Business Analysis on Sony Corporation
Business Analysis on Sony Corporation for the years between 2001 and 2011 Overview Looking back on the past decade of Sony Corporation, opportunities walked along with challenges.The “combination of giants” between Sony and Ericsson caught attention of the whole world.The invention of mini vertical mobile phone promptly captured the youth market.
When Sony Ericsson was at its best, its sales figures were ranking Top Three in European and American markets. However, since 2008, Sony Ericsson almost has opted out of the top list in mobile phone industry.
The revolution of iPhone and Android ruined Sony Ericsson’s confidence thoroughly. In addition, the political conflicts and historical factors, such as Diaoyu Island incident, to some extent, have affected the sales in recent years further. Our business analysis emphasizes on the development of Sony Corporation during the period from 2001 to 2011, especially the overseas market expansion in mobile phone industry. We will introduce the development process of Sony and the challenges they faced or will face from three perspectives: business, political and socio-cultural factors.
Besides, we, as well as Sony Corporation, concentrate most is how to turn these challenges to the opportunities. Firstly, let us illustrate the organizational structure of Sony Ericsson, especially Sony Ericsson China. The market share of Ericsson has ever ranking no. 3 in global mobile phone market in late 90s of 20 century. Their promoting strategy in Chinese regions made an excellent success because of selecting LIU Dehua and JIN Chengwu as spokesmen. However, Ericsson suffered a huge loss resulting from a mistake in generating strategy in 2000.
Meanwhile, Sony mobile phone could scarcely capture the market share, for they were too late to get access to the GSM (Global System for Mobile Communications) market. It was in this context that Sony and Ericsson reached a consensus that each of their mobile phone departments subscribed 50 percent shares to establish a joint venture corporation, that is, Sony Ericsson. They two operated the company together that Ericsson was responsible for technology and quality control while Sony was in charge of the outlook design and sales.
The organizational structure is as following. Since 2008, the tablet revolution led by Apple and Android has inflicted a severe impact on Sony Ericsson. In 2011, Sony broke up with Ericsson and purchased the remaining 50 percent shares owned by Ericsson before. Sony kept the mobile phone production department, but their market share cannot be compared to the past. Secondly, the development of Sony mobile phones went through a tough procedure. Let’s briefly review the milestones and look forward to the future.
Sony Ericsson sustained high losses in the first two years, until T618 was launched in 2003. T618 was an influential mobile phone type which directly turned SE into profits. And then, to make full use of Sony’s technology in Walkman, SE launched W800 in 2005, bringing the concept of music phone to the public. After that, K790 was the first professional camera phone with flashlight, which beyond any other brands at that time. The net income in Sony reached a peak in 2008 with 369,435 yen in millions, while it decreased abruptly in 2009 resulting from the rapid rise of Apple and Android.
The cooperation with Android cannot revived SE as the development of X10i and Xperia arc Lt15i could not make ends meet. The continuing losses upset Ericsson and accelerated the termination of the contract between Sony and Ericsson. Therefore, we recommend that Sony should change their marketing strategies to “low cost, low price” strategy in order to capture the markets in developing countries. In addition, the conclusion of financial annual reports in the past decade is one of the core factors to evaluate the development of Sony. SONY ‘s Net Income(Loss) 2001-2011
YearNet Income (Loss) 200116,754 200215,310 2003115,519 200488,511 2005163,838 2006123,616 2007126,328 2008369,435 2009-98,938 2010-40,802 2011-259,585 According to the financial figures, it is not hard to track the operation status in Sony for the ten years. 2003, 2008 and 2009 are remarkable turning points and we will demonstrate the business, political and socio-cultural causes in detain as follows. Analysis on Business Aspect In 2000, the subsidiary of famous telecoms giant, the world’s third-largest mobile phone company Ericsson, suffered a continuous loss.
Ericsson used it as a trigger to start the joint venture company with Japan electronics giant Sony with equal-shared stake in global mobile phone business. Sony Ericsson was established in 2001 as a prestigious international brand for youth. Its global headquarter was located in London which was incompatible with the common thought that Sony Ericsson belongs to Japan . Its international employees were up to 7500 including the research and development talents from Europe ,Japan ,China and America.
It was a hidden danger for two parties’ division that a considerable number of the technology was mainly transplanted from Sony Company. The new co-operation company combined the Sony’s capability of planning and designing video product, marketing electronic product and promoting brand with the Ericsson’s specialization in mobile telecommunication technology, operators relationship maintaining and network facilities construction. At the beginning two years, Sony Ericsson took debts of 16. 2 billion Swedish grams from Ericsson causing 5 percentage market shares shrunk which made large shareholders have to reinvest 300 million.
