Sony is a Japanese company that specializes in consumer electronics, which accounts for about six percent of the market share. The company also operates in foreign countries like the Japan, Spain, United Kingdom and Canada.
The company has numerous stores in the United States, Spain, United Kingdom and Canada. It has in the past decade experienced significant growth, enabling it to maintain its position in the competitive market.
The company has a large and diversified team of workers who are drawn from all walks of life.
Culture at Sony and Human Resource Policy
Sony as a company stands on a very strong foundation, which has its roots from the organizational culture. The company is actually strong in terms of its objectives, principles, policies and values that are widely held; whereby all of them are clear, in addition, it is held strongly by its members, particularly the founders.
Consequently, this defines the success story of the organization, which keeps on burning in the heart of every worker. The workers are encouraged to participate sufficiently and work together.
The employees are free to bring out their ideas. Nevertheless, it is in this state that the company is in a position of regenerating, thus facilitating or enhancing its effectiveness.
The development of human resources is one of the most important parts of the human resource policy in the company.
The human resource development policy of Sony is to develop its employees by ensuring that they are properly trained so as to keep them acquainted with the latest technology and skills in order to make them competent in meeting the current market demands (Karmar, p.92).
Local Training
Each and every factory of the company has its own residential training programs whereby the employees are trained in order to be able to meet their particular needs.
The biggest part or percentage of the employees at the company receive local training in their respective countries, whereby the training programs are designed specifically to meet the set standards as well as the demands of the particular countries.
The programs run every years and the duration taken by an employee in completing his or her training program depends on the course that he or she is taking.
In addition, we find that it is the responsibility of the institution to ensure that programs and policies help in the continuing of staff.
The workers in the organization should take the initiative of assessing interests and skills and seek activities of development that are compatible with their needs; they should work together to establish development and training objectivities.
Many programs of employee training and development fall under the categories of Career Development; Professional Skills; Management Development; Basic Skills and Supervisory Skills.
International Training
Even though the company mainly prefers local training as the best way of developing the expertise and proficiency of its employees, we find that this has been substantially enhanced by the International Training Center that is located in the corporate headquarters of the company in Tokyo, Japan.
Since its inception, the International Training center has always brought together managers and aspiring managers, providing them with training that meets the international standards of the profession.
Perhaps this is what has enabled the company to grow to the level it is currently, since the managers of all the branches in different countries across the world have sufficient knowledge and expertise that is not only limited to their respective or particular regions, but of internal and general standards.
The employees attend classes in accordance with the manager’s wishes, even though their qualifications also matter. A typical class is composed of twenty to thirty nationalities. There are several courses provided which can be divided into two broad groups:
Management Courses take about sixty percent at the training center. Those who take these courses must be within the company for a period of no less than five years time, whereby they are trained in appreciating the real values of the company together with business approaches.
Executive courses are classes that usually have individuals who attended management courses about five to ten years before. Here, they are trained on how to be in a position of representing the company internationally and working with foreigners, whereby they stress on the analysis of the industry (Fleetwood, & Hesket, p.63).
Conclusion
The main objective of the company is to ensure that each and every employee is given the opportunity of maximizing his or her potential and ability.
Sony does not only do this for the benefit of the employees but also for its own benefit, since in this current competitive world, whereby technology has reached great heights, it is important that employees are knowledgeable about the latest skills so as to enhance their productivity, thus making the company remain relevant in the industry as well as remain in the driving seat.
Training also enables the employees to gain much experience and knowledge that would enable them to get promotions within the company.
The enhancement of this virtuous circle is the ultimate objective of their training efforts at several various levels via many programs of training running every year.
Works Cited
Fleetwood, Steve, and Anthony Hesketh. Understanding the Performance of Human Resources, Cambridge, 2009. Print
Karmar, Ray., et al, Human Resource Management in Australia-strategy, people, Performance, (4th ed.), Sydney: McGraw-Hill (chapter1 and 5) 2011. Print
Sony Corporation was not afraid to embrace change. In fact, the company was proactive when it comes to implementing change, hoping to guide a successful organization into the 21st century.
The moves made were radical considering the fact that the company’s core business was in manufacture of consumer electronics goods and yet it acquired Columbia Pictures and CBS Records.
From the point of view of change management, the company leadership did everything right in securing the cooperation of various stakeholders even when it was clear to many that Sony was in uncharted waters.
The acquisition of a movie company and a recording company was difficult to justify, however, Sony was able to pull it through.
Finally, change was implemented but at the end Sony realized that the commitment to implement change is not enough, it is also crucial to apply due diligence to figure out the long-term effect of a strategic move.
