The Business Environment and Strategic Management - Sony - Case Study Example

The business environment and strategic management BY YOU YOUR SCHOOL INFO HERE HERE The business environment and strategic management Introduction Strategic management is the development and execution of a firm’s primary objectives and goals founded on contemplation of available resources and the ability to assess the external environment to determine opportunities where a business maintains its operations and competes with other organisations (Nag, Hambrick and Chen 2007). Strategic management involves utilising various tools and techniques in an effort to ensure that value is added to an organisation. With the aforementioned definition in mind, certain tools and techniques are critical in providing an organisation with competitive edge, greater profitability and overall value in relation to the needs of owners, customers and other stakeholders. This essay explores a variety of different strategic management techniques and tools that achieve the objective of giving an organisation more significance and competitive value, with an emphasis on the Sony Corporation, an organisation that has struggled in recent years to find this value. A brief background of the issues with Sony Sony, historically, was considered a pioneering organisation for its ability to innovate in the consumer electronics industry, especially notable with its introduction of the Walkman, a revolutionary method of making music listening a mobile consumer concept. However, in recent years, Sony is being outperformed by many competitors such as Samsung who are first-to-market in smartphone innovations and 3D technologies. Between 2011 and 2014, Sony reported massive financial losses, forcing the organisation to put more emphasis on strategic management in order to give the firm a better market reputation and provide superior value to the firm. In 2012, Sony’s shareholders learned that the organisation had lost a massive 67 billion Yen (Sony 2012). In 2011, this loss approached 200 billion Yen as a result of continued inability to compete effectively with more innovative firms such as Sharp, the aforementioned Samsung, and other consumer electronics organisations that continuously improve product benefits and features in the market where Sony competes. Sony continuously fails to utilise the many tools and techniques available in strategic management ideology to recognise new ideas, restructure the value chain to improve its competitiveness, and provide consumers with products that are relevant to their contemporary needs and expectations. The Five Forces Model Sony does not appear to recognise the different external threats that jeopardise the organisation conducting business without continuous change. Michael Porter, a respected business theorist and practitioner, developed his Five Forces model, a strategic management framework that identifies what specific forces shape the consumer electronics market and threaten an organisation that is not adaptable to change according to external market conditions. This model identifies the bargaining power of consumers and suppliers, competitive rivalry, new entrant threats and substitute products in the market where a firm competes (Porter 2008). By assessing these five forces, an organisation is capable of identifying how to properly allocate resources to combat the aforementioned threats and restructure the organisation to provide more relevant offerings, build a more positive market reputation, and alter operational strategy more effectively. To illustrate, this planning and environmental assessment tool in strategic management would identify that competitive rivalry is the most significant threat to Sony. This organisation continues to assert, through integrated marketing communications, that the firm is still a pioneer in this industry. This marketing dysfunction recurrently tells many consumer demographics that Sony’s products are of superior competitive quality and are innovative in a market that no longer shares this attitude and belief about Sony’s competitive relevancy. The firm markets itself under this strategy, still attempting to position the firm as an innovator, illustrated in Figure 1. Figure 1: Sony dysfunctional marketing positioning as innovator Source: Jones, D.(2014). Advertising. [online] Available at: https://www.pinterest.com/pin/13933080067458732/ (accessed 1 April 2015). As it pertains to smartphone technologies, Samsung continues to innovate benefits and features, however the firm utilises marketing communications in a different fashion. In a highly saturated competitive marketplace, Samsung realises that other competitors are also innovating and, instead, chooses to utilise lifestyle-based marketing to capture the attention of a very diverse demographic of consumers in its international markets. This is referred to as psychographics, a very potent and effective tool when positioning a brand is difficult due to a high volume of competitive rivalry. Figure 2 shows how Samsung outperforms many smartphone competitors in order to gain consumer interest when positioning by innovation is substantially difficult. Figure 2: Samsung psychographic marketing effectiveness Source: Deviant Art. (2014). Samsung Plasma TV Ad. [online] Available at: http://jackimx.deviantart.com/art/samsung-Plasma-tv-print-AD-161119388 (accessed 2 April 2015) This psychographic marketing approach is critical to Samsung’s successes and is more aligned with this competitor’s overall mission and vision to provide consumers with products that enhance their lifestyle. Why is psychographics so effective for Samsung? Research indicates that when a product brand is capable of expanding a consumers’ personal social and lifestyle needs, they develop strong attachments and loyalty to these brands (Zhang and Chan 2009). Further, Nandan (2005) asserts that in market environments where product benefits and features can be rapidly replicated, the only real asset that a firm maintains is its brand identity. Samsung seeks to build potent and long-lasting relationships with its customer by developing marketing communications, a value chain aspect, that are in-line with consumer attitudes, beliefs and values. This creates superior attachments to Samsung products over those of Sony that continue