New Management Structure of Sony Corporation - Coursework Example

………………………….. College ……………………………… ……………….. MANAGEMENT New Management structure of Sony Corporation Introduction In contemporary business world, change and how to manage it successfully has become a hot topic on the minds of organizational leaders. Change is happening everywhere for good reasons such as to correct past failures or to accomplish learning and improvement (Lewis, p. 1). Its speed and complexity are increasing and most leaders believe that future success of their organizations depend on how successfully change and innovations can be managed. Change has become a critical requirement in today’s marketplace for continued success, but majority of change efforts are failing to accomplish their desired outcomes due to several factors related to time, people, customers, technology, leadership etc. In 2012, Sony Corporation has undergone a strategic change at its management structure to drive revitalization and growth across its business segments. This paper critically analyzes the organizational change executed in Sony Corporation and evaluates how this change could yield far positive outcomes in both financial and other organizational performances. Sony Corporation Sony Corporation, established and incorporated in 1946, is one of the most widely reputed brand names across the world for electronics and technology products. It is engaged in designing, developing, manufacturing and selling of different electronic equipments, instruments and devices for consumer and business markets. Sony, headquartered in Konan, Tokyo, Japan, has long been using third party contract manufacturing for some of its products. Apart from using third party middle-men sellers for marketing its products, the company is using internet and other channels for directly selling its products to final customers (Reuters.com, 2014). Sony develops and markets consumer products such as LCD televisions, home and vehicle audios, DVD players, memory based portable audio and video devices, compact digital players, personal computers, digital imaging etc. It designs and develops professional devices and solutions such as broadcast and professional use products apart from some Business-to-Business solutions. The company is also engaged in acquisition and distribution of television programs, motion pictures and animated films. Apart from these products and related services, Sony Corporation offers certain financial services such as life and non-life insurance and loans (Bloomberg Business Week, 2014). Organizational Change and its drivers Organizational change is an informed and participative process that brings out newer or innovative ways of carrying out the business or any of its functions by leading the firm to its major goals and success (Jacobs, p. 22). Organizations need to change their business practices because it helps them gain greater adaptability and viability in business environments. Organizational changes may take different forms such as downsizing, structural changes in management, reengineering, outsourcing, product differentiation and so on. A major change that was implemented in Sony after 2012 was structural change in its management structure. As change is a difficult task for management due to various obstacles including resistance to change from people, the management literatures have developed strategic management perspectives to effectively manage the change by managing resistance. Anderson and Anderson (p. 33) described the drivers of change model to explain what motivates change in a business organization. They explained seven drivers that are environment, market place requirement, business imperatives, organizational imperatives, cultural imperatives, leader and employee behaviour and leader and employee mindset. They explained that the need for change is catalyzed by dynamic shifts in the business contexts. New customer requirements in the market catalyze need for new business strategies and thus strategic changes become critical requirements at organizational level. The change in management structure has been primarily driven by market-place requirement and organizational imperatives. It was environmental pressure, as Palmer, et al (p. 50) noted, that caused strategic change in the management structure of Sony Corporation. The change was mainly driven by the intention to drive revitalization and growth across Sony’s electronic businesses. The change was also intended to deliver compelling user experiences through aligning unique assets in place throughout Sony group (Reuters, 2012). The management realized the organizational imperative that decision making process to be made faster and smoother so as to result in effective operations management. Change process at Sony Corporation In 27th March, 2012, Sony Corporation announced the establishment of a new management structure led by its then president Kazuo Hirai with a view to drive revitalization and further growth in its core electronics business segment. Hirai (2012) said that the company has rebuilt the Sony group by introducing a new top-management structure with a view to accelerate decision making and strategic execution very effectively. With Mr. Kazuo Hirai at the centre of the newly structured management team to work with the team including Masaru Kato- CFO; Tadashi Saito- CSO, Shoji Nemoto- head of technology, and Kunimasa Suzuki-head of product strategy, the new management structure was designed and intended to establish rapid decision making process as ‘One Sony, One Management’ platform (Hirai, 2012). In 2012, Sony Corporation announced the structural change in its management structure. According to this change, Howard Stringer was Director and Representative Corporate Executive Officer, but he was designated as Chairman and Kazuo Hirai, he was until then Representative Corporate Executive Officer, was designated as President and CEO. Similarly, Ryoji Chubachi and Hiroshi Yoshioka, they were until then Director and Corporate Executive officer were designated as Vice Chairman and Officer in charge of Medical business respectively. This change in the organizational structure has been executed to ensure that all electronics and business related decisions are taken in most effective, rapid and smoothest manners possible. Palmer, Dunford and Akin, (p. 89) considered downsizing, reengineering and restructuring the management as transformational changes that can fundamentally alter the basic nature of the firm. The new top-management structuring at Sony can be considered as a strategic transformational change intended by Sony’s new President and CEO, Kazuo Hirai to rationalize the