An Analysis And Case Study About Sony Corporation Marketing Essay

Introduction

This assessment is basically an analysis and case study about Sony Corporation. It first briefs the case study and then it will discuss the macro and micro environment analysis in general and Sony Corporation in specific. The case study will also explain Sony’s SWOT analysis and will evaluate the strategies followed. Furthermore it will give recommendations for business growth and followed by conclusions and at the end.

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overview of the case

Sony started business by being one of the world’s best performing and innovative electronics company. It later on failed on meeting customer demands when other companies competing against it and launched new innovative products. In 2005 Sony decided to change its strategy by appointing an America citizen to be the head of the Japanese company. This shake-up aimed to get Sony back in track with a programme of reorganisation cost cutting and reinvention and it was found to be necessary due to the regular losses and reduction in profits. Below statistics show Sony’s losses and profits of 1995 to 2004

2005 – profit after tax was USD 2.3 Billion

2004 – profit after tax was USD 1 Billion

Losses: Sony consumer electronics division had worldwide sales of USD 47 Billion but delivered a net loss of USD 339 Million

Other losses: USD 96 Million

Profits: play station – sales over 7.5 USD 4.7 Billion and trading profit of USD 650 Million

Sony pictures trading USD 339 Million

Financial services USD 530 Million

Audio products such as walkman, and TV products like the WEGA model, were under major competitive threat from new digital technology coupled with low-wage labour manufacturing. Sharp electronics for example is way much advanced in the development of LCD technology. Even Sony’s newly developed laptops; VAIO was competing against Dell and HP with lower production costs.

Main Problems:

Sony strategy has been regarded as too late and with too little innovation. The business at Sony was becoming more towards management than manufacturing and services.

Over many years the innovation nature of Sony’s products delivered it competitive advantage. This is no longer seen and thus Sony shifted away from innovative products, the reason that caused fluctuations and profit drop. Another reason behind this fluctuation is that Sony got involved in too many unprofitable businesses. Competitors have become able to match its products performance at lower costs and electronics like TV’s and CD players were facing increasingly heavy competition, lower prices and lower profitability. Sony’s new strategies focused on moving to low-wage countries and outsource more work to cheaper countries.

The step down of Sony’s chairman Nobuyuki Idei and his fellow board members in 2004 aimed to accelerate cross-company collaboration by bringing in new ideas, more strategies and alliances.

10,000 jobs were dropped from total workforce of 130,000 and 11 production facilities were closed. Focus was put on LCD screens, and Playstation 3 semi-conductors business would be examined. Assets would be sold and products range would be reduced to 20%.

Challenges

Sony believes that will face low-cost economy in Korea, and therefore it must reduce its product prices to compete against the Korean innovative products.

Sony’s management style and strategies need to adapt with consumers demand.

Lack of coordination. There are inventions that are not routed through management. These are sophisticated products which could easily attract customers.

More focus is to be put on products that are highly demanded by customers and study is to be made on what electronic items is the market lacking of.

The Marketing Environment.

The marketing environment impacts and surrounds leading the organization. There are three key perspectives on the marketing environment:

1-The micro-environment

This environment influences the organization directly. It includes consumers and customers, suppliers that deal directly or indirectly, and other local stakeholders. Micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

2-The macro-environment

This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws it is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.

3- The internal environment.

All factors that are internal to the organization are known as the ‘internal environment’. They are generally assessment by applying men, money, machinery, materials and markets. The internal environment is as important for managing change as the external.

PESTEL analysis of the macro-environment

Political factors. It refers to government policy such as the degree of interference in the economy. Type of goods and services does a government want to provide. What degree does it believe in subsidising firms? Political decisions can impact on many very important areas in the business such as the education of the workers, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. Like when the government set the minimum wages for the employee. Euro currency exchange may drop in the UK making Sony easier to expand.

Economic factors. It includes interest rates, taxation changes, economic growth, inflation and exchange rates. Change can have a major impact on a firm’s behaviour. Interest rate plays an important role in a company growth and price factor of the product.

Social factors. Changes in social trends can impact on the demand for a firm’s products and the availability and willingness of individuals to work. Customer demand to test the product has increase so……..