to miss the mark on what drives consumer behaviour in this consumer electronics industry. Whilst the literature supports that lifestyle marketing and the socio-psychological dynamics of marketing are beneficial, supported by empirical study, it does not express the breadth of marketing opportunities that could also provide value to a firm. However, when examining Sony and its competitors, and with Sony unable to achieve profitability for a period spanning four years, Samsung’s lifestyle-based and socio-psychological based marketing is bringing this business considerable revenue growth. Therefore, when considering how the Five Forces model can achieve value, using real-world examples with marketing-based empirical literature seems to find congruency, hence giving Samsung value when utilising these strategies in comparison to the Sony Corporation. Porter’s Five Forces model as a strategic management tool can provide better planning and seizure of market opportunities. It provides guidance for an environmental analysis of what is driving competitive strategies and allows Sony to seek new positioning strategies and utilising more effective marketing based on the analysed effectiveness of competitors such as Samsung. Marketing, as operational strategy, is critical to how a brand is perceived by consumers. Brand value is substantial and evaluation of competitive marketing strategies can assist Samsung in devoting more resources toward positioning in terms of innovation (a message not justified with less emphasis on R&D). Other aspects of Porter’s Five Forces model would assist in examining new market threats, such as Vizio, which is becoming a legitimate pioneer of television products, which is developing superior high definition technologies. By recognising the strengths and weaknesses of new market entrants, Sony can better devote more resources toward product development, altering production systems, and developing partnerships in the international supply chain that can facilitate better technological improvements in product design and features. Porter’s model also provides a firm with the ability to recognise substitutes. In this industry, smartphones, personal computers and other mobile devices are substitutes to traditional television viewing, allowing consumers to stream videos and programming content from virtually anywhere. This model is critical as a strategic management tool in determining strategies to make televisions more inviting to consumers or otherwise combat the threat of substitutes. For instance, if television revenues fall for Sony, the firm can innovate by offering Sony-branded programming content available on these substitute devices and restructure operations to produce fewer televisions, but better cater to the mobile market with opportunities to seek Sony for their mobile video, music and viewing needs. Value is provided to the organisation through the Five Forces Analysis in this fashion, ensuring that the organisation adjusts according to changing external market conditions. Generic Strategies Model The Generic Strategies model assists management of an organisation in determining how best to achieve competitive advantages (Gamble, Thompson and Strickland 2010). For instance, evaluation of the competitive market may indicate that most competition in consumer electronics is seeking differentiation strategies to position themselves properly in the market and gain revenue growth. For instance, in the smartphone market, competitor Apple differentiates through design expertise, always seeking to make products more lightweight, user-friendly and capable of more advanced technological competencies that better service the market. The Generic Strategies model and its analysis intention might indicate that Sony would be more effective competitively by seeking a cost leadership strategy. This is effective when customer market segments are price-sensitive and allows the organisation to provide lower-priced products. Sony, if appropriate, could become a cost leader by ensuring more productive asset utilisation, spreading fixed costs over a broader volume of units or lowering operating costs (Jermias 2008). Such strategies might include seeking a lean production system as a means of controlling various costs along the entire procurement model, exploiting economies of scale, or using its size and scope to force price reductions with various vendors. Generic strategies as an evaluative strategic management tool provides value to a firm by allowing it to adjust value chain activities, including marketing, procurement, service or even technology to ensure that consumers are given lower-cost products that make the brand more attractive as compared to competition. Whilst Jermias (2008) did identify that becoming a cost leader is achieved by more efficient spread of fixed costs, it is not the only cost leadership strategy. In some instances, a larger organisation maintains considerable market power which allows them to control pricing along the vendor supply chain. Not all firms utilise this bargaining strength in this fashion to control costs (which will ultimately impact pricing strategies) and it would require aggressive and negotiation-minded strategic managers to facilitate an effective and well-rounded cost leadership strategy. Not all strategic managers have these robust competencies which may require investment in training and HR leadership teaching in order to ensure that managers have the hard-line competencies necessary to exploit market dominance necessary to facilitate an effective and workable cost leadership strategy. Quality techniques and tools For some players in the consumer electronics industry, quality is a major determinant of whether consumers will establish loyalty toward the company and find it superior (perceptively) against many different competitors. In the consumer electronics industry, the switching costs for consumers are very low in an environment where there are many different products with similar benefits and features available in the market. Therefore, some strategic managers turn toward implementing Six Sigma as a means of providing organisational value. Quality management is the surpassing of consumer expectations through higher quality product outputs (Farris, et al. 2010). Six Sigma’s general intention is to