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STRATEGIC PROJECT MANAGEMENT

COMPETITIVE STRATEGY (C11CZ)


Group Assignment# 2

S ONY C ORPORATION AND ITS O RGANIZATIONAL


CHANGE

For Review of
Dr. Mohd. A. Salama

Submitted by
Group# 9
Group Name

Atiye Arooni - 091575553


Yulia Storozheva - 091615457
Julia Parbey - 091575601
S Shafaq Akbari - 091598828
“SONY CORPORATION – INNOVATION ALL THE WAY”
TABLE OF CONTENT

TABLE OF CONTENT..................................................................................................................................I
TABLE OF FIGURES.................................................................................................................................III
EXECUTIVE SUMMARY...........................................................................................................................II
ACKNOWLEDGEMENT...........................................................................................................................III
INTRODUCTION..........................................................................................................................................1
SONY...........................................................................................................................................................1
COMPANY STRATEGY........................................................................................................................................1
ORGANIZATIONAL STRUCTURE...........................................................................................................3
CORPORATE STRUCTURE OF SONY CORPORATION..................................................................................................3
Multi-Divisional structure (M-form).......................................................................................................3
Strategy and Organizational Structure...................................................................................................4
GOOLD AND CAMPBELL TESTS...........................................................................................................................6
The Specialist Cultures Test: ..................................................................................................................6
The Difficult Links Test ..........................................................................................................................6
Shared know-how Links.....................................................................................................................................7
Shared Tangible Resources Links......................................................................................................................7
Pooled Negotiating Power Links........................................................................................................................7
Coordinated Strategies Links.............................................................................................................................8
Vertical Integration Links..................................................................................................................................1
New-Business Creation Links............................................................................................................................1
The Redundant Hierarchy Test: .............................................................................................................1
The Accountability Test...........................................................................................................................2
The Flexibility Test..................................................................................................................................2
THE RISK AND BENEFITS OF THE MULTIDIVISIONAL STRUCTURE........................................4
THE BENEFITS ................................................................................................................................................4
THE RISKS ......................................................................................................................................................5
THE CULTURAL WEB BEFORE HOWARD STRINGER.....................................................................6
THE CULTURAL WEB AFTER HOWARD STRINGER........................................................................9
SIR HOWARD STRINGER’S CHANGE MANAGEMENT...................................................................11
CONCLUSION.............................................................................................................................................14
REFERENCES.............................................................................................................................................15
APPENDICES ..............................................................................................................................................17
APPENDIX A: STRUCTURAL ASSIGNMENT (2005)...............................................................................................17
Structural Heads....................................................................................................................................17
Strategy Committee heads.....................................................................................................................17

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APPENDIX B: SONY GROUP INFORMATION (2009)..............................................................................................18
Sony Group Organizational Chart .......................................................................................................18
APPENDIX C: DETAIL COMPANY STRATEGY (2005)...........................................................................................19
APPENDIX D: SONY OPERATING CHART (2009)................................................................................................22

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TABLE OF FIGURES

FIGURE 1 – SONY ORGANIZATIONAL CHART (AS OF OCT 2005) ..............................................4


FIGURE 2 – THE SPECIALIST CULTURE TEST ..................................................................................6
FIGURE 3 – THE DIFFICULT LINKS TEST...........................................................................................7
FIGURE 4 – THE REDUNDANT HIERARCHY TEST...........................................................................1
FIGURE 5 – THE ACCOUNTABILITY TEST..........................................................................................2
FIGURE 6 – THE FLEXIBILITY TEST.....................................................................................................3
FIGURE 7- CULTURAL WEB BEFORE HOWARD STRINGER BECAME CEO OF SONY
GLOBAL.........................................................................................................................................................8
FIGURE 8- CULTURAL WEB AFTER HOWARD STRINGER BECAME CEO OF SONY
GLOBAL.......................................................................................................................................................10

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PAGE LEFT BLANK INTENTIONALLY
E X E C U T I V E S U M M A RY

This report has been prepared towards the completion of our second
assignment of Competitive Strategy (C11CZ).

The report is an evaluation of the organization structure implemented


by Sir Howard Stringer in October 2005. The transition of Sony’s
organization structure from Transnational structural to multidivisional
structure has been analyzed in detail.

Goold and Campbell’s five tests have been conducted to determine the
appropriateness of Sir Howard Stringer’s structural choice given his
desire to make Sony a more innovative and flexible organization. The
risks and benefits of the structural choice has also been assessed.

The report displays the cultural web of Sony before and after Sir
Howard’s arrival. It was derived that the Reconstruction type of
strategic change had been used to bring about the transformation in
the organization’s culture. Consequently, Sir Howard adopted the
“Education and Communication” and the “Collaboration/Participation”
styles of strategic change implementation.

In conclusion, it can be seen that the stock share value has increased
during 2005-2007 which means that Howard Stringer was doing a good
job at implementing his change.

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ACKNOWLEDGEMENT

We thank Heriot-Watt for giving us the opportunity to enhance our


learning in Strategic Project Management by means of this group
assignment.

