Business Consultancy: Sony vs Panasonic Report

Executive Summary

Recent technological developments have continued to take the world by storm since the invention of the computer and its follow-ups. In the world of technology, however, technological innovations and changing consumer demands in various markets are responsible for keeping marketers on their toes as competition is cutthroat. One of the companies that have dominated the field of electronics and technological innovations is Sony. This is more of a reflection of a savvy marketing and strategic marketing position via vertical integration rather than a significant technical advantage.

The dominance has had its low moments with the electronics powerhouse opting out of some fields due to the high levels of competition evident in this field as demonstrated by the emergence of very many companies especially in the Asian ”tiger” economies whose economic and technological advancements is supersonic. This company was recently embroiled in a marketing war with Nintendo Wii in the marketing of their computer games Play Station 3 and the ”Wii” which went as far as to the courts. Again the corporation was caught in another battle with their other rivals Toshiba in the marketing of their high definition technologies, a war that Sony won. In light of this matter, the corporation has sought the services of a consultancy firm to analyze its competitiveness with their major rivals Panasonic Electronics on the marketing of their LCD plasma television sets.

Introduction

Company history

Sony is a Japanese-based multinational conglomerate corporation one of the largest in the media conglomerates of the world with total revenue of over $82 billion as per the close of their 2007 financial year report. The corporation started in 1945 after the 2^nd World War as a radio repair shop operated by one Masru Imuka. After a year he was joined by a partner Akio Morita hence a change of name to Tokyo Tsushin Kogyo K. K. which translate to Tokyo Engineering Telecommunications Engineering Corporation and changed its name to Sony Corporation in 1958.

As of today, the company is better known as Sony. Currently, the corporation has opened up many branches across the world under CEO Sir Howard Stringer, a British businessman. The corporation’s portfolio is diverse through its five operating segments – electronics (65% of revenues), games (19 %), entertainment (motion pictures and music) (8%), financial services (5%), and other electronic segments (3%). These make Sony one of the most comprehensive and relevant entertainment companies in the world.

The introduction of the LCD technology in the world of entertainment has raised the standards of screen viewership with high color quality and definition expected with the coming of this product. The corporation is now faced with the increased market share of Panasonic in the plasma TV segment at its expense. Apart from being low priced the company is looking at other ways through which Panasonic is using to attract the market share that it has in such a short while obtained such a significant share.

A new approach to the market is required hence the need to carry out a self-analysis study that will help to reposition the electronics giant to its rightful marketplace after rectifying the problems that seem to ail the company at the moment concerning the performance of its plasma brands. This paper here is an analysis of the situation as it is at the moment in regards to the particular brand of product in the market.

Industry overview

Many companies have entered the market of manufacturing high definition television though not many of them have mad4e any impact on the market. Most of the companies involved in the selling of this technology are Sony, Samsung, Dell, Hitachi, JVC, LG, Mitsubishi, Panasonic, Pioneer, Phillips,

Situation Analysis

At the moment television viewership has registered tremendous growth as facilitated by the increase in the number and affordability of the brands in the market. Many companies and especially in China have continued to make replica counterfeit sets that claim to be Sony-supported. With the co-operation of government and more consumer enlightenment, this problem is well in its decline.

One of the most highly expanding markets in Africa where availability of TV was very low some years back. The economic growth of some of these countries is spurring growth in other industries thereby providing much-needed employment and as a result, increasing the consumer’s purchasing power. Panasonic has also noticed the potential growth in this market thereby investing heavily in it.

Regional offices and distribution channels have been set up. This analysis sought to project the performance of Sony’s Bravia brand against Panasonic’s Viera brand of which both are high definition. There is a lot of anxiety in Sony and Panasonic and other firms electronics firms also regarding market responses towards the withdrawal of Toshiba in this category of high definition. Both are relatively similar in their major features with the major differences being in the pricing and the physical appearance.

One of the best ways forward is a carrying out a comprehensive SWOT analysis test to obtain the best information on the company’s position in the market and its chances of flooring its biggest rival a fete that feels within rich following the big win over Toshiba.

PEST Analysis

Political environment

• Government tax policy on electronic imports
• Foreign trade regulations, quotas, and trade agreements
• Attitudes towards monopolies and competition.

Environmental factors

• Important for all companies projecting growth and expansion
• Member of Climate Savers Program
• Formulated the Sony Group Environmental Vision
• Unified environmental management system based on ISO: 14001 standards
• Products focused on efficient use of resources, minimal radioactivity, and content management
• In February 2007 Sony became the first consumer electronics company to be awarded the Sustainable Energy Europe Award by the European Commission
• Reduction of negative environmental impact by Sony facilities

Social-cultural factors

• Sony involved with the program ”For The Next Generation” focused on the protection of a sustainable future society
• Participation in charitable foundations in America and an Employee Volunteering program to help local communities.
• Operating in Africa as an important potential market for Sony. Is disposable income enough to still cater for top-notch television sets considered a luxury by many? The economy is still growing strong, mainly because of consumers having personal disposable income on their hands as a result of a rise in employment levels. Latest gadgets and envy for their neighbors’ giant TV screens have seen consumers borrowing against their houses and taking personal loans to buy more household items for their homes. Today’s society does not have as much access as it had in 2007 and earlier years to credit for discretionary consumption due to lack of salary security.