guarantee that processes are efficient and that product outputs are superior in quality by identifying the key sources of what builds defects and minimise opportunities for variation throughout many different processes (Raghunath and Jayathirthia 2013). Though complex, Six Sigma provides strategic tools that consist largely of statistical methods and analyses to build more efficient and quality-oriented outputs whilst also ensuring that an organisation better exploits its human capital productively to save costs and boost overall productivity. Six Sigma utilises such analytical tools as scatter diagrams, cost-benefit analyses, histograms, value stream mapping, and statistical process control. These analysis methods require managers to view many aspects of business processes from a quantitative lens, thereby recognising where inefficiency is present, where variations can be reduced and where costs can be better controlled (Gershon and Rajashekharaiah 2011). Value is added to the organisation through Six Sigma (and other total quality management tools) by offering customers superior quality products with fewer opportunities for defect or failure, streamline production systems to be more efficient, and identify how to restructure internal activities in a way that better controls costs and waste. Six Sigma does require strategic managers to maintain capabilities to analyse complex statistical data, which might require training support from other Six Sigma leaders in the industry. It would also require employees to share the same vision of waste control, cost controls and productive efficiency from a statistical perspective. This is not always a simplistic (or inexpensive) task, however if the firm allocates professionals to assist managers with key learning on quantitative methodologies and allocates human resources to gain human commitment in a Six Sigma environment, the long-term payoff can be consumer brand loyalty which allows a firm to charge higher prices and gives the firm a much better long-run market reputation. Jacowski (2008) does assert that change resistance is common with Six Sigma design and implementation, however if a firm is capable of overcoming these resistances using visionary internal marketing communications and focus on human resources management, the economic and reputational benefits of superior quality systems and product outputs are substantial for revenue growth and differentiation of the competitive brand. PEST and SWOT Analyses Though rather simplistic models of environmental analysis, these are effective models for ensuring that strategic managers align the business properly to the external market. The PEST analysis model provides careful guidance for exploring political threats and opportunities, economic factors of an operating region, social and technological factors that dramatically impact business. Macro-environmental issues impact how an enterprise is capable of changing and adapting to market conditions and ensure proper fit between internal capabilities and resources to the external environment (Gupta 2013). Political factors identified might include, but are not limited to, changes in the regulatory environment in an existing market. The PEST Analysis might find that a new market, such as a foreign strategy for new market entry, is more viable to ensure that the business maintains more autonomy or does not have to incur significant export/import tariffs and other taxations. This analysis tool provides value to the organisation by identifying social changes that will impact consumption behaviour of product output whilst technological examinations might identify new operational technologies that can facilitate faster output, more cost effective output, or ways to reduce variations and deviations in production. An economic analysis might uncover that currency exchange rates are not conductive for staying in an existing market or that consumer disposable incomes are not growing, therefore allowing a firm to seek new market entry strategies in another foreign market. The SWOT Analysis allows a firm to identify its internal strengths and weaknesses whilst also examining external market threats and opportunities. For example, this simple strategic management tool might identify that the organisation is efficient in customer service whilst weak in marketing. This could allow the organisation to differentiate the firm in terms of service competency, thereby linking marketing strategy with the ability to build long-term and valuable relationships with consumers that buy products that have superior service systems and ideologies. The firm might, through SWOT Analysis, recognise opportunities for capturing a new market segment with valuable personal resources and needs in a foreign nation whilst also mitigating threats in an existing market, such as a poor supply chain or currency devaluations (McManus, Li and Moitra 2007). The PEST and SWOT frameworks give strategic managers a portrait of where the firm requires change, where it can build on its competencies, or explore new market strategies pertaining to marketing strategy, seeking joint ventures, or changing overall positioning and differentiation strategies. These analysis frameworks provide value to the organisation by showing it where adaptation is necessary to remain competitive, how to restructure to be more productive or efficient, explore expansion opportunities, or any number of factors that could give a firm a better reputation, grow revenue and profit, or gain attention from a more diverse group of consumers. Fortunately, PEST and SWOT analyses do not require significant managerial training to conduct internal and external investigations and are not costly analysis frameworks, but represent rather rudimentary consideration of the macro-environment. However, both models are critical to exploring how to achieve competitive and cost-related advantages in the market where the organisation operates. The Ansoff Matrix The Ansoff Matrix is a superior tool for strategic managers to determine the most effective method of achieving growth. This model refers to potential strategies such as market penetration, market development, diversification, or product development (Jeffs 2008). To illustrate, an organisation might decide that its market is stagnating (as justified through