We would like to give a hearty thanks to our Professors at Heriot Watt,


namely Dr. M. A. Salama and Dr. Michael Clarke for their time and
guidance for completing this assignment.

We would like to thank the university librarian Ramakant for his


cooperation in providing us the appropriate books and journals for
reference.
We would also like to thank our families and friends for their support
through out the completion of this assignment. We could not have
done this without them.

-- PM Stars Incorporated

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Competitive Strategy

INTRODUCTION
As a part of this report let us start by introducing Sony Corporation.

SONY
Sony is one of the leading manufacturers of electronics, video,
communications, video game consoles, and information technology
products for the consumer and professional markets.

Sony was founded on 7th May 1946. The representative corporate


executive officers at Sony as of today as Howard Stringer(Chairman,
CEO and President), Ryoji Chubachi (Vice Chairman) and Nobuyuki
Oneda (Executive Deputy President and CFO). (Sony Global (2009) has
provided the above information).

Sony Corporation (commonly referred to as Sony) is a multinational


conglomerate corporation headquartered in Minato, Tokyo, Japan, and
one of the world's largest media conglomerates with revenue
exceeding ¥ 7.730.0 trillion, or $78.88 billion U.S. (FY2008). Its name is
derived from sonus, the Latin word for sound.

Sony Corporation is the electronics business unit and the parent


company of the Sony Group, which is engaged in business through its
five operating segments—electronics, games, entertainment (motion
pictures and music), financial services and other.

Sony's principal business operations include Sony Corporation (Sony


Electronics in the U.S.), Sony Pictures Entertainment, Sony Computer
Entertainment, Sony Music Entertainment, Sony Ericsson, and Sony
Financial. As a semiconductor maker, Sony is among the Worldwide
Top 20 Semiconductor Sales Leaders. The company's slogan is
make.believe. (Wikipedia (2009) provided information regarding Sony
Corporation).

Company Strategy
Vision (2005): “make Sony cool again”
Vision (2009): “make.believe”

When Howard Stringer joined as the CEO


of Sony Global Japan he made new

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Competitive Strategy

strategies and used those strategies to restructure the organization to


be in-line with these strategies.

Firstly, he looked at the core competencies of the company and


focused mainly on the electronics, games and entertainment sector.
He established a growth strategy saying, “Our target is for the Sony
Group to achieve consolidated sales of over 8 trillion yen and an
operating profit margin of 5% (electronics 4%) by the end of fiscal year
2007”. NewsBlaze (2005) published the company strategy from the
fiscal year 2005 to 2008 as given in Appendix C of this report.

The three-year revitalization plan/strategy was as follows (in brief):

1. Restructuring the Electronics Organization


Eliminated the corporate silos and bring more focus on
competitive growth.

2. Improving Sony’s Profit Structure


a. Cost Reductions
b. Sale of Real Estate, Stock and Non-Core Assets

3. Strengthening Sony’s Current Electronics Business


Focus on areas of the Electronics business by bringing
profitability in television by the second half of 2006.

4. Focusing Resources on Growth Strategy


a. Making the HD World and Major Profit Pillar
Launching of a range of high-definition products in 2006.

b. Focusing on Intelligent & Interoperable Products


Developing network-enabled products and applications

c. Strengthening Technology Development


i. Creation of Home and iii. Next-
Mobile Platforms Generation Display
ii. Concentrating (OLED)
Investment on iv. Enhancing
Semiconductors and Software
Key Component Development
Devices

5. Group Convergence Strategy


a. Pursuit of mobile entertainment
b. Establishment of Cell Development Center

6. Group Strategy by Individual Sector focus on:

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Competitive Strategy

a. Games c. Mobile Phones


b. Entertainment d. Financial Services
i. Motion e. Network Services,
Pictures Retail
ii. Music f. Retail Business

Note: Refer to Appendix C for a detailed Company Strategy.

O R G A N I Z AT I O N A L S T R U C T U R E
Corporate Structure of Sony Corporation
From the analysis on the organizational structure that Howard Stringer
was trying to implement in 2005 we can see that it was clearly a multi-
divisional structure. This structure has been further worked on since
2005 and there have been slight changes to the same.

Multi-Divisional structure (M-form)


The multi-divisional structure is also known as the “product structure”
where the divisional structure groups organizational function into a
division. Each division works as an independent section within the
company and the divisional structure contains all the necessary
resources and functions within it. Each Division will have its own sales,
engineering and marketing departments. (Wikipedia, the free
encyclopedia (2009).

The organizational structure in 2005 that Howard Stringer was trying to


implement is a hybrid structure which is as follows (Please refer to
Appendix A for the assignment of each person in the division):

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Competitive Strategy

Electronics Business

.
Sony Ericsson Mobile Communications

Connect Company
B&P Business Group

Audio Business Group

Digital Imaging Business Group

VAIO Business Group

Video Business Group

TV Business Group

Game Business Group

Entertainment Business Group

Personal Solutions Business Group

Sony Financial Holdings Group


Semiconductor Business Unit

Core component Business Unit

Product Strategy Committee

Technology Strategy Committee

Production Strategy Committee

Procurement Strategy Committee

Sales Strategy Committee

Figure 1 – Sony Organizational chart (as R&D


Headquarters/Corporate of Oct 2005)
(Source: Johnson, Scholes and Whittington, 2008)

Please refer to Appendix B for the new Organization Structure as of 1st


July.

