Sony is Japanese multinational conglomerate corporation with the revenue of US$71.87 billion (FY11). Sony’s principal business operations include Sony Corporation (Sony Electronics in the U.S.), Sony Pictures Entertainment, Sony Computer Entertainment, Sony Music Entertainment, Sony Mobile Communications, and Sony Financial, which are engaged in business through 4 segment: Electronics, Motion picture, Music and Financial services. This conglomerate corporation is known with slogan: “Sony. Like no other”. Growth from a company with initial capital of US$2000 in Nagoya,Japan in 1946, becomes one of Worldwide Top 20 Semiconductor Sales Leaders, third-largest television manufacturer in the world, after Samsung Electronics, LG Electronics, third-largest mobile manufacturer in the world after Samsung Mobile and Apple, but Sony now is in the hard time and in process of recovery.
Before the current reorganization, Sony have implemented quite many of reorganization but they seem didn’t work, in the first months of 2012, Sony have been face with foundering TV business and the massive tax charge, that make them lost US$6.4 billion. Come up with the newly strategy “One Sony” in April 2012, new CEO Kazuo Hirai aims to revitalize and grow the electronics business to create new value, strengthen the core business which are: 1. Strengthen core business: Digital imaging, Gaming, Mobile.
2. Turning around the TV business
3. Expandiing business in emerging markets
4. Creating new business, accelerating innovation
5. Realigning the business portfolio and optimizing recources
The new CEO have plan to reorganize the corporate, sell some business, reduce by 10,000 job to have fund for the return of Sony and no information for Sony Financial change. Sony target US$67.42 billion revenue and operating income margin of 5% in its electronics business and sale of US$ 95.51 billion, operating income margin of more than5%, and ROE of 10% for the Sony group overall (FY14).
I. Environment analysis:
1. Marco environment:
With the globalization, the world now is more “flat”, allow to customer from more and more countries can access to foreign products, also it enhanced the production, created more value for human on the world, so the demand of product is expanding rapidly, Sony ‘s products are one of the highest expanding demand products. Although the world economy continues to struggling with post-crisis started from US in 2008 and the global economic growth have weakened further, the world still witness the success in business of big electronics and mobile company such as Apple, Samsung 2.2 Social and demographic:
According to UNICEF, the world’s population is 7 billion as the end of 2012 and expected to increase in next 5 years. This means that the demand of all the products will increase along.
There are more than 67% of American household play video games, 40% were women and they almost under 25 year old. This show that this form of entertainment is mainstream now in US. The trends are similar in Europe and Japan. The other country market show the optimistic with the rapidly increasing of gamer. The demand of the other electronic entertainment and mobile is clearly growth in the past decade.
Coming along with the rapid growth of the Internet is the new services on it such as internet storage (Mediafire, Dropbox, Box.net,….), internet integrate with TV (which is now one of Sony ‘s TV line), internet calls, internet service on mobile,…creating wider market and more direction to expand business for Sony.
But also there are difficulties for Sony, the margin for technology advancement is now diminishing, which is unfavorable for the pioneer of technology such as Sony.
As one of the biggest company and contributed significantly for the growth of Japanese economy, Sony have received the back up from Japanese government. For instance, in the last months of 2011, Japanese government provided US$2.6 billion to Sony, Toshiba Ltd and Hitachi Ltd for their plan to merge their liquid-crystal display operations, in the effort to compete with the rivals from Taiwan and South Korea.
Intellectual property as well as commercialization and protection have given the corporation a significant source of comparative advantage.
So the macro environment is favorable for Sony to implement it’s new strategy “One Sony”.
2. The competitive environment:
2.1 The threat of new entrants:
The threat of new entrants is low. The electronics industry requires huge capital to build the manufacture, buy the equipments, fund to R&D; economics of scale; technology and innovation to produce the produce and create product differentiation. Moreover, the new entrants will meet a lot of difficulties with prevention of the big companies in the industry such as Sony, because these companies have huge capital and power to create a lot of barrier to the new comers and usually buy the new comers if they have potential to gain profit (unique technology, intellectual property,…), then turn them as one of the company’s SBU.
One thing need to mention also is the legal requirements, to enter the electronics industry, the new entrants are required to obtain approval from the government, which require plenty of high requirements.
These make the potential entrant in the low level.