Introduction
In the decade of the 80’s and 90’s there was an electronic gadget that was ubiquitous from Tokyo to New York. It was none other than the Sony Walkman. At the same time household from Asia, Europe and America were entertained using a Sony Television set and the most popular model was the Sony Trinitron.
The once humble and unknown Japanese electronics company has taken the world by storm and was one of the most profitable corporations in the 20th century.
They key to their success was innovation, specifically the creation of miniaturized and portable music machines as well as cutting-edge technology that powered their TV set. Music lovers used their Walkman to enjoy music whenever and wherever they want to listen to their favorite songs.
At the same time TV viewers were delighted with the picture quality of the company’s Sony Trinitron TV set.
Needless to say, Sony became the undisputed leader in consumer electronics and was considered a savvy innovator with a knack for knowing what the people really wanted when it comes to consumer electronic goods (Nathan, 1999, p.10).
However, change management was not the strongest suit of the company’s corporate leaders during the latter part of the 20th century. It was difficult to change something that was profitable for a long time.
The corporate leaders at Sony made the decision to expand its presence in the United States and set their sights on the U.S. entertainment industry.
The company tried to change but the attempt failed (Tabuchi, 2012). The corporate leaders and major investors at the Sony Corporation must think long and hard on how to implement an effective change management program that could help the company succeed in the 21st century.
Literature Review
Sony was a small Japanese firm when it started but after a few decades, it became a household name due to its innovative electronic products. Phenomenal is the best word to describe the impact of the Sony Walkman and the Sony Trinitron TV.
The company was a leader when it comes to revenue, innovation, and mass appeal. Sony endeared itself to countless millions around the world with a parade of electronic products that are both cutting edge and practical (Nathan, 1999).
The company charged ahead and made daring moves to expand its manufacturing capability to meet soaring demand. Sony Corporation decided to expand and trained its sights on the lucrative U.S. entertainment industry. The decision to buy a film studio was a major leap for the electronics company.
The move could be considered as an extreme example of integration wherein one company tries to control every aspect of the business. For example, a restaurant purchased a farm so that everything that it needs in the kitchen is sourced from this farm.
Nonetheless, it does not require an expert in business management to know that this type of integration does not work all the time. Most of the time it is best to work with suppliers; for instance, manufacturing firms buy components from other firms.
In the case of Sony the purchase of a movie company cannot be considered integration because there is a huge divide between a television set and the movies that are viewed through it. The business decision was mind boggling because the acquisition of Columbia Pictures is not even remotely related to the electronics business.
However, corporate leaders of the company believed it was the right move.
Richard Lynch explained their decision through this remark: “The strategic logic here was that of developing a vertically integrated company – from the service that develops the pictures and music to the machines that deliver them in individual’s homes” (2006, p.207).
Richard Lynch’s explanation made sense however, it is difficult to comprehend how vertical integration could be achieved because those who purchased Sony Trinitron TV are not compelled to buy movies that were produced by Columbia Pictures.
Therefore, when Sony purchased Columbia it was a business transaction that benefited Columbia Pictures but it did nothing to improve the sales of Sony’s electronic products.
Fig.1. Financial Year 2012 Results by Segment (Sony Group, 2013).
Consider for instance the original name of the company; it was called the Tokyo Telecommunications Engineering Corporation.
Therefore, Ibuka and other pioneers laid the business framework that future leaders should follow. It was a statement that the identity of the organization was bound up in technology and hardware. However, decades later, Sony was in the business of making movies.
In order to have a clear picture on how far the company has deviated from its core business, consider the information gleaned from a case study of Sony Corporation, specifically the circumstances that surrounded the deal to acquire Columbia Pictures:
On September 24, 1989, Sony … bid $3.4 billion in cash for Columbia Pictures Entertainment Inc. It was the highest bid ever by a Japanese company for any U.S. property. In addition to the cash price, the Japanese electronics giant assumed nearly $2 billion in debt and contractual obligations (Spar, 2003, p. 368).
Aside from Columbia Pictures, Sony also invested in the purchase of CBS Records. All of a sudden Richard Lynch’s explanation made sense, Sony wanted to produce the music that people would listen to with their Walkman.
Immediately after the acquisition of the said movie company and the music recording company, the financial situation at Sony began to change from bad to worse.
In the early part of the 1990s, problems began to crop up, specifically in relation to the acquisition of CBS Records and Columbia Pictures. Consider the highlights below (Spar, 2003, p. 378):
1990 – Columbia Pictures Entertainment suffered negative cash flow
1991 – the combined cash flow of Sony Pictures and Sony Music turned negative
1992 – In the third quarter alone, announced a 37% decline in operating income
1993 – The film Last Action Hero a $60 million production, bombed at the box office
It did not take long before the executives and shareholders realized that the creation of Sony Music and Sony Pictures was an ill-advised move.
