The Formation and Evolution of Sony Ericsson Alliance - Assignment Example

Ericsson is a Swedish company and one of the largest company in telecommunication sector. Ericsson has been active since more than 100 years and its operations are spread to more than 140 countries. The company provides solution ranging from systems and applications to communication tools including mobile phones.Sony with headquarter in Tokyo, Japan, is active in the field of consumer electronics market, and information technology and telecommunication product for personal and professional consumers.

Sony Ericsson Mobile Communication (SEMC), a Joint venture with equal interest by Sony and Ericsson was formed under the name and style in 2001 merging their mobile phone business worldwide. The new company was launched on October 1, 2001 after the approval of boards of both the companies. The merger was also approved by the European and other regulatory authorities. The new company, headquartered at London, UK, envisaged total employee strength at the time of merger at 4000 of which Ericsson brought 2500 and balance contributed from Sony.

The mission statement of the new company is to become the communication entertainment brand enabling everyone in creating and participating in entertainment experiences (Welcome to Sony…). The new company’s product line includes Mobile phones and handheld multimedia communication products. Reasons for Forging Alliance The alliance between Sony and Ericsson has been seen as an attempt to refurbish the languishing mobile phone business of Ericsson against their arch rivals Nokia and Motorola.

As per the data provided by International Data Corp (IDC), Nokia controlled 30.8 percent market, Motorola at 14.6 percent and Ericsson at 10 percent of market share in mobile market at the time of merger. Thus, Ericsson’s market share is way below market leader Nokia.In forging the alliance, Ericsson had benefit of access to Sony’s Japanese market, and Sony’s consumer experience particularly in digital screens, and Memory stick. Sony had the benefit of access to Ericsson base stations and 3G infrastructures.

Moreover, Sony had access to Ericsson handset core technology and entry to US market. In forming a joint venture, Sony had the benefit of sharing Ericsson’s international telecommunication experience and chance to fill missing link in form of satellite, gateway and phones. On the other hand, Ericsson had access to Sony’s design and production processes and facilities in China. Sony’s financial strength was in benefit to Ericsson in the long run. Research and development costs could be shared between the partners in the current competitive arena.

Ericsson was categorical in its financial report of 2001 that Ericsson will have a chance of augmenting supply chain strength from Sony’s proven and established supplier resource base. Thus, a clear competitive advantage for Sony and Ericsson lay in the development of mobile internet devices with robust hardware and tested content. The modus operandi was to bring cooperation through bilateral contributions to fill the gap each had in their own fields as it was need of a day in fast changing technology driven and resource constraint market.

References1. Welcome to Sony Ericsson Mobile Communications. [Online] available athttp://www.sonyericsson.com/cws/companyandpress/aboutus/mission?lc=en&cc=us [Accessed 16 May 2011]2. Sony, Ericsson unveil US$500m merger [Online] available athttp://www.zdnetasia.com/sony-ericsson-unveil-us-500m-merger-38008998.htm [Accessed 16 May 2011]