Sony's Compony Annual - Report Example

Analysis of the Sonys annual report Contents Executive Summary 3 Introduction 3 Decision-making process at Sony: factors and decisions 4 Management of decision-making process as CEO 5 Analysis and consideration of consumer electronics industry 7 Application of forecasting models in case of Sony 8 Conclusion 9 Works Cited 10 Executive Summary The paper deals with the various factors that are responsible for influencing the decision making aspect of the Sony’s management in international context as found from the annual reports of the company for the year 2013. The various factors that have been studied in this case are the costs incurred per unit of the product and service offered. The factors also include the determination of feasibility of investment so that the investments provide optimum returns to the business. The various aspects of decision making that are influenced by these factors have also been explained in the context of Sony. The analysis of the industry has also been explained as important factors that influenced the decision making of the management. The paper also includes the use of a forecasting model to determine the effectives of the decision making of the management of Sony. Introduction The case on Sony Corporation deals with the various factors that have been taken into consideration by the management in order to take effective decisions for the growth of their business in the areas of consumer electronics, entertainment, financial services, etc. The decisions taken by the management have been aimed to create the required momentum to revive the dip in sales revenues and operating profits earned in 2012. The decisions taken by the management of Sony have also taken into consideration the developments of the consumer electronics industry. According to the changing scenario of the consumer electronic industry, the decision making of the management has been influenced. The forecasting model has been used to forecast the value of sales of Sony which would provide insights on the business trend in future. The varying factors in relation to the market would again influence the decision making process of the management in sustaining the momentum of the business in future. Decision-making process at Sony: factors and decisions The decision making process in Sony has been influenced by several factors which have been explained as follows. Since becoming the president and CEO of the company, Kazuo Hirai has met several business retail partners, suppliers, employees and management staffs in the establishments of Sony in about 16 countries. The feedbacks received from the meetings and conferences enabled the management of the group to gain insights on the success of the various initiatives of the past and the changes in the strategic approach of the group that should be undertaken to attain a sustainable momentum for the business. The decision making process in Sony has been influenced by strategic objectives undertaken by the management to build one organization. This meant that the decision making process was driven by the management’s views on developing the culture of sharing the various assets, business knowledge, technologies and services across the business domains in order to enable the organization to grow rapidly (Sony Corporation 1). The management kept a stronghold on the business whereby they collected the information on the costs incurred by the various divisions of the Sony Group spread across various countries. The direct costs and the indirect costs incurred by the group in their business operation were taken into account for fixation of the per unit price of the products and services offered in the market. The costs incurred by the financial services division, electronic division and others were consolidated and the comparative revenues generated by these division were evaluated. The decision making for marketing, investments, collaboration were influenced by factors like cost incurred in the business operations and the revenues and the returns generated from the business wings of the company. The factors like business risk, credit default risk, exchange rate risk, competitive growth have been taken into account to take decisions on the reinforcement and strengthening of the electronics, entertainment and financial services divisions. The decisions taken by the management of the Sony Group for establishing a positive momentum in the growth of revenues and profits could be classified as reinforcing the growth of the electronics division of the company, further improving the profitability of the financial services, undertaking corporate social responsibility, marketing and advertisement of the technologically improved mobile and smart-phone devices introduced in the market (Coade 78). These decisions were taken by the management in order to increase the efficiency of the business operation that resulted in the growth of revenues from 6.5 trillion Yen in 2012 to 6.8 trillion Yen in 2013. The company has also turned its position of operating losses in 2012 to earning operating profits of 230 billion Yen in 2013. Management of decision-making process as CEO If I am the Chief Executive Officer of Sony, I would adopt the decision making process that would be guided by the following steps. Since the company has been at a position of loss in terms of operating income, I would initially focus on engaging with the ground staffs and the management in each operational establishment of Sony that has the potential to contribute to the business of the group. My interactions with the internal stakeholders would be aimed at taking feedbacks on the areas of difficulty and the necessary actions to be taken to improve the operational efficient. Next, I would ask my team to collect data on the total operational cost of the electronics, entertainment, financial services and other divisions of the company of the company. The activity based costing approach would be suggested by me to allocate the cost of operations of the group to each unit of the resource deployed by the group for undertaking the business operations. The determination of full cost per unit of the product and service offered by the group would used to determine the unit price of the product and services. This would help me to sanction the price fixed per unit of the product and service offered in the market. I would suggest the management to take decisions on the pricing of the product and service in order to attain maximum profitability in the business (Kozami 91). According to the potential of the electronics and entertainment, financial services division of the group I would suggest undertaking appraisal for investment in these business divisions aimed at reinforcing and strengthening the business for attaining the required momentum for growth. The standard techniques of