The negative cash flow and the failure to realize their objectives were unacceptable to the shareholders and therefore a major change needed to be initiated in order to bring back Sony Corporation to the top of the list of the most profitable company in the world.
The changes that were made right after the dismal performance of the company shook the foundation of Sony. In fact the core leadership and most probably the board of directors were compelled to hire an American to become the company’s first ever CEO.
Several years later a commentary was written with regards to the historic move, “Sony Corporation of Japan did something almost unheard of in Japanese business circles.
It appointed a Welsh-born American citizen as head of the Japanese company” (Lynch, 2006, p. 107). A message was sent and it reverberated all over the world.
Michiyo Nakamoto, made the revelation that the crisis surfaced as early as April of 2003 and she added that at the same year, “…Sony revealed a sharp deterioration in its electronics business and weak mobile phone sales.
It launched a costly overhaul to regain its competitive edge. Yet barely halfway through that three year exercise Sony is again faltering” (2005).
Richard Lynch on the other hand made a complimentary analysis that supported Nakamoto’s observation and he wrote that Sony’s woes could be the result of the following: a) threat from low-wage labor manufacturing and b) shifting away from innovative products e.g. liquid crystal display (LCD) screens (20006, p. 108).
It was made clear that the former CEOs of Sony dreamt of making a great deal of money by venturing into the entertainment industry while at the same time prodded the other half of the company to manufacture and sell consumer electronic goods.
The juggling act did not work and there was no evidence to show that the firm accomplished vertical integration.
The company that was once known for its innovative technology made wrong assumptions when it comes to the future of music and TV technology.
Thus, the company was caught flat-footed in the fast transition to new technologies. Therefore, “Sony, which had not invested in manufacturing LCD panels, was forced to buy them from competitors”
(Nakamoto, 2005, p.12). This episode in Sony’s history helps explain the sudden rise to prominence of a Korean electronics company called Samsung. Needless to say, it was late in the game when the company realized that it was betting on the wrong technology.
Their problems could be traced back to the day they purchased Columbia Pictures and CBS Records. The rush to consolidate in the guise of vertical integration was a major blunder in company history.
For example, CBS Records was in the business of producing music and therefore, it placed the company in bind because it could not invest in a technology that could store music in a digital format. During that time no one knew how to handle the thorny issue of copyright infringement and digital music files.
In fact, Sony’s corporate leaders were adamant to “discourage the electronics division from marketing a portable player that could download music from the Internet” (Nakamoto, 2005, p.14). It was also the same time period when the Steve Jobs and his team were poised to change the world with their Ipod.
Sony had the resources and the technological capabilities to develop a device similar to iPod, however, all plans related to its development were considered taboo because of CBS Records.
It is important to point out that two major changes were made in the latter part of the 20th century. First, there was a rush to create vertical integration and second, there was the radical move to hire an American CEO to drastically alter the fortunes of the ailing company.
However, it is also important to point out the theoretical frameworks needed to understand the change process.
There are at least four major categories of change and these are: 1) Evolutionary; 2) Dialectics; 3) Life Cycle; and Teleological. Evolutionary change is a continuous cycle of variation, retention, and selection that could result in gradual or radical change (Sengupta & Bhattacharya, 2006, p.5).
The dialectic theory of change on the other hand talks about the “existence in a pluralistic world of ambiguous and contradictory forces and values that compete with one another to get control over the others” (Sengupta & Bhattacharya, 2006, p.5).
However, the life cycle theory of change proposes that there is a “linear and irreversible sequence of prescribed stages, which facilitates organization to move from the point of departure towards an end,” (Sengupta & Bhattacharya, 2006, p.5).
Finally, the teleological theory talks about the company’s “interaction with the external and internal construct and its effort to reach the defined goals” (Sengupta & Bhattacharya, 2006, p.5).
It is important to point out that the change made at Sony Corporation is described more effectively using a combination of the dialectics and teleological theory of change.
Fig.2. Sony Corporation’s Net Income 2008-2012 (Statista, 2012).
Analysis of the Research Findings
There were two major changes made in the latter part of the 20th century. First, Sony decided to expand and acquired CBS Records and Columbia Pictures. It could be argued that the dialectics and teleological theory of change is applicable in this instance.
With regards to the dialectics theory, the company was pressured to expand because at that time the company needed to sustain its growth. With funds at its disposable due to the phenomenal success of Sony Walkman and Sony Trinitron, the organization needed to invest in something that would ensure long-term growth.
In the dialectics framework there is pressure from competing forces and it could be argue that during this period Sony was wary of its rivals within the consumer electronics industry. Thus, there was the need to take the first step and there was the pressure to break away from the pack and take the lead in the race.
