The Rise and Fall of Sony Ericsson - Case Study Example

The rise and fall of Sony Ericsson JV Name: Institution: Course: Tutor: Date: The Rise and Fall of Sony Ericsson JV Introduction Skills and resources are often scarce in the business world. However, it is upon any company to initiate helpful strategies meant to uplift an organization. An organized administration will look into several alternatives and choose the best alternative that can help in solving the problems considering the company in question. In addition, it is necessary to involve stakeholders and other members of the company on the challenging situations facing the company in question. This will help in seeking advice that can be incorporated and work miracles. The nature of a decision adopted must consider the long and short-term goals of the company and predict future outcome. A Joint venture is an example of an alternative that two companies can implement with the aim of improving performance of both companies. In this case, a joint venture can be described as a business contract two or more companies decide to develop their companies in terms of identifying new entities and assets that may boost the company’s performance. In addition, the joint venture will enable the two or more companies to share the benefits and loses of the company as per the contract. Therefore, Sony Corporation and Ericsson considered this option to find solutions to their poor performance. History of Sony Ericsson as a Company According to Sony Ericsson Joint Venture, which became effective in September 2001, the two companies (Sony and Ericsson), wanted to increase sales of their products and be among the leading industries that supplied consumer electronics, mobile phones and other related products to other parts of the world. In addition, they were interested in giving more to consumers in order to justify the greatness of their products. Apart from just becoming a company that sells electronics and mobile phones, they were also interested in making the company a communication entertainment brand. This means they wanted to inspire their consumers to engage in other activities rather than use the phone for making and receiving calls (The rise and fall of Sony Ericsson, n.d., para.1). However, this dream was shunted, as the venture was not stable. This can be attributed to the fact that they did not focus on the long-term outcome of their intention. This can be evidenced by the occurrence of smart phones from companies like Apple and BlackBerry. In the early years that followed the effective establishment of the venture, Sony Ericsson was rated among the top mobile phones sellers and other consumer electronics in the world. The imaginations of Apple and Black Berry were the main cause of the fall back of Sony Ericsson Venture between 2007 and 2008 (The rise and fall of Sony Ericsson, n.d., para.2). The imaginations were much better in terms of delivering more than just communicating. The emergence of several Apps and different features that were more interesting to use were invented by apple and BlackBerry (The rise and fall of Sony Ericsson, n.d., para.3). In the end, Apple and BlackBerry became among the leading companies in the sale of mobile phones and other consumer electronics. What motivated the two companies to forge the JV? As earlier said, Sony Corporation and the Swedish Mobile Company, Ericsson intended to bring more to the consumer world rather than just seeing their consumers communicate and do nothing else with their phones. However, the main motivation of the JV can be attributed to the fact that Sony Corporation wanted wed to combine its expertise on consumer electronics with the advanced technology that Ericsson had by then, in order to capture a large market share in the world of mobile communication. This means that both companies were lacking something important in their companies and with the help of the venture; it would enable them to attract more consumers. In the end, they would become the most admired global industry due to their innovative skills. The motivation of the two companies to forge a venture was also subjected to several strategic factors. For example, Nokia was a market holder by 2000 in the sale of mobile phones. However, Sony and Ericsson figured out that their best bet to out compete Nokia was through combining their skills and ideas (The rise and fall of Sony Ericsson, n.d., para.1). Therefore, Sony opted to seek the technological leadership skills of Ericsson that finally helped the company with booming results in 2007 and 2008. On the other hand, Ericsson played its role by strategizing on how to enhance the companies’ technological and financial stability. This would eventually enhance trafficking in Sony Ericsson Company for the demand of better consumer electronics than those of Nokia. In the end, the combination of this assets and skills were considered to allow Sony Ericsson to produce products that were technologically innovative. It is vital to state that the alternative of forming a venture by Sony and Ericsson was a good idea; however, other considerations that could be considered by the two companies that include traditional mergers or acquisition. Advantages and Disadvantages of Joint Ventures Joint ventures are vital in sustaining the companies that feel that they need external support in order to achieve their goals. Among the advantages of joint ventures, include the sharing of power in the partnership and utilizing resources than either of the companies did not have. For example, Sony needed technological leadership skills in order to provide consumer electronic that were highly innovative. However, due to inefficient funds to invest in training their employees; they could not achieve this mission. In the end, through a series of negotiations with Erickson, Sony got an alternative. On the other hand, Ericsson also figured out that a joint venture would reduce their expenses in determining where to place its innovative skills and provide consumer electronics there were innovative. Therefore, this means that, joint ventures help companies to enjoy skills indirectly, needed by a company in question at a lower cost as it awaits future outcomes. Even though, Sony and Ericsson were convinced that the advantages of the venture would help them meet their goals, they realized that this was not an alternative to rely on or implement. The two companies failed to look on the darker side of the venture keenly. In the end, this would have been their guide of finding a better solution to their venture problem. Joint ventures have the advantage of taxation, as they are not allowed to file taxes as a business entity. However, there are potential disadvantages attributed to conflicts and disputes among the partners. In this case, there are situations that Sony and Ericsson could have disputes over performance of the company. The management of Sony Corporation and Ericsson were different. This resulted to issues of group consciousness. There are situations when both companies were not happy; by the way, management seats were distributed in the top office. For example, under most cases, voting favored Sony leaders other