SONY AND ERICSSON JOINT VENTURE
a) Using appropriate concepts introduced in the lecture on “Analysing international opportunities and Country risks” and/or ‘s Diamond, assess the opportunities offered to Sony Ericsson by the EU country that the company has entered.
We can’t possibly deny the fact that there are industries in one nation that are more successful than others. According to (1985), success is determined by factors that influence competitive advantage amongst nations in which he and his 30-man team conducted a research that led to the model of “Diamond of National Advantages”.
Ludwig in 2002 found that ’s Diamond suggests that the national home base of an organisation plays an important role in shaping the extent to which it is likely to achieve advantage on a global scale. As a sample, let us examine Japan’s Sony and Sweden’s Ericsson entry into European waters.
Japanese consumer electronics company Sony Corporation and Swedish telecommunication company Ericsson established a joint venture in 2001 to make mobile phones (). Augustsson (2005) found that the reason for the merging of the two companies was to unite Sony’s global consumer marketing expertise with Ericsson’s technological leadership in the communications sector. puts in that a nation’s capacity to innovate and upgrade determines its competitiveness.
Nokia became Sony Ericsson’s biggest rival in Europe. Ludwig found that ’s model points out that to stimulate strong competition, existence of local rivals are important. In this view, the demand for mobile in Europe has has been cited to swell to 100% by the year 2007 (2005). The anticipation of future needs is determined by a local demand that provides comprehensible and in advance signals of demand trends to local suppliers than to foreign competitors.
As economic crisis in Europe during the 90s have rooted on focus on low unemployment rate, fixed currency rate, increased inflation, high labor costs and decreased competitiveness for export companies in the 70s. however contradicts the idea that “labour costs, interest rates, exchange rates, and economies of scale are the most potent determinants of competitiveness” (1990 ). Chance also plays an important influence on ’s diamond. Sony Ericsson’s joint venture had been during a time when Ericsson was experiencing almost failure in Sweden and Europe as well.
Another influence in competitive advantage is the related and supporting industries. According to Ludwig (2002), relationship between related industries and suppliers are interdependent. She further explains that This close relationship opens lines of knowledge and communication to companies. Through this communication, companies are able to exchange ideas and feedback.
In Sony Ericsson’s case, as The (2006) reports, what happened was that on March 2000, fire engulfed the Philips factory in New Mexico, where Ericsson had decided to source its chips solely, and in the process contaminating the sterile facility. At that time, Nokia was also sourcing its chips at the same facility. When it was evident that Philips would not be in production for months, Nokia looked for other alternative sources while Ericsson faced shortage.
The role of government and company leadership yet plays another important role in ’s Diamond. According to (1990), the government is both a catalyst and a challenger. In view of this leaders still have the last decision to whether prefer stability and easy routes around a problem, or take the risk and move on ( 2002).
Currently, Sony Ericsson is led by t as President and as Executive Vice President. Today, Sony Ericsson is based in Hammersmith, London but has research and development teams in Japan, China, US, UK and Sweden.
b) Discuss the advantages and disadvantages of the mode of entry adopted by Sony Ericsson on entering the EU.
theories presented in Competitive Advantage (1980) and Competitive Strategy (1985) have had a great impact on the academic world and in the world of business (2006). In the case of Sony Ericsson’s entry into European waters, it was proven to be an advantageous move.
Amongst its advantages were the healthy competition, Infrastructure, workforce, and related industries and suppliers.
Competition is intense thus make it very healthy. Infrastructure is also good as well as the continuing demand for mobile phones. Workforce is also good as well-educated and specialised persons are put into position. There are also varying related and supplying industries.
The drawback, or disadvantage of it, was that due to the high demand for mobile phones, Sony Ericsson attracted many other telecommunications company to invest in mobile manufacturing and thus lowering prices.
In conclusion, Sony Ericsson’s entry into Europe was very successful. The joint venture came up at the time when most European companies, Swedish more specifically, were at their peril. Luckily, Sony Ericsson’s introduction into the European market prompted more innovations and thus advantageous for everybody in general.
The simple story is that entrepreneurs started small interactive media firms to cater for the rapidly increasing demands for IT and Internet solutions that followed the developments in IT in the late 90s. An Internet buzz crazed, leading to massive investments in IT and interactive media firms, and a stock market bubble as firms grew in size and numbers, though not usually in profits (2005).
To understand competitiveness and productivity, (2001) explained that for (1990), the unit of analysis cannot be the ‘economy as a whole but . . . specific industries and industry segments’. while the basic unit of analysis is the industry, success is explained in terms of clusters: ‘Nations succeed not in isolated industries . . . but in clusters of industries connected through vertical and horizontal relationships’ ().
(2001) further said that for (1990), firms are not the source of competitiveness. Instead, firms derive their competitive advantage from their home base environment. The environment, in turn, is shaped by four ‘determinants of national advantage’: factor conditions; home demand conditions; related and supporting industries; and firm strategy, structure, and rivalry. The four elements form a mutually reinforcing system, it is the ‘diamond’.
Credit:ivythesis.typepad.com
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