Building and Sustaining Strategy of Sony Inc

Building and Sustaining Strategy

Case Study of Sony

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Building and Sustaining Strategy of Sony Inc Table of contents

Week 2: Overview of Sony (600 Words) ....................................................................................... 3 Sonys Mission............................................................................................................................ 3 Sonys Vision .............................................................................................................................. 3 Sonys goals and objectives ........................................................................................................ 3 Week 3: Sonys stakeholders .......................................................................................................... 3 Week 4: External analysis of Sony (600 Words) ............................................................................ 4 Five forces analysis of Sony ....................................................................................................... 4 Bargaining power of buyers .................................................................................................... 4 Threat of new entrants ............................................................................................................ 4 Competitor rivalry................................................................................................................... 4 Bargaining power of suppliers ................................................................................................ 4 Threat of substitute products ................................................................................................... 4 PESTLE Analysis ....................................................................................................................... 4 Week 5: Internal view of strategy (600 Words).............................................................................. 6 Sonys strategic capabilities and core competencies .................................................................. 6 Week 6: Analysing strategic capabilities (600 Words)................................................................... 6 VRIN framework analysis .......................................................................................................... 6 Value chain analysis ................................................................................................................... 6

Building and Sustaining Strategy of Sony Inc Week 2: Overview of Sony (600 Words) Based in Tokyo, Japan, Sony can be said to have created a company that is among the

worlds best-known brands. In fact, Sony is the largest conglomerate in media, with revenues of above $72 Billion. The company has several strategic business units that comprise of Sony Pictures Entertainment, Sony BMG Music entertainment, Sony Corporation, Sony Financial Holdings and Sony Computer Entertainment (Sony, 2013). Today, Sony is notably the leading manufacturer of video, electronic, communications, information technology and game video consoles products for both the professional and consumer markets (Porter and Porter, 2009). Sonys Mission

Sonys Vision

Sonys goals and objectives

Look up your chosen company on the Internet (find its home page as a start) and try to identify its mission, vision, goals and objectives. Put these down in your portfolio and evaluate each of them in turn, for appropriateness and effectiveness. If you find one or all of these missing or unclear, try to explain why.

Week 3: Sonys stakeholders

Identify the key stakeholders of your chosen company. - Identify how your chosen organisation balances the needs of stakeholders (if at all). Be sure to give your own view but cite appropriate references.

Building and Sustaining Strategy of Sony Inc

Week 4: External analysis of Sony (600 Words)

Provide a Five Forces analysis for the industry chosen for your learning set; then critically evaluate how these forces affect the strategy of your own chosen company. - How do you think these forces might change in the future? How might these changes affect the strategy of your own chosen company?

Five forces analysis of Sony Bargaining power of buyers

Threat of new entrants

Competitor rivalry

Bargaining power of suppliers

Threat of substitute products

PESTLE Analysis External Analysis Political The fact that Sony operates in various countries is common knowledge. These countries have different policies and approaches to business. That being said, Sony has varying business experiences in these countries in terms of competition and legislation. For example, countries

Building and Sustaining Strategy of Sony Inc

like Ukraine, China, Brazil and Russia have failed continuously to address piracy concerns raised by Sony (Floyd and Wooldridge, 2010). Economics The current trends in globalization have made it possible for Sony to expand its reach worldwide. Similarly, the company has been able to expand a great deal due to the same trends in globalization(Warren, 2002). However, globalization also has adverse negative effects on the company. The global recession, for example, affected the sale of Sony product a great deal. As a result, the annual sales registered by the company dropped, and so did the profits. Social cultural and demographic The increase in popularity of Sony created product like video games is an advantage for the company. Adults and children around the world are taking time to enjoy these products. Similarly, the fact that the population of the world inhabitants is increasing is good news to the company. This is because there will also be an increase in the disposable income. This is a demographical advantage to numerous companies including Sony (Harryson, 2011, pp. 288-295). Technological Advancements in technology have created a business niche in terms of the creation of gadgets to utilize such technologies. Sony has shown a resilient ability to leverage on new technologies and make profits. However, it is imperative that a note is made, one that identifies the diminishing nature of the margin for advancement in technology. This means that although new technology may take years to create, the time in which a company can enjoy the profits from such a creations are limited. This is because other companies imitate the technology and end up offering it at a lower price (Warren, 2002).