2.2. The bargaining power of buyers:
The power of buyers is high. With the access to the internet, the customer can get the information about the product fully, including the price, the hardware, the software, methods of delivery and compare between difference companies to choose the best set for their demand. Moreover, the switching cost from one brand product to another is almost zero, especially in Europe, USA and Japan. Hence, the companies always try to optimize and offer the customer their best set to satisfy the customers to pull them to the company
2.3. The bargaining power of supplier:
The power of supplier is low. Sony do not buy the supplements from one supplier but it buy them from the best offer. Like another conglomerate corporation, Sony have their own research centre to create their own product differentiation and avoid from rely on the supplier.
2.4 The intensive of rivalry among competitors in the industry:
The competition in electronics industry is high. The product between different brand is not different much, the margin of technology advance is now shorter, the product cycle therefore is shorter too while the cost for R&D is more and more higher.
2.5 The threat of substitute products and services:
The threat of substitute products and services for electronics industry is low due to the growth quickly of the electronics industry (although it have slower than the period of 1980-2000), there are no type of product and services can compete with electronics nowadays and if it have, the big companies on this industry will the first who have them.
So the electronics industrial will not the good for the new players, it just the ground for big player such as Sony, Samsung, Apple, HTC, Nokia,… to compete each other, mainly in the new technology , differentiate their products.
3. Internal environment:
According to Value chain analysis mode which devised by Porter(1985), a company have primary activities( inbound logistics, operations, outbound logistics, marketing&sales, service) and support activities(firm infrastructure, human resources management, technology development, procurement). The analysis below will show the pros and cons of Sony.
4.3 Inbound Logistics:
Ability to conduct the various complex in-bound logistics activities well to facilitate smooth operations and productions
The religious zeal to innovate coupled with tacit knowledge to build revolutionary products that memorise customers into buying them. The long tradition and experience will help Sony create the best optimize for its operation. 4.5 Outbound Logistics:
Possess the capability to train employees and associates to manage and perform the vast and complex out-bound logistics activities that enhance operations protocol. Moreover, the logistic companies will be the considerable choice for Sony’s logistics activities when needed or to cut-off some activities and concentrate to the main ones.
4.6 Marketing & Sales
Possession of a world-class marketing acumen and tacit knowledge that has made Sony a global mega brand.
Able to integrate the various resources and functional activities to meet the needs (innovative, quality and reliable) of global customers.
4.8 Infrastructure & Finance
Possess the necessary physical resources to help generate value-creating competitive advantage as well as a large reserve that can be leveraged to invest in infrastructure to further lower costs.
4.9 Human Resources
Able to leverage on financial resources to provide competitive numeration packages and training that help to motivate and insentitives. Staff who shows managerial potential is cultivated to take over leadership posts. With the middle-managements and low level managements, Sony provided the training in management, updating market information, delivery by in-side or out-side “teacher”.
Able to leverage on technologies well and ahead of its competitors to create innovative and high quality products, be one of the pioneers on the new high technology products.
Possess procurement know-how that leads to quality input at lower costs.
With above analysis, we can see Sony have capabilities and advantages to implement a strategy take Sony back to the track and make more and more profits in the years after.
II. One Sony strategy:
Sony offer different products for different customers, it’s product line is very large with electronics products (video equipment, audio equipment, television, mobile, components), entertainment products( famous PlayStation, games, movie and music).
“One Sony” strategy with key initiative to transform the electronics business are:
1. Strengthen core business: Digital imaging, Gaming, Mobile. 2. Turning around the TV business
3. Expanding business in emerging markets
4. Creating new business, accelerating innovation
5. Realigning the business portfolio and optimizing resources.
In this period of time, the global economy is still struggling post-crisis and the growth of economics is slower further, the customers are still cut-off their spend on buy products, the competitive in electronics industry is more and more. The One Sony strategy ‘s one aim to accelerating innovation, create the differentiation but mostly they still focus on the core business: Digital imaging, Gaming and Mobile. In the core business Sony have the advantage as one of the leaders of the market with wide-known product such as Xperia mobile, PlayStation console game, Home theatre,…
This will retain Sony as the famous company in the electronics industry, know world-wide (keep them from the situation as Nokia), the profit of the core business will provide fun for R&D, which essential for any companies in the electronics industry, creating new business, accelerating innovation. Although Sony choice the focus strategy, but as any strategy, Sony then have to create differentiation on its products (create new business, accelerating innovation) come along with reduce cost (realigning the business portfolio and optimizing resources). This movement will help Sony have the advantage on compete with the rivals, whom desperately want to gain more market share.