Strategic Planning for the Sony Corporation - Essay Example

Strategic Planning for the Sony Corporation Market entry Multinational company like Sony, which has presence throughout the world, would have enteredall of the feasible geographical markets. Considering this fact, Sony’s market entry strategies would be more of re-entry strategy than “new market” entry strategy. On those lines, as part of future strategies, Sony can re-enter China in the gaming console market with strong effort, as the Chinese government has lifted the ban on foreign gaming consoles in early part of 2014. “China had banned games consoles in 2000, citing their adverse effect on the mental health of its youth.” (Carsten 2014). However, the Chinese government decided to lift the ban on gaming console, albeit with certain caveats. China is regarded the third largest market for video games, and through its newly launched gaming console PlayStation 4, Sony hopes to make strong impact there. Substantive growth According to Thompson (2005), organizations can achieve substantive and thereby optimal growth by adopting substantive strategies of merger and acquisition. That is, organizations like Sony have to merge with stronger organizations or acquire ‘complimenting’ organizations as part of its future strategies. In that direction, Sony could acquire certain hardware manufacturing organizations or units, which can contribute or supply the needed materials for the manufacture of its various products. Sony has already initiated strategies in that direction by finalizing the plans to acquire a semiconductors plant in Tsuruoka, Yamagata prefecture, currently owned by Renesas Electronics, which manufactures image sensors for Sony’s as well as Apple smartphones. Apart from this above mentioned future strategy, Sony as part of substantive growth strategies can acquire more hardware manufacturing units to compliment its functioning and growth. In that direction, the company has said it has plans to spend ¥60 billion ($585 million) on acquiring and developing facilities for its chip operations, which gets 77% of sales from image sensors. (Yasu 2013). Limited growth Thompson (2005) includes Joint venture as a key form of limited growth. That is, instead of spending heavily to completely acquire other entities, organizations can select capable partners and enter into joint ventures with them. This way, organizations like Sony can match, compliment and accentuate their capabilities along with their partner. On those lines, Sony as part of their future strategy can enter into joint ventures with hardware manufacturing companies. Sony has already began plans in that direction by launching talks with certain hardware manufacturing entities like Japan Display Inc. and other players. Japan Display Inc. is regarded as “the worlds biggest maker of liquid crystal displays for smartphones and tablets”, and Sony is considering setting up a joint venture with it for developing organic light-emitting diode (OLED) displays for its’ smartphones as well as tablets. (Murai 2014). Retrenchment According to Thompson (2005) retrenchment is always considered as a remedial action, and that includes assets reduction strategy, cost reduction strategy, restructuring, etc. That is, organizations need to first focus on its business segments, which are not functioning up to the expected levels. Then initiate correction strategies to make it work, and even after that if it does not work, they can come up with assets reduction strategy, restructuring, etc. With Sony facing sizable losses particularly in its PC as well as Television business segments, as part of its future strategies, it can implement retrenchment or assets reduction strategies in the PC business, and restructuring in the TV business. That is, it can sell off its PC business, and create a wholly owned subsidiary for its TV business or even get into a joint venture with other key player in the TV segment. Advantages and disadvantages of each option, and recommendation With China being one of the largest gaming markets with huge population, Sony can earn sizable profits, if it makes a strong entry. This perspective was validated by Satoshi Nakajima, a spokesman for PlayStation console business, who stated, “We do recognize that China is a promising market, and we will continue to study the possibility.” (Carsten 2014). The other advantage with this strategy is, Sony has partnered with the state-run Shanghai Oriental Pearl Group to make and sell PlayStation consoles and software in China, and through this association with a local player, Sony can successfully ‘piggyback’ on it. However, the disadvantage with this strategy is, China is strongly saddled with free-to-play PC and mobile phone games. That is, the absence of consoles has left PC games as well as mobile phone games “with almost two-thirds of the market, according to data released at the annual China games industry conference.” (Carsten 2014). With a whole generation not being exposed to gaming consoles including PlayStation, Sony could face a major uphill task. The other disadvantage is the cost factor with price of Sony PlayStation 