The teleological framework is also applicable in this instance because the company made goals to increase its profitability and ensure its position as the best consumer electronics company in the world.
Thus, the company decided that there is no other way to do it other than to increase its efficiency by creating synergy with other companies or other business partners. The decision was to establish vertical integration.
The stakeholders involved were the corporate leaders at Sony Corporation, CBS Records, and Columbia Picture. The other major stakeholders were the shareholders of the respective companies as well as the employees and customers of the three organizations.
With regards to the first major change that was made, the company must be commended when it comes to the preparation made and the actual activities that were geared towards making the change. The major stakeholders were aware of the decision and they fully supported the move.
The integration of CBS Records and Columbia Pictures into Sony Corporation was completed without a major glitch.
The change process was completed, however, this case study points out another major component of change and that is the decision-making process that was made prior to the goal of creating vertical integration. In the long run it was proven to be a costly mistake.
It is important to point out that the changes that were made were not the result of a life cycle process. In other words, it was not something that the leaders considered as inevitable. They made radical changes to the company because of the perception of competing forces and the fear of obsolescence.
In other words the company was eager to stay relevant and was more than eager to sustain its phenomenal growth. It is acceptable to make the conclusion that the company overreached and tried to do something that the organization was not built to handle.
The second major change was to overhaul the company’s management process by hiring an outsider. Needless to say it was not easy to get a unanimous vote to hire an American CEO.
An overview of Japanese history and culture, as well as an in-depth look at their management techniques would reveal that the Japanese people are almost fanatical in the way they value loyalty and raising up leaders and managers from the ground up.
Hiring an outsider who did not have a deep understanding of the company’s history was not a popular choice. However, the decision was made to deal with consequences of the Columbia Pictures and CBS Records fiasco.
The hiring of an American CEO is not an example of a life cycle type of change. In other words, it was not part of the natural growth and development of the company to hire an American business leader.
Thus, the change that was made was totally out of character. The change framework applicable is dialectics and teleological because the company responded to external pressure and made the decision to change.
The decision to hire an American CEO did not result in radical changes, such as, the sale of Sony Pictures and Sony Music.
It could be argued that the purpose of the hiring may have been to appease investors and to show stakeholders that Sony was trying its best to mitigate the impact of the decision to acquire two companies that struggled to make a profit.
Conclusion and Recommendation
The financial and business related problems of Sony Corporation are important reminders that organizational transformation must be top priority of the company.
The phenomenal growth of the company from a fledgling electronics consumer company in Japan to a world-leader in miniaturized music equipment to cutting-edge TV technology and its near collapse is proof that change must be constant. It is therefore critical to understand the nature of change.
Thus, business leaders must be grateful that thinkers and analysts were able to determine four broad categories of change management frameworks. Although there four major frameworks only two are applicable in the case of Sony’s change management process.
The dialectical and teleological frameworks could explain why Sony was compelled to make changes. These two frameworks focused on external and internal forces that created pressure for a firm to make the necessary changes to adapt. As a consequence Sony Corporation was compelled to make radical changes.
It is therefore imperative to point out that Sony did not wait for changes in the outside world to overtake them and render the organization obsolete. In fact, the company adopted a more proactive approach.
Other companies fail to embrace change. Sony did not fear change, however, the change management process that they adopted required a second look. The turning point was the decision to adopt vertical integration. Without a doubt leaders of various industries believe in the importance of vertical integration.
The purpose of vertical integration is to create a more cost-efficient operation. Moreover, the strategy was also implemented to significantly increase Sony’s market share when it comes to their portable music devices.
It is not clear however, how the leaders were able to connect a music recording company to a portable music device like Sony’s Walkman.
It is difficult to understand how someone could make the assumption that the purchase of Sony equipment would compel consumers to buy files, data, or software from the same organization.
For example, a car manufacturer is not expected to create their own tires because consumers have the freedom to choose the best brand.
There are so many things to consider when it comes to the purchase of ancillary items. Consumers base their decision on price, quality, and even the convenience of purchasing a particular item.
The justification to acquire CBS Records on the pretext of vertical integration requires a stretch of the imagination.
However, there seems to be no justification for the purchase of Columbia Pictures because Sony’s Trinitron does not operate using film from the movie studio. Therefore, it is hard to understand where vertical integration could be inserted in this particular business deal.
Executives at Sony must realize that the eagerness to anticipate change and the commitment to change are not enough to succeed. It is important to pursue due diligence in thinking through the decision process. For instance, the two companies struggled with billions of dollars in debts.
Secondly, there was no clear plan how Sony could transform a financial liability like Columbia Pictures into a cash cow. Furthermore, they purchased CBS Records at a time when music studios were losing money because of digital music files.
