The Competitors of Sony and Their Strategies - Dissertation Example

Business Plan Table of Contents Introduction 3 The Company, Sony: An overview 3 Competitive advantage of Sony 4 Core Competency of Sony 5 EnvironmentAnalysis 5 Mode of Entry 7 The Competitors of Sony and their Strategies 9 The venture: Potential Market size, Cost and Risk associated 10 The prospective market size 10 The cost incurred in the venture 11 The Risk Involved 11 Conclusion 12 Reference 13 Bibliography 15 Introduction The global competitive environment has rapidly changed in these recent years. There have been changes in every aspect including communications, transportation and technology, adding a new momentum to the competitiveness quotient of the companies. As the trading barriers have almost collapsed, more and more companies are stepping forward to expand their businesses, globally. This report aims to offer a business report on the international business opportunity, open to Sony. This report encompasses Sony’s core competence and competitive advantage. Using such analysis, a business venture has been proposed for Sony to move with. The proposal contains an analysis of the proposed market size, estimated cost involved and associated risk with the same. An analysis of the environment of its home country is significant to configure its international strategies. There can be certain trading barriers which can put hurdles for the organisation to grow globally. Apart from this analysis, it is crucial for a company to enhance its competitive strategies to be ahead of its competitors. A study of the competitors and their strategies has been provided to have an enhanced and sustainable competitive advantage. An insight into the modes of entry will help to zero down on a particular entry mode for Sony to expand its business, cross borders. Overall this business report presents an analysis the global business prospects for Sony. The Company, Sony: An overview The company operates in the high profit consumer electronics products and gaming systems industry. The company’s production range encompasses digital cameras, semiconductors and walkman stereos (Hoovers, 2010). The company even makes a host of items like game consoles and software. Broadcasting of films, television and other video products are one of their vast operating areas. The company is also involved in music, animation production and marketing and other businesses. Apart of all these global businesses, the company is also engaged in the financial service businesses, but this operational area is confined only to its home country, Japan. Competitive advantage of Sony To compete in any market, it is very much required for an organisation to possess competitive advantage. A firm needs to identify its competence in the market against its competitors. However, the more important pert is whether the company is able to sustain its competitive advantage. A company with a well placed strategy seeks not only to achieve its competitive advantage against its competitors, but must try to hold one the same. Back in 1946, the company had started its business as a small company in Japan. From there, now, the organisation has reached at such heights, where it has been known as one of the leading companies in the consumer electronics, worldwide. Sony has been the host of a number of high end technical products. No doubt that the company has been successful to offer innovative products at a regular basis. Product innovation has been the one of its competitive advantage of the company. The research and development division of Sony has enabled them to touch such heights in product innovation and excellence. This division has been in the epicentre of their growth strategy, from where the products derive their value added, distinctive features and device technologies. Sony has accelerated the success through the development of large scale integrated circuits and other core components of their products. Sony’s continual ability to invest in its research and development divisions and properly prioritise its investments has set Sony to be ahead of its competitors (Sony, 2006). In most of the cases, Sony has been always preferred to be the first mover in the market and in a way to fetch the first mover advantage. At least it needs to be put forward that Sony’s competitive advantage also lies on its management ability to encompass the innovative research and production expertise into its competencies that allow its business adaptable to the new upcoming opportunities (Essay Academy, n.d.). Apart from that Sony’s competitive advantage also lies in its diversification strategy. Sony implements a relative diversification strategy which has encouraged Sony to include those businesses in its portfolio, which can provide valuable strategic fit to its existing value chain. Correlated diversification has allowed the company to focus more on the management of the business diversifications and at the same time strengthened the strategic unity among the global business activities (Essay Academy, n.d.). Core Competency of Sony Sony’s core competence lies in its miniaturisation, allowing the company to make everything starting from Walkman, video cameras to notebook computers (Stanford, n.d). To bring this competence in the products, Sony ensures that the engineers, technologists and marketers share a common understanding of the customer requirements. That is why the company encourages its people to aim for the customer satisfaction through technological advancement and addition of value added services. Environment Analysis Economic Japan economy is one of the leading economies on the globe. The economy has been evolved based on the industrialised and open market economy. Based on the purchasing power parity, Japan is the third largest economy, worldwide. The economy is the second largest economy, while measured according to the foreign exchange rate. The economy has shown its efficiency in international trading; however the country has seen low productivity in agriculture and mining services. Two substantial changes had been noticed in the post war economy, manufacturer, distributors and suppliers have experienced interlocking structures and the lifetime employment guarantee for a part of the urban population (CIA, 2010). However, as the market is getting more open and wider, these policies are on their way to removal. Political Japan Political environment is shaped as the McArthur constitution enforces in the post World War II period (Asia rooms, 2010). The strength of Japan lies on its political governing personnel, who have placed the country as a great nation. The economy and polity of Japan depends upon its constitution. As per its constitution, the