4 being steeper for an average Chinese gamer. The other key disadvantage is, as mentioned above, with the Chinese cultural department playing a prominent censor’s role, Sony’s ‘wings’ could be clipped. Due to these disadvantages, this option can be placed at the last and fourth position. The basic advantage of having joint venture with Japan Display Inc. is that, Japan Display was “itself was formed two years ago through a merger of the LCD units of Sony, Hitachi Ltd. and Toshiba Corp.” (Inagaki 2014). That is, with Sony contributing its technical know-how, resources, employees, facilities, etc., to the setting up of Japan Display Inc., this joint venture can have a smooth run in the operational sense as well as in the management sense. The other advantage is, with this joint venture being actualized mainly with the intention of coming up with low cost OLED displays, Sony can gain competitive edge over its South Korean rivals in smaller-size panels. However, the disadvantage with this option is that, already Sony and Panasonic “formed an alliance in 2012 to jointly develop OLED technology, but decided to call off the venture late last year.” (Inagaki 2014). Previous disbanding of the alliance does not augur well for this joint venture. The other key disadvantage is, this joint venture option may not make major positive changes to Sony’s performance, considering the fact it contributes only to few business segments like smartphones. Due to these fewer advantages and mainly disadvantages, this option can be placed at the third position. The advantage with the strategy of acquiring hardware manufacturing plant like the Renesas’ facility can provide Sony with apt supply of products needed for the manufacturing of its key products. With Renesas’ facility making quality image sensors, it can be used by Sony in the manufacture of its smartphones, tablets and digital cameras. The other advantage is, Sony can also sell those sensors to other companies. “The Tokyo-based company is increasing output of the sensors, which help phones take high-quality photos, as companies such as Apple Inc. buy Sony’s technology for use in their own devices.” (Yasu 2013). However, the disadvantage with this option is that, this being a new acquisition, Sony has to invest more and also work hard to streamline the operations inside this facility as well as in other future acquisitions in order to optimize the productions there. “According to the report, Sony will invest a further 20 billion (slightly less than 195 million dollar) for the purchase of new production facilities.” (Nelva 2014). The other disadvantage is, although this semiconductors plant also manufactures the DRAM chip, which is currently used by Sony’s competitor in the gaming console section, Nintendo, Sony has no plans to use those chips for its’ gaming console. “Despite its former Wii U-related output, the factory won’t be used to produce components for Sony’s consoles.” (Nelva 2014). Considering these disadvantages but certain specific advantages, this option can be placed at the Second position. The main advantage with this retrenchment strategy is, it provides Sony a good opportunity to become lean and meaner. That is, Sony now anticipates its target of returning the TV and PC businesses to “profitability will not be achieved within the fiscal year ending March 31, 2014 ("FY13")”, and so considering this fact, they can think of retrenchment strategies in both its segments, or in particular the PC business. (Sony 2014). The other advantage in selling off its PC business is, it can avoid the volatile as well as precarious period for the entire PC industry. That is, “Year-over-year shipments have been falling consistently for the last two years”, and Sony is no exception to it. (Cunningham 2014). Sony has already initiated steps in that direction by selling off its VAIO business to Japan Industrial Partners (JIP), and has to take the similar steps in the whole of PC business. As far as its’ TV businesses is concerned, the advantage with having a separate, though wholly owned unit or having a joint venture with other key player, is that, it can provide Sony with the supporting framework to bounce back. In addition, as Sony has been operating in the TV segment for many years, and is a trusted brand in that segment, there are potential opportunities for it, and so through the subsidiary unit or joint venture, it can come up with innovative, quality and successful products. Due to these advantages, retrenchment strategy in the PC and TV business can be picked as the number one recommendation. Roles and responsibilities of Sony staff who are directly involved in strategy implementation While implementing the retrenchment strategy of selling of its PC business, Sony’s staffs will also be impacted, with their roles and responsibilities undergoing major changes. That is, as Sony wants to cease designing as well as development of PC products, the employees working on this segment had to be aptly allocated or compensated. Thus, instead of recruiting new employees for implementing the recommendation, Sony has to allocate or compensate the existing