both qualitative and quantitative investigations of the market) and requires new strategies to continue to improve revenue opportunities. The Ansoff Matrix provides value by giving strategic managers guidance for how to adjust the business and its operations to achieve its growth goals. As another example, the organisation might determine that product development, creating new products targeted at existing markets (Gamble, et al. 2010), might allow it to extend the corporate life cycle. For instance, a firm in the consumer electronics industry might devote less resources toward customer service and, instead, develop a more valuable research and development department that continues to identify opportunities for innovative product design and launch. The Ansoff Matrix allows the firm to view competitor activities, determine what strategies will give the firm a better market positioning, and stay viable as a profitable competitor in the organisation’s markets. This matrix allows a strategic manager to view its entire value chain and determine how to align the firm to seek a new growth strategy. If the firm chose diversification, the company might expand out of its current product line and enter new industries. This occurred with the large supermarket chain, Tesco, that diversified from just offering consumers groceries to financial services management and banking. This ensured that the supermarket industry where it operated, if it became stagnant and without growth, did not become the only source of revenues for Tesco. In this fashion, the Ansoff Matrix would provide value by ensuring that revenues are achieved in multiple industries and the firm could build a positive reputation with a very diverse group of consumers with varying needs and expectations. Using the Ansoff Matrix as a strategic management tool would, in the long-term, require significant adjustment of the entire business model to achieve goals of diversification, market penetration, product development or market development. It would require training individuals to adjust to new operating systems and processes, alter recruitment if the firm chose to enter new industry markets, and would require managers to readjust existing supply chains in order to facilitate new production systems and strategies. The short-term expenditures in human resources, procurement, and other important value chain activities would be worth the cost if the firm successfully captured new markets, gained a better market reputation, or could legitimately become an innovator in its operating markets (or desired markets). Whilst the Ansoff Matrix is proposed as a valuable strategic model, there is little evidence of empirical data showing support of its long-term benefits; mostly emphasis on theory. Therefore, it should be recognised that more real-world studies should be conducted on industries that utilise this strategy to justify its relevancy and long-term viability. This limitation of the model’s lack of empirical support should be noted. Benchmarking Benchmarking involves measuring the performance of an organisation against those in a market or industry that have achieved superior performance (Parker 1996). It is a process of learning from others in an industry that have adapted effective best practice models and using this knowledge to facilitate change in the evaluating organisation that might achieve similar or superior performance outcomes. Competitive benchmarking is a valuable tool for an organisation as it allows for evaluation of how to reverse engineer products and analyse how an industry leader reaches customers cost effectively and efficiently. Benchmarking analysis tools include, as one example, activity analysis which seeks to benchmark cost and efficiency advantages of a competitor or other industry leader, examining how to adjust back-office systems or even consider outsourcing as a cost savings in key operational areas. The process of benchmarking allows a strategic manager to witness where there might be problems with certain processes, products or systems of the firm and then use another industry leader’s systems that produce higher quality product outputs, save costs, or generally improve the reputation of the organisation on its market. Whilst benchmarking might appear to be simplistic, in reality it is not. Benchmarking involves putting together a team of investigators that can gather data, report on this data and share knowledge to make tacit knowledge explicit. Benchmarking involves consistent repeating of operations to achieve the benchmark goal and execution time can be substantial to an organisation (George 2014). This can entail short-term expenditures in terms of travel expenses for teams visiting industry leaders, research costs, the costs of keeping a benchmarking database that stores qualitative and quantitative information, and labour expenditures (to name only a few). However, despite the costs and complexities, the organisation achieves value through benchmarking by creating a new set of metrics that identify how to change, adjust operational strategy, control human activities throughout the change process, and define statistical techniques that contribute to efficiency and determine what specific infrastructure is required of the organisation to achieve the benchmark goal. More productive and cost effective implementation of technologies and processes underpins substantial value for the organisation if an organisation is willing to invest the labour-based and economic-based capital into conducting benchmarking research and implementation testing. George (2014), in the literature, seemed to insinuate that benchmarking is a simplistic process. However, knowledge creation and knowledge-sharing are complex concepts in organisational studies and development of a learning organisation, with committed employees and middle managers, requires substantial emphasis on internal communications, leadership, change management, and knowledge management to make this a success. Team development as well as group dynamics and socio-professional relationship quality must be feasible within an organisation that seeks change according to findings of strategic management models and matrices that assist in identifying new strategies. An organisation seeking a benchmarking strategy must be prepared for these