Technological factors

• Downloadable Content as a threat.
• Sony is diversified within the technology industry
• The constant evolution of technology in this sector. A good look at Bravia you think that’s the climax innovation in television but check the market six months from now.
• Price cutting is pulling consumer electronics profit margins per unit lower and lower. Two years ago, a flat-screen television set did cost $5,000-$10,000 but have dropped to $1,000. Profits for consumer electronics continue to rise defiantly because consumers appear to have more disposable income to spend.

Sony’s Five Forces Analysis; Bravia vs. Viera

Power of suppliers:

• The products are meant for high income earning consumers
• Product is limited and is offered through strategic alliances.

Power of buyers:

• Strategic relationships with content owners are critical.
• High bargaining powers of the consumers

Barriers to entry:

• Limited content supply
• Established marketing positions.
• Proprietary Technology
• Capital
• Political instability

The Threat of Substitutes:

• Counterfeit cheap replicas from China and other middle east countries such as Taiwan
• Low-cost models from competitors

Competitive rivalry

Among the many competitors in this field, there is no one single company that boasts of complete market monopoly hence all have to compete for the limited market share available to them all. In this paper, concentration is on the major player’s in the market.

The figure below is a summary of the five forces analysis in relation to Sony and Panasonic.

Sony’s Strengths and Opportunities

Dominance

Undoubtedly, the settlement of the battle between Sony and Toshiba will allow Sony to consolidate its dominance in the physical delivery of media content through industry and market standardization from now until the market reaches a complete maturity stage given that I will uphold its competitiveness.

Platform

Having been able to launch and maintain the blue-ray format in the market without scarifying profits to gain market share, will give Sony a head start of making this product a profit platform to invest in maintaining its leading edge in the entertainment industry. After winning the format battle with Toshiba, Sony enters almost into a blue ocean scenario, and it will allow it to get prepared for the red ocean scenario if decides to enter the market of media content delivery through the internet.

The Sony Bravia boasts of the following features

• Slim fit that minimizes space occupied
• Enhanced visual and aural clarity
• Precise color reproduction
• Live color creation
• Smooth color transition
• High connectivity as enabled by the HDMI input
• Has a PC input enabling it to double up as a computer monitor
• User-friendly screen and remote control
• Has a wide viewing degree of 178 degrees to enable clear viewing from any angle
• Quick response time
• Integrated digital tuner
• Astounding stereo sound to match the spectacular visuals

Sony’s Winning Strategies

The bowing out of Toshiba in this market was the result of creative strategic marketing activities. The most significant of these are as follows:

1. The early vertical integration into the world of clear imaging with a move to invest in major Hollywood studio’s long before other competitors had a clue
2. The development of a sound technological platform.
3. The strategic use of existing Sony brands, such as the inclusion of Blu-ray technology in the popular PS3 video game has strengthened the brand further.
4. The development of critical strategic alliances with not only the major Hollywood movie studios in America and Nollywood in Nigeria but also industry powerhouses such as Wal-mart, Apple, and Dell.
5. The disciplined retention of Blu-ray brand value without budging to the pressure of licensing Chinese manufacturers for mass production or under-valuing dedicated Bravia players at the consumer level.

Considering all of the above factors, the most critical was Sony’s ability to capture the attention and allegiance of major industry players such as distributors’ promotion companies. It was Toshiba’s lack of a keen eye that saw them lose the opportunity to negotiate these alliances that would inevitability turn the tide of momentum towards Blu-ray. Although Sony may not have been considering this specific strategic issue to apply the same way for Panasonic and its Viera, it has positioned Sony in partnerships with the major movie studios and helped the management to have a positive attitude in their fight for market share with Panasonic.

Sony: Future Outlook, Future Strategies

Although the war with Toshiba may be over, a lot of time was wasted fighting it out in the marketplace that other competitors such AS Panasonic were left unattended thus making a considerable market penetration to the disadvantage of Sony. In this industry, day and age of fast adapting companies with highly innovative products, it is only a matter of time before a new and better product enters the market as proven by the replacement of VCR by DVD’s and MP4’s and now CD’s are being replaced by microchips in the MP3’s and the iPod. As noted in Porter’s 5 forces analysis, the threat of substitutions, from Chinese counterfeit replicas is the greatest hurdle so far as they are cheap. This threat is further heightened by the fact that though Africa’s working population is projected to have realized an increase in the amount of disposable income available to them, this assumption has not stood the test of time.

Several factors are pushing consumers to embrace purely digital ownership of High Definition Plasma television sets. These include,

1. The desire to watch multiple formats, and which are multiple devices compatible
2. The development of improved DRM (Digital Rights Management) tools,
3. The normalization of music downloading, and
4. The iconic brand and pop culture following the company’s long presence in the market and maintaining the same level of quality.

