Sony's Battery Recall Fiasco

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Case Details:

Case Code : MKTG162
Case Length : 11 Pages
Period : 2005-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : Sony Corporation
Industry : Computer / Consumer Electronics
Countries : USA, Japan

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Sony's history can be traced back to 1946 when Masaru Ibuka (Ibuka) and Akio Morita (Morita) established Tokyo Tsushin Kogyo K.K. (Tokyo Telecommunications Engineering Corporation), in Nihonbashi, Tokyo. The company was set up with the objective of conducting research and production of telecommunications and measuring equipment.
Over the years, Sony grew to become a leading manufacturer of electronics, communications, video gaming, and information technology products for retail consumers as well as institutional customers. Sony became widely recognized the world over for its innovative and high quality products...

The 'Zippo' Batteries

In June 2006, it was reported that during a conference in a hotel in Osaka, Japan, a Dell notebook burst into flames. In July 2006, two more incidents of Dell's laptops catching fire were reported. On August 14, 2006, Dell and the United States Consumer Product Safety Commission (U.S. CPSC) together announced the recall of 4.1 million Sony lithium-ion batteries that were used in Dell's notebooks. The US CPSC said this was the largest safety recall in the history of the consumer electronics industry...

The Impact of the Recall

Analysts noted that even though Sony's battery operations accounted only for three percent of Sony's total electronics sales and six percent of the company's operating profits, the worldwide recall had clearly affected Sony's brand image as a manufacturer of high quality consumer electronic products. Roger Kay, an analyst with Endpoint Technologies Associates Inc., commented, "I think it might be a good time for Sony to sell the business to somebody else. If I was HP, I would buy Sanyo batteries so I can say Sony-free because - even if you say they are making perfectly good batteries now - all of that gets lost in the noise. All the consumers know is Sony has a bad battery."...

Future Outlook

Despite the negative perception among customers and the inconvenience caused, most industry experts were of the view that the recall would not significantly impact the buying decisions of consumers. Some felt that the honest approach demonstrated by Sony and the notebook manufacturers might have actually helped to boost consumer confidence in the brand...


Exhibit I: A Brief History of Sony's Lithium-Ion Battery Development
Exhibit II: Key Financials of Sony (In US$ Million)
Exhibit III: Notebook Manufacturers Affected by the Battery Recall (As of October, 2006)
Exhibit IV: Market Share of Lithium-Ion Battery Manufacturers in 2005


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