absolute power is inherent to the people residing in the country. The authority is developed from its people. The policies are developed for the benefits of the population in Japan. Freedom of belief, liberty in speech, publication, writing and public meetings which comply with the law, are granted. The constitution resembles these policies, which are subsequently featured in the same (CIA, 2010). Social The social structure of Japan is family oriented. In the Japanese societies, the belief of the people lies in their feeling of togetherness; people think that they are a part of the groups. The group can be the nation, school, office, family or any other organisation (Asia rooms, 2010). Decision making is quite slower here than in the other countries, people have tendency to seek approval of each of the members in the respective group. At the same time the decision making process is quite tedious as any proposal needs to get the approval of all group members before implementation (Asia rooms, 2010). This may be a challenging situation for their individual or the organisations which are intended to expand their business cross borders. This can, even, be a wrong indicator to the foreign investors (Ghimire, 2006). Cultural Japan is very much rich in the cultural context. The thought processes are mostly understood rather than expressed explicitly. This can be tricky for the investors, who has come form the low context based cultural environment. However, its strong ethics have encouraged the people to take more liabilities on their portfolios (Ghimire, 2006). So it seems that being in Japan, as such there is no certain barrier for Sony to expand its business, internationally. Rather, Japan’s free trading market and business oriented economy would encourage the company to trade across barriers. Japan is very much attached to its language and most of the people are more conversant with Japanese. Sony must take care of the fact that crossing the borders would demand a lot of cultural adaption from the company, which the organisation must be ready to fulfil. Mode of Entry There can be different modes of entry, through which Sony can expand its business across the borders. The company can set up its business all new, starting from the very beginning. Else, they can do it with mergers, acquisitions or through joint ventures for some particular projects. Setting up a new business altogether is an expensive way to move on. The cost incurred would be much higher than in any other entry modes. In an international market, it would be very tough for Sony to make its existence, as the customer base is not conversant with the brand name and with the product; it would take a lot of time to build the customers’ trust on their products. At the same time, the company would have to take trouble to recruit employees for their local organisation. One of the most important reasons of the company’s success is its human resources. As Sony is in such a business, where the organisation would need innovative and technologically advanced people for their business, finding out the right calibre for the company is not going to be an easy task for the company. Compared to the other entry modes, in new set ups, the company would take much more time to understand the legal, political and social framework of the foreign country, it is intended to work in. So, understanding the political, legal, environmental, social and economic framework of the company, while surviving in the competition through the development of new customer base, would be difficult for the company. The organisation can merge with a company in the foreign country to expand its business over the border. In such a case, Sony must look for an organisation which is of smaller or equal size of the company, itself. At the same time the company must be operating in a sector, in which Sony operates in. This is important from the point of view that in that case Sony would not have to worry much regarding the right calibre or the required technology. Sony can fetch the best of the both research divisions, both of the companies. At the same as Sony would have the local people on its base, it would be easier to accustom with the social, cultural, environmental and legal framework of the foreign country; and hence the company would be more able to understand the customers’ needs in a much better way. Sony would get the existing customer base of the target company to build up its customer base and hence the risk would be much lesser compared to that involved in new business set ups. One of the several problems, which can happen in merger, is that Sony would have to share its brand name with another foreign company. Sometimes there can be even fight for power between the management. As, in the mergers both the companies would have equal control, both the companies management would try to enforce their own power to attain managerial the control. That can result in a greater conflict within the organisation. No doubt, that in no time that would kill the operational processes. That is why acquisition seemed to be most proper way to enter into a business. “Acquisition provides a rapid means of gaining an established product market position” (Schoenberg, 2004). In the process, Sony must target on a well known foreign organisation in the same field; however it is preferred that the target company is of smaller size than Sony itself. The rationale behind this is that in this case it would be easier for Sony to afford the company. Acquiring a company would ensure the full control of Sony over the acquired company; hence the probability of conflicts arising is much lesser compared to that that in merger. The Competitors of Sony and their Strategies The competitors of Sony have included several companies. Some of them are Sharp Corporation Sanyo Electric Co Ltd Pioneer Corporation Panasonic Corporation JVC Kenwood Holdings, Inc Alpine electronics, Inc. Being in this industry means it demands a lot of research and development activities from the firms operating in this sector. Changes in technological arena are taking place in a rapid rate. Sony ha surely been able to make its own mark in the industry; however the sustainable growth is more important to have in the industry. To have enhanced sustainable growth, it is very much necessary for Sony to understand the strengths and strategies of its competitors. All of the above companies are from Japan, operating in the domain of electronic goods. There are certain places in which the companies can go ahead of Sony. For an instance Panasonic’ strategy is quite different to Sony and hence they have different needs than that of Sony. The company, Panasonic, has the expertise to reengineer the