case study on sony company

How Sony Became The Ultimate Pivoting Success Story

Table of contents.

Today, Sony stands as a behemoth in the global electronics industry being the go-to brand for a vast collection of premium-quality consumer electronic products.

Sony's market share and statistics:

• Sony's annual revenue in 2022 was $81.3 billion
• Number of Sony's employees in 2022: 111,000
• Presence in more than 204 countries
• Sony's market cap is $101.83 billion Feb 2023

But it wasn’t always this way.

Sony’s beginnings trace all the way back to post-World War II in Minato, Tokyo, where it was established as a small shop of radio repairs, that too with a different name. 

Starting its journey with borrowed capital, a windowless workshop, little to no equipment, but a dedicated team, Sony has made its way to the top and currently is one of the biggest players in the electronics world.

Let’s travel back to World War II and understand how it all began.

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$500 Partnership Lays The Foundation Of Sony

It was March of 1945, and the war was in full swing. The crumbling of the axis powers and bombings in Japan brought chaos. Tokyo’s bombing was the last straw that sent the Japanese military into panic mode, and special reinforcements had to be called in.

This brought together two exceptional individuals: Akio Morita, a weapons researcher, and Masaru Ibuka, a navy lieutenant. Little did they know that they would partner together in the future to become co-founders of Sony.

Starting Small

When World War II ended, so did the military careers of Morita and Ibuka. Right after, as Japan went through one of its worst phases of unemployment, the two decided to find employment wherever possible.

Therefore, in 1946, Ibuka began working in a small workshop in Shirokiya departmental store, repairing radios for a living. In October, Ibuka paired with his team to form Tokyo Tsushin Kenkyujo, also called Totsuken, and often shortened to TTK.

Converters & A $500 Partnership

As is the case for any business, Ibuka and his team immediately began to search for a gap in the market. Something that was in demand, could be produced and would begin churning profits for them. This break came in the form of adaptors, or as they were called – converters.

Informational mobility had been almost non-existent during the war. While some radios had become damaged in the chaos, others were disconnected from the shortwave unit to prevent the Japanese public from having access to enemy propaganda by tuning in. Now that the war was over, the Japanese were hungry for information, and Ibuka cashed into this golden business opportunity.

His team created short-wave converters that gave regular radio access to the shortwave unit. This meant people could tune in to any channel they wanted and listen.

As the converters grew in popularity, they made it to the “Blue Pencil” column, where Akio Morita read the article and was impressed by Ibuka’s work. He contacted his former colleague, and the two formed a partnership in May 1946 with $500 of borrowed capital, and the desire to conquer the world of consumer electronics.

It’s All Rice

If you’re thinking that this partnership would be the turning point for TTK and the enterprise will grow to unbelievable heights here on, think again because the journey of Sony is anything but expected.

The first official product of the company was an electric rice cooker – yes, really! And it was a great failure.

The idea for rice, which might sound absurd, came from the aftermath of the war. As money remained scarce, some people purchased the shortwave converter radios for cash while others offered rice. The partners had an idea: they would help consumers cook rice electrically.

Adding aluminum electrodes on the underside of the wooden cookers seemed to do the trick until it began ruining the rice – over or undercooking it.

The first product of the company was officially a failure, generating only $300 in profits on a turnover of less than $7000 in the first year. 

The next product was electrically heated cushions, which also failed miserably, and it seemed, Sony had yet to come up with its great breakthrough.

Key Takeaway 1: Observe and Improvise

The early years for the TTK team were filled with struggles: minimum capital, limited manpower, and a windowless workshop. On top of it, the initial products were failures, one after the other.

For an ordinary start up this would have been the end of the road. But TTK’s improvised strategy meant they were always on the lookout to cash in on new opportunities.

So, even though the rice cooker and cushion had not done well, they represented the company’s ability to understand the needs of the consumer and come up with unique, innovative designs, despite limited resources.

Not only did this approach help them survive, but it also laid the ground for future growth.

The Breakthrough That Placed Sony On The World Map

Thomas Alva Edison, considered America’s greatest inventor, was always open about his failures. He once said,

I have not failed. I’ve just found 10,000 ways that won’t work.