Building and Sustaining Strategy of Sony Inc Legal Several issues stand out as far as legal is concerned. These include; intellectual property rights, intellectually property, as well as protection and commercialization. These issues and the recognition of the same, have given Sony a reasonable source of comparative advantage on enterprises (Aaker, 2004).

How do you think these forces might change in the future? How might these changes affect the strategy of your own chosen company?

Week 5: Internal view of strategy (600 Words) Sonys strategic capabilities and core competencies
- Analyse your chosen business strategic capabilities and core competencies - Compare and contrast your chosen business strategic capabilities and core competencies against other competitors/ players.

Week 6: Analysing strategic capabilities (600 Words) VRIN framework analysis

Using the VRIN framework, identify sources of sustainable competitive advantage of your chosen business;

Value chain analysis

- Conduct a value chain analysis, including a diagram, for your chosen company

State how effectively they are using their capabilities and competences. Could the position be improved? How?

Building and Sustaining Strategy of Sony Inc

The research and development section at Sony differs greatly from that of other companies. This is mainly because the section is greatly flexible. Despite this, Sony has maintained its status as a traditional Japanese company. The company offers lifetime employment to many people. It also displays strong norms and values which, consequently, shape the formulation of their strategies and their eventual actions. In Sony, superior achievement is rewarded with status instead of bonuses (Porter, 2004). The company also has a strong apprentice and mentorship relationship, one that is contained in a strong seniority system. This is a typical characteristic of Japanese firms. This can be classified as the cultural setting that allows for a collective approach in the formulation of strategies. In Sony one of the mission statements, management policies ensures a collective vision as well as stress on the human resource. Internal analysis Sony is arguably the leading manufacturer of consumer electronics in the world, a field it has exploited and developed since 1946. In a world of total digital convergence, Sony seems to have it all. Sony is always ahead of its competitors with the latest next generation equipment and product, all in the bid to meet the needs of its very diverse clientele (Asakura, 2009). Sony highlights a dedication that is unmatched, one that exhibits a vibrant innovative culture that often results in quality products. The company also involves an innovative research and development process in the manufacture of its products, a factor that results in Sony becoming a global megabrand and a force to reckon with. Therefore, a question could be raised such as: what core competencies are employed by such a company to ensure that it maintains a leap of success that

Building and Sustaining Strategy of Sony Inc is quantum, in aworld that is characterized by a digital convergence? An internal analysis of the company should be a major step in answering such a query (Maritan, 2010). Accounting ratio analysis In the year 2002, Sony had an operating profit margin ratio of accounting of 0.018, the

return on the equity of stakeholders was a mere 0.006 and the return on the total number of assets indicated a poor 0.002. The high investment rate does not also illustrate a corresponding growth in profitability. These poor results are testament to the fact that the company had not been managing certain aspects of their operations effectively and that was the main reason why they were unable to attain average levels of returns (Porter and Porter, 2009). Sony also had a debt to asset ratio that was quite high, and that was increasing rather moderately. In fact, in the year 2002, the debt to asset ratio was 0.71, a figure that is higher than that of other companies that manufacture consumer electronics. This is a clear indication of a company that is leveraged highly. Therefore, Sony faces an imminent danger if its creditors demand for the repayment of the debt owed (LunneyJr, 2002, p. 975). Financial resources In the year, 2001, Sony registered a net sale of fifty three billion US dollars, hitting an all-time record. However, it is mentionable that its operating income of US$ 1.01 billion, which was earned in the same year, was a forty percent drop from the previous year. It is therefore safe to say that Sony has a profit margin that has been significantly eroded over time (Limantara, 2006). As a matter of fact, and based on annual reports of the company, the net income of the company has been on a downward trend. In 2002, Sony had a relatively large reserve of 683.8 billion Japanese Yen. Therefore, an inference can be drawn that since Sony has a large reserve for cash and cash equivalents, it has