Sony Corporation must also reconsider how the company interpreted vertical integration. Even a small business firm understands that it is not prudent to integrate everything into the company’s supply chain. It is best to focus on their strengths and establish business partnerships to help them deal with their weaknesses.
The change process must not only focus on the need to change in the present time, it must also focus on the long-term and immediate effects of the changes that were made. A comprehensive feasibility study should have been included in the change management process.
Finally, Sony should rediscover its roots and remember that the company rose to prominence because of innovation and not the acquisition of other companies.
References
Lynch, R 2006, Shaking up Sony: restoring the profits and the innovative fire, Indiana University Press, Indiana.
Nakamoto, M 2005, Caught in its own trap: Sony battle to make headway in the networked world, Financial Times, London.
Nathan, J 1999, Sony: the private life, Houghton Mifflin Company, New York.
Sengupta, N, & Bhattacharya, M 2006, Managing change in organizations, New Jersey, Prentice Hall.
Sony relies on an ethnocentric orientation in staffing. The staffing orientation requires that managers from headquarters hold key organizational positions in new marketplaces. By employing individuals to work in places they understand better, Sony will empower the employees accordingly based on the organizational culture practiced in the specific country of doing business.
When recruiting individual for foreign operations, the company should employ competent individuals who understand the region better (Abraham 28). This will make it easier to cope with the culture of the people. Proper training and mentoring programs to the managers will ensure they are prepared for the international assignments.
Managing Talent in the Company
The presented analysis shows that Sony is facing challenges in finding the best talent for its organizational operations in Europe and China. If the company is to have an adequate pool of international talent and managers, the first approach is to embrace the issue of diversity.
The company should recruit managers from different backgrounds with knowledge and proper expertise towards management in the business (Abraham 28). The managers should also be familiar with the working environment and region where the business will operate.
This is because different cultures have varied cultural mindsets and organizational behavior. The idea entails promoting productivity and ensuring the greatest gains from the business. The company should also promote diversity in the workplace. This is an important to promote a global mindset thereby improve performance.
Sony’s Training Efforts
Sony’s training efforts is effective as applied currently. The company pursues programs to train its recruits and counsels them to do whatever they are passionate about and improve their talent. The company also offers an online training system. However, in light of the company’s multi-country operations, the company can take some steps to improve the training process. The first step is recruiting a diverse workforce.
A training program based on the expected performance and the unique knowledge of the recruits in needed. The other step involves mentoring and leading the employees to improve their talent (Abraham 27). Finally, the company’s 2-year eight-module training program covers all aspects of Sony’s business and operations. The program should train the employees about their specific works and departments they are working in.
Labor Relation Problems
In Indonesia, Sony faced some labor unrest thus affecting its output. In Britain and Mexico, similar cases of labor unrest and issues have been faced and the reason there is need to address them. If the management is to improve these labor relations, the first thing is to improve the working conditions of the employees and offer them good working environment.
This will improve the labor relations in the company. A proper human resource team should address the specific problems and issues faced by the workers (Abraham 28). The top management should design a standardized workplace norms catering for the needs and expectations of the employees. There should also be a long-term strategy to employ the required number of workers to avoid future lay-offs.
Sony’s Corporate Social Responsibility
The current integrity approach employed by Sony to maintain and retain a universal workplace standard is a good idea. The best thing for the company is to standardize its workplace conditions to create the best working environment internationally. This will result in equal opportunities for all employees and offer them a superior working condition.
While this is something acknowledgeable and effective, the company can consider doing more like promoting environment conservation programs, fighting poverty, and providing essential needs to individuals in the developing nations (Abraham 28).
The company should improve the working conditions in the emerging markets. This will make the company an industrial leader because it will manage its operations properly and achieve the greatest gains.
Works Cited
Abraham, Susan. Development of Employee Engagement Programme on the Basis of Employee Satisfaction Survey. Journal of Economic Development, Management, IT, Finance and Marketing, 2012; 4(1), 27-37. Print.
The internal environment of any business is critical to its long-term sustainability. Factors that shape the internal business environment include the management approach, decisions, and strategic plan. Various internal factors within Sony have contributed to the company’s decline over the years. This section will discuss two key factors that have played a major role in the company’s decline, namely, lost opportunities and mismanagement and Sony’s organizational culture.
