SONY Strategic Analysis
INTRODUCTION
Success in any company that operates for marketing and profit acquisition lies on the ability of the management in positioning and establishing the products/services being offered. Furthermore, the ability of the company and its management to compete and maintain a competitive edge among its competitor is another basis to say that it is successful. The constant development and innovation on the product line and the growing number of clientele also define the corporate standing of a company.
This paper analyses the strategic capability of a company in an electronic industry, SONY Corporation. In analysing how SONY Corporation is competitive, the study utilised SWOT, resource audit, core competencies and value chain analyses for the industry attractiveness. Practical and strategic recommendations are elicited in relation to some pitfalls observed in the case study. Furthermore, analysis on the possible steps taken by SONY are also discussed.
SWOT ANALYSIS Strengths. One of Sony’s most potent strength is that they are one of the world’s best known brands. As they have been in the business for 62 years now, the experience that they have in manufacturing cannot be overemphasised. They already have built a solid reputation for being a dependable electronics brand. Additionally, they have the strength of being diverse with respect to their product lines, having taken in many companies in the different aspects on electronics production. These subsidiaries are: Sony Electronics, Sony Computer, Entertainment, Sony Ericsson (50%), Sony Pictures Entertainment, Sony BMG (50%), Sony Marketing, Sony Life, Sony Assurance, Sony Bank. The wide range of subsidiaries give the clients a wide range of choices within the SONY corporation. Furthermore, the company is not limited to electronic products, though this is their major product line, they also venture to other fields such as the entertainment industry, and the insurance and banking industry. They are also known to be supportive of societal causes, particularly education. SONY has been known to have invested in many foundations and scholarships that bear its name. Traditionally Sony’s international operations were a source of that allowed the company to maintain its position as the one of the largest electronic conglomerates in the world and to respond to other company’s competitive moves. During the worst years of the Japanese Bubble economy in 1980s, the company invested in the entertainment industry. That move provided the cash that saved the company from falling out such as other companies in Japan, and gave it key products that were essential to stem its competitors’ moves while it invested in new product development. Today, and even if its western operations still represent the bulk of Sony’s total operations and world assets, its foreign operations still make substantial contributions to the company’s strong performance and leadership in the industry. Weaknesses. The company’s organisational structure has become inefficient as the company became more complex. This hindered Sony’s ability to manage its international network of subsidiaries, branches, and companies. Additionally, there are a lot of speculations over the likely performance of SONY in the future, as the company’s financing section is swamped down by hefty outstanding debts. The firm is not in risk of bankruptcy, but the SONY management is in a tight spot, and has to be extremely vigilant to not make it any tighter. There is also a notable management issues within the company, with the ousting of former COE Nobuyuki Idea, replaced by Howard Stringer in the SONY helm. Moreover, due to the dependence of SONY to its former glory and accomplishments, it has remained stuck in its place. Many companies have taken over its spot due to its inability to come up with more innovative products. Also, due to indecisiveness, it is now forced to copy the LCD technology from other leading companies. Finally, because of the increasing competition, the company has witnessed a decline in overall sales, a weakness on their part as they have somehow failed to overcome the challenges that additional competition brings. Opportunities. SONY Corporation has the distinct opportunity to have better and more innovative products, in order to gain back the trust and liking of their clients. Since SONY already has the name, the only thing it needs to do is to make up for its loss in the past few years. Furthermore, it should foster innovation within its mobile phone division. Mobile phones remain a craze not only in Asia, but around the world. SONY should increase its production of “needed and wanted” products within this division. Phones with cameras, stereos and MP3 players are a hit. If SONY could utilize their expertise in making good built-in MP3 and stereos in mobile phones, they could once again pull their audience back. SONY could further widen the scope of their opportunities through specialising and rationalising its worldwide operations on a regional basis and to develop a network organisation in which its subsidiaries would increase their transactional linkages. Besides SONY learning about the possibilities of producing quality electronic products in their areas of operation at a comparative cost advantage, other relevant factors could bring about new opportunities for exporting vehicles: the parent company’s efficiency-seeking strategy; its competitive disadvantage in the TV/LCD/Flat-screen segment of the market and the competitors’ moves in this market-segment; and the new more flexible regulations in the respective countries in which they have manufacturing plants. Further, with Sony’s existing capability to innovate on electronic products, they have the opportunity to penetrate a still larger scope of market. Threats. As with any firm in the electronics industry, Ford faces very tight competitive rivalry in the electronics market. Competition is escalating, with the threat of new entrants continuously flowing into the market from South Korea, China and Eastern Europe. SONY is also exposed to the risk of movement in the price of raw materials. The key economies in the US, Europe and the Pacific are also experiencing slow downs lately. These economic factors are latent threats for the company under analysis. While SONY strategies responded to the local opportunities and competitive advantages that were built over time in different national markets, the competitiveness of foreign operations was also dependent upon the company’s management capabilities and its overall position in the industry worldwide. If such factors were to perform under expectation, their competitiveness in the international scene would suffer seriously.