From the organizational structure above it can be seen that Howard


Stringer was attempting to implement the multi-divisional structure. He
had assigned Ryoji Chubachi to handle the main Electronics business
and Chubachi had implemented the multinational matrix structure. We
will not go into details of the matrix structure but will explain it below
in brief.

In case of the Multinational Structure of the organization we can see


that there were a few business units that were put together in order to
increase their responsiveness in the market. There were five
committees created across all these business units and business
groups. This gave a better integration of knowledge, flexibility and the
ability to analyze these units across its procurement, technology,
product strategy, sales and productive business outcomes.

Strategy and Organizational Structure

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Competitive Strategy

When Howard Stringer took over the Sony Global Corporation in 2005
he gave strategies for each product in the company. The strategies are
stated above in the Introduction section of this report.

As per the strategies implemented we can see clearly that he had


devised different strategies for each core product that Sony was
providing and so he also divided the company’s organizational
structure the same way. Thus, we see that the company is become
more flat and each division is reporting to the Headquarters.

As in a multidivisional organization such as Sony, the division’s become


flexible as in the sense that they are able to merge, add or close
divisions. This is apparent in the fact that Sony’s Mobile division
merged with Ericsson to produce Sony Ericsson range of mobiles.
It can also be seen that Sony’s Music Entertainment division had a 50-
50 joint venture with Bertelsmann Music Group naming Sony’s Music
division as Sony BMG Music Entertainment and in August 2008 Sony
bought Bertelsmann’s 50% shares and Sony renamed its Music division
as Sony Music Entertainment.

Ergo, it is apparent that because of Sony’s multidivisional structure


each division is able to work as its own company which is flexible
enough to have joint-venture projects as in the case of Sony Ericsson
and the company is also able to make the decision of buying over
another company such as the Bertelsmann Music group.

When Howard Stringer took over Sony he also closed down a chain of
restaurants and other non-core business companies that Sony owned.

With a multidivisional structure in place Sir Howard Stringer was able


to control and oversee each division from a distance by monitoring the
business performance of each division.

If we look at the advantages of a multi-divisional structure we can see


that because the structure is divided by product lines it allows each
division to grow and specialize on their competences.

We can see that each division has actually become its own company
like the Sony Electronics Inc., the Sony Pictures Entertainment Inc., and
Sony Computer Entertainment Inc. As we will see in the redundancy
test later in this report we can see that each of the companies that are
based in each country have their own head offices. This means that
there are many parent levels in this organization which means that
many of the supporting departments such as HR and IT will be
redundant but due to the large organization structure of the company
Sony needs these headquarters to be set-up. Although the knowledge

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Competitive Strategy

sharing and cooperation between the business units become very


limited but Howard Stringer has tried overcoming this by placing five
strategic committees across the business units which are the product,
technology, production, procurement and sales. Thus standardizations
and centralization has helped to reduce effort and poor coordination.

Also, with Howard traveling around Sony’s operations at a rate of


30,000 air miles a month (Nakamoto 2006) is building spirits and
reflecting in the eyes of the employees all around Sony.

Goold and Campbell Tests


We will use the Goold and Campbell last 5 tests to determine the
appropriateness of Howard Stringer’s structural choice given his desire to
“make Sony cool again” (Clayton 2005).

The Specialist Cultures Test:


The Organization Structure: Specialist Culture test

Very Very
Poor Satisfactory Good
Poor Good

Figure 2 – The Specialist Culture test

In the Specialist Culture test we placed Sony between ‘Good’ and ‘Very
Good’ as Sony has an Engineer-driven culture (Edwards, Lowry, Ihlwan,
Hall 2005). “Sony is an engineering culture” (Paczkowski 2008) says
Howard Stringer and they really take care of their engineers. Engineers
have the freedom to think and come up with new designs. When a
certain project was untaken engineers from all the different
departments met in one place to finish that task. This shows that there
is no organizational contamination of the specialist engineer culture
test.

The Difficult Links Test


The Organization Structure: Difficult Links Test

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Competitive Strategy

Very Very
Poor Satisfactory Good
Poor Good

Figure 3 – The Difficult Links Test

Shared know-how Links


Sony holds Knowledge-sharing
sessions and several other
activities company wide. They host
forums to enable interactive
discussion about the company
news and they engage their
employees in company
developments and “in-the-Know” at
all times as claimed by them on
their website.

Sony also provides all documents,


policies, lessoned learned and all
other types of documents on their
intranet sites.

Shared Tangible Resources Links


Though with a multidivisional
organization with so many parent companies the amount of duplication
of work increases but after Sir Howard Stringer came into Sony he
divided all core businesses by products into separate units that would
report to the Corporate office and setup a corporate R&D unit to
reduce the duplications and also brought in standardized engineered
products to help the reduction of cost.

