Sony Corporation - Losing Competitive Advantage


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Case Details:

Case Code : BSTR192
Case Length : 20 Pages
Period : 1998-2005
Organization : Sony Corporation
Pub Date : 2005
Teaching Note : Available
Countries : Japan
Industry : Consumer Electronics

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EXCERPTS Contd...

Stringer Becomes CEO

At this juncture, in March 2005, Stringer became the first non-Japanese CEO to lead Sony in its six decade history. During the five years before Stringer assumed charge as a CEO & President, Sony's stock price had eroded by 75%. Stringer was head of Sony's North American business and was known for drastic cost cutting measures; he had reduced Sony's workforce by 9000 in Sony US. Stringer played a major role in a group of private equity investors led by Sony which had acquired MGM in September 2004.

After the deal Sony planned to make films like James Bond and Pink Panther and also have a hold over MGM's vast library. Though Stringer wished Sony to have higher share in the company, he could not convince Sony's top management in Tokyo, and for this reason Sony's share was limited to US$ 300 million of the US$ 1.6 billion. The flip side of Sony's limited participation was that the other investors had a lot of power, and they even had the right to replace Sony with another studio after one year. Stringer identified five main challenges for Sony. These were: getting rid of the 'silo' culture in Sony, obtaining profitability across businesses, making products in line with industry standard technologies, improving the competencies in software & services, and divesting non-strategic assets...

Restructuring in 2005

On September 22, 2005, Sony adopted a new strategy in order to revive its dwindling fortunes. The strategy concentrated mainly on three sectors - electronics, games and entertainment. The electronics business of Sony, which generated maximum revenues of 4786.2 billion out of total sales of 7159.6 billion, was to be revitalized through a series of structural reforms coupled with a growth strategy aimed at achieving group sales of 8 trillion by 2008. Sony aimed at achieving a profit margin of 5% and cost reduction amounting to 200 billion by the end of fiscal 2007-08...

Looking Ahead

Sony is likely to concentrate on products like digital camcorders, mobile phones, Walkman and Playstation. The company was planning to launch a new TV lineup. According to Stringer, "These products are a few of our weapons against commoditization." Under the new strategy, Sony aimed at reviving the brand 'Sony'. With the new products that Sony was planning to introduce, a person with a Sony Walkman, mobile phone or portable Playstation could watch movies, listen to music and play video games anywhere, anytime. In 2004-05, Sony planned to sell 2.5 million LCD televisions as against 1 million sold the previous year. The sales of rear projection LCD TVs was estimated at 1.4 million in 2004-05 as against 650000 sold during 2003-04...

Exhibits

Exhibit I: Sony's Financials (1991-2005)
Exhibit II: Sony Organizational Chart (As Of April 01, 2003)
Exhibit III: Sony - Electronics Sales & Operating Revenues
Exhibit IV: Sony - Financial Highlights by Business Segment
Exhibit V: Sony Organizational Chart (As Of July 1, 2005)
Exhibit VI: Sony Organizational Chart (As Of October 2005)

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