For Ibuka and Morita, the entrepreneurial journey of Sony was similar. There had been a multitude of failed products, one after the other. In fact, Ibuka had almost given up hope on the household appliances market, but Morita convinced him to innovate, create, and conquer.

It seemed then, that rice cookers and heated cushions were simply examples of products that did not work in the Japanese market. They were not failures, but a business’ trial and error to get their breakthrough – which they did in the 1950s in the form of a tape recorder.

Nine Hundred and Ninety-Nine Uses Of The Tape Recorder

After their tried and tested runs of home appliances, the founders decided to move away from the home-appliance market and towards the development of electronic items.

In 1949, a newly imported tape recorder by the Japan Broadcasting Corporation flooded the markets. While tape recorders weren’t a popular item in Japan at the time, Ibuka looked at the product and an idea clicked!

Using their power of innovation, the TTK team made two prototype tape recorders:

• G-Type : Used mainly for industrial purposes, these had a recording time of 60 minutes.
• A-Type : Created for household usage, these had a recording time of 30 minutes.

As the recorders were released in 1950, the demand for G-Type especially spiked as teaching aids. However, it is important to remember that the Japanese market wasn’t too fond of tape recorders back then.

So, what did Ibuka do? Innovate and strategize.

With a military background, Ibuka came across a U.S. military booklet. This was called “Nine Hundred and Ninety-Nine Uses Of The Tape Recorder”. Putting on his thinking cap, he came up with a marketing strategy of converting the booklet into Japanese and spreading it around.

As the Japanese consumer market became aware of the uses of a tape recorder, they flocked to secure their purchase, and soon, the sales were at an all-time high. The conversion of a simple booklet into an effective marketing tool enabled TTK to move out from their small abode, and into a building in Shinagawa. The journey up had begun.

The Transistor Revolution

After learning from the tape recorder experience, Ibuka knew he had to be vigilant of global electronic trends and new products that could have potential as a business opportunity. His observation, once again, proved key when he caught wind of a tiny technology called the “Transistor” in 1952.

Back then, consumer electronics were mostly based on vacuum tubes. Unfortunately, this technology was not only bigger in size, but it also consumed a considerably high amount of power. Consider this:

While a vacuum tube consumed an entire watt of electricity, the transistor merely required a millionth of a watt (precisely 1/1000,000 watt!) to function.

Ibuka immediately recognized the potential of this technology and knew it could pave the way for the future of his company if utilized correctly.

The transistor technology had been produced by Bell Laboratories but was up for licensing and usage by Western Electric. The problem – it had a $25,000 price tag. While this may not seem much today, back then it was worth a whopping 9 million yen , and obtaining the technology made the company go almost bankrupt.

Everything had been put on the line for TTK. But merely capital injection was not enough. The technology had been up and running in the U.S. for years, and so the founders knew they had to elevate their game.

The existing transistor technology had one shortcoming – its low power output. Morita channeled his physics knowledge and came up with an answer. While the Germanium in the transistor itself wasn’t too conducive, adding impurities such as Phosphorus improved its power considerably!

In this way, Japan’s first transistor radio was created and launched in the market in 1955 by the name “TR-55”. This radio was small, portable, and an immediate success.

From The Japanese TTK To The American Sony

Radios were not a new item back then. An American company called Regency Electronics had already launched their transistor radio a few months prior to the TR-55, but Sony’s product was superior in quality and power.

For the company, this opened the doors to the West. Morita and Ibuka traveled to the U.S. to market their transistor radio and expand their consumer base beyond borders. But they faced a roadblock.

The Americans thrived on and purchased according to familiarity, and Tokyo Tsushin Kenkyujo, or its short form Totsuken, simply did not have the charm they liked. Instead, it was difficult to pronounce and seemed alien.

This led to dropping sales – something the founders were afraid of. Therefore, it was decided to change the name of the company to an easier form – Sony.

This came from the Latin word “ Sonus ”, which translates as “sound”. Since the company was dealing in radios, it only seemed befitting to choose a name that conveyed what it stood for. In addition, Sony also relates with “ son ”, a word in Japanese culture that hints at young adults who strive to be innovative and create new things.

