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The Current Strategy of Sony
Sony is one of the most common brands in almost all the households across the globe. This is because Sony has been recognized to be among the leading brands in the electronic industry. Essentially, Sony is a major corporation which is headquartered in Tokyo. This company was formed in 1946 when two Japanese engineers, that is, Masaru Ibuka and Akio Morita set to establish their own company. During this phase, Sony had only 20 employees (Chang 2011). Currently, this company employees over 168,000 people worldwide.
Much of the strategic thinking of the hugely successful Sony Company has focused on lifestyle as the key determinant of a product. However, following the commitment of the company to focus on small – screen, portable television set in the early 1960s, Sony acknowledged the need to constantly re-evaluate the company’s scope in consumer electronics, and this philosophy led to the walkman stereo which was introduced in 1979 (Ferrell, Hirt & Linda 2006).
Through skilful innovation and creativity Sony became aware of the importance of understanding the changing social attitudes and behaviour in order to develop more of what the company’s executing later called software thinking. Essentially, its music and motion pictures are rated to be among the most comprehensive entertainment companies in the world. The Sony brand has been ranked among the top 100 brands in the world.
This implies that it is worth over $11 billion. Despite all these, Sony faces certain challenges (Hill & Gareth 2007). For instance the financial crisis which ht the globe in 2007 disturbed Sony’s operating environment. This was characterized by decreased demand on their products which led to losses which were recorded in the year which ended March 31, 2009. In order to counter this, the Sony management initiated a string of measures which were aimed at curtailing this trend and ensuring that the brand remains to be among the leading brands (Hill & Gareth 2007). Among the strategic plans that Sony is working on include carrying out a restricting process that would ensure that the organization retails its vitality. In addition, since the year 2010, Sony has been working on reducing operational costs.
This has been further seen with the resolution to reduce and eventually stop producing items which were not profitable to the organization. These changes are based on ‘the transformation 60’ which entails the process of clarifying the purpose of the organization with an emphasis on structure and technology and ensuring that the organization is in a position of sustaining the projected profit margins.
The Strategy Being Adopted by Sony to Regain Lost Market Share
As a company, Sony places a lot of emphasis on innovation and technical advancement. This was characterized with the walkman which Sony brought into the market. Furthermore, the introduction of the Viao notebook has also played a key role. It is worth mentioning that Sony tries to achieve its goal of playing a significant role in various sectors which have brought forth these positive results.
The introduction of the HD version of the flat screen television has brought to the fore the creativity and the innovative potential that this company has (Herstatt 2006). Essentially, as a strategy, this company has strives for technical advancement which has ensured to a greater degree the competitive advantage over the rest.
As an electronic company, Sony relies on the advancements which are made in the information technology industry. Essentially, the current state of affairs in the world stipulates that a company should be in a position of ensuring that it can be able to stay on top of the game through innovation and creativity. It is worth noting that the exponential growth in the consumer electronics industry over the past few years can be mainly attributed to the emergence of a phenomenon called the convergence.
This has been based on the fact that since companies cannot really come up with entirely new products anymore, they increase their market share by inventing products combining features that were formerly only available in separate products (Herstatt 2006). This approach of merging these products is what is termed as convergence. The confluence and merging of separate markets of digital based audio, video and information technology. This has led to an increase in demand of consumer products which have got multiple functions (Hill & Gareth 2007). It is also important to note that the revolutionary emergence of the digital technology has also contributed to the increase of global sales in the consumer electronic industry.
This being the case, the ability of a company to stay afloat in these times will depend on its ability to take a preceding role in innovation and creativity. Japanese companies like Sony have captured the consumer electronics market. In a survey that was carried out which was measuring the health of famous consumer products based on creativity and innovation, Sony brands was listed to be among the popular brands.
In the current market, Sony’s strategy is to actively respond to the digital revolution which is taking place (Ferrell, Hirt & Linda 2006). Today, the markets for entertainment hardware and software are being redefined by forces of digital and networking technologies. Furthermore, the introduction of satellite broadcasting and other types of electronic distribution is enhancing the value of all types of entertainment software. In this case, Sony’s course of action is clear. In this case, there is the emphasis on information technology as a key element in the future prospects of this company. Essentially, the driving force of this company is to enhance the incorporation of digital technology in the hardware and software business.