Lost Opportunities and Mismanagement
Sony emerged as a pacesetter in the world of electronics by introducing new technologies ahead of the other manufacturers. Sony makes a wide range of electronics ranging from cameras to Smartphones. Sony is still making products that are desirable and of impeccable quality. Perhaps Walkman remains the most notable invention by the company. Despite being able to adopt emerging technologies to create high-quality products, Sony’s presence has continued to decline in the market of electronics. People are less excited about using the company’s products compared to the situation in the last two or three decades. Numerous scholars have explained this shift in customer away from Sony’s products. It is mostly associated with an ineffective business strategy. A business strategy refers to an organization’s long-term goals spanning between 3 to 5 years or longer. A business strategy guides a business in pursuing its goals in an ever-changing market environment. Therefore, businesses need to have a flexible strategy that will incorporate the changing trends such as customers’ preferences.
One of Sony’s major failures was the company’s inability to shift from a product-centered culture to customer-centered production. The situation led to its loss of opportunities where clients were only interested in companies that provided items that could satisfy their demands. Advancement in technology has resulted in a shift in market behavior, with customers becoming more demanding and charismatic wit reference to the products they use. In other words, customers nowadays want to feel that the products they are using reflect on them, quality notwithstanding.
This rationale best explains why Sony, despite continuing to churn out some of the highest quality gadgets, has continued to experience a dwindling market share. Sony failed to adjust her strategy to suit emerging customer needs, the most notable being customer experience. Competitors such as Apple’s iPhone jumped onto emerging technology to offer customers’ experience-oriented gadgets that have often caused market excitement every time a new model is being released. Sony lost this opportunity. On the other hand, it continued to focus on hardware, which, unfortunately, offered less versatility when compared to software. Focusing on software enables manufacturers to manipulate technology in creating formidable and customer-centered products.
Xu and Muneyoshi observe that being a hot seller is important for the long-term survival of any business since it enables a company to remain within the vision of customers (281). Launching a successful product every few years is critical in keeping customers perpetually interested. Throughout six decades, Sony was known for releasing successful products from time to time. However, the company’s last formidable invention has been identified as the PlayStation, which was launched in 1995 (Xu and Muneyoshi 281). By becoming less innovative, Sony was giving way to determined rivals to take over the market, thus effectively edging the company out as the greatest manufacturer of electronics. According to Xu and Muneyoshi, Sony has failed in converting its world-class technology into profits due to a failure to match changing customer trends (281).
Numerous scholars have used the case of Walkman to illustrate how the company’s strategy caused it to miss opportunities to advance its market strength. When Sony launched the cassette recorder in 1996, no other market player could have matched the technology. In 1971, the company went ahead to invent the Walkman, which was a portable improvement of the cassette recorder. Over the years until 1999, Sony was engaged in efforts to modify the Walkman to suit consumers’ demands regarding price and comfort of use. However, the company was too focused on the product model to the extent that it failed to observe subtle tendencies by customers.
Xu and Muneyoshi explain that Walkman’s rigid platform, ATRAC, could not accommodate the MP3 format, which had become growingly popular in the late 1990s (282). Sony also remained aloof to the desire by customers to have numerous songs in one gadget (Naganathan 70). Perhaps Apple was reacting to Sony’s insensitivity to its customers when it launched the versatile iTunes in 2001. Unlike Walkman, iTunes was software that allowed users to access different music platforms on personal computers. Figure 1 below shows the company’s brand worth during the 2000-2014 period. It is evident that the lost opportunities have led to the company’s loss of value.
Figure 1: Sony’s brand value and ranking between 2000 and 2014 (Xu and Muneyoshi 281).
Naganathan identifies the lack of innovation as a major cause of Sony’s decline (70). The situation undermined the company’s image, which had been built around innovativeness over the decades. Sony has also failed to engage effectively in the process of continuous improvement. Continuous improvement helps a business to strengthen its core competencies, thus enabling it to compete effectively in the market. Conversely, Sony engaged in unnecessary diversification, which prevented the company from concentrating on its strong areas (Naganathan 70). Sony’s presence in numerous businesses (electronics, online music stores, games, movies, and financial services) has prevented the company from achieving market positioning. Lack of brand focus undermines a business’s strength in the market since it cannot promote itself competitively.
In addition to a weak strategy that led to the company’s loss of opportunities, mismanagement also played a key role in its decline. Xu and Muneyoshi observe that poor decisions have compromised the company’s edge in the market (281). For instance, failure to follow up on PlayStation 2 and PlayStation 3 paved the way for Microsoft’s Xbox 360 to attained unparalleled market success. At the time when Microsoft was launching Xbox 360, Sony had 70 percent of the gaming console market share. The mismanagement included the cost structure of the transition from PS2 to PS3. In addition, the PS3 platform was more difficult to use compared to the previous PS2, thus allowing Xbox to attract many of Sony’s customers. Atlas Equifin, a minority stakeholder in Sony India, sued the company for alleged financial mismanagement (Money Control par. 1). Allegations of mismanagement can undermine a company’s fundraising since shareholders refrain from raising capital.
