Strategic Audit of Sony Corporation - Case Study Example

Capstone Strategic Audit: Sony Corporation Executive Summary Business stakeholders and economists have overtime attested to the fact that venturing into business is not an easy task. Moreover, for investors and managers to ensure that they remain relevant for a considerable duration, they must feel the demands of the market and respond to them succinctly. To this effect, I presume true the fact that Sony Corporation has in the past embraced the correct business practices that have enabled it to expand and develop to not only a global leader, but also a brand that is highly held by its customers. That notwithstanding, Sony Corporation has in the past had to deal with several strategic challenges some of which originate internally and externally. An example of an external problem that Sony Corporation has had to come up against is the unpredictability of the market such as the great economic slump of 2008, which did not favor the goals of Sony Corporation. Internally, the organization has had to deal with the challenge of ensuring that its mission, vision and core values as an organization complement its objectives. This report provides more insight on some of the practices that you should embrace as an executive to ensure that the strategic issues can be amicably tackled whenever they arise. An example of such is the fact that the organization should put in place a strategic task force, with the responsibility of analyzing all the market risks and making recommendations on the most-suitable way of handling such practices. In like manner, the report assesses the operational performance of Sony Corporation and assesses whether it complements the organizational culture witnessed within the Corporation. Strategic Issues and Value Proposition With the exception of 2013, the past few years have not been productive for Sony Corporation. The unproductivity is majorly because the global leader has expressed considerable slump in revenue collection resulting into huge losses. In the year 2009, for example, the organization registered a 23% decline in revenue collection, an issue that was brought about by a downturn in their margins. Last year 2013, on the other hand, was vibrant for the Corporation as it registered profits amounting to $458 million. This elevation in profits can majorly be attributed to the new strategic mechanisms and operational performance that your organization adopted at the end of 2012. For starters, it is far-reaching for us to acknowledge the fact that your organization has been making constant changes on your business operation practices (Grayson, 2013). This has been brought about by the urge to give a respond the demands of the market, and positively the strategies that you have been adopting as an organization have always brought forth improved results. Business Strategy Your current business plan as Sony Corporation is that you have considered it necessary to focus on your core strategic and business units while at the same time reorganizing your broad portfolio of business units. This is to imply that Sony Corporation has been focusing on three businesses namely games, mobiles and digital imaging, where the Corporation saw the need to strengthen its network, embrace innovation and focus on integrating all the available forms of technology. In your new business strategy, the organizations have resorted to reducing the transaction cost of your television unit by 60% and at the same time lower its operating cost by 30%. At the management level, your organization has ensured that it hires managers, who believe in the mission, vision and values of Sony Corporation and those who are ready to ensure that the objectives of the business are met (Grayson, 2013). This was majorly witnessed when the organization made considerable changes within your management team a few years ago. Market Position and Competitive Advantage In regard to market positioning, I presume true the fact that Sony Corporation has not been doing well of late. In the TV market, for example, Sony Corporation comes in third after both Samsung and LG. Similarly, the organization currently ranks fourth when it comes to both tablets and smart phones with Samsung and Apple enjoying well over half of the global market. The Corporation has not found the ride easier either in the entertainment sector as it comes a distant fifth behind the likes of Warner Bros, Paramount and Disney (Frynas, 2011). The analysis from my audit points to the fact that though Samsung has surpassed Sony Corporation in both the TV and smartphone world, it is a notch higher in digital imaging. This is majorly because most of its digital imaging products are in 3D and of high quality. The high quality can be attributed to the fact that its cameras are of high resolution hence resulting into high-speed response, increased image lens sensitivity as well as reduced picture noise (Frynas, 2011). Similarly, the Corporation has a competitive advantage in the fact that it responds to complaints from their clients within a short duration of time. The Five Forces Analysis Sony Corporation has faced several strategic issues within the market. This section employs the use of Michael E. Porter’s five forces to provide more insight on some of the strategic issues that Sony Corporation has faced within the past few years with emphasis being put on the external environment. Threat of New Entries As illustrated above, the past five years have not been productive for Sony Corporation with the exception of 2013. This in essence has resulted in the value of Sony Corporation declining within the market. Partially, the reason this has been so is the threat of new entries into the market. Of great concern is that the cost that the new entrants have to pay so as to open its doors to the market, is little. Similarly, they enter