In this case, as a strategy, this will add value to the vast store of music and filmed entertainment assets. As this process unfolds, the belief is that it will be critical for the company to extend the business domain in order to be in a position of embracing the electronic business domain. Idei, one of the key leaders within this organization went on record to highlight information technology based on the fact that it became easier to create the synergy between hardware and software content.
This was especially based on the fact that internet and broadband technology had been developed. Initially, the synergy was difficult to attain. This was because of the analogue age that had taken centre stage (Hill & Gareth 2007). However, the current age puts this company in a more strategic position as all content which is CDs and VCRs can be condensed into a single entity.
As a major business strategy, Sony started digitizing its concepts in film and music content. This was in preparation of the broadband age. During the 2002 annual report, Sony had already digitized 1,000 films, 33,000 hours and television programs and over 500,000 songs. This led to the establishment of the Movielink which was done jointly with other film companies. Eventually, Sony announced its plans of using these sites for online downloading of Sony’s films, games and movies. This was largely geared towards establishing a market edge over the other competitors who were obtaining Sony’s market share. Essentially, the overall strategy of this company was to ensure that it gels innovation and creativity into the emerging technological trends which were being experienced.
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At this stage it is worth mentioning that from the perspective of a company pioneering a new technological standard in a marketplace where network effects and positive feedback loops operate, the key question becomes, what strategy should be pursued to establish a format which remain to be dominant? In response to this question, to an extend Sony’s strategy has worked to their advantage. This is because Sony has established a format which has been build. This has installed the base for its standard as rapidly as possible, thereby leveraging the positive feedback into its technological advancements (Hill & Gareth 2007).
This has further been occasioned by the approach where the company has been able to induce customers to bear the switching costs and ultimately locking the market into its technology. In essence, this process requires the company to jump start and then accelerate demand for its technological standard or format so that it becomes established as quickly as possible as the industry standard, thereby locking out competing formats of other companies. Some of the preferred strategies which have worked for this company have included ensuring a supply of complements. In this case, it is important for the company to make sure that in addition to the product itself, there is an adequate supply of complements.
For instance, no one will buy the Sony PlayStation 3 until there is an adequate supply of games to run on that machine. In this light, before Sony produced the original version of PlayStation, that is, in the early 1990s it established its own in – house unit what was supposed to produce videogames for the PlayStation. This was a successful feat because the moment it launched the PlayStation, it also simultaneously issued sixteen games to run on the machine, giving the consumers a reason to purchase the format (Hill & Gareth 2007).
Furthermore, Sony also licensed the right to produce games to a number of independent game developers, charged the developers lower royalty rate than they had to pay to fellow competitors such as Nintendo. Thus, the launch of the Sony PlayStation was accompanied by the simultaneous launch of thirty or so games, which quickly helped to stimulate demand for the machine. Pricing is another aspect which this company put into place that ensured that it managed to stay on top.
In this case, a common tactic to jump – start demand is to adopt a razor and blade strategy. This is characterized by pricing the product low in order to stimulate demand and increase the installed base. In this case, the Sony PlayStation provides a good example of this strategy which this company has used effectively. Sony linked the introduction of the PlayStation with nationwide television and advertising aimed at its primary demographic and in – store displays that allowed potential buyers to play games on the machine before making a purchase. Question three
The Porter’s diamond model is model which was developed by Michael Porter in order to evaluate the competitive nature of a company based on its location. This model is based on the fact that there are reasons which make some industries which are located in certain nations are more productive and competitive on a national and international scale as compared to other organizations in other nations (Herstatt 2006).
According to this model, there are four main factors which play an active role. These factors include the factor conditions, that is, those aspects which when exploited by companies within a nation, they increase the company’s competitive advantage. Some examples of such factor conditions include highly skilled workforce, linguistic abilities of the workforce and rich amounts of raw materials (Hill & Gareth 2007).