corporate governance in more strategic and effective ways. Howard Stringer, Sony’s previous CEO spent almost five years to align the company behind ‘four-strategic plan’ wherein its product lines were segmented across television, phones, tablets and PCs. The ‘four-screen’ plan was replaced by ‘One Sony, One management’ plan by Hirai to revolutionize the way it works with different stakeholders. Since consumers want products that are multi-functional and highly innovative, it has become an extremely important requirement for a technology company like Sony to restructure its management to ease rapid decision making and effective execution of plans. Just before Hirai took over the role in Sony, the operating profits mainly in Sony’s electronic business was negatively affected by earthquake and 2011 floods apart from the severe hit of economic downturn worldwide. Company reported 9.6 percent decline in the FY 2011. Sony experienced an operating loss of 67.3 billion yen, compared to the 199.8 billion yen of operating profits in previous year (Annual report, 2012). In order to change the situation, Hirai strategically structured the management by accelerating managerial decision making and began to develop groundbreaking products, services and technologies to maximize Sony’s technology advantages. To successfully implement this change program, Hirai focused on five major initiatives. They are; strengthening digital imaging, gaming and mobile segments, turning around the television business, expanding business in emerging markets, creating new business by accelerating innovation and realigning Sony’s business portfolio by optimizing resources (Annual report, 2013). Apart from the change in management structure, Sony Corporation in 2012 has executed many other changes. The company abolished Consumer products and Services group, integrated Home Entertainment Business group with personal audio business and realigned personal imaging and Sound business group as Digital Imaging business. Sony has newly established a Medical Business unit and realigned Research and Development platform as System and Software Technology. These are some other changes Mr. Kazuo Hirai implemented in Sony Corporation in 2012. To lead the company move ahead, Hirai believed that the company should always strive to maintain supreme value for society, and established this norm as the foundation of Sony’s CSR strategy. Hirai has attempted to fulfill Sony’s corporate responsibilities by implementing effective corporate governance, compliance and responsible sourcing (Annual Report, 2013). Anderson and Anderson (p. 213) theorized that an organization’s structure continually changes between centralization and decentralization, local and global focus, standardization and autonomy etc. Changes in an organization’s structure takes place in certain surges. The market place, for example in the electronics industry, gives accurate information on time which in turn causes people in the organizations to question the efficacy of present management structure. This leads to dialogues, discussion and so on among the people. New ideas will be generated by individuals regarding how the management to be structured. Based on Kurt Lewin’s theory of change, the change that was implemented in Sony can be considered as a planned change and that it has taken the forms of unfreezing, moving and refreezing. According to Lewin’s model, change occurs due to two sets of opposing forces- those that are focused on managing stability and those that militate for change. Unfreezing involves reducing those forces that maintain firm’s behaviour at its present level. The unfreezing can be accomplished through psychological disconfirmation. At the second level, moving or shifting occurs in which the behaviour of the organization shifts to a new level. As there occurs a change in the organization, it as a result causes intervening of new behaviours and values through changes in organizational structures. Refreezing stabilizes the firm at a new state of equilibrium, by stabilizing organization’s culture, values, structure and shared beliefs (Leban and Stone, p. 56). Outcomes of the change It is very important to analyze how these changes return to profitability or performance and competitiveness. As part of the change, Sony proposed to cut around 10,000 jobs, which is around six percent of its global workforce. Cost saving will benefit the firm in long run. Sony was also looking to reduce costs incurred in manufacturing small and medium sized LCD production by reducing the amounts of money it spent in manufacturing these LCDs. It is very important to note that Sony experienced 9.6 percent decline in profits in the financial year 2011 (Gamepolitics.com, 2012). Based on the statistics of Sony total revenues between 2008 and 2013 depicted in the diagram above, Sony has been experiencing continuous decline in total revenues since 2009, and the company started experiencing growth in 2013. The change in growth, profitability and total revenues is the direct outcome of the strategic change the management has implemented in 2012. Recent reports about Sony’s operating and net profits showed that the changes implemented in 2012 have directly impacted greater profitability for the company. Sony has reported an operating profit of 230.1 billion Yen in the business year ended in 2013, compared with 67.3 billion Yen loss in the previous year. This result was in line with an average 230 billion Yen profits as previously estimated. After 2012, Sony’s shares have gained 82 % rise compared with 37 in the benchmark Nikkei 225 (CNBC, 2013). Conclusion In 2012, Sony Corporation has shuffled some critical management responsibilities under a new system of ‘One Sony, One Management’ wherein the CEO Kazuo Hirai hoped to revitalize the operational functions of the company to drive better outcomes of profitability and competitiveness. This change has been strategically implemented and effectively executed in a way to benefit the company to ensure long-term profitability, and the recent reports about its operational profits have shown that the company proved achieving its target. Most often, change efforts in organizations are challenged by ‘resistance to change’, but it is was not evident in the case of change implemented by Hirai at Sony Corporation, and this is very clear that he implemented the change very effectively by proving better outcomes of profitability in forthcoming years. This paper has presented theoretical perspectives of change and its drives and analyzed how this change has been executed, with the help of Kurt Lewin’s change model theory. 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