By virtue of the support of parent companies, Sony Ericsson was booming later and embodying its own style in processing image and wireless telecommunication. In the September of 2003, it first gained profit with introducing an influential upright mobile phone using a few-but-delicate strategy to compete with corresponds’ mass products. In the next year, the developing trend for Sony Ericsson was irresistible that it opened Valentine’s party cooperated with many outstanding brands to launch its new phones .
Its classic and innovate products started to be appealing to various consumption levels in different areas. Starting from the second season of 2005, Sony Ericsson used existed brand Walkman in Sony to create the first bi-brand phone which took over electronic entertainment career of Sony.It made a good performance for increasing both market share and profit . Furthermore, it transplanted Sony Walking and Cyber-shot brand successfully getting a reputation. However, photographing and music functions were commonly imitated by other brands causing Sony Ericsson lose its edge in advanced technology.
Some demerits of its products also appeared such as inconvenience of phone download, insufficiency of capability and incommodity of background use. Main reasons for the declined performance were that products did not keep up with the rhythm of market and not pay attention to the Smart mobile phone market. Its delicate high-price strategy was in a dilemma for consumers were unwilling to pay a large bill of non-smart cell phone . Meanwhile its internal management was in chaos and the contest for leadership among the executives led to the change of personnel in 2007.
Coincidently, an economic crisis happened and changed the consumer’s demand of phone. Sony Ericsson found itself left behind on account of insufficient supply of low-end phone, lack of brand-new products for high-end and shortage of amazing spot in the field of smart phone. Its ever strongest music and photography phones for the mid-market were surpassed by competitors. And it also did not recognize the great demand in Chinese market that it was doomed a tough year for Sony Ericsson . In 2008, Sony intended to purchase the equity of Ericsson which was set aside.
Considering the unsatisfied performance in new products launch and market share for last three years, Sony Ericsson former executive in Silicon Valley Nordberg became the CEO . He abandoned futureless Symbian system and low-end market focusing on the Google’s Android system to reform the company strategy. The decision turned out to be wise that Sony Ericsson launched several excellent Android phone and turned losses into gains gradually. The hesitation between multiple platform system let Sony Ericsson miss a lot of golden chances to boom.
It seemed to be an irresistible trend for Sony Ericsson’s ending which will provide space for Sony to shine itself. At the end of October in 2011, Sony officially announced that it offered 1. 05 billion euros to take over the other 50 percent stake Ericsson held. Now Sony Ericsson is a wholly owned subsidiary of Sony and will no longer exist but with a Sony logo. Sony mobile takes advantage of Android platform to develop rapidly and its market share grows gradually with Xperia series launching. In addition, Sony closed its functional phone production and was dedicated to operate Android smart phone.
It can also integrate its huge resources under its name Analysis on Political Aspect Political factor is playing a crucial role in the process of oversea market expansion, for it decides what entrance mode that a company will choose. This section will critically discuss about the political aspect in the way of Sony Company’s internationalization and conduct an analysis on both Sony in China and Europe as a particular example. Political Environment and Company Strengths From 1945 after the World War? international political situation turned to be stable and peace in general, which create a valuable moment for Japan and other countries to develop economy in postwar time. USD-centered International Monetary System provided a comparatively stable condition for international trade. And in 1946, Sony was started from scratch. Inside the country, on the one hand, with western democratic political system and legal institute built in Japan successfully, Japanese government gradually relaxed the restriction on import and export trading since 1960 in order to push economy grows.
On the other hand, economy development brought with living-level to rise. The demand for household appliance rose as well. These are basic national conditions to Sony for its oversea business activities. For Sony itself, firstly it has a clear and specific goal and plan on inland and oversea marketing. Secondly, it insists on high quality product with high price strategy, which establishes the reputation for the brand. Thirdly, enterprise culture attracts customers to build up a brand loyalty to Sony. Political Challenges of Sony’s Internationalize
As the company did an excellent sales performance in Japan, it decided to stretch its branches into oversea area. In January, 1959, Sony became the new brand name instead of the original company name to meet the international trend. Opportunities and threats are both exist on the way of oversea expansion. Here is an analysis on Sony Company’s expansion worldwide and the main challenge of its entrance mode select in different countries and areas, under the effects by the political factors. In November, 1986, Sony set up its first European headquarters Sony Euro in Germany.
Before that, it settled the branches respectively in US(1968), Germany(1970) and France(1973) to enlarge the sales revenue and promote its concept of localization around the world. A remarkable example that Sony Company joint venture with Ericsson Company to create a new brand of Sony Ericsson, which both of them holding 50% of the share. And in February, 2012 Sony took over it as sub company via acquisition. For Asian companies, European monetary system provide them a ideal trading base, for they can easily enlarge the sales target in Euro zone.