Secondly, the demand conditions of the product. In this case if the demand conditions for the product are higher within the country, then the local firms will ensure that they work at producing high quality products than the foreign products. This ensures that the company will work towards ensuring that the quality provided outclasses the products from other firms. Consequently, this will ensure that the company is able to perform better on a global front. In this case, Sony being a Japanese company strives to ensure that the quality of the products that it offers its local consumers is of good quality (Hill & Gareth 2007).
This has ensured that this company gains a better standing regarding electronic products on an international scale. Thirdly, is the related and support industries. This is based on the premise that when the local industries are competitive, the chances that the corresponding companies are also going to be competitive are higher. This leads to ensuring that companies which are based in these countries strive towards enhanced quality and efficiency when it comes to the provision of goods and services. For instance, Sony as a company benefits from a string of highly competent businesses which offer related services and products in Japan (Hill & Gareth 2007).
Thus, ensuring that Sony as a company is able to gain a footing on the global scale. Lastly, the firm strategy, structure and rivalry play a crucial role in this sector. Essentially firms from different nations have got different structures. This at times affects the competitiveness especially when it comes to the national front.
Case Analysis: Sony
Essentially, Sony is best placed in the world as a consequence of the services that it has at home regarding the quality of the labour force. It is worth noting that labour costs in Japan, including wages and salaries, seasonal benefits and fringe benefits are high in comparison with other countries in the region. In essence, the Japanese labour force is highly productive and well educated. This gives Sony an upper hand locally as compared to other competing firms (Hill & Gareth 2007).
This implies that Sony has been in a position of producing high quality products and electronics based on the quality of the work force that it has. Consequently, it has been better placed to excel internationally as compared to other firms. Secondly, the work ethic in Japan is quite high. This has ensured that the company is able to deliver products in time. This has earned Japanese companies an upper hand among the consumers and the buyers of electronic products. In addition, putting into consideration the fact that Japanese companies work together on certain common fronts ensures that their products gain easy access into other markets globally based on the innovativeness and creativity which is enhanced.
Sony thrives on strategy. This has been encouraged at the national level where the government has ensured that it creates a climate that enhances strategic alliances. Sony has become a highly sophisticated industry which has been buoyed by the country’s policy regarding technology. Thus, most of the strategic decision and choices of this company have been based on the ability of the company to maximize on this fact.
Essentially, the current society is tending towards digitalization of information, this has spurred this country to establish policies which have placed electronic companies in this country to build and establish products which meet the challenge of the age. Eventually this has ensured that this company is able to place itself strategically in the national scale (Ferrell, Hirt & Linda 2006).
Demand conditions within Japan have also played a crucial role towards ensuring that this company is able to thrive globally. Due to the fact that the Japanese are highly educated, the natures of products are also of high quality. This has pushed Sony to work towards meeting the high quality needs of the country thus ensuring that the products have an edge on the global front. Sony has been going through a restructuring phase in terms of leadership.
Due to the fact that this is an international brand, the management have sought to ensure that the regional companies are in tandem with the prevailing conditions of these regional companies. This has been enhanced by the leadership approaches which have been embraced by the management team (Herstatt 2006). Essentially, this has ensured that the company is able to resonate with the challenges which are facing each regional section locally while at the same time meeting the standard quality measures and practices.
The nature of operations of this company has ensured that this company stays on board. The brand that Sony bears is an international brand which is associated with quality. Essentially, this has ensured that this company gains client base across the globe. It is worth mentioning that the nature of operations which has been embraced by this company has ensured that the company is able to maintain focus and objectivity in all the operations that it undertakes. Coupled with creativity and innovative ideals held by the workforce, the company brand will remain to stand out across the globe.
Chang, SJ 2011, Sony Vs Samsung:The Inside Story of the Electronics Giants’ Battle For Global Supremacy, John Wiley & Sons, New York.
Ferrell, OC, Hirt, GA & Linda, F 2006, Business:a changing world, 5th edn, McGraw Hill/Irwin, California.
Herstatt, C 2006, Management of Technology And Innovation in Japan, Illustrated edn, Birkhäuser, New York.
Hill, CWL & Gareth, RJ 2007, Strategic Management:An Integrated Approach, 8th edn, Cengage Learning, Carlifornia.