RESOURCE AUDIT
A resource is a basic element that a firm controls in order to best organise its operational processes. A resource, or set of resources, can be used to create competitive advantage (2002), that is why an audit of the resources of a firm is a must if it is to utilise them to create the latter. The sustainability of a company’s competitive advantage depends upon the ease with which the resources can be imitated or substituted (1993). When resources are combined they can lead to the formation of competencies and capabilities (1990).
Financial Resources. Although Sony’s 2007 financial results showed a full-year gross profit of $ 1,761,943.0, their track record during the 62 years that they have been operating shows that they are the type of firm who is able to rebound from such downturn in profits. The increase in results reflected profits at the many areas in Sony’s subsidiaries (Financial statement, 2007). The electronics sector’s revenue, income and cash are generated primarily from sales of electronic products to SONY dealers and distributors, while their financial services sector’s revenue is generated primarily from interest on finance receivables, net of certain deferred origination costs that are included as a reduction of financing revenue. To improve the business and its profitability, SONY plans to reduce their costs through material cost actions, health care cost reductions and capacity and personnel reductions .
Human Resources. The approximate number of individuals employed by Ford and their consolidated entities (including entities that they do not control) as of 2007 is at 163,000.
Physical Resources. To date, they have over a hundred subsidiaries worldwide which houses more than 300,000 employees that they have in their payroll. SONY did not choose to expand its manufacturing operations in low-cost production sites or rationalise its operations (closing more plants, downsizing the labour force further, or increasing the movement of parts and components between various locations) on a worldwide basis .
Intangible Resources. Finally, a discussion of Sony’s global strategy would be incomplete if no reference were made to the strategic alliances and international joint ventures with other electronics companies (most notably with Ericsson, to which it creates its mobile phones arm) that have been established in order jointly to develop, engineer, design, market, and even produce other electronics product lines in Japan and abroad. These associations, which preceded SONY 2000, have proliferated and have become vital in maintaining a competitive position for a company not only in specific local markets but also at the global level. They also represent a marked change both from Sony’s previous practices that maintained full ownership of their operations and protected know-how and other ownership advantages, and from the US anti-trust laws that prohibited large firms from entering into such associations. Through them, SONY was able to serve local and global markets, to reduce production, development, and marketing costs, and to cope with excess capacity in the industry. These partnerships also contributed to the geographic dispersion and inter-regional integration of different functions of the value-chain of production. While this integration took place outside the borders of the corporation, it complemented Sony’s efforts to design a global configuration for its organisation and network of subsidiaries.
VALUE CHAIN MANAGEMENT ANALYSIS
Firms respond to conditions in their marketplaces by modifying their competencies such as internal capabilities and linkages with suppliers and associates and the ways in which they position themselves in relation to their competitors specifically their strategic direction (2002). The value chain also is useful in retailing decision-making. Understanding the linkages between activities can lead to more optimal make–or–buy decisions that can result in either a cost advantage or a differentiation advantage. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit (2000). In the case of Ford Motor Company, the entire operation of the business should be examined and evaluated in order to determine the service delivery processes that strengthen as well as weaken the business. This will result to managerial options to eliminate the liabilities that detract the business or the need to developed and intensify some aspects of the operations.