extenuating dynamics to change processes through benchmark comparisons which should be recognised before providing effective recommendations for Sony. Recommendations for Sony Based on the value-added benefits of all aforementioned strategic management models, it would be a viable strategy to recommend that Sony consider the following strategies immediately: Repositioning the brand utilising more effective contemporary marketing strategies. Implement the Six Sigma ideology Seek growth through product development The strategic management tools and techniques identified in this research study that provide organisational value served as the underpinning for recommending new strategies for Sony. Repositioning the brand away from that of being a pioneer and an innovator (when legitimate product outputs and market sentiment do not support this reality) would be highly beneficial. The Five Forces model by Porter provided a framework for evaluating that Samsung was superior in using consumer-based, psychographic marketing strategies to achieve a more superior market reputation and build loyalty, reinforced by Zhang and Chan (2009) and Nandan (2005) as being viable marketing constructs for brand loyalty achievement. Sony has been lax in benchmarking the competitive marketing strategies of major competitors and continues to utilise marketing communications and positioning strategies that are highly ineffective to revenue growth. Using Porter’s Five Forces model as a tool for this evaluation illustrated substantial short-comings of Sony’s marketing strategy, thereby providing opportunities for building a brand that is relevant and attractive to profitable consumer segments. Allocation of resources toward product development would also facilitate Sony recapturing market share in this highly saturated and competitive market. More allocation of labour and financial resources toward innovation for existing markets could ensure that Sony beats new market entrants (such as the aforementioned Vizio) in marketing ingenious products. Product development would also provide value, as an opportunity provided by the Generic Strategies Model, by changing the mindset of existing consumer markets to build faith and confidence in the Sony brand as a company that can provide consumers with more inventive and novel products. If the company were to choose not to adjust is pioneering and innovative positioning, then implementation of Six Sigma would be required as a means of providing legitimately quality output in an environment where more quality-focused competition such as Apple outperform the Sony brand in the smartphone industry. However, for Sony, this represents a substantial change management ideology that must be considered to gain commitment and effectively train strategic managers to create, interpret and teach statistical learning gleaned through quantitative methodologies. Stoiljkovic, et al. (2010), firmly assert that for Six Sigma to be launched, it requires development of an organisational culture that remains dedicated to complying with new, stringent Six Sigma methodologies and processes. This transcends only changing processes to be aligned with statistical metrics, but entails that strategic managers have leadership capabilities, work collaboratively with human resource experts, and be capable of appealing to the complex socio-psychological dynamics of employee behaviour and attitude. For a slow-to-change, hierarchical structure like Sony, this might be labour-intensive and require several years of transformational leadership to achieve this goal. Conclusion As illustrated by this research project, the many tools and techniques of strategic management identified are highly valuable to the organisation. They allow for examination of resources (both human and economic), ensure the firm understands, fully, its external market conditions, teach the organisation how to go about changing value chain activities and human behaviour, and adapting to competitor activities in a way that provides revenue growth and reputation in a market that is valuable for long-term growth. The Five Forces Model, the Ansoff Matrix, Generic Strategies Model, PEST Analysis, Benchmarking, and Six Sigma illustrated the most beneficial strategic management strategies that would assist Sony in turning a profit in a market where competition continues to outperform. Stakeholders and investors in Sony might wonder why the firm continues to be outperformed by competition, without a clear-cut portrait of where the firm is failing and what strengths it can potentially capitalise upon. However, the strategic management tools and techniques identified in this study provided the guidance for where Sony required change and adaptation that could not have been achieved successfully without their utilisation and exploration. This, again, illustrates why the tools identified in this study are most valuable to the organisation: as it changes the mindset of strategic managers to make them more aware of the markets in which they operate and how the organisation must be adaptable and adopt new strategies if the organisation is to achieve competitive advantages. If this study’s recommendations are followed, Sony will build a more attractive brand, achieve revenue growth, and position the organisation against competition effectively. Marketing emphasis, as shown by Porter’s Five Forces model, and Six Sigma have inter-dependent consequences for achieving the important brand identity as identified by Nandan (2005) as being critical as the only truly valuable asset a firm maintains today. The Generic Strategies model showed that product development would also be aligned with a new marketing focus, giving Sony, finally, the capability to achieve an effective marketing reputation and positioning that is critical for a firm that has not been able to achieve profit and revenue growth by using stagnant and unrealistic strategic initiatives. Sony is an excellent case study for why the strategic management tools and techniques found in this study are highly valuable for a firm. References Farris, P., Bendle, N., Pfeifer, P.E. and Reibstein, D.J. (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Pearson Education Inc. Gamble, A., Thompson, A. and Strickland, J. (2010). 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