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STRATEGIC MANAGEMENT

5 YEAR RECOVERY PLAN FOR SONY

Student Name: Faruk Ali


Student ID: 159121018

Executive Summary
Sony Corporation is a leading Japanese manufacturer of electronic devices, games and
entertainment products which incurred huge amount of loss for four consecutive years. The
company declared that it incurred a total loss of 6.4 billion dollars for the year end in March
2012. The companys main weakness lies in the numerous product lines In addition to this
problem, the company also faces both internal and external challenges. Thus, a SWOT
analysis and Porters Five Forces Analysis is carried out to understand the basic strengths and
weaknesses of the organization. This helped to find out the basic reason behind the poor
performance of Sony Corporation. Based on the analysis, a-five year recommendation plan
have been framed that consist of four basic steps. Following this plan would help the
organization to improve it current position in market.

Introduction
Sony Corporation is one of the leading electronic companies which hold the power and
leadership of the electronic market. The company mainly deals with designing,
manufacturing and developing various sort of audio and video related products,
communication devices, televisions etc.

Figure 1: Sony Logo


(Source: Sony.net, 2016)
However, poor performance of SONY has led it loose 2.1 billion . The organization seems to
have overestimated the sales of its smartphones and tablets for the year. Even the company
marketed its unprofitable VAIO laptop brand and reinvested a huge amount of money in its
detriment smartphone line. The company also sold its products with little profit margins in
order to gain more market share, but the plan did not work out. In order to recover from this
situation, the company is planning to concentrate on its premium lineups in certain key
markets and by considerably reducing the number of models in its mid-range line-up. The
ineffective performance of Sony Corporation has resulted in huge loss. Considering this
issue, a recovery plan have been framed for five that would help the management of Sony
Corporation to make improvement.

SWOT Analysis for Sony Corporation


A SWOT analysis is carried out to identify the basic strengths and loopholes that can be
improved in context to Sony Corporation.

Strengths

Weaknesses

Rich heritage of technological expertise Substantial retirement benefit commitments


Strong corporate brand identity
Poor estimation of production
Projected growth in the consumer
Huge loss due to ineffective business
electronics market

strategy

Opportunities

Threats

Planning to venture the healthcare sector Continued economic slump


Sony Ericsson joint venture
Emerging competition from brands like
Advantage from its movie and music
Apple
business
Table 1: SWOT of Sony Corporation's
(Source: Larkin, 2010, p.50)
Sony has built a brand name whose identity is deeply rooted and well established in the
minds of latent customers. This fact can be upheld by the 2011 survey where Sony was
declared as Asias most valued brands. Apart from designing and manufacturing Trinitron
Color Television and VCR, the company also developed magnetic tape, compact disc and
Blu-ray disc which are highly used nowadays as a medium for high definition video
playback. The Consumer Electronics Market can be expected to grow at a rate of 7.2%
annually (Roberts and McClure, 2009, p.90). Sony can easily take advantage of this increase
too. The organization has the opportunity to step forward towards healthcare sector in a
significant way through a possible acquisition of 30% stake in Olympics. Again, the Sony
Ericsson joint venture has enabled the organization to act independently in the smartphone
and tablet market. It has an added advantage from its movie and music business along with
its experience in the gaming sector in order to provide a value added content to buttress its
product line. The company has proposed a four screen strategy in order to implement this
idea.
Sony Corporation commits to provide retirement benefits to its employees by issuing pension
to each of its employee. This will lead the company to make repeated cash contributions thus

diverging money from product related issues (Roberts and McClure, 2009, p.95). The
organization also seemed to have overestimated its sales regarding its smartphones which
proved to be a huge loss for the company. This also throws light on the fact that the company
needs to implement effective business strategies for its growth. The company fell victim of
the unfavourable economic conditions in Usa, Japan and Europe which has lead to the
decrease in companys revenue to a great extent. This condition also lead to emerge several
competitors against Sony in the electronic market such as Apple, which has managed to
mainly focus on fewer number of products to build competency and make them
extraordinarily successful.
Porters Five Forces Analysis
Porters Five Forces Analysis is carried out to provide a industry and competition analysis for
Sony. According to this analysis Sony suffers from high internal rivalry, high buyer power,
low supplier power, high barriers to entry to new industry and high threats from substitutes.