Building and Sustaining Strategy of Sony Inc

the financial resources it needs to ensure a continued development of an extensive infrastructure, internationally. Such an infrastructure would prove to be vital in the provision of the required diversity, to the multinational consumers who enjoy Sony products. Therefore, this should be considered as a strategic competitive advantage, which should ensure that Sony stays ahead of any new entrants into the market (LunneyJr, 2002, p. 975). Organization resources This refers to the design and structure of the organization at Sony. With continued success and growth, Sony decided to adopt the strategic business unit organizational approach. The approach is a form of multidivisional structure that focuses on the implementation of Sonys related and linked diversification strategy. The SBU form of the Sony corporate level strategy consists of three levels (Snippert, 2006). These are the strategic business units, corporate headquarters and SBU divisions. Sony is divided into six broad SBUs, namely; game, electronic, picture, music, communication network and financial services. These divisions are divided further into smaller units of business, commonly referred to as divisions. These divisions, found within each SBU are unique to the SBU. This means that they have very little in common with the divisions in other SBUs. However, the divisions within a particular SBU share a relationship in terms of shared markets and products, or both (Limantara, 2006). Sony headquarters at Tokyo exercise financial and strategic control over the SBUs. To Sony, the SBU multidivisional structural form has been a proper match to the strategies by Sony. It offers benefits that inherently allow the company in the management of the many demand of the diversification process better (Ito, 2007, pp. 57). However, the SBU form is not perfect. It also has its drawbacks. For example, if there it is necessary for coordination to be carried out between various SBUs, numerous problems may arise since the structure of the SBUs, and the

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competitive atmosphere, do little to foster cooperation and coordination among or between SBUs (LunneyJr, 2002, p. 575). Similarly, there exists a huge divide between the divisions that are included in the competitive structure, and those that are included in the cooperative structure in the sense that they do not share corporate strengths that are common. Therefore, the process of creating integrating devices for use is almost impossible. In the future, Sony could increase the number of times that division managers have direct contact with each other, so as to mitigate the negative aspects of the SBUs. Sony can also establish liaison roles for every division. They can also form task forces and work teams, which are temporary, for the projects that demand a focus on the sharing and extraction of competencies, embedded in the divisions. These work teams should be answerable to the management by submission of reports on their activities and progress (Litman, 2005, pp. 917-961). For the above-mentioned initiatives to be executed successfully, Sony is supposed to evaluate the performance of its Division managers. This should be done based on how effective their facilitation of cooperation efforts has been. Similarly, Sony should introduce a way through which the current reward system can emphasize in the overall performance of the company. This will be a step towards the resolution of issues pertaining to the SBU form. For Sony, a proper match exists between the organizational structures and international strategies. Thus, the company has ease controlling and coordinating its operations globally. Therefore, and in the advancement of this end, Sony utilizes its vast worldwide divisional structure for products in the implementation of the global strategy. In turn, the company is able to achieve the necessary economies of scale and economies of scope on a level that is global (Snippert, 2006). Further, the company pursues the economies of scale end by outsourcing, thus giving it a better control of costs. However, Sony also faces major challenges in their world

Building and Sustaining Strategy of Sony Inc structure combination and their global strategy. Such challenges include difficulty in the