Therefore, 1955 was also the year when the company changed its logo to depict the new name – Sony. A new global brand identity placed Sony on the world map, kickstarting its success.

Ket Takeaway 2: Connect With The Customer

Sony’s tape recorder was a fabulous invention, but the Japanese market didn’t have the awareness or demand. Using a simple already-published booklet, the company upgraded their marketing and conveyed to their customers how useful their product was.

Similarly, the TR-55 was an exceptional product. But would not sell in the U.S. due to the company’s difficult name. The founders were agile and changed the name of the company to something that would resonate with the new demographic.

Hence, along with developing useful products, Sony focused its marketing and branding techniques to make its offerings relatable and meaningful for the customer, in turn boosting its sales and outreach.

The Apple Of Its Day – A New Age For Television and Music

A small company can specialize in one product. However, if a business aspires to become a force in the world, history narrates diversification of product portfolio to be key.

Let’s take the example of Panasonic, Apple, Microsoft, or Nestlé. Belonging to a different set of industries, these businesses have become global conglomerates, churning hundreds, thousands, and even millions in revenue by the minute.

What do they all have in common? A diverse range of products.

Morita and Ibuka understood the need for continuous innovation, development, and advancement, paving the next three decades with several meaningful products and collaborations; turning the Made In Japan tag into today’s Made In China .

The Pocket Radio

Hindered distribution channels in the U.S. meant that the TR-55 still did not hit local markets despite the change in name. However, this did initiate a movement of change towards small, portable radios.

Therefore, when Sony released the TR-63, it had hit the bull’s eye!

These radios were advertised to be pocket-friendly, portable, and incredibly handy. As a result, people flocked to the markets and this transistor radio became a breakthrough product. From selling roughly 100,000 units in 1955, the count went up to a whopping sale of 5 million units sales towards the end of 1968.

But do you want to know something shocking?

The unique selling point of the radio was its pocket-friendliness, when in fact, the radio was not able to fit in standard pockets at all! When Sony realized that the radio didn’t fit, they customized the pockets of their sales staff to align to their marketing campaign, this established results and brought in sales.

Elevating The Media Game

It seemed that radios were just the beginning. Soon, the research and development team at Sony was making waves by coming up with unique products.

• TV8-301 : A small, portable transistor television was produced in 1960 that was considerably smaller and handier than the usual, large, vacuum-using televisions back then.
• Sony Trinitron: If there is one old Sony product that you might see today too, it is the Sony Trinitron. A giant leap from the black-and-white media technologies, the Trinitron televisions were bright, colored, high-quality, and truly the first of their kind. While they did require a heavy investment and weren’t launched until 1968, the founders found their risks paid off when this television featuring premium picture quality became an instant hit!

As consumers of foreign markets began to hear the might of Japan’s Number One , Sony’s clientele grew. What began from Japan had now headed towards the West and wasn’t stopping any time soon.

The Era Of Digital Music

Once Sony had made its name in the radio and television industry, it decided to step up its game by making an entrance into the world of music.

For this feat, they chose to indulge in a joint venture with CBS Inc., forming CBS Sony Records. They produced vinyl records and released the first Video Cassette Recorder (VCR) in 1971. As pioneers of such tech, Sony won an Emmy award for its excellent product.

This move was directed by none other than Norio Ohga, the same man who had once worked for Opera and criticized the early tape recorder of Sony. The founders immediately knew they wanted a critical man like him by their side. This man would take Sony into the future by later becoming president and chairman of Sony.

In 1988, Sony bought all the shares of CBS Sony Record to become its sole owner. After multiple collaborations with famed singers like Michael Jackson, it comes as no surprise that today, Sony is the world’s biggest music publisher with revenue reaching as high as $3.2 billion a year.

Let The Format Wars Begin

Sony paired with Matsushita Electric (now known as Panasonic) to create a videocassette format in 1969. But the expensive nature of the product, and therefore lack of sales made them part ways. However, both of them continued to work on their formats.

The result: One of the fiercest format wars ever.

