- April 22, 2020
History and Growth
SonyCompany was founded in the year 1946 by Masaru Ibuka. The company wasstarted as a radio repair shop after the end the World War II. AkioMorita, Ibuka’s friend, joined the business the same year and theyregistered the company with a name “Tokyo Tsushin Kogyo” (SonyCorporation, 2015). Sony increased its popularity when it built thefirst tape record that was given the brand name “Type-G”. Inearly the 1950s, Sony started researching on the application oftransistors in the field of communication (Sony Corporation, 2015).Some American companies had managed to produce transistor radios, butSony went ahead to make it a commercial brand in 1955 (SonyCorporation, 2015). The radio was a major breakthrough because itgave Sony an access to foreign markets (such as Canada, Australia,Germany, and the Netherlands) where it exported its products. Otherversions of the radio with high quality sound were produced in thelate 1950s.
Theexport business continued to grow until the 1980s, which enabled Sonyto diversify into other businesses, such as movie (Sony PicturesEntertainment), banking (Sony Bank), and insurance (the Sony Life)(Sony Corporation, 2015). However, Sony started struggling withuncontrolled growth, which resulted in the adoption of size-downmeasures (such as employee retrenchment) between 1990s and 2006 (SonyCorporation, 2015). The company embarked on its new growth plan in2012, when it started releasing more innovative products, includingthe 4K Ultra HD television. The new growth plan seeks to assist Sonyto recover the brand that faded following the stiff competition fromother technology corporations.
Sonychanged its corporate structure in 2016 in order to increase thelevel of accountability. The reorganization process involved thesplitting of business lines (such as the TV, Mobile Communications,Game and Network Services, and Music) into wholly owned subsidiaries(Sony, 2016). The management structure was also adjusted where thecompany is now headed by a team of Corporate Executive Officers. Theyare followed in the rank by the Business Executives. The third rankin the leadership hierarchy will be the Corporate Executives. Thesechanges were implemented to help Sony overcome its growth and thefinancial crisis that lasted for more than one decade.
Strengths and Weaknesses
Thereare four major strengths that have helped the Sony Corporation remaincompetitive in the market. First, Sony has a diversified productoffering and a wide geographic base (Tang, Misra & Shanholt,2012). The ability to meet a large number of customers and satisfythe needs of a diverse clientele has enabled Sony to maintain itscompetitiveness. Secondly, the company is well established inemerging markets, which has given it a competitive advantage over itscompetitors. For example, it is estimated that emerging markets(including China, India, Brazil, and African countries) representabout 40 % of the global population (Marketing Teacher, 2016). Byfocusing on these markets that are often ignored by many technologyfirms, Sony has managed to maintain its sales, even during thedifficult times. Third, the company reorganization and recruitment ofglobally experienced employees that started in 2016 has prepared Sonyto take advantage of the 7.2 % projected growth in consumerelectronics (Marketing Teacher, 2016). The strong management, coupledwith a high level of experience in the global market will help Sonyincrease its market share by taking advantage of the growth in demandfor consumer electronics. In addition, research and development isone of the key components of Sony’s value creation process. It hashelped the company develop new ad more innovative products (such asTV), which has enabled it overcome the stiff competition.
AlthoughSony has strengths that have increased its ability to retain a highlevel of competitiveness over the years, there are two internalweaknesses that will continue limiting its growth in the future.First, Sony has a poor proximity to its customers. A study has shownthat over 60 % of the company’s production facilities are situatedfar from the consumer base (Marketing Teacher, 2016). This increasesthe cost of distribution, thus limiting the ability of Sony tocompete through price wars. Secondly, Sony has been recordingdownward trending revenues in four of its major divisions. In 2009,the electronics, Game, Financial Services, and Picture reported adecline in revenue growth by 17 %, 18 %, 7.4 %, and 16.4 %,respectively (Marketing Teacher, 2016). The persistent decline in theprofitability of major divisions will limit the ability of Sony toaccess the money that it needs to finance research and developmentprojects, thus reducing its competitiveness.
Sonycan take advantage of the many opportunities that are available inits external environment. For example, the company can enter intostrategic acquisitions and joint venture with other firms in order toexpand its market share. Its past experience shows that it is aflexible company that can easily do business with other enterprises.For example, Sony’s joint venture with Sharp resulted in theproduction of large sized LCR modules and panel (Marketing Teacher,2016). In addition, a shift from the production of ordinary mobilephones to smart gadgets will help Sony take advantage of the 10.5 %annual growth in demand for smart devices (IDC Research, Inc., 2016).Moreover, the anticipated acquisition of Olympia will enable Sonydiversify its business by entering the health care sector. Thediversification will give Sony an opportunity to distribute itsbusiness risks in different market segments and industries.