products and develops new products in imitating the former one. Sony has excelled in the product innovation while Panasonic’s core competency lies in its product imitation. The implications of the same on the operational and financial process can be manifold. The cost incurred to imitate the products is much lesser than that incurred to develop the products. Panasonic do not need to put as much as investment in their research and development centre, as that of Sony. As a consequence, Panasonic can offer its products in a much lesser price than that of Sony. Sony asks for a premium from the customers to avail the innovative new products. So Panasonic products are much cost effective while compared to Sony. As Sony looks forward to develop new products for their customers on a regular interval, they also demand some premium pricing for their products to meet up the cost for their research and development division. However, in such a course they are loosing on a certain segment of the customer base that is more comfortable to buy the products of Panasonic or other local brands. However, right now Sony has created a brand name and the expectation from the brand has increased, looking at their innovative rage of products. Sony must not compromise on the same, although it can look into the pricing to make it bit affordable; hence increasing its customer base. The venture: Potential Market size, Cost and Risk associated The prospective market size The market of electronics goods has been experienced a continual growing pace. The market is increasing its sphere at a rapid rate. So no doubt, that Sony must move in accordance with the increasing market shares. As a growth strategy, Sony may like to expand and enhance its business across borders. In such a case they would be more able to capture the global market of electronic goods. As per a piece of news, by the year 2012, the global market for the electronic products is supposed to increase to a value of $ 3.2 trillion. For the last five years, the global arena of the electronic goods has been increased at a compound annual growth rate of around 9.5 % (PR Log, 2008). Surely Sony has got an enhanced and larger stage to prove itself in these coming years. The cost incurred in the venture As discussed in the former part, acquisition would be the right entry mode for Sony to become a global brand name. To expand its business through acquisition, Sony may have to pay bit higher than that in merger. In this case, the cost incurred would mostly include the value of the target company. The valuation of the target company must be done in a proper way. The obligations of the company must be taken care of while deciding on the target company for acquisition. Apart from this, cost can be incurred to restructure the company and this cost would vary with the intensity and level of restructuring. The Risk Involved There can be certain risk in acquisition. The most important of which is the protest of the employees of that organisation. There is a human resource risk associated with the case. The employees can deny the managerial control of the new company. In such a course the whole operating process can go to a trembled situation; hence can loose on trust of the local customer base of the foreign country. To survive such situations and to have a much better control over the existing employees, the acquirer can keep some of the management personnel of the target company. In such a way the company would be able to gain the belief of its existing employees. Sometimes providing a salary raise can be way to attain the reliability of the employee base. Whatever way Sony opts to, the means should be mutually beneficial for both the organisation and the employees. Other risks would include certain financial risk like exchange rate risk. As company would be dealing in multiple currencies, it is apparent that the profit margin can increase or decrease in compliance with the movement in the currency rates. Sony must hedge the same to attain a better profit margin. Conclusion It is of much significance for a company to expand its business to have a sustainable growth strategy. As global market is expanding more, the organisations are also looking for international expansion to explore the growth opportunities, the global market is offering. Sony has built its name based on its innovation and excellence in product development. Its strong and enhanced research and development division has been the epicentre of its success. However, the company must remember that there can be certain and challenges on the way to global expansion. Sony must adapt to the social, cultural and industrial environment of the foreign country to make a sustainable growth, worldwide. Reference Asia Rooms. 2010. Japan Economy and Politics. [Online]. Available at: http://www.asiarooms.com/travel-guide/japan/japan-overview/japan-economy-and-politics.html [Accessed on March 31, 2010]. CIA. 2010. Japan. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html [Accessed on March 31, 2010]. Essay Academy. No Date. Evaluation of Sony Corporation’s strategy. Available at: www.essayacademy.co.uk/sample/2.doc [Accessed on March 31, 2010]. Ghimire, B. May 27, 2006. Doing business in Japan. [Online]. Available at:http://internationalbusiness.suite101.com/article.cfm/businessinjapan [Accessed on March 31, 2010]. Hoovers. 2010. Sony Corporation. Available at: http://www.hoovers.com/company/Sony_Corporation/crxxhi-1.html [Accessed on March 31, 2010]. PR Log. January 20, 2008. Global Market for Electronic Products Expected to Increase to $3.2 Trillion by 2012, says New Report. Available at: http://www.prlog.org/10046010-global-market-for-electronic-products-expected-to-increase-to-3-2-trillion-by-2012-says-new-report.html [Accessed on March 31, 2010]. Sony. 2006. Fact Book 2006. [Online]. Available at: http://www.sony.net/SonyInfo/IR/library/fact/FY06_3Q.pdf [Accessed on March 31, 2010]. Stanford University. No Date. Strategy and Marketing Primer. [Online]. Available at: www.stanford.edu/class/msande473/483primerV3.doc [Accessed on March 31, 2010]. Schoenberg, R. November 19, 2004. Acquisition Strategy. [Pdf]. Available at: http://www.blackwellpublishing.com/content/BPL_Images/Content_store/Sample_chapter/9781405118286/McGee_sample%20chapter_Blackwell%20Encyclopedia%20of%20Management%20Stategic%20Management.pdf [Accessed on March 31, 2010]. Bibliography Dunning, J.H. Multinational Enterprises and the Global Economy. London: Allen & Unwin, 1993. Friedman, T.L. The World Is Flat: A Brief History of the Twenty-first Century. New York: Farrar, Straus and Giroux, 2005. Rugman, A. 2002. International business: critical perspectives on business and management. London: Rotledge. Read More