capital budgeting would be applied to determine the net present value, internal rate of return, payback period and profitability of the investments to be undertaken for boosting the potential of the business. By considering the risk factors associated to the business, the competitive environment, I would sanction the investments in the areas of business operations, marketing and advertisements, technological improvements, business expansion, etc. At the end of this approach, I would ensure that the business departments of the Sony Group operate in collaboration with each other. The ultimate goals for this approach would be to share the technological and business knowledge, assets of the company, service to the customers in order to develop as brand image of a single group. The activities of corporate social responsibility would also be advised by me in order to brand image of the group in the worldwide markets. By managing the business activities of the group through the decision making process as mentioned above, I would be able to attain sustainable momentum for the group in the long term. Analysis and consideration of consumer electronics industry The analysis of the consumer electronic industry in the context of political, economic, social, technological, legal and environmental factors should be taken into consideration for the purpose of decision making by the managers of Sony. Sony being a Japanese multinational business would need to consider the impacts of political transition of the ruling parties in Japan. The change from a single party to multiple party governments in Japan has implication for Sony’s business in terms of the legal and regulatory framework to be put in place for the consumer electronics industry. The management of Sony would need to take decision on business strategy depending on the restriction on trade policies in the international markets. The reduction in the income level of the people of Japan due to the economic recession has resulted in deflation and subsequent loss of demand for the consumer electronics products. Sony has faced a decline in revenues from selling consumer electronic items in Japanese markets. The managers should, therefore, look to venture and reinforce their business in overseas markets like China, India for providing the required momentum to the business. The average age of the people of Japanese society is 44.8 years who have lost faith on the consumer electronics industry due to the concerns of security failure. The mangers should look to target the enthusiastic and the new age target segment of customers in the worldwide markets for increasing the market share of the business (Fitzroy and Herbert 28). The consumer electronic industry has shown an inclination towards multi-functional consumer electronic devices that are compatible for use in the networked applications of cloud computing system. The managers of Sony should take decision for investing in 3D technologies and keep up with the technological progress in the market to attain competitive edge. The managers of Sony should also taken into account environmental considerations of recycling hazardous electronic wastes and also undertake corporate social responsibilities to establish itself as a corporate citizen (Hill and Jones 46). Application of forecasting models in case of Sony The application of Forecasting Model could be used on the financial data of the Sony group in order to forecast the future performance value of the company. In line with the strategic decisions undertaken by the management of Sony, the sales revenues over the past years have used in the 2-year Moving Average model for forecasting the value of revenues that would be earned by the group in the next two years (Shim 29). The results obtained from the 2-year Moving Average model, applied on the actual sales data of the company obtained from its annual report, have been presented below in tabular form as well as in graphical presentation. Moving Average method of forecasting Forecasted value Parameter (in trillion Yen) 2010 2011 2012 2013 2014 2015 Sales 7.21 7.18 6.49 6.80 6.96 6.82 The two year moving average model applied on the sales data reveals that the revenues to be earned by the company in the next two years are likely to increase as compared to the sales revenues generated in the previous two years. The trend of revenues earnings of the company reveal that after recovery of sales revenue earnings in 2013 from the dip in 2012, the increase in sales is likely to continue in 2014. This has been forecasted with the help of the moving average model which depicts an increase in revenue earnings of the company by 0.16 trillion Yen in 2014 as compared to the value of 2013. As per the 2 year Moving Average method of forecast, the revenues of Sony would decline again by 0.14 trillion Yen in 2015 but it would again be higher than the current volume of sales. The results have been depicted with the help of 2-year Moving Average graph as presented below. Conclusion The key insights from the analysis of Sony’s case have been summarised as follows. The management of Sony has undergone a restructure with the appointment of the new CEO in 2013. The CEO and the management have taken crucial decision for revamping the strategies of the organization in order to boost the sales revenues and operating profits. The various direct and indirect costs of the business have been estimated and the areas of business risk have been evaluated in order to decide on the investments in the areas of technological advancement, marketing and advertising, business expansion, etc. The management has also emphasized on building a single organization with the culture of sharing the technologies, assets, services in order to attain competitive advantage in the global markets. The business growth in terms of revenue earnings in future have been forecasted which are important for taking decisions by the management for modification of the business strategies. The business strategies are required to be reviewed by the management on a periodic basis in order to adapt with the changing environment in relation to the consumer electronics industry. Works Cited Coade, Neil. Managing International Business. Stamford: Cengage Learning, 1997. Print. Fitzroy, Peter. and James, Herbert. Strategic Management: Creating Value in a Turbulent World. New Jersey: John Wiley & Sons, 2007. Print. Hill, Charles. and Gareth, Jones. Strategic Management Theory: An Integrated Approach. Stamford: Cengage Learning, 2009. Print. Kozami, Azhar. Business Policy and Strategic Management, 2e. New Delhi: Tata McGraw-Hill Education, 2002. Print. Shim, Jae. Strategic Business Forecasting: The Complete Guide to Forecasting Real World Company Performance, Revised Edition. Florida: CRC Press, 2000. Print. Sony Corporation. Investor Relations. 2014. Web. 14 March, 2014. . Read More