Figure 2: Porters Five Forces Analysis


(Source: Larkin, 2010, pp.33)
Internal Rivalry

Sony has setup various industries and thus suffer intense rivalry across sectors. Electronics,
game, pictures etc constitute the main market segment. Sonys intense rivalries include
Apple, Microsoft etc who exhibited stronger economical results. Apple Inc.s economic
growth almost remained undisturbed even in the recent economic crisis. But Asian firms
incurred huge loss by the economic crisis (Valentin, 2010, p.67). Samsung, LG and other
organizations suffered from low revenue and profit in 2014 and 2016. Samsungs profit
margin bounced back rapidly but LG and other organizations had slow recovery from this
crisis. In case of Sony, its ample competitors affected most of its ventures. Sony has lost
numerous market share in the audio sector. Within information and communication, Sonys
VAIO line of laptops represents 5% of the market, and sales numbers surpass the industry
average, likely due to the growing popularity of Microsofts Windows 7 operating system.
Entry
According to economies of scale, companies can decrease their costs when increasing output,
which new entrants can accomplish without years of experience. Thus the threat of new
entrants is relatively low. Sony has this advantage (Valentin, 2010, p.72). Requirement of
capital to enter this sector is high as the products are high end, expensive luxury goods. The
new entrants in Sonys industry needs a strong set of technological skills. Finally, patent
protection and various government regulation keeps the threat of new entrants low.
Substitutes and Complements
Sony mainly targets high end customers with their expensive product line. Though Sony tries
to make different designs and models for each of its product, but in practical sense it suffers
from a lot of substitutes and complements. Many of its competitors who manufacture
substitutes for Sonys product, maintain a very low profit margin and offers products at a
considerably lower price. An increase in price of Sony products will lead the customers to
divert to close substitutes of the same product (Rand et al. 2012, p. 88).
Supplier Power
The company faces low supplier power. Sony seeks to choose raw materials from various
suppliers in order to produce high quality luxurious products. While opting for suppliers,
Sony aims to develop new technologies in order to attract more customers, keeping prices
low utilizing e-commerce website to advertise the products and retaining a competitive edge
in the market. For the software part, Sony aims to choose high quality security so as to
prevent from any sort of vulnerabilities.
Buyer Power

A buyer can gain information related to any product by going through online reviews of the
products. With the help of this information, buyers can switch from one brand to another
without incurring any transaction costs (Rand et al. 2012, p.93). Though Sony tries to
develop new technologies and designs for each of its products but it is difficult to fairly
differentiate between the products thus it leaves price elasticity high and buyer power high.
Future Challenges of Sony
Being one of the leading electronics company, Sony has to face various challenges in
maintaining its standards and market position.
Winning the standards war
There always remains a fierce competition among the rivalries. Thus it is of utter importance
to maintain the standards of the products manufactured and thus maintaining its position in
the market. In order to avoid any failure, Sony should explore joint alliances for joint
standard specification (Hernndez-Espallardo and Delgado-Ballester, 2009, p.480).
Competition vs Collaboration with Conventional & Non-Conventional Competitors
Sony has to compete with both conventional and non-conventional rivalries. Again Sony has
explored the sectors of these rival companies in computer, laptops, gaming, smartphones etc.
In the world of digital convergence, a company like Sony needs to cooperate selectively with
its rival companies. Sony has already started outsourcing and collaborating with its
competitors and it should explore if it can do more.
Technology Adoption
Despite elaborate preparation for the next generation of networked entertainment, the
networks themselves remain conspicuously missing. From mid 2003, not a single product of
Sony has incorporated any of the next generation features (Hernndez-Espallardo and
Delgado-Ballester, 2009, p.489). In the year 2002, around 30% of Sonys walkman sold still
used traditional cassette tape. Perhaps, Sony should form alliances with some telecom
companies and find ways to expedite progress.

5-Year Recovery Plan


According to Powell (2009, p.35) contrasting to the above analysis, it is observed that
competition, catastrophe, currency, macro-risks and economic downfall has become the most
relevant issues of challenge for Sony. Sony can implement these plans as the implementation
will help Sony to procure a profit of $4.2 billion in revenue by the year 2018 without
destroying target sales of the company. Moreover, it will help them to incur another $50
million revenue in the preceding two years. A strategic plans for Sony has been developed
based on four basic criteria to cope up with the poor performance and minimize all its
deficiency. The recovery plan would enable Sony to gain competitive advantage, preserve
the reputation of the company and controls the lawsuit damages. The macro-risks are targeted
in the last phase. The five year recovery plan has proved to be of great success for Sony. the
recommendations are discussed below.
Finding a Segment Focus
According to Hulland and Richard (2009, p.200) Sony was established on the year 1946
basically as an telecommunication company. After this they have expanded their business in
many sectors such as games, electronics, pictures and financial services. Furthermore they
have expanded their business in many diversified fields such as in R&D, unrelated areas of
customer service and marketing. In each of this segment Sony has to face many of their
competitors which has not allowed them to be successful in any of the segments. For this
reason they have reconstruct their policies in each of the field to prove their success and make
them the leading company.
Reconstructing the their plans with the recommendation will help them to emphasize and
apply all their resources in all the segment in a productive and fruitful way. The segments
which have produced the least profits to the company will either be closed or merged into the
main segment of the company. Reconstruction of the plan will motivate the company in
developing an entire group of Sony hardware and Sony software which will be used
collaboratively as used by Apple products. The centerpiece of this collection will be the main
segment. This will help Sony to suppress its competitors and reach the leading position as
their variety of segments have spread into many resources which there other companies are
not been able to do. Furthermore this changes in the plan will help sony to cure the motion of
downward trend of the customers for their company into a positive one (Powell, 2009, p.20).