Sony’s organizational culture
The culture of an organization influences its success or failure to meet its strategic goals. Organizational culture ranges from how employees interact with each other to the organization’s management approach. The lack of an effective organizational culture can lead to a business failure much the same way a lack of organizational strategy does. Sony’s organizational culture is a reflection of Japanese culture. Innovativeness is part of Japanese culture. This observation explains why Sony has always strived to adopt innovative strategies throughout the company’s lifetime. Other aspects of the Japanese culture include employee satisfaction and the ‘customer is king’ attitude. Nevertheless, Sony’s organizational culture has not been helpful for the company’s strategic presence in the global market. The inflexible nature of its culture has been a disadvantage to the company.
The silo mentality was a cause of Sony’s failure (“Strategic Direction” 2). Silo mentality is described as the attitude that limits interaction among departments within an organization. It undermines the flow of information. Effective communication within an organization facilitatesdecision-making by ensuring that the conflict of objectives is eliminated (“Strategic Direction” 11). On the contrary, Sony was characterized by a lack of coordination between divisions, a situation that undermined the company’s market strength. Strategic Direction describes the culture at Sony before 2005 as “having been characterized by an every-man-for-himself attitude where each division protected its own interests with passion” (3). These divisions created inconsistencies in the company by allowing rivals to seize Sony’s market share. For instance, Walkman was replaced as the market leader by iPod while pS3 gave way to Microsoft’s Xbox.
Sony’s organizational culture as being resistant to change. This attitude is greatly associated with the company’s slow adoption of the growing significance of software (Cole 39). Because Sony had attained great success through hardware, it was tempted to ignore software. This claim is evident in the company’s top management, which is comprised mostly of hardware engineers (Cole 39). According to Cole, by focusing on hardware over software, Sony sacrificed the optimization role that software would have played in enhancing product quality and versatility (39).
Insight & Recommendation
Future of Sony and the Japanese Economy
Cole asserts that top-technology companies in Japan, including Sony, do not fully appreciate the growing relevance of software (39). This attitude is greatly responsible for the declining innovation, despite Japan being only second to the US in creating new technologies. Worldwide, the value assigned to hardware innovation is diminishing. Instead, the software has become the center of technological innovation since it offers a competitive advantage through its wide versatility. Additionally, the software allows developers to create multifunctional applications. It also provides a wider functionality of hardware (Cole 6). Therefore, the future of technology lies in software advancement. Japanese firms realize this fact. They are working tirelessly to shift from hardware-centered to software-focused innovation. Twenty years ago, it was predicted that Japan would surpass the US in software innovation. Instead, Japan has continued to lose its software edge. Cole observes that electronic devices embedded with software in Japan declined by 50 percent between 2004 and 2011 (7).
The future of Sony is dependent on the company’s ability to manage its numerous divisions in a sustainable way. There has been speculation that Sony is currently being broken up for sale (Patel par. 2). If this goal is achieved, it means that each division will be independent of the other. Sony’s focus has been on the Smartphone business. Despite the acute competition from key players such as Samsung and Apple, Sony has registered a slight profit margin from building and selling Smartphones. In 2012, Sony held about 2 percent of the Smartphone market as shown in Figure 2.
Fig. 2: Market share of mobile brands in 2012. Source: (Jia and Yin 449).
The above statistical findings indicate that Sony still has a long way to go in achieving a reasonable share of the Smartphone market. Part of Sony’s lack of success in the mobile market is the prominence of Samsung. Patel observes that Sony’s Smartphone has not been successful because it targets customers who are currently buying Samsung phones (par. 3). Nevertheless, Sony can maintain relentless efforts to lure Samsung’s customer base, especially in the Asian market. Additionally, Sony can capitalize on the recent misfortunes bedeviling Samsung’s Smartphone brand. In the last few months, there have been reports of Samsung’s Galaxy Note7 exploding, thus causing uproar among agitated customers (“CASS Business School” par. 4).
Sony’s future lies with the PlayStation 4. The last four years have seen restructuring efforts in the company in a bid to revive its market strength. Part of the restructuring process involved revamping the PlayStation to diversify the uncertain Smartphone market (Fahey par. 1). Currently, PlayStation 4 has experienced robust growth, which is promising for the company. The current CEO, Kaz Hirai, believes that PlayStation’s renewed success will cater for weaknesses in other divisions of the company. Current efforts include making PlayStation into a launchpad for other gadgets and services. This plan will allow other developers to create products to work with PlayStation, thus increasing its usability. Therefore, Sony is succeeding in an area that Microsoft’s Xbox 1 has failed in, namely, focusing on games.
