Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code :LDS0024C

Year :2007

Industry :Engineering, Electrical and Electronics

Region : Japan

Teaching Note:Available

Structured Assignment :Not Available

Abstract: On 7th March, 2005 the Board of Directors of the giant multinational Sony Corporation created history by appointing a non-Japanese, Howard Stringer to head Sony Corporation as Chairman and CEO. Stringer took over at a time when operating margins of the Electronics division, which contributes to nearly two-thirds of Sony’s total revenues, were showing negative growth. Sony’s product segments were also beset with problems. The company was losing the television wars to Sharp, its Walkman line was being crushed by the Apple iPod and its PlayStation games console was threatened by Microsoft’s X-box. In September, 2005 Stringer began implementing the first part of his strategy to turnaround Sony. He cut 10,000 jobs, 7% of Sony’s global workforce, closed down 11 out of 65 production facilities worldwide and put in place plans to reduce costs by $1.8 billion by March, 2007.

The case highlights the strategies adopted by Stringer primarily with respect to the Electronics Division. Stringer realised that reducing costs was just one of the many parameters that could affect bottom lines. What was required was new projects and strategies covered by timely decision making. Sony’s lacklustre performance in the electronic business was because of low-price competition from, amongst others, Samsung, Matsushita Electric (Panasonic), Apple and Microsoft. The case analyses the product groups with the games consoles, audio systems, digital cameras and television. It examines the performance of these groups and studies the downslide in sales over the years especially in the new millennium.

Stringer was also trying to reinvent Sony’s brand image to make it more relevant to digital-age consumers. He had to keep in mind the reality that standardisation of key parts and the increasing role of contract manufacturers in the electronics industry had led to falling margins and a tougher competitive landscape. Stringer had to also sort out copyright infringements and antipiracy problems. The major goal of his restructuring plan for Sony was to make electronics more profitable by making gadgets and content work together effectively so that consumers would be willing to pay a premium price for them. Stringer also felt strongly about High-Definition (HD) products being the key to Sony’s future success. Also, under his stewardship, Sony was the first to make the television the centre of the Internet world by skirting around the computer monitor and taking the Internet direct to the television screen.

The case further details the initial results of Stringer’s turnaround strategy. By January, 2006, Sony’s stock price on the Nikkei rose by 30% over the earlier three months, outpacing Japanese rivals such as Pioneer, Sharp, and Panasonic. Operating margins had also turned the corner, up from 1.3% in 2004 to 2.6% in 2006.