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coordination of actions and decisions, as well as the inability to respond rapidly to the needs and preferences of local people. Fortunate for Sony is the fact that the solutions applicable to problems arising from the SBU form, also apply to the global strategy or the worldwide combination of structure (LunneyJr, 2002, p. 545). Physical resources To date, Sony continues to invest heavily in infrastructure. This is despite the fact that they already possess an extensive domestic and international infrastructure, as far as the industrial world is concerned (Harryson, 2011, pp. 288--295). This can mainly be attributed to their need to maintain a sufficient capacity, one that will enable them to meet the growing demands and needs of their customers. Sony has notably invested in music, picture and games.Similarly, the company has registered amazing success in the mobile phone industry with the creation of their trademark Sony Ericsson phone. By the year 2003, Sony owned fiftyfivemanufacturing plants after shutting down another fifteen (Litman, 2005, pp. 917--961). To add on to this, Sony has twelve manufacturing plants in Japan, that are home grown. The company also prides itself with ownership of radio factories in places like Ireland. Therefore, it can be concluded that Sony, through its physical resources, is likely to create a competitive advantage over its rivals in the market. Technological resources Sony has always been first in the creation of many products. In fact, some of the products created by Sony have created new markets for themselves. Technologically, Sony has shown resilience in its advancement, as well as its ability to stay ahead of its competition in the production of consumer electronics. The ability to leverage on technology ahead of competitors

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is one of Sonys strengths. Thus, Sony has been able to create products that are high quality and innovative, to satisfy the needs of the customers, and to increase revenues and sales (Snippert, 2006). Human resource management Sony has been able to avail comprehensive training programs to its employees. This is meant at equipping their employees with knowledge and skills that are superior to those of others. In addition to this, the company offers curriculums that are tailor made to suit the local needs of their managers and engineers around the world. Sonys management structure allows for in-house promotion to senior positions. This allows for continued managerial success and proliferation of the culture of innovation. Sony also has built a framework that allows for regular communication between managers and employees as far as contributions in work are concerned. As a result, there has been an establishment of a compensation system, one that evaluates the contribution of employees fairly and satisfactorily (Litman, 2005, pp. 917--961). There is an award issuance program that targets outstanding employees at Sony. Sonys ability to motivate its human resource is a strength, since it improves productivity of the staff. Innovation resources Sonys ability to maintain its innovativeness, as well as ensure that they always create innovative product that improve sales, is one that is valuable. This helps them to widen their profit margin, an indication that Sony does possess a substantial amount of innovation resources that are of a high quality (Floyd and Wooldridge, 2010). Reputation resources

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The brand name Sony is one of the most trusted and recognized brands in the world. In the light of this positive perception of the consumers, the brand name is a very vital strength to the company (Harryson, 2011, pp. 288--295). Risk management To date, Sony has employed a rather holistic approach to the effective management of risk. This has continuously been viewed favourably in the eyes of stakeholders, and more so by its shareholders (Litman, 2005, pp. 917--961). Value chain analysis In-bound logistics Sony covers a large area of operation. Products manufactured by Sony make their way to markets all around the world. Therefore, the ability, by Sony, to ensure effective management of the geographically and complexly dispersed in-bound logistics is a value that Sony considers a strength. The company has the ability and capacity to distribute its numerous products to people all around the world (Asakura, 2009). Operations Sony being a big brand has had some operational issues in the past. Operations wise, the company has not been doing well at all and especially in the field of music, entertainment and location based entertainment. The inability by the company to address this inter-operative, and other related issues has been a cause for concern for many consumers and stakeholders. Therefore, this is a weakness for the company (Asakura, 2009). Out bound logistics The fact that Sony possesses a capability to train business partners and employees is a major advantage to the company. This is because the company is able to manage the complex

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and geographically dispersed activities of out bound logistics. In turn, this enhances the already established operational protocols and adds on to the strengths of the company (Thomas, 2005).

