phones that are integrated with cameras. The current position of Sony is not easy to turn around, now that it has been making losses since 1998. However, the technology industry is highly dynamic and provides an easy chance for rebound. What is necessary at the moment is for the company to carry out complete overhaul and reinvent itself, ready to fight for its top position. SWOT Analysis Strengths Sony has an immense ability to manufacture high quality products that meet the consumer satisfaction. This is what has maintained the demand for its products soaring. The corporation also enjoys god reputation from the consumers, making it easy to launch new products and penetrate new markets. Also, the corporation has experienced several failures, which have turned out to be a learning opportunity for its developers and engineers. Sony also has a capacity to expand and diversify in new products, since also the company enjoy strong brand equity among consumers worldwide. Weaknesses The company has been experienced losses in several of its products, while there is a general slowdown in the sake of its products in general. There also seems to be a lack in unified direction for the company, since it is trying to expand and diversify in almost all directions. This denies the company a chance to focus and concentrate on a few products or a limited portfolio. Also, the products seemed to be promoting different brands such as Wega, instead of brand Sony. There also seems to be a lack of coordination between various departments in the company, leading to reduced productivity. Opportunities The engineering department has been growing, promising more vibrant products as new talents join. The company produces authentic products that are not just in response to competitors’ products, hence high reputation. There are several aggressive marketing techniques that have been employed by the company, which have proved to be attractive to new customers. There is also almost unlimited opportunity for expansion outside the United States and Japan (Frisch, 2004). Threats Sony’s competitors are extremely powerful, and many are specialized in a limited product mix thus giving them an enormous competitive edge. There is also an increase in counterfeit products that sell as Sony’s, greatly eating into their market and damaging the company’s reputation. The lack of direction strategy in the company makes their focused competitors be more effective. The field is also highly dynamic, which is advantageous for the competitors who have a simpler product mix. The Feasibility of Applying Porter’s Diamond Model on Sony Case The Porter’s diamond model focuses on various aspects such as factor conditions, demand conditions, related and supported industries, government, chance and firm strategy, structure and rivalry. In terms of factor conditions, Sony enjoys immense human, physical, knowledge, capital resources and infrastructure. This is because the company has been in operation for long and has had a chance to develop all these. The technology industry is also unique and extremely dynamic; hence, it requires specialized resource, which Sony has acquired with time. The corporation therefore has a competitive advantage in terms of this. Demand conditions keep changing and varying with time. The nature of technology industry is that there are different types of consumers; the early adopter who are so enthusiastic in adopting new products and the late adopters who often follow later. These two groups create different types of demand and are a crucial driving force. The demand for better, more advanced products makes Sony strive to keep ahead and invest in research and development to enable it satisfy the consumer needs. The corporation is chiefly located in Japan and USA, although there are various factories and production units in different parts of the world. The respective governments have been extremely supportive in every stage. Governments appreciate the role played by the company in terms of tax returns and other direct benefits to the economy. The governments will thus be highly supportive. In Japan, the government is usually committed to supporting innovations and industries. This is why many large corporations have developed from Japan, such as Sony, Toyota, Nissan and Hitachi. The related and supporting industry play a prominent role. They provide the stimulus for invention and innovation. They provide a platform for incubating innovations so that the company can adopt them, and they also provide the necessary competition to keep the company on an invention mode. They also promote the production of supportive technologies, which Sony relies on for its operation. There are also occurrences outside the company’s control that must be considered and adversely affect the company. Many products succeed depending on the consumer tastes, and it is difficult to know if they will pick up. The industry is not particularly predictable and thus, there are very many unpredictable factors that come into play. This is also crucial when the company is launching new products or expanding to new markets. By carefully studying and analysing these factors, Sony can learn valuable lessons and apply them to promote its growth. These will apply differently for each product since most of Sony’s products are remarkably different from each other and each product demands a different approach. However, these are not exhaustive, and the most noteworthy thing that the company should focus on is a research and different. This is usually expensive in the technology industry, but the results are usually very beneficial. References Chang, S. 2008. Sony vs. Samsung: the inside story of the electronics giants' battle for global supremacy. Singapore: Wiley. Frisch, A. 2004. The Story of Sony. North Mankato, Minn.: Smart Apple Media. Sony cuts staff in restructure. 1999, March 15. Electronics Times, 36, 77-81. Read More