Thereare several threats that are likely to affect the future growth ofSony. The company has been facing stiff competition and price warsfrom other technology firms, such as LG and Samsung. Thesecompetitors are able to produce consumer electronics and smartdevices at a lower cost. This has enabled the companies to sell theirproducts at a lower price compared to Sony (Tang, Misra &Shanholt, 2012). Additionally, Sony relies on the services ofexternal partners, with the objective of reducing the cost ofproduction and helping the firm specialize in the core areas of thebusiness. However, these partnerships subject the company to therisks associated with the production of substandard goods andinfringement of patent and copyright. Moreover, Sony operations canbe affected severely by incidents (such as bankruptcy and accidents)that may affect external partners. An exponential increase in theproduction of counterfeit goods has also been shrinking Sony’smarket share.
Itis evident that Sony has several weaknesses and threats that put itsgoing concern at risk, but the strategies laid down by the managementwill help it exploit the opportunities and utilize its strengths inorder to remain competitive. For an instant, the high cost ofmanufacturing and the distance between production plants andconsumers can be addressed easily using the company’s experience inthe global market (Marketing Teacher, 2016). Moreover, Sony’investment in research and development is among the key components ofthe value chain that will enable the management to protect its goingconcern by offering superior and innovative brands. This will helpthe company address the challenge of stiff competition. Moreover, theopportunity to diversify into health sector by acquiring Olympia willhelp Sony distributed the business risk, thus addressing theweaknesses associated with a decline in revenue in some divisions(Marketing Teacher, 2016). Most importantly, Sony’s presence inemerging markets will give it a competitive advantage over otherplayers in the technology sector. Therefore, Sony has the capacity toaddress its weaknesses and threats. It also has the resourcesrequired to exploit the available opportunities.
Corporate Level Strategy
Fromthe mission statement of Sony, it is clear that the company focuseson inspiring and fulfilling the curiosity of its customers. Sony’sstrategic goals include the establishment of business managementpractices that emphasize on profitability without pursuing highvolume (Sony, 2016). In addition, Sony intends to define the positionof each of its lines of business with clarity and create boundariesbetween its portfolios. The company’s corporate strategy isdiversification, which is confirmed by its decision to grow byacquiring other firms, such as Epson Imaging. Besides, Sony has tensof subsidiaries that operate in different sectors, including theproduction of software, mobile devices, entertainment, musicpublication, and energy devices, among others (Sony, 2016). One ofthe key pros associated with Sony’s corporate level strategy is theability to distribute the risk to different enterprises. For example,the company has remained profitable, in spite of the fact that someof its divisions have been reporting a significant decline in revenue(Marketing Teacher, 2016). The loss of control is one of the majorcons associated with the diversification strategy. Investing in tensof businesses at the same time has limited the capacity of Sony tospecialize and excel in a particular line of business. Although theproduction of consumer electronics is the key line of business, Sonyspends a lot of resources in other enterprises.
Business Level Strategy
Sonyuses differentiation as its key competitive strategy. Sonydifferentiates its products by ensuring that they have the qualitystandards that competitors cannot meet. For example, the VAIOnotebook was produced with functionality and form that competitorshave not been able to copy (Marcus, 2011). Sony’s marketingstrategies aim to increase sales, especially to women who form morethan half of buyers of consumer electronics. Some of the keymarketing strategies used by Sony include the issue of discounts,bundle pricing, and aggressive advertising. Sony produces at a highercost compared to most of its competitors (such as LG), butalternative strategies (including the bundle pricing and emphasis onquality) attract a large number of customers. Sony’s general focusis the production of quality and innovative brands that address thespecific needs of the target consumers.
Organizationalchange is among the key strategies that Sony has been using toimplement its strategies. For example, the company announced thebiggest change in 2016 when it separated different lines of businessand made them wholly owned subsidiaries (Sony, 2016). This wasfollowed by a change in the leadership hierarchy structure that wasintended to increase accountability and the company’scompetitiveness in the international market. The Sony Reward programhas also enabled the company to earn customer loyalty since it helpsthem get gifts (such as DVIDs, electronics, and games) whenever theybuy its products (Sony, 2016). Customers earn points whenever theybuy Sony products, and redeem them for free gifts.
Conclusion and Recommendations
SonyCorporation is among the largest technology companies in the world.Although Sony was started as a small radio repair shop in Tokyo, itsability to invest in innovation, aggressive marketing, and effectivebusiness as well as corporate strategies facilitated its rapid growthto an extent of becoming a multinational corporation. However, Sonyfaces several threats and weaknesses that might limit itscompetitiveness in the future. This paper makes two recommendationsthat can help Sony protect its going concern and retain itscompetitiveness. First, Sony should move some of its productionplants to geographical areas where many customers are located. Thisrecommendation is based on the studies indicating that more than 60 %of Sony’s goods are produced away from customer bases (MarketingTeacher, 2016). The recommendation will help Sony reduce the cost oftransporting finished products to the market, thus assisting thecompany to sell at a lower price.
Secondly,Sony should differentiate its products further by includinginnovative features. The stiff competition that is attributed tocompanies (such as Samsung and LG) is based on their ability toproduce at a lower cost (Tang, Misra & Shanholt, 2012).Therefore, Sony should offer goods that are different from what isavailable in the market since it is disadvantaged in terms of thecost of production.
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