Marketing and sales As far as marketing and sales are concerned, Sony has been able to maintain a competitive edge to its competitors. This has been done by maintaining its sensitivity to the actions of its competitors, as well as focusing more on the needs of their consumer base as far as products are concerned. As such, Sony has been able to maintain a top-class performance and marketing shrewdness, one that has earned it the twenty-first most valuable brands in the world (Weele, 2010). Service Sony is one company that has established many activities that are service related, and which are all aimed at enhancing the satisfaction of the customer. These activities are carried out the Sony centres, as well as call-in stations that are staffed with knowledgeable and friendly customer care representatives (Aaker, 2004). SWOT Analysis STRENGTHS Huge reserves that make Sony capable of generating funds to expand operations internally. Physical resources that can allow Sony to generate a value-creating competitive advantage. WEAKNESSES The companys high debt ratio puts it as risk in case the creditors demand for the repayment of debt. The weaknesses in the divisional structure as well the global strategy of the company that makes it difficult for

Building and Sustaining Strategy of Sony Inc The ability to leverage on new technologies before their competitors as well as the ability to use this technology to create high quality products that are innovative. This increases the sales and profit margins The ability to train and motivate staff members in the bid to increase productivity. The ability to come up with innovative and revolutionary products that suit the needs of their customer base. The positive perception, of the brand name Sony to prospective customers. This boosts the sales and revenues of the company. Ability to manage the complex, vast and geographically dispersed activities of in-bound and out-bound logistics well. A word class marketing strategy and acumen, one that makes Sony a mega brand globally.

15 the company to ensure coordination and cooperation among the different divisions in the structure, as well as in the numerous branches around the world.

Building and Sustaining Strategy of Sony Inc The ability to train and develop its business partners and employees to have the ability to handle the out-bound logistical activities.

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OPPORTUNITIES The current trends in globalization that make it easy for companies to enter new markets. The reregulation and privatization trends that make it easier for companies to acquire other companies encourage expansion. The rapid growth of the video game industry that has presented a growth in business. An increase in the world populous that has led to more disposable income. Technological advancements that have created a niche in the development of gadgets to utilize this technology. Technological advancement that make it possible for the company to reduce

THREATS Government policies that areunfavourable. A global recession that has been prolonged. Piracy. Aggressive competitors and competition and more so from low cost imitators.

Building and Sustaining Strategy of Sony Inc their cost of operation.

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With the above in mind, Sony has a high potential for growth. However, the company needs to revise and reevaluate some of its strategies in the bid to ensure that it remains profitable. Similarly, the company should learn from past mistakes, that had seen a major decline in its profit margins, and improve on its operational strategies to ensure efficacy. Sony is a recognized brand name. If the company works extra hard to streamline certain aspects of its operation, then it will remain as such.

References List Aaker, D. 2004. Brand portfolio strategy. New York: Free Press. Asakura, R. 2009. Revolutionaries at Sony. New York: McGraw-Hill. Floyd, S. and Wooldridge, B. 2010.Building strategy from the middle. Thousand Oaks, Calif.: Sage. Harryson, S. 2011. How Canon and Sony Drive Product Innovation Through Networking and Application-Focused R\&D. Journal of Product Innovation Management, 14 (4), pp. 288-295. Ito, Y, 2007..NeurofuzzyPid-type Stabilization Strategy for Corporate Models: The Case of

Building and Sustaining Strategy of Sony Inc Inc. 628 p. 061. Limantara, A. 2006. Marketing strategy: how can Sony penetrate the girl's market as the new market segment for its Sony PSP product, pp. 50-89 Litman, J. 2005. The Sony Paradox.Case Western Reserve Law Review, 55 (4), pp. 917--961. LunneyJr, G. 2008. Fair use and market failure: Sony revisited. BUL Rev., 82 p. 975. Maritan, C. 2010. Competitive strategy. Cheltenham [u.a.]: Elgar. Porter, M. 2004. Competitive strategy. New York: Free. Porter, M. and Porter, M. 2009.Cases in competitive strategy. New York: Free Press. Snippert, B. 2006. Intellectual property strategy: A case study of the Sony PlayStation game controller and recommendations for future IP strategy practices, pp. 60-85 Thomas, H. 2005. Building the strategically-responsive organization.Chichester [England]: Wiley. Warren, K. 2002. Competitive strategy dynamics.Chichester, West Sussex: Wiley. Weele, A. 2010.Purchasing & supply chain management. Andover: Cengage Learning.

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