Pooled Negotiating Power Links


Sony’s Mobile division merged with Ericsson to produce Sony Ericsson
range of mobiles. Ericsson had the latest mobile technology and Sony

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Competitive Strategy

had the vast experience in consumer electronics and entertainment


like music, pictures and games. Bringing them both together in a 50-50
joint venture gave Sony power in the market. This would help both the
companies generate economies of scale.

It can also be seen that Sony’s Music Entertainment division had a 50-
50 joint venture with Bertelsmann Music Group naming Sony’s Music
division as Sony BMG Music Entertainment. Financial analysts covering
the merger anticipated that up to 2,000 jobs would be cut as a result,
saving Sony BMG approximately $350 million annually (Wikipedia,
2009)

Coordinated Strategies Links


After Sir Howard took over he put together the Electronics Unit which
consisted of:
1. The Semiconductor
Business unit
2. Core component Business
Unit
3. B&P Business Group
4. Audio Business Group
5. Digital Imaging Business
group
6. VAIO Business Group
7. Video Business Group
8. TV Business Group
9. Connect Company

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He strategically placed all these units and groups together in order to
establish Sony as a leading player. They wanted to develop a
semiconductor and core components group thus they put these two
relevant new business units under the Electronics Unit.

With this new engineering structure Sony wanted to increase their


internally sourced components, centralize their engineering functions
and reduce their cost by consolidating and cutting down their
manufacturing sites.

Vertical Integration Links


By coordinating the flow of it’s internally sources components and by
standardizing designs through out the company Sir Howard has
managed to reduce cost and enhance product development.

New-Business Creation Links


Vertical integration is very obvious in the Sony business as they try to
enter the digital world they are buying companies and doing joint
ventures to meet the specific needs of their customers and that is to
bring the mobile, music, gaming and video entertainment together.
Sony is in a good position to do a backward or forward integration in
case it decides to do so. The structure is flexible enough to
accommodate that.
The links are best handled through self-managed networking among
units n top management should leave this up to the unit rather than
impose to-down coordination process.

The Redundant Hierarchy Test:


The Organization Structure: The Redundant Hierarchy Test

Very Very
Poor Satisfactory Good
Poor Good

Figure 4 – The redundant Hierarchy Test


The reason we have placed them between satisfactory and good is
because although the company had many parent levels in the
organization they were able to reduce the redundancy through
standardizing they internal sourced components. Sony also
standardized its designs across the different units and in its core
business which was the Electronics Business they had five committees
across each group which were the product, technology, production,
procurement and sales. This centralization has helped to reduce effort
and poor coordination.

Also, with Howard traveling around Sony’s operations at a rate of


30,000 air miles a month (Nakamoto 2006) he tends to increase the
communication gap between the different groups and companies at
Sony.

The Accountability Test


The Organization Structure: The Accountability Test

Very Very
Poor Satisfactory Good
Poor Good

Figure 5 – The Accountability Test

The reason we have placed them between good and very good is
because in the multidivisional structure the overall structure of the
company is flat. Thus, most of the units are directly reporting to the
corporate office. This increases the responsibility and accountability of
each unit heads.

The Flexibility Test


The Organization Structure: The Flexibility Test

Very Very
Poor Satisfactory Good
Poor Good

Figure 6 – The Flexibility Test

The reason we have placed them between good in the case of its
flexibility is because Sony’s structure after Sir Howard Stringer had
made it flexible for the company like the Sony Mobile business unit to
merge with Ericsson Sony’s Music Entertainment division had a 50-50
joint venture with Bertelsmann Music Group.
Sony also sold many of its non-core assets like the restaurant chains
etc after its restructuring since it made it easy by moving these non-
core business units out of the way to concentrate on the core business.
THE RISK AND BENEFITS OF THE
M U LT I D I V I S I O N A L S T R U C T U R E
As we found out through our analysis that Sony Corporation has a
multidivisional structure and Goold and Campbell’s five tests of good
general design principles helps us to see what risks and benefits that
Sony Corporation faced when Howard Stringer took over.

The Benefits

1. In Electronics group Sony placed centralized decision-making


power over key areas under the Electronics CEO. This change
assures coordination and focus across newly defined business
groups.
2. Exact horizontal coordination in main areas- product planning,
technology, procurement, manufacturing, and sales and
marketing-will allow fast and streamlined decision making across
product lines.
3. Concentration on particular business area (Games,
Entertainment, Electronics, Mobile phones)
4. Flexible (Sony Corporation can focus it’s resources on different
business groups, which depends on market situation, add, close
or merge divisions )
5. Specialization of competence (We can see that each division has
actually become its own company like the Sony Electronics Inc.,
the Sony Pictures Entertainment Inc., Sony Computer
Entertainment Inc.)
6. Ability to give clear direction and make a working environment
that draws out the unique talents of employees and helps them
to reach their full potential
7. Encourages general management development
8. Ownership of strategy (As per the strategies implemented we
can see clearly that he had devised different strategies for each
core product that Sony was providing and so he also divided the
company’s organizational structure the same way)
9. Investment in core businesses
10. Sony divisions enable to work in tandem for their mutual
advantage (to develop new-age products).
The Risks