Meanwhile, Hardy and Clegg (1996) believe that modern organisations passed by the guild structures and as organisations grew larger, skills become increasingly fragmented and specialised and positions become more functionally differentiated. Stakeholders are defined as the individuals or organisations which can either gain or lose from the success or failure of a system (Boutelle 2004). Cohen and Moore (2000) said balance between enhanced company processes and renewed objectives should be critically appraised in order to ensure the success of the company. As such, stakeholder analysis reminds management that it is important to evaluate the interests of the individuals or organisations who can influence or can be affected by the activities of the company.
Porter (1985) in his seminal work of value chain proposed it as a tool to identify and to analyse the origins of competitive advantages and suggested that the activities of the business could be grouped into two: primary and support activities. What activities a business undertakes is linked to achieving its competitive advantage, and SONY seemed to be best prepared to implement a global strategy, because of the superior competitive advantages of its foreign operations compared with other companies. Paradoxically, Sony’s rivals showed a greater disposition to use resources from outside of Japan. It was not until the 80′s that Ford focused on developing a global strategy as a means to enhance its competitive position in the industry. Before then, SONY largely focused on building a strategy that would allow the company to recover its competitive position in its own home market, which was essential for survival. An analysis of the structural and institutional factors that shaped Sony’s strategic response both to the new industry rules and the short-term challenges posed by other industry competitors explains this paradox. A number of broad sustainability challenges set the context for all of the value chain activities (see appendix 2). These issues apply across the value chain: (1) Population growth; (2) Urbanisation; (3) Child mortality; (4) Maternal health; (5) Infectious diseases; (6) Biodiversity; (7) Loss of ecosystem services; (8) Poverty; (9) Education; and (10) Gender Equality. All these issues are attended to by the Ford Motor Company in alignment with their efforts to maintain sustainable competitive advantage through preserving the good public image that their clients expect from them.
CORE COMPETENCIES
SONY has several core competencies which they could utilise to further gain advantage over their competitors, and if possible, overtake LG and other companies in its market leadership in the automotive industry. One core competency of the company is their brand management. The strength of their automotive marketing has been such that their brand is known even in the parts of the world where cars are not the common medium of transportation. Another core competency is their supply chain management, which links to their ability to maintain a steady stream of raw materials coming in for production because of their long-term good standing with their raw materials supplier. Their highly coordinated logistics system handled by outsourced firms also form part of their core competencies, leading to excellent inventory management and always on schedule production activities. Another marked core competency is their ability at the moving assembly line. Being the pioneer of such mass production system, they were able to get ahead of the competitors manufacturing processes-wise and were also able to save on costs and time. Yet another core competency is Sony’s focusing on its product development technology under a single product-information-management program through standardising and incorporating them. If sustainable development is to achieve its potential, it must be integrated into the planning and measurement systems of business enterprises. And for that to happen, the concept must be articulated in terms that are familiar to business leaders. Many observers believe that more stakeholders — investors, consumers, nongovernmental organisations and others — will insist that companies to take environmental and social costs as seriously as they take purely financial costs. In addition, investors are expected to increasingly seek out sustainable companies and avoid firms with poor environmental performance, judging the sustainable companies as better risks over the long term. Likewise, consumers are expected to search for products that perform well environmentally.
CONCLUSION
Today, most companies like SONY Corporation find it impossible to create any kind of sustainable competitive advantage based on product alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-cantered competitive advantage. Thus, there are numerous aspects that every management should tackle. In SONY Corporation, the key internal strengths are the appropriate and effective marketing strategies used. On the other hand, the flaws of the marketing strategies implemented by the company serve as its major internal setback. Then again, the continuous effort of every company likes SONY Corporation to improve its operational standards is the ultimate solution to emerging conditions brought about by different occurrences such as stiff competition, globalisation, technological innovations and others.
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