Competition

The company has already identified the competitor to look out for. Among the many competitors in the field, some have remained adamant in their search for a significant market share. It thus happens that the problem that remains unsolved is identifying the strong selling points that give Sony a run for its money. A good analysis of the competitor’s strong point gives a lot of valuable information in developing and coming up with the best ways to counter that competition.

Panasonic Electrical

The company is also Japanese-based. It was started in 1918 by Konosuke Matsushita at the age of 22 as a socket and bulb-making enterprise going by the name of Matsushita Electric Devices Manufacturing Works. This was a case of pure talent as the young man had no formal education whatsoever. Now that business was picking up and Konosuke had money to invest, he rented a two-story home, thereby establishing Matsushita Electric Devices Manufacturing Works on the first floor.

With this larger workshop, Konosuke was able to hire more hands and expand his production to include an innovative attachment plug and a two-way socket, both of which he designed himself. These new products proved immensely popular, earning the company a reputation for high quality at low prices. And by 1922, Konosuke had to build a new factory and office to house his growing business.

The company, under the leadership of its founder, is credited with very many innovations such as the electrical bicycle lamp, the 1927’s super iron among many. The company continued to expand its line of products to include dry batteries, synthetic resins, cables, etc. In managing this portfolio, Konosuke introduced the autonomous management system to help in running his expanding company by dividing the company into divisions.

By the time Sony Corporation was being founded in 1945, Panasonic was manufacturing over 200 products both electrical and nonelectrical. With the invention of the brand “National”, the company was experiencing double-digit growth annually. The diversity in Panasonic’s product range has ensured that the revenues are comparable to Sony’s. In their annual report in March 2006, Panasonic had consolidated net sales of US$76.02 billion against Sony’s net sales of US$64 billion for the same period. This shows that Panasonic is financially superior to Sony something that the company should be wary of since the expansion of Panasonic is very unlikely to be hit by financial glitches something that may be a real problem to Sony.

With such a long experience it is expected that the company can utilize its long-standing position in this market to its advantage which leaves Sony at a disadvantage. However, the company has not been ken top market its products based on this assumption. The coming of the Viera in the market has seen the company’s sales improve to a record high.

The Viera boasts of the following features:

• One-touch control of all Panasonic high definition components
• On-screen menu
• SD memory and slot
• 1080P screen resolution
• Display panels have anti-image retention technology
• Crisp motion with ultra-fast switching from one station to another
• Effective customer care with free chat online

The concierge program that donates 5% of any Panasonic purchase to an Eco-conscious charity. Panasonic has managed to operate a notch higher than Sony because Panasonic has a wide of products that are doing well than other competitors in the

Panasonic has also managed to tame the competitiveness of Sony by concentrating on the areas where Sony seems to be shying away from. at the moment this is best explained by Sony’s involvement in the financial services market. However, Panasonic is concentrating on the production of TV panels, DVDs, and cameras. On the other hand, both have focused their attention on other forms of entertainment provision by investing in-flight entertainment for Panasonic through the Panasonic Avionics Corporation and Sony’s acquisition of CBS Records.

Panasonic’s Threats and weaknesses

The comparisons between these two companies have been carried out widely as these two are the major market players. At some point, Panasonic failures in some of its products have been highlighted here and there thus if Sony is anything but serious should make the best attempts to capitalize on the failings of its main competitor.

Hitachi

The company was founded by Namihei Odairo as an electrical repair shop in Japan in 1910. They came into the limelight after making their first products which were three 3.6775kW electric motors. Growth was imminent in the company that was highlighted with the manufacture of a large scale computer in 1990 that had the highest processing speed by then. The company had a very wide range of products that at one time it was thought to be a vehicle manufacturing unit as displayed by the 1993 bullet train the first of its kind with a maximum speed of 270 kmph.

In the same way, as Panasonic had done, Hitachi introduced its system of managing its portfolios called ”hard real-time management technology”. The company’s products are trusted by many due to the high rate of innovation a trademark of the company matched by no other. To cap it on this company’s success its pioneering in many fields has won many consumers in an unfounded belief that the newest original technology is with Hitachi while others are just copycats.

Implementation/Recommendations

1. Work on a downward movement on the prices without comprising on the quality to increase competitiveness.
2. Careful and phased expansion in Africa due to the volatile political situation in the region.
3. An alternative source of funding to the expansion plan should be sought.
4. Mergers should be made with some relevant and potential organizations in Sony’s financial services to help the organization in focusing its management, financial, and personnel capabilities in the manufacturing of electronics segment only. This induces specialization resulting in greater innovations and efficiency in the workplace.
5. The design of the Bravia should be altered to give it a more different physical appearance from the Viera and other competitors.
6. The company should be stricter in the handling of the trademark rules defrauders and other unlicensed producers of Sony products.

Conclusion

The company has a very great influence and presence in the electronics market and its products are used as a measure of the standard to other brands from other companies in the market. However, the greatest hurdle to the company is the efficiency of a downward price revision without compromising on quality. With such a strong brand name in the market, it is expected that any Sony-branded electronic equipment in the stores will perform well

References