1. Conflicts between divisions


2. Additional cost of the center
3. Difficulty of co-operation between business groups (due to the
large organization structure of the company the knowledge
sharing and cooperation between the business units become
very limited but Howard Stringer has tried overcoming this by
placing five strategic committees across the business units)
4. Divisions might grow too large (as we said before each division
has actually become its own company like the Sony Electronics
Inc. or the Sony Pictures Entertainment Inc. and there is a risk of
them grow too large)
5. Power is centralized
6. As CEO Sir Howard Stringer recalled in a 2005 New Yorker article,
the engineers started to suffer from a damaging “not invented
here syndrome,” even as rivals were introducing next-generation
products such as the iPod and Xbox. As a result of their belief
that outside ideas were not as good as inside ones, they missed
opportunities in such areas as MP3 players and flat-screen TVs
and developed unwanted products—cameras that weren’t
compatible with the most popular forms of memory, for instance.

Looking at the above risks and benefits we can see that though there
were a lot of risks in the structure Sir Howard needed to make a
decision and he made this decision with the help of allies in the
company and he also took help from persons who were made in-
charge of changing the IBM structure many years back. They were
successful in doing so and since Sir Howard was declared President of
Sony Global we can say that he is still in there and is still fighting and
restructuring to put Sony back on to globe again. Sony is today coming
up with new customer focused products rather than products that are
innovative but it is not what the customer wants.
T H E C U LT U R A L W E B B E F O R E H O WA R D
STRINGER
Organizational culture sometimes influences the organizations strategy
if taken for granted. Culture has played a role in Sony’s current
financial difficulties. They had power blocks which hindered the flow of
communication and corporation between the management, designers,
production and marketing.

The Cultural Web, developed by Gerry Johnson and Kevan Scholes in


1992, provides one such approach for looking at and changing your
organization's culture. Using it, you can expose cultural assumptions
and practices, and set to work aligning organizational elements with
one another, and with your strategy.

The Cultural Web identifies six interrelated elements that help to make
up what Johnson and Scholes call the "paradigm" - the pattern or
model - of the work environment. By analyzing the factors in each, you
can begin to see the bigger picture of your culture: what is working,
what isn't working, and what needs to be changed. The six elements
are:

Power Structures: Sony had a culture, were long serving executives


have very strong influence on the organization. At their annual general
meetings all these executives take up the front seats whiles the lower
ranks are relegated to the back.
Many of the working seniors did not even discuss their share values
and did not have the involvement in the business.

Control Systems: Sony emphasized on budget plans and emergency


fixes as their main control systems. Quality was not really emphasized,
they believed in getting the work done with the least amount of cost.
Lower level staffs were not awarded for their achievements or bonuses
given at the end of the year. All these were aimed at controlling cost.

Organizational Structure: They had the functional/Transnational


type of organization where the CEO sits at the top and all functional
heads report to him. They believe in top management taking all the
decisions without the involvement of the junior level engineers. These
caused lack of communication and co-operation between the various
units and more of delegation to get the problem solved.
Stories: Sony had gone through continuous restructuring for the past
9 years to improve their financial positions. Sony was not customer
focused. They did not invest in non-core businesses and lacked new-
age products even though they had very good and talented engineers.

Although Sony believed in harmony of the people and the company but
with all this restructuring the morale of the employees was down and
this was evident when there was a comment that there is sparkle in
the eyes of the employees after Howard Stringer took over.

Rituals & Routines: As per the Japanese culture of respect Sony had
a ritual that it never fired its high rank executives even after retiring.
The senior managers were made “Advisor” (Gunther, 2006) and each
of them had their own secretary, a car and driver and they also had
the authority to second-question people who were actually working at
Sony.
At Sony the ritual was that if an engineer came to know about a fault in
the product they would let the seniors know they would just fix the
problem and just do it. Thus seniors were not involved in the business

Symbols: There was a symbol of seniority when the company never


really retired its senior managers and also in the fact that during
annual meetings the seniors would be given the preferred and best
seats in the hall while the others were given uncomfortable seats to
symbolize the importance that Sony gave to its senior managers.
To create the harmony they want and give employees a range of
different health and wellness programs. Some of those (as taken from
the Sony Site) are as below:

1. They provided On-site fitness centers


2. On-site flu shots
3. On-site cafeterias
4. Wellness fairs
5. 100% medical and dental plans
6. Health risk assessments
7. Gym discounts
8. Stop Smoking programs
9. Nutrition information
Stories

Continuous restructuring
Morale was down
Believed in the harmony of the
environment and the people’s
freedom of working in that
Ritual & Routines environment
Symbols
Respect for senior managers Senior management given big
Work in Harmony giving employees pays
the best working environment. No one really gets retired
Seniors never got fired. Health related programs and
Engineers got the freedom to do discounts available.
what they wanted to. Complete Medical covered.
Engineers did not inform senior
The Paradigm
managers of faults they just fixed
it.
Respect for Seniors
Emphasis on Harmony through-
out the company
Health and wellness programs,
discounts and medical
coverage
Engineer-driven Culture
New innovative products Power Structure