The features that the focused segment has to incur are as follows. The focused segment has to
be the main segment. The focused segment has to have the potentiality to merge all the other
segments so that Sony is able to grasp all the current resources. There should be a moderate
competition in the market. Lastly, these plans can be implemented when Sony will have a big
share in the market.
Acquiring Aggressively
The establishment of the focused segment by Sony is done then they will be able to start
acquiring aggressively in this segment. The acquisition will help Sony in gaining the market
share, accessing into new technologies and patents and manufacturing costs will be reduced.
According to Hitt et al. (2012, p.45) the capturing of market share will help Sony in
producing higher pricing power, productivity will be raised by the economies of scale, and
the reduction in manufacturing costs will help the company in price competition, Sony will
be able to fasten their innovative progress by assessing the new technologies and patents
otherwise the company will be running in loss. If the company does not take up these plan
they wont be able to incur their losses and make the estimated profit of $4.2 billions in
revenue. Keeping in mind the financial condition of Sony they should start acquiring small
companies in the focused segment rather than overpaying premiums. In this way they will be
able to capture the market again and be the leading company in all the segments.
Refining Quality Control
According to Mauri and Michaels (2010, p.215) the main strength of Sony company lies in
their brand name and brand value. The brand name helps Sony in capturing the market up to
an certain extent. Customers believe in the quality of the products as reliable and good due to
its brand name. For the last few years the quality of the product has been questioned. This has
caused a severe bad impact on the brand name of the company. In the year 2010 Sony has
launched a huge number of laptops naming Vaio which could not create a good market as
the laptops had overheating issues. In the year 2006 Sony recollected eight models of digital
cameras as they had the problem of image pick-up. All these issues not only hampered the
profit of the company it ruined the image as well as the reputation of the company. Sony
produce good quality products in the market but some series of this laptops and cameras have
been giving issues which has caused the downfall of Sonys image and reputation (Freeman,
2010, p.27).
After the above incidents Sony paid their most attention on their quality control it is predicted
that they will face more problems and challenges as Sony relies mostly on their external
partners in business. Furthermore, it would be difficult for Sony to control the quality of
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products in the near future if they start acquiring aggressively. In the year 2011 they improved
their quality control. Sony has made a drastic improvement in their system but the plans
suggest more evaluation in the mechanism and strong monitoring system in their each
manufacturing processes. Though the problems discussed so far in Sony are caused by small
components they should distribute all their efforts in the component level for more
effectiveness. They should be more effective in the scrutiny of the components in a
specialised way to regain their market position. They should not take their attention away
from the components for maintaining the quality of assembling process. By following these
plans Sony will be able fill up all the loopholes they have formed in the recent years thus
once again capturing the market position and regain their corporate image to greater extents.
This will also help Sony to incur the loss of $2.1 billion in revenue and furthermore make a
profit of $4.2 billion in revenue within the year 2018 (Mauri and Michaels, 2010, p.218).

Sony Corporation Headquarters


Corporate Executive Officer in Charge of Top Management
Corporate Executive in Charge of Product Quality and Safety
Head of Quality Center

Business Unit
Head
Quality Officer
Product Compliance

Regional HQ
Head
CS Officer
Product Compliance

Manufacturing Sales OEM Supplier

Sales Company

Figure 3. Sony's current Quality Control System


(Source: Powell, 2009, pp.25).

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Exploiting the Playstation brand


According to Freeman (2010, p.65) Sony has a very positive image in the manufacturing its
playstation versions. The quality of all the versions of playstation has proved healthy. This
product has helped Sony to make a huge profit in the world market as well as helped them to
reconstruct their corporate image. This sector of Sony is a stable profit generator and they
should be focused in this segment. According to this plan, Sony has to focus on their existing
quality products so that it will help in regaining their lost image in the market and try to
improve more in this sector so that the customers do not lose faith on their brand name.
Consequently they should look after the quality control of the focused segment which will
further help them stabilise their brand name and increase their brand value. By
implementation of these plans Sony will be able to regain its status in the world market and in
the hearts of people and help in incurring the losses faced in the recent years and start
achieving their goals (Hitt et al. 2012, p.39).
Conclusion
It can be concluded from the report that Sony is going through a turmoil in the past and recent
times in their business strategies and plannings. Many models have been taken up to show the
analysis of Sonys traits and positiveness. Some series of products like laptops and digital
cameras is the main downfall reason for Sony due to unwanted product defects. The five year
plan has to be implemented by Sony so that they can incur the losses they have faced and
achieve their aim of earning a profit of $4.2 billions in revenue by the year 2018. This plan
will also help them to gain their lost image among its customers and again capturing the
market to regains the leading position.

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References
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2016]

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