the market with very skillful human resource, which makes it easier for them to catch up with other players within the market such as Samsung, Royal Phillips, Apple, LG and Schweitzer Electronic (Grayson, 2013). The new entrants have also found it easier to venture into the electronics market because there are no barriers that prevent them from opening up. The fact that the technology that has been brought forward by the likes of Sony Corporation is not protected in any way also makes it easy for the new entrants to make a few modifications and launch fresh products of high quality in the market. Supplier Power One of the mechanisms that have been employed by Sony Corporation in an attempt to capture a broad percentage of the global market is the use of suppliers. This has resulted in the Corporation making use of suppliers in areas such as Mumbai and New Delhi, where they enjoy a large customer base. Similarly, the Corporation has put in place Sony Care and Sony World Centers in various part of the globe, thereby ensuring that they bring their services closer to the customers. You have also made use of retail stores and supermarkets in different corners of the globe to ensure customers do not have to cover a large distance before getting your goods and products (Luh, 2003). Amidst all this, one problem that has stood out is the fact that your products have majorly been availed to customers who reside in urban areas while those in rural areas have been left out. Threat of Substitution This is the greatest challenges that Sony Corporation has had to handle in the recent past. The threat of substitution has been brought about by the fact that other competitors within the market produce goods of high quality as well and inject them to the market at a lower cost. As is the nature of customers, they have always settled on the cheaper products from other companies leaving Sony Corporation products, which they consider expensive (Pederson, 2010). Competitive Rivalry Competition is healthy for the economy not only because it helps it grow, but because customers have an ample variety of products to choose from. As mentioned in the section above that touch on the threat posed by new entrants, competitors of Sony Corporation such as Samsung come up with products of different qualities. An example is the smartphones unit where they have come up with the waterproof Samsung Galaxy S5 that rivals the Sony Xperia phone, which is a product of Sony Corporation (Pederson, 2010). A few years ago, Sony Corporation was untouchable in the electronics industry. Nevertheless, consumers shifted their loyalty to other brands, and this has hurt the dominance of Sony Corporation. Buyer Power Given that the products produced by Sony Corporation are of high quality, they retail at higher costs. In as much as a customer may have been interested in acquiring a gadget from Sony Corporation, he or she would be forced to opt for cheaper products produced from other companies. Buyer power has similarly affected the performance of your organization in that client who makes purchases from your stores buy goods in small quantities while those who make purchases from your competitors buy in bulk. SWOT Analysis The internal environment of any organization plays a critical role in ensuring that it accomplishes all its objectives. In this section, I have employed the SWOT analysis to shed more light on the internal environment of Sony Corporation with special emphasis being put on its strengths, weaknesses, opportunities and threats. Strengths In as much as the last five years have not been productive for your organization, I have to attest to the fact that Sony Corporation has built a name. It is for this fact that it was recognized as Asia’s most valuable brand in 2011, during one of its most unprofitable durations. At the same time, Sony Corporation is synonymous for technological excellence. This can be seen in rich heritage of technological expertise such as the Blue Ray disc that is currently being used as a medium of high definition, which your predecessors and yourselves have spearheaded. The PlayStation is similarly one of Sony Corporations great strengths (Daft, 2010). This strength is majorly because since it was launched in the market, its demand has always been on the rise. Digital imaging is similarly one of your greatest strengths. This is because your products are of high quality, and this explains why the sale from the digital imaging unit has come in handy in offsetting losses from the consumer production unit. Weaknesses One of the weaknesses that have been witnessed within your corporation over the past few years is the high cost of media production. This has no doubt affected its media business. Similarly, your Corporation has lost about $6.3 billion in its T.V unit over the past eight years in a row. At the same time, your organization has lost a large share of the market to other manufacturers such as Samsung and LG. Another weakness that has been pointed out from my audit is the fact that you have put more emphasis on diversification (Daft, 2010). Thereby shifting focus from your primary competency that was making great consumer electronic products, this has in a way distorted your brand. Opportunities I presume true the fact that your organization should take advantage of its movie and music ventures as well as its experience in the gaming unit to deliver content that add value to its line of products. The buying off of its Sony Ericson joint venture should give your company the opportunity to act on its own and innovate, thereby capturing a large percentage of the smartphone and tablet markets. Another great opportunity that your corporation should explore is the healthcare sector, notably imaging as the Corporation intends to acquire 30% of Olympus (Grayson, 2013). Threats As we have illustrated in the section above, Sony