A lot of power was given to seniors


in the company who were not
Control Systems
involved in the day to day work.
Less responsibility on the shoulder
Budgets
of the seniors managers as
Emergency Fixes
responsibility was not taken

Organizational Structures

Transnational
Branches/devolved
Delegative leadership style
Engineer-driven culture

Figure 7- Cultural Web before Howard Stringer became CEO of Sony Global

Sony Corporation mainly focused on giving the best environment to its


employees especially its engineers who were the minds behind the
innovations. A high level of respect was kept between the senior and
junior employees in the company. Various Health and wellness
programs and benefits were available for employees. Sony was an
engineer-driven culture which put what the engineers thought and
innovated before what the customers wanted or what the market
demanded.
T H E C U LT U R A L W E B A F T E R H O WA R D
STRINGER
Power Structures: Howard was made the new CEO thus giving power
of the company to him. He was able to make changes but very smartly
Howard made Chubachi his right hand man since he was aware that he
was the first non-Japanese CEO of the company. His power can be seen
in the fact that Howard is now President of Sony in 2009.

Control Systems: There was a more cost control in the company


through reduction of employees in many of the sites. Manufacturing
companies were consolidated and shut down in many areas. Rewards
and bonuses based on group performance (not seniority) after Howard
Stringer had taken over.

Organizational Structure: With the structural changes that Howard


had made to the company Sony had a flatter structure. Management
was made to be more involved in each of the business units of the
company. There was more responsibility given to senior and middle
management.

Stories: As per Chubachi, it was said that since Sir Howard had taken
over “there was a sparkle in the eyes of the employees”. The over all
morale of the company was better. After Howard came people were
still not sure if they knew where they were leading to but they
understood the company strategy which was to make the company
cool again. People were more excited.

Rituals & Routines: After Howard came he dissolved the advisory


board that consisted of 45 senior mangers who had a say in the
company even after they had retired. Main customer who had used
Sony products for a long time where now giving their inputs on the
Sony products. Engineers were given more appreciations. Success was
being celebrated through Award ceremonies, Christmas parties,
training programs and knowledge sharing sessions.

Symbols: After Howard came he dissolved the advisory board that


consisted of 45 senior managers who had a say in the company even
after they had retired. Each of them had a secretary, a car and driver
and probably many other benefits. The gap between the senior
management and the juniors was being reduced.
Stories

Reduced Gap between the


senior managers and juniors.
People were more aware of
the company strategy.

Symbols

Ritual & Routines Senior management who had


retired where not taken care
Good communications of by the company.
Customer involvement Promotions based on group
Appreciations performance
Giving praise The Paradigm
Celebration of success
Respect for Seniors
Emphasis on Harmony through-
out the company
Health and wellness programs,
discounts and medical
coverage
New innovative products Power Structure

Engineers given limited


power
Control Systems
Management given more
responsibility along with
Budgets
current power.
Partnership agreements
Restructuring of power in
Financial controls
the company

Organizational Structures

Multi-divisional
Units based on market priority
and business needs.
democratic leadership style

Figure 8- Cultural Web after Howard Stringer became CEO of Sony Global

From the above cultural web we can see that Sony did not undergo
major paradigm changes but did move from a transnational structure
to a multi-divisional (Electronic department was a matrix) structure.
S I R H O WA R D S T R I N G E R ’ S C H A N G E
MANAGEMENT

Change management is also known as Change control. It is usually


referred to the process by which the change of a
system/process/organization is implemented in a controlled manner.

If we look at the above Cultural Webs before and after Sir Howard
Stringer took over Sony we can see that in order to bring the changes
as per the paradigms shown above he had to adopt a Change
Management program.

Organizational change management processes include techniques for


creating a change management strategy which is getting everybody
involved in the change process. Engaging senior managers as change
leaders, they become the sponsors of the change program. You also
need to build awareness of the need for change (communications)
getting everybody to understand why the need for change. Developing
skills and knowledge to support the change (education and training),
helping employees move through the period of change (coaching by
managers and supervisors), and methods to sustain the change
(measurement systems, rewards and reinforcement).

Howard Stringer had instituted all these processes for his change
management, but due to the dominance culture that existed before
Howard Stringer took over, he had some resistance against his change
management programme. There were forces for change and forces
against change. Using Kurt Lewin’s force field analysis tool will help us
analyse some of the driving and restraining force in Howard Stringer’s
change management. These were some of the forces for and against
his change management.
POSITIVE FORCES ( + ) NEGATIVE FORCES ( - )

• He came from a different  Dominant values where they


culture and a different way believe in top management
of doing things taking all the decisions
• Customers want new  They believe in the status
products quo, the normal way of
• Improve speed of production doing things
and raise volumes of out put  Not customer focused
• Involvement of all employees  Fear of losing their position
using the bottom-up or become redundant
approach  Uncertainty not sure if the
• Experience and talented change program will work or
engineers not
• It was a long-term strategy
• Introducing new technologies
• Reducing cost

As per Johnson and Scholes in their book Exploring Competitive


Strategy they have provided a framework for strategic change.