Technological factors: new technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, computer aided design and bar coding are all improvements to the way do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products. Because of bargaining power of buyers increase Sony need to provide innovative products to its customers and different from competitions. Also the increase of use the technology effect production and marketing of Sony product.

Porter five forces analysis

Bargaining Power of Suppliers: medium

The Firms can find information about supplier’s prices and product on the internet. Internet is global because of that companies can access too many suppliers all over the world that can choose from them. So Internet affects the bargaining power of suppliers.

The bargaining power of suppliers in Sony Corporation is medium because it not depends on one supplier. In addition internet gives different choice of suppliers to the Sony.

Bargaining Power of Buyers: high

Customers can use the internet to find information about different firm’s product and prices. Internet gives wide choice to the customers.

Bargaining Power of Buyers in Sony Corporation is high because of high competition .So the customers have different choice. Also customers can easy switching to buy product with lower cost.

Threat of New Entrants: low

Internet have low cost standard to the entry barriers. It is not expensive like brick and motors store and it is easy to use. Also internet make easily to business when want to exit than offline store.

Threat of New Entrants in this case is low because the competition high. Capital cost and entry is high. …….., multinational players in the industry have also increased the barriers to the industry. Strong players in the market Like Sharp, Samsung, Philips and LG

Threat of Substitutes:

Substitute products or services reduce demand by providing the buyers with alternatives. Internet allows the easy innovation of substitutes. The Competitor’s online store is just a click away.

The threat of substitutes is high. Sony Corporation competitors are able to match most electronic innovations and many rivals attempted to source similar products from lower cost sources.

Intra-firm rivalry:

By internet the market is worldwide and large numbers of firms in competition. Internet technology provides an opportunity to customize services but the cost of attracting the customers is very high. When the company not differentiated their product from other then it will face price completion.

The competition is high. Sony is international industry. High competition forced Sony Corporation to reduce their price such as Sharp from Japan and Samsung from Korea.

SOWT Analysis

Strength

Sony ability to be successful in several markets is one of their strength. They have completed an impact in the video the PC market, game market, and especially the television market and there are still numerous others. The second strength is brand name. The name Sony appeals is unique and actually appeals to a large segment of customers in the world.

Sony had greatest human capital, especially its engineers which make up the R&D department. Sony becomes International Corporation from bringing the capacities and best of strategies together to the organization.

Weakness

The biggest weakness in Sony’s is lack of innovation with PS3. In addition Sony’s ability to read customer demand was still capable of improvement.

High cost manufacturing base.

Lack of team work……………………in the organization.

Employee’s found difficulty to adapt with technology changes.

Japanese company, Sharp Electronics, was much further advanced in the development of LCD technology than Sony Corporation.

Sony made considerable attempts to reduce its manufacturing costs by relocating its manufacturing to low-wage labour countries. But had failed to recognise the importance of some of the new technology.

Sony company culture did not always support innovation.

Sony’s ability to read customer demand was still capable of improvement.

Sony had developed a new range of laptops -called the VAIO with excellent on screen display. But the company was competing against other companies with lower production costs like Dell Computers and HP/Compaq.

Sony lost the product initiative on liquid crystal display panels to rival companies such as Sharp from Japan and Samsung from Korea.

Sony slowed by its top-heavy management structure.

Sony restructured its organization, but could not really improvement it effectively due to the highly influential Japanese cultures.

Opportunities

While technologies become more complex and accessible, the electronics infrastructure market will increasingly change with technology and this will negatively and positively affect Sony Company. Customers today would like to have devices and services that match with the new technology.

Sony Company has formed strategic alliances and merged with other companies in the sector top form strong competitive companies and it still has opportunities to further these opportunities. ………..

Threats

Cost-cutting, reorganisation, and reinvention.

From technological advanced organisation and operating from low cost economies.

Currency fluctuation.

Low product life cycles.

Evaluation

Generic strategy

Sony had followed many strategies to achieve their goals and objectives for example generic strategy, Direction of growth and method of growth.

According to Porter (1985) competitive advantage arises from selection of the generic strategy that best fits the organizations competitive environment and then organizing value-adding activates to support the chosen strategy.

In generic strategy, As Porter argued that a business must choose between the cost leadership and differentiation strategy. Sony Corporation start use differentiation strategy then follow cost leadership strategy. But when they want to combine they stuck in the middle because lack of innovation. They spend a lot of mony in research and development.