employees. In that direction, approximately 250 to 300 Sony Corporation and Sony EMCS Corporation employees could be hired and involved in the PC operations of JIP. (Sony 2014). Sony will also have to come up with opportunities for other employees by transferring them to other business segments within the Sony Group. As far as the remaining employees are concerned, they can be offered early retirement program to have a decent livelihood and also to find other employment opportunities outside. Estimated resource requirements that Sony will need to identify and allocate Apart from the employees, Sony needs to allocate the resources used in the PC business to its other relevant business segment. In that direction, Sony can allocate its resources to its smartphones and tablets segments. Sony is focused on transferring its PC business resources to its mobile product lineup on smartphones and tablets. (Sony 2014). As far as the resource requirements for its TV business plans, while coming up with a wholly owned unit or as a joint venture, Sony can utilize it’s already available strong resources to compliment the new setting. With Sony’s CEO Kazuo Hirai clearly hinting that “complete withdrawal from TVs wasnt "realistic" considering the costs of pulling out of such a large business”, and Sony may “explore an outside partnership”, the resources can be aptly allocated. (Inagaki 2014). On those lines, Sony is particularly focused on coming up with quality and at the same time cost effective 4K TVs. “Our bet is really with 4K LCDs,” Mr. Hirai said. (Inagaki 2014). With Sony already entering into alliance with OLED manufacturing entities like Japan Display Inc., and thereby getting access to the relevant resources or technologies, Sony could make it’s TV business a success by coming up with quality products. SMART When one focuses on the above recommendation and its implementation in line with SMART objectives, it fulfils majority of the criteria. Although, it was not Specific, considering the fact it involves two major and extensive business segments, it is Measurable, Attainable, Realistic and Timely. Selling off all its PC segments could provide apt measurement to the objective, but still with its PC resources going off to other mobile segments including smartphones and tablets, it is not fully measurable. It is attainable because selling of its PC business and restructuring its’ TV business is highly possible, thereby making Sony leaner and meaner. PC business retrenchment strategy can be realistic, and for TV business strategy to be realistic, it has to find an able partner. This objective is also timely because Sony has already initiated steps in that direction, and it has to come up with more strategies in order to have a positive turnaround. Conclusion Organizations operating in any sector have to keep on coming up with optimal strategies, for it to overcome losses and travel on a successful path. This is applicable to the Japanese Multinational Sony Corporation as well, considering the fact, it is facing sizable losses in the recent past, and so in a need of positive turnaround. For that positive and successful turnaround, Sony has to come up with strong future strategies. In that direction, after analysing and evaluating four key options that the Sony Corporation could adopt when considering its future strategies, this report selected the retrenchment strategy for its’ PC and TV business. As both these segments are mainly dragging back Sony, PC business has to be deposed, and TV business has to be restructured. References Carsten, P., 2014. China suspends Ban on Video Game Consoles after more than a Decade. Available from http://mobile.reuters.com/article/idUSBREA0606C20140107?irpc=932(accessed on June 19, 2014) Cunningham, A., 2014. Sony sells off VAIO PC business amid Prolonged Industry Slump. Available from http://arstechnica.com/business/2014/02/sony-sells-off-vaio-pc-business-amid-prolonged-industry-slump/(accessed on June 19, 2014) Inagaki, K., 2014. Sony, Panasonic Mull OLED Panel Tie-Up with Japan Display. Available from http://online.wsj.com/news/articles/SB10001424052702304811904579585762460019656(accessed on June 19, 2014) Murai, R., 2014. Japan Display may tie up on OLED panels with Sony, Panasonic-sources. Available from http://www.reuters.com/article/2014/05/26/japan-display- oledidUSL3N0OA06R20140526(accessed on June 19, 2014) Nelva, G., 2014. Sony Finalizes Plans To Acquire Factory Producing Wii U’s DRAM Chip for Nintendo. Available from http://www.dualshockers.com/2014/01/28/sony-finalizes-plans-to-acquire-factory- producing-nintendo-wii-us-dram-chip/(accessed on June 19, 2014) Thompson, JL., 2005. Strategic Management: Awareness and Change. Cengage Learning Sony., 2014. Sony Announces Plans to Address Reform of PC and TV Businesses. Available from http://www.sony.net/SonyInfo/News/Press/201402/14-019E/(accessed on June 19, 2014) Yasu, M. 2013. Sony said to begin Talks with Renesas to Acquire Chip Plant. Available from http://www.livemint.com/Consumer/XUDpygjP8XFhELIcI4RiyI/Sony-said-to-begin- talks-with-Renesas-to-acquire-chip-plant.html(accessed on June 19, 2014) Read More