Diagnosing the change situation  Managing Styles and roles  Levers for managing
change

In the case of Sony it is evident that Sir Howard adopted the


Reconstruction type of strategic change. In this type of a change the
paradigm does not fundamentally change but there will be major
organizational restructuring and cost cutting. From the report we can
see that Sony did not undergo major paradigm changes but did move
from a transnational structure to a multi-divisional (matrix) structure.
There was a lot of emphasis on cost cutting in the organization as well
with the shut down and consolidation of manufacturing sites and the
closing of non-core businesses.

The style adopted by Sir Howard could mostly be seen as the


“Education and Communication” and the “Collaboration/Participation”.
Sir Howard was buying the trust of the top management and making
the strategy clear to all members of the company. He had his own set
of allies in the company that helped him make a new strategic change.
These two styles of change are both time consuming and also from the
case study we see that like in an education and communication style of
managing change, the companies future was not completely clear but
the people trusted him to make Sony cool again. In case of a
Collaboration/Participation style we can see that almost within the
existing paradigm Sir Howard had been successful to a huge degree.

The situation that Sony was in it required a leader and a reason for
change. Sir Howard Stringer became the leader they needed and his
allies and top management became the change agents.

The levers for change are the outer rings of the Cultural Web and can
also be the paradigm of the situation before Sir Howard Stringer took
over Sony.

The change was well communicated with in the company as Sir


Howard made many trips around the world to make sure that he
communicated clearly the change he was planning to implement.
C O N C LU S I O N

In simple words if we had to conclude it would be best effective to see


the progress chart of the company since Sir Howard Stringer took over
Sony as the new CEO.

(Source: http://www.engadget.com/2009/05/14/sony-posts-1b-loss-first-in-14-years/)

Ergo, whatever Sir Howard Stringer did pretty much worked until the
recession hit the global market. To see the chart until 2009 kindly
refer to Appendix D.
REFERENCES

Book

− Porter, M.E. Competitive Strategy: Techniques for Analyzing


Industries and Companies. New York: Free Press, 1980

Internet

− Clayton, H 13 March 2005. Sony Stops Bowing to tradition and


promises to be ‘cool again – Business Anaylsis & Features. The
INDEPENDENT Business [Online]. Available at:
http://www.independent.co.uk/news/business/analysis-and-
features/sony-stops-bowing-to-tradition-and-promises-to-be-cool-
again-528184.html [Accessed 14 October 2009]

− Edwards, C., Lowry, T., Ihlwan, M., Hall, K., OCTOBER 10, 2005. The
Lessons For Sony At Samsung. BusinessWeek, [Electronic]. Available
at
http://www.businessweek.com/magazine/content/05_41/b3954047.h
tm [Accessed on 15 October 2009]

− NewsBlaze (September 21,2005) Sony Group Mid-Term Corporate


Strategy FY2005-FY2007 Strengthening Group Performance through
Revitalization of Electronics. Daily News from the news experts at
NewsBlaze [Electronic version],
http://newsblaze.com/story/2005092123123500001.mwir/topstory.h
tml [Accessed on 11 Oct 2009]
− Paczkowski, J. May 28, 2008. A TV Thinner Than a Credit Card: Sir
Howard Stringer, Chairman and CEO, Sony. AllThingsD, [Electronic].
Available at: http://d6.allthingsd.com/20080528/stringer/ [Accessed
on 15 October 2009]
− Wikipedia, Oct 13, 2009. Sony BMG. Wikipedia, the free
Encyclopedia, [Electronic]. Available at
http://en.wikipedia.org/wiki/Sony_BMG [Accessed on 17 October
2009]

− Gunther, M. June 1, 2006. The Welshman, The Walkman, and the


salarymen. FORTUNE, [Electronic]. Available at
http://money.cnn.com/2006/05/26/news/newsmakers/stringer_great
teams_fortune/ [Accessed on 18th Oct 2009]

− http://www.sony.net (2009) (online). [Accessed on 10 Oct 2009]

− http://en.wikipedia.org/wiki/Sony (2009) [Online]. [Accessed: 11 Oct


2009]

− http://en.wikipedia.org/wiki/Organizational_structure#Divisional_stru
cture (2009) [Online]. [Accessed: 11 Oct 2009]
APPENDICES

Appendix A: Structural Assignment (2005)

On 7 March 2005, Sony announced a new organizational structure


headed as shown below:

Structural Heads

Sir Howard Stringer: Chairman, Group CEA and Representative


Corporate Executive Officer of Sony Corporation

Sir Howard Stringer: Head of the Entertainment Business Group and


Head of Sony Corporation of America

Ryoji Chubachi: Representative Corporate Executive Officer,


President of Sony and CEO of the Electronics Business Group of the
company.

Katsumi Ihara: Representative Corporate Executive Officer, Executive


Deputy President and Group CFO, and would also oversee financial
matters and support Stringer and Chubachi in corporate strategy and
resource allocation.

Strategy Committee heads

In the electronic section the committee heads were as below:

Yutaka Nakagawa: Product Strategy Committee

Ryoji Chubachi: Sales Strategy Committee and Production Strategy


Committee

Katsumi Ihara: Procurement Strategy Committee

Keiji Kimura: Technology Strategy Committee.