(Differentiation) It turns to fast growing market for mobile telephones. Developing new robot toys

(Cost leadership) Move production of some of its more standard electronic products to low wage countries.

Direction of growth

Sony have came out with new product which is (Sony online Service) that will eventually let users download music, television shows, movies and games from the company’s extensive library onto gadgets like computers, Blu-ray players, televisions, game consoles and digital cameras by doing business online that will allowed Sony to become online business and entering new market that mean Sony used two directions of growth that are diversification strategy and product development strategy. The advantage for use of diversification strategies to Sony is to spread the risk. Sony is not totally dependent on one product, industry or market. Large seasonal and cyclical fluctuations in demand for the existing product make Sony diversify in order to balance out sales. Also, improve company image: because diversification can bring name and goodwill to Sony since it serves a wide cross section of customers in the market and also gains wider dealer support due to its diversified range of product and hence higher market power. Sony had used product development strategy to attract new customers, retain the existing once and to increase market share and to maintain Sony’s image as product innovation. In contrast diversification strategy disadvantage are lose the focused in single product, slow growth and high risky.

Method of growth

Sony used organic method of growth .Sony have own suppliers and distributors. They have diversifying into a different industry, which related to the current industry that the organization is in. By add product and service which related to organization knowledge and experience. They have introduced Sony online service in terms of the technology.

Approach to strategic management

Sony is in core competency approach. Some companies in the same industry are more successful than it. Like Sharp and Samsung. Sony needs to concentrate more on changes in the …………

Recommendations 

Market Development:

One direction that Sony could possibly take is concentrating more on customer’s demand. At present the customer has much more choosing power and competition of other companies is high. Competitors are also able to manufacture duplicate items in shorter periods besides offering them to customers for cheaper prices.

To create larger profit margins, it is important that Sony concentrates more on the business sector, supplying high technology equipment and parts to industries. This would enable Sony to use its unique talents in video games and semiconductor technology to create its office version in future and also make it less dependent on coming up with a solid stream of relatively short-lived hit products.

Approach is product development: 

Internally, more cooperation should take place between the Research and Development groups. The product lines should be made more compatible with one another via transparent and cooperative communication between groups and managers to build brand loyalty for consumers, i.e. projects should be routed to all and should not be hidden. Also, products should be made with added value and longer life time rather than having frequent changes in models, and hence shifting from a manufacturer oriented to consumer’s oriented mindset.

 Generic strategy

Sony is seen to be repeating history. When the Japanese took over the US market through cheap yet quality goods, other Asian countries such as Taiwan and South Korea, with their low labour cost followed suit and they now pose as great competitors to Japanese firms and Sony in particular. Japanese firms should therefore be more competitions in setting up high technology standards and shorten the technological lead time over the Asian firms in order to gain maximum profits. Cost cutting can also play a good factor in winning customers and improving profit margins. In short they need to follow hybrid generic strategy.

In addition to Japan, Sony also has spread divisions in the United States and other parts of Asia; by this set up Sony can take advantage of the cheap labour and hold a head start against growing consumer markets.

Functional ……….

Sony Corporation needs to learn more from their competitors to achieve the needed growth and competitive advantage in the future. To reach that goal Sony must look to the new technologies that are there in the market and how they can develop or produce a new product. For example; the new digital camera for Sony cyber shot is the new revelation with touch screen. Also, the new LCD Television with the help of Samsung Company in South Korea will raise the profit to the company.

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Moreover, the company should see their product life cycle and like the laptop batteries problem and trays to fix it or develop a better once. Also, they should expand their branches to help the customers get the warranty privilege when any manufacturing problem happens. Then it comes to the promotion and advertising they should focus not only to inform the customers for the product but also to create brand preference through differentiation and expend the company market share.

Method of growth:

They need to follow inorganic strategy because of speed changing in environment. In addition inorganic is faster than organic strategy.

In conclusion: 

Although there are copycat firms that are taking share and profit from Sony, the major aspect of Sony’s success is the innovative spirit and pursuit to excellence which cannot be copied. Sony’s main objective is to focus on integrating its many talents against the increasing competitive market.