than Ericsson yet they were known to have better skills. Such differences would create management problems that would eventually cause a divide among the employees. In the end, the company lost focus on what it was trying to achieve. Therefore, due to competition in the communication brand, other companies like Apple and BlackBerry took advantage of the weakness within Sony Ericsson Company Joint Venture and used it to their advantage. It is vital to note that company liabilities of joint ventures are not shielded. They have unlimited liability towards debts and obligations. This means that, in case there is any debt pending, the company’s assets are always at risk. For example, both Sony and Ericsson were not financially stable. That is why they opted to combine efforts and work together. In addition, the joint venture allowed them to identify new assets and innovation that could be useful in increasing their sales. There are situations when either one of the parties were faced with debts while trying to solve the companies issues. This can be in the form of borrowing money from the bank with the aim of paying back according to the obligations and conditions indicated the contract. However, due to unavoidable circumstances, the company fails to pay the debt; the bank finds a solution of auctioning any assets they want irrespective of the owner in the joint venture. This means that, either company will suffer the consequences that it did not intend to initially. In the end, such problems result to conflicts and disputes between the two parties. While entering into a joint venture, one party may benefit more from the other rather than presenting an equal share as per terms and conditions of the venture. For example, it is notable that in order to advance innovative products, a company must have advanced technology and skills to make things work as desired. In this case, Ericsson played a huge role in the initial success of the company. However, it can be noted that, Sony got equal shares yet the innovative part was highly directed to Ericsson. This was a disadvantage to Ericsson as Sony was providing the materials while the technical part of innovating products that could meet consumer demand was done by Ericsson. This means that, Ericsson had a higher advantage of maintaining its progress by finding a better partner of whom they could share profits and loses effectively. On the other hand, Ericsson would have purchased Sony and managed it fully due to its management and leadership skills. Therefore, Ericsson would have succeeded in having all the profits without complaining about the efforts it enforced in the whole process. Alternative to the joint venture After considering the disadvantages of Sony Ericsson’s joint venture, one can conclude that other alternatives could have been implemented to achieve better results. It can be noted that, most companies that encourage joint ventures do not last in the partnership. This can be evidenced by the several disadvantages explained earlier. However, considering strategic options like acquisitions or mergers would have made Sony Ericsson’s dreams sustainable. As earlier said, the main intention of Sony and Ericsson was to come up with best selling mobile and consumer electronics that were advanced. However, due to shortage in technological and leadership skills and finance in Sony and Ericsson respectively something had to be done to help the two companies achieve their dream. One of the best alternatives that Sony and Erickson would have implemented is the formation of Limited Liability Company. Back in the 20th century, the formation of Limited Liability Company was intended to help companies that had the idea of combining forces, the advantage of shielding the shields business owners and companies from allegations of private liabilities. Initially most companies had problems in shielding their private asset especially when it involved a venture. Such situations lead to complaints and disputes just as it occurred with Sony and Ericsson. However, with the formation of Limited Liability Companies, solutions can be incorporated in terms of debts or negligence of obligations. For example, in case Sony borrowed a loan from the bank in order to invest in some skills, the company should pay irrespective of the business partner that initiated the borrowing. The reason being the company is a joint venture. However, in case of Limited Liability Company, each company is liable to its own debts and negligence of obligations. For example, if Sony borrows money from a bank and fails to pay then it will be answerable to the bank. The bank will not have the right to auction private assets that belong to Ericsson. Another alternative to the idea of joint venture is the formation of acquisition and mergers. This can be attributed to the fact that mergers involve combining forces of two companies and forming one new business entity. In addition, the merger will require new management rules to be set and followed rather than having two different set of management styles that may conflict and affect the management of joint venture companies. For example, Sony and Ericsson would have considered looking into merging and forming a completely new entity. This would have enhanced the management skills used by the company. In the end, it would have reduced conflicts and disputes between the companies’ administrations. In addition, acquisition process of which one company fully own the two companies and making it one would have helped the company achieve its dream of becoming the best communication brand in the world. While considering the scarce resources between Sony and Ericsson, it is notable that they would have achieved more if they had one management. This can be attributed to the fact that, single style of management is best in leading a company towards a direction that is deemed the best. For example, the decision to take over the company fully by Sony, gave Sony Ericsson the advantage of utilizing skills fully without fearing to benefit the other company. In addition, Sony will have the opportunity to make strategic steps in the innovation process, as they will have one manager who oversees the progress of the whole company. In addition, having one manager has the benefit of looking into different sectors that need upgrading without fear of blessing one side mo than the other side. Therefore, Sony will succeed in having better products due to incorporation of all resources under one management. Conclusion It is vital for companies to strategize and think through on how to solve their inefficient skills without destroying the companies’ further. Joint ventures may be the best solution in terms of cooperation and finding new markets in states that are hard to penetrate. However, it is also vital to consider the long-term goals and benefits that the joint venture can provide. Otherwise, in the case of Sony Ericson JV, the step taken by Sony to own the company fully will help the company pick its broken pieces and sustain its initial dreams. Reference The rise and fall of Sony Ericsson n.d., viewed 08 May 2013, < http://www.cellphone-manufacturers.com/sony_ericsson.html> Read More