Meanwhile, the main challenges they faced with in European market are serious as well. Exchange rate risk in monetary policy and stability of financial system is uncertainty. Crisis of finance would make a great loss once spread rapidly. Bank industry can be depressing while economy recession, then debts and mortgage challenging the foreign companies. During the last economy crisis, Sony Company reduced the staffrimmer at a number of 10,600 around. Sony first established its branch office in Beijing, China in the year of 1996.
Since the company already had a far-spread reputation, brand effect was its strength to open the market of China. And Sony had accumulated fairly enough capital by the end of 20th century after decades of development and expansion. At that time, Chinese government executed positive policy on introducing foreign capital, such as tax preference and concessional debts, which greatly supported Sony to set the branch office in the format of foreign-owned enterprise with confidence. However, there is always an unpredictable and essential factor that may influence its sales in mainland.
Challenges came and went following the complex relationship between China and Japanese. Recently, it is reported that sales volume of Sony products in China has an obvious drop-down after the Diaoyu Island Event. Advertising activity was limited in some local TV station, and the public called for boycott of Japanese products. All these made the sales volume of Sony decreasing. In view of this condition, Sony Company continue focusing on product quality and carry out necessary promotion campaign.
According to top manager, they insist of positive attitude towards further development in China. Analysis on Socio-Cultural Aspect Socio-culture is one of the crucial factors which will largely affect development of a company. In this part, we will discuss the social-culture problems in Sony. Sony Enterprise Culture As is known to all, Sony Corporation (??????? ) , commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Konan Minato, which established in 1946, Tokyo, Japan.
As a Japanese enterprise, it has a wealth of enterprise culture. The first one is that Sony’s founder not only knew the importance of science and technology, but also determined the declaration when the company was founded, “the company’s aim is to rapidly progress the war a variety of techniques are applied to the national life to”, “in a timely manner to all universities and research results into products and commodities”. In addition, they also vigorously introduce foreign advanced technology.
The second one is that, in order to give full play to the enthusiasm and pioneering spirit, Sony launched a unique personnel system, which allows and encourages people “volunteered” to apply for various research and development projects according to their interests, hobbies and expertise. Sony believes that those who are not complacent, do not stick to conventions, jump around in the various research groups are most likely to develop a new tech or product. The third one is that, innovation is an important part of Sony’s corporate culture, as well as the key to success.
The company founder once said:” Sony’s success is due to the innovation in science, technology, management, marketing and other aspects. ” Now Sony develops about 1,000 new products, an average of every working day 4 species. The last one is that, Sony keeps the faith” love and respect each other”. All the employees ranging from director to humble workers are equal. During working time, they all wear the same jackets, just like a harmonious family. Sony’s Executives do not have their own office. They work with others together.
So everyone can get on well with each other in a very short time. I think this kind of enterprise culture largely determines the success of Sony. The employee will feel relax in such culture environment instead of feeling nervous. So they can work more efficiently and have more room to innovate. But there are also some discordant parts. As Sony is a Japanese company, they usually start their work early while the Europeans do not like to work before 10. 00 a. m. This will cause “culture shock” when the Sony approaching to the world market.
Adapt to European market In order to foray into the European market, Sony created a joint venture named Sony Ericsson. They use global localization strategy to adapt to the whole world, especially to European market. They established their factory in America, Europe, southeast Asia and so on to realized the localization production. The localization production realized localization management. Sony employed the local talents with high management skills. I think the global localization strategy has its two sides. There are several advantages.
The one is, due to this strategy, they will hire the local people. Generally, the local people know more detail. So they can help the enterprise adapt itself to local culture and environment. Secondly, this strategy can ease and avoid political risk, desalinate host country residents for the joint venture of foreign capital impression. On the contrary, this strategy will cause technical secret problems. It is hard to guarantee that not let out any secret though the sharing of technical knowledge. Secondly, there will have some coordination problems between subsidiary and parent company.
It seems to be impossible to reconcile the subsidiary’s target with parent company’s target. Finally, this strategy needs more capital and resource. So it will suffer a higher risk. Conclusion Through the analysis we have done, we present the worries about Sony’s future development. Although its shared working place and enthusiastic company culture are impressing that shows the respect of equality and the concern of individuals, the lacking sense of fashionable technology will not smooth the development way of Sony.
Its high quality control spirit will appeal to the frequent and honest customers, but the imitators and the allure of competitive prices will finally take away Sony’s customer base. In addition, the stressful political relationship between China and Japan will influence the choice of electronic consumption in China so that Sony had better seek a boarder market to maintain its sales and work harder on nurturing its product identify.