Sony is making gradual efforts to increase software innovation at the company. This shift from hardware to software is a reflection of the current Japanese technology environment. Companies realize that software is the core of modern innovation. For instance, Sony’s latest models of PlayStation are designed to accommodate developer software. Analysts have further observed that the restructuring at Sony has rescued the company from a future financial disaster. Therefore, it is safe to conclude that the company is slowly regaining a share of the market for most of its divisions.
Recommendations
There is a gradual shift from hardware-centric to software-intensive innovation in Japan currently (Cole 43). Japan ranks significantly lower regarding software innovations compared to the US. However, Cole observes that Japan is still ahead of other developed economies regarding software innovations (43). At Sony, Kaz Hirai has been making gradual efforts to improve software innovation at the company. Nevertheless, more needs are done if Sony is to compete on the same ground as rival companies. In the Smartphone sector, Sony is among the weakest competitors as shown in Figure 2. This dismal market performance is attributed to low innovativeness in mobile technology. One of the ways that Sony can promote software innovation is by investing in innovators. The company can hire employees who are passionate about software development as opposed to hardware.
Sony’s top management constitutes hardware engineers. This situation can pose challenges in implementing software innovations. Japan has a shortage of information technology professionals when compared to the US. Cole observes that hardware engineers on the top positions are more likely to hire other hardware engineers to fill the junior positions (11). The result is that the company has a deficiency of software innovators. Additionally, hardware engineers are likely to ignore the importance of software innovation in the company. Therefore, it is important for the company to overhaul the management to include software engineers at the top positions.
Sony should strive to produce items that are desirable to customers, including televisions, Smartphones, and cameras among other devices. This goal will be achieved by improving the user interface to be more attractive to customers. In addition, Sony should avoid the trend that has seen it include features that customers do not always use or desire to use in their gadgets. This strategy will save resources for building and improving the features that customers are interested in using. For instance, Sony’s smartphone has too many buttons and dials that make it unappealing to the user. Instead, the company may incorporate a larger touch screen with soft buttons.
Sony operates in too many lines of businesses, namely, semiconductors, mobile devices, cable television, stereos, movies, and financial services among others. One of the disadvantages of over-diversification is the issue of fighting competition on many different fronts. This situation means that colossal resources are deployed to manage the overwhelming competition. Additionally, operating in numerous fields can limit a company’s ability to develop its core competencies. Thus, it is important for Sony to minimize the field it operates in by getting rid of some of the businesses. This situation will enable the company to focus only on a few divisions, thus promoting innovativeness and efficiency. Sony should also design products according to the market destination. For instance, power outages are common in emerging countries. This situation would call for devices with inbuilt power storage or a longer battery life. Therefore, localization of products will benefit the company through rebuilding customer trust and hence loyalty.
Sony should diversify its markets by reaching out to the emerging economies. In large market areas, Apple and Android Smartphones have not fared well due to high prices. Sony should exploit this market gap by designing cheaper, yet desirable Smartphones and tablets. Sony can also extend its financial services to the emerging markets where internet banking is yet to become fully established. In addition, Sony Pictures, a subsidiary of Sony Entertainment, has been delivering content that is oriented to western and Japanese audiences. Sony Pictures can expand its catchment by designing content that is local to the emerging film industries such as Bollywood. Finally, the company should dedicate a reasonable amount of its resources to research with the aim of creating new technologies and products. The key focus should be on the user interface, which has not been well addressed by Sony.
Conclusion
Sony has endured a declining market share for its many products in the last two decades. The once robust pacesetter in the technology world has been blamed for a declining spirit of innovation. Sony’s strategy has not focused on the long-term sustainability of the company. Its organizational culture also undermined communication between and among divisions within the company. Nevertheless, Kaz Hirai, the current CEO has led restructuring efforts aimed at regaining the company’s market share in areas such as gaming services and Smartphones.
Due to the success of PlayStation 4, the company is gradually regaining ground. The management believes it is out of the difficulty zone. Although Sony is not quite innovative with software development, it still fares much better when compared with companies in emerging economies such as the GCC nations. For Smartphones, the major manufacturers that dominate the GCC region include Samsung, Touchkon, HTC, and Motorola. These Smartphones, which are manufactured elsewhere, are sold in the Gulf region. Other electronic companies with a market share in the region include Siemens, Frigidaire, and Philips. Overall, innovation in the Gulf region is still much lower compared to that of Sony.
Jia, Jianzhong, and Yuchan Yin.”Analysis of Nokia’s Decline from Marketing Perspective.” Open Journal of Business and Management 3.4 (2015): 446-452. Print.
Naganathan, Vivian. “A Comparative Analysis on Sony’s Approach to Problem Solving and Decision-Making.” International Journal of Management and Business Research 3.1 (2013): 69-88. Print.