Corporation has faced price competition from other manufacturers including Samsung and LG, who have managed to capture a considerable percentage of the market by introducing lower-cost smartphones and television sets. Online threats from hackers has similarly contributed to your corporations PlayStation network losing ground as a customers data was leaked out (Kate, 2010). Strategy Scorecard My strategic analysis points to the fact that Sony has many positive aspects to its credit. This is complemented by the fact that its employees are looking out for ways and means through which it can be improved. That notwithstanding, my strategic audit points to the fact that your Corporation seems to have lost its magic touch. To this effect, the Corporation should use its innate strengths as well as the opportunities judiciously to revive the past glory that it has been associated with. Recommendations The above section has focused on the business strategy that you have used within your corporation as well as its operational performance. At the same time, it has employed Porters five forces to analyze some of the challenges that have arisen from the external environment as well as the SWOT analysis to audit the internal environment within your organization. As illustrated in the paragraph above, it there is a need to adopt fresh strategies that complement the strategies that are already in practice. With Corporations like Apple interested in launching the Apple TV, there is also a need to ensure that competition from the new entrants is funded. I acknowledge the fact that your team has been ambitious in its diversification process that has enabled it not only to focus on consumer products. Nevertheless, I hold the opinion that your first choice of action should be to sell your business units that do not bring forth the expected returns. This would in return enable your team to focus on few business units, thereby building competency and consequentlty, brings out the best out of your products (Luh, 2003). An example of a firm that has managed to build competency out of a few business units is Apple Inc., which has not diversified its products. Compared to the past years, we all attest to the fact that your current market position is not good. This is because you have lost ground to both Samsung and LG in both the TV and Smartphone market. In as much as your innovations have stood out in the media unit, you come a distant fifth after Warner bros, Disney and Paramount. It is imperative for your team to think outside the box and create products that would give you the competitive edge that you had over other market players a few years ago. As it stands, a considerable amount of your revenue originates from Japan; precisely 32%. In as much as Japan has proven to be a worthy nation, it is imperative to take note of the fact that the stability of Japan as a nation does not look good as the Yen has continued to slump. My advice on this is that you should work towards ensuring that the 32% is not lost when the economy of Japan becomes unproductive (Grayson, 2013). I acknowledge the great role that you have played have it comes to innovation. Your Blue Ray disc, for example, has been a hit, and that explains why it is the foundation on which high definition is built. The same applies to your digital imaging where you are way above the rest with your cameras that give high-quality pictures with reduced noise (Frynas, 2011). Nevertheless, I believe that you have lost your touch of class, and it is for that reason that you are losing ground to other manufacturers when it comes to the smartphone and T.V markets. To this effect, I advise that your innovations should be appropriate, and should be suitable to the desires of the customers. Your Sony Xperia smartphone is no doubt unbelievable. This is because it brings the future to the uses. That notwithstanding, I believe that with the acquisition of the Sony Ericson joint venture, you should consider providing cheaper smartphones that target those from low-income families as well as those from developing nations (Grayson, 2013). As it stands, your products are only available to those who reside in urban areas, leaving out those in rural areas. I congratulate you on the fact that you have created Sony World and Sony Care centers that not only bring your products closer, but your services as well. I however believe that it is of great significance for your corporation to consider opening up retail stores closer to rural areas. This would increase your revenue and at the same time ensure that you capture a substantial portion of the market and the process gaining ground on Samsung, LG and Apple who enjoy a significant percentage of the market (Kate, 2010). In conclusion, you should respect the Sony brand. Majorly because assets need to be handled with great care. Some of your strategies may require time to implement, for this reason, you should not be in a hurry to register profits, but rather, you should be patient with your strategies. References 2012 Report on the US Audio & Video Equipment Manufacturing Market Featuring Panasonic, Sony, Pioneer, Toshiba, Royal Philips, LG Electronics, Samsung, and Bose. (2012, December 5). Electronics NewsWeekly, p. 4. Daft, R. L. (2010). Organization theory and design. Mason, Ohio: South-Western Cengage Learning. Frynas G, J. (2011). Global Strategic Management. New York: Prentice Hall Grayson, R. (2013). Sony: the company and its founders. Minneapolis, MN: ABDO Pub.. Kate G.(2010). David Hennessey. Global Marketing. New York: Prentice Hall Luh, S. S. (2003). Business the Sony way: Secrets of the worlds most innovative company. Oxford: Capstone. Pederson, J. P. (2010). International directory of company histories. Detroit, Mich.: St. James Press. Städtler, R. (2011). Strategy Coursework - Sony Corporation. München: GRIN Verlag GmbH. Read More