Appendix B: Sony Group Information
(2009)
Sony Group Organizational Chart
Summary (as of July 1st, 2009). The chart has been taken from Sony Global
(2009) (http://www.sony.net)

The below lists of the organizational structure is based on the Sony


Global Organizational Structure as of 1st July 2009. The entire group
has been divided into 7 major groups.
Namely these groups are as follows:
1. Sony Disc & Digital Solutions
2. B2B Solutions Business Group
3. Consumer Products & Devices group
a. Semiconductor Business group
b. Device Solutions Business group
c. Personal imaging & Sound Business group
d. Home Entertainment Business group
4. Networked Products & Services Group
a. Network Mobile Center
b. Sony Media Software and Services
c. Personal Device Business Division
d. VAIO Business group
e. Sony Computer Entertainment
5. Sony Ericsson Mobile Communications
6. Sony Music Entertainment
7. Sony Pictures Entertainments
8. Sony Financial Holdings Group
Appendix C: Detail
Company Strategy
(2005)
Vision (2005): “make Sony cool again”
Vision (2009): “make.believe”

In 2005, Howard Stringer had proposed Sony’s growth strategies as


“Strengthening Group Performance through Revitalization of
Electronics” which he would achieve through structural reforms and
centralized decision making. The three-year revitalization plan was as
follows.

7. Restructuring the Electronics Organization


New Business Groups for Specific Product categories were
created and each Corporate Executive Officers were given clear
responsibilities at the Electronic Headquarters level to oversee
cross divisional functions. This eliminated the corporate silos and
brought more focus on their competitive growth.

8. Improving Sony’s Profit Structure


a. Cost Reductions
The plan was to cut 200 billion yen in costs by 2007 by
downsizing, alliances and disposals of 15 business
categories, the number of models created would reduce by
20% and the manufacturing sites would reduce from 65 to
54. The total headcount would reduce by 10,000
employees by 2007.

b. Sale of Real Estate, Stock and Non-Core Assets


Costs of 120 billion yen would be saved by reviewing and
disposing (were necessary) real estate, stock and non-core
assets.

9. Strengthening Sony’s Current Electronics Business


Main focus areas of the Electronics business would be on
television, digital imaging, DVD recorders and portable audio.
The target was to be profitable in television by the second half of
2006.

10. Focusing Resources on Growth Strategy


a. Making the HD World and Major Profit Pillar
Launching of a range of high-definition products such as a
range of Blu-ray disc related products and HD content in
2006.

b. Focusing on Intelligent & Interoperable Products


This would be a growth area for Sony and they would
strengthen their efforts in developing network-enabled
products and applications

c. Strengthening Technology Development


i. Creation of Home and Mobile Platforms
New LSI systems would be introduced to integrate
across a range of home entertainment products and
a new system LSI would be created for mobile
products to enhance performance and lower power
consumptions.

ii. Concentrating Investment on Semiconductors and


Key Component Devices
Blu-ray Disc-Related Devices/Imagers/Cell: Sony
would concentrate on these products and
continuously enhance them.

iii. Next-Generation Display


The focus will be on self-luminous flat panel Organic
Light Emitting Diode (OLED) displays

iv. Enhancing Software Development


The mission of the technology Development group
would be to effectively utilize the global resources for
software development including expanded resources
in US and China.

11. Group Convergence Strategy


a. Pursuit of mobile entertainment
The goal would be to develop products and services that
enable consumers to enjoy entertainment content “on the
go”.

b. Establishment of Cell Development Center


A Cell development center will be established under the
direct supervision of Sony’s CEO to promote development
of Cell-based technology, products and applications.

12. Group Strategy by Individual Sector


a. Games
Playstation 3 will be launched which will strengthen Sony
Group and grow the market for computer entertainment,
links with electronics and entertainment would be
expanded and the PlayStation Potable will be enhanced.

b. Entertainment
i. Motion Pictures
Sony Pictures Entertainment (SPE) will continue its
pattern of stable growth with the industry’s largest
digitized content and on recently acquiring MGM
library where SPE is the sole distributors and it is
being rapidly digitized.

ii. Music
Sony’s merger with BMG would strengthen the
company’s management. Sony Music Entertainment
Japan continues to show growth both in sales and
profits

c. Mobile Phones
Sony Ericsson Mobile Communications will produce new
product to leverage the entertainment assets of the Sony
Group. The Walkman phone is an example of the same.

d. Financial Services
The three business – Sony Life, Sony Assurance and Sony
Bank are maintaining profits and delivering strong and
consistent results.

e. Network Services, Retail


Sony Communication Network Corporation is targeting an
IPO for this fiscal year to allow it to develop an
independent strategy for growth and the realization of its
corporate value.

f. Retail Business
In the retail businesses, strategic alternatives to maximize
the value of the assets, including alliances with relevant
partners would be explored.
Appendix D: Sony Operating Chart (2009)

(Source: http://www.engadget.com/2009/05/14/sony-posts-1b-loss-first-in-14-years/)