Sony created their format in 1975, called Betamax, a product of supreme quality that could record up to 1 hour. Despite being the best in the market, it suffered at the hands of the VHS, the format developed by Matsushita. The VHS was cheaper and benefitted from the goodwill and massive clientele of Matsushita, generating a much higher turnover.

Yet again, Sony applied its policy of observation and conquest and resorted to creating VHS machines after the stiff competition.

Walk And Listen, Man!

If you’re thinking the decade’s research and development was over, and Sony would continue producing its usual products – think again!

It seems the thinking hats of the Sony team were always at work, even when they weren’t really trying to innovate. For example, the Walkman, a portable stereo cassette player that became one of the most popular players of all time, was actually inspired by Norio Ohga’s desire to listen to music easily as he walked.

The idea clicked immediately: A cassette player that could fit in your pocket, paired with a pair of headphones that had impeccable quality.

Since the headphones had already been in production, the idea took merely 5 months for execution, and on the 1st of July 1979, Sony had released the Walkman, which sold over 385 million units ! As a never-before-seen product, the Walkman was a phenomenal success, despite being priced at $150 !

Later, Sony paired with Philips to create the compact disk and invent the CD player in 1982. ushering in the transition to the era of digital music.

Stepping Into The Film Industry

If you are fond of watching movies, it is impossible to have not come across one spearheaded by the Sony team. This is due to Sony’s diversification in the late ‘80s.

In 1989, Sony bought Columbia Pictures Entertainment for $3.4 billion , a bold move indeed considering the acquisition already had a debt of $1 billion. However, this decision gave Sony access to an extensive library of films and a stronghold in the U.S. entertainment industry and its distribution.

With time, it seems the decision was the right one; the company has rolled out blockbuster movies like the Da Vinci Code, Skyfall, and Spiderman series since then; one after the other.

Key Takeaway 3: Never Stop Innovating

Innovation is key to sustaining success. Sony faced fierce competition from other established companies as well as foreign policies.

However, its main ingredient of success remained its powers of innovation – from the VCR to VHS and the mighty Walkman. The company realized that if one product range or service was doing well enough today, its demand and popularity could soon die down in a competitive and dynamic world.

Therefore, to conduct successful business continuously, it needed to innovate and update its products to stay ahead of the competition.

A Company Of Parallels: Financial Services, Gaming, and Mobiles

By the end of the 1980s, things were going great for Sony. It had expanded to newer markets, had a strong grip on music, and had a research and development (consuming 9% of sales ), that continued to work its magic.

Sony posted record earnings of $384 million in 1990, which was a massive 35% increase from the earlier year. However, like all business cycle booms are followed by slumps, the recession in the early ‘90s produced a considerably challenging environment for Sony.

How the company maneuvered its way through such business scenarios, however, is an entrepreneurial inspiration.

Revolutionizing The World Of Gaming

The company had decided to venture into video gaming by the late ‘80s and availed the help of gaming giant, Nintendo Co. Ltd. in this new endeavor. However, the deal fell through in 1992 when Nintendo backed out, and Sony was left on its own.

Did Sony then back down since gaming was a completely new horizon? Absolutely not! The company continued to work on the production of their first game console, and merely 2 years later, the Sony PlayStation was launched in the Japanese market.

An immediate success, it sold more than 100,000 units on the first day, and roughly 2 million by the end of its first 6 months. The console was released in the U.S. a year later, and the sales tally continued to climb. Sony had revolutionized gaming, and the world was about to find out.

Despite Morita’s passing in 1999, innovation did not stop at Sony, and the PlayStation 2 was released in 2000, becoming one of the biggest hits among gaming consoles. By today, this product has sold nearly 158 million units ; and continues to be headstrong, bringing in newer variations such as the introduction of Virtual Reality. Currently, the PlayStation 5 is on the market, with further editions in the works.

Getting Mobile

Sony’s next step – conquering the mobile market. In 2001, the company joined hands with the mobile division of Ericsson with a 50-50 share. This came to be known as Sony Ericsson.

Their first product, a rounded-designed phone called the T65 was well received by the public. In 2012, the company was bought and renamed Sony Mobile Communications, this time competing in the smartphone industry with Sony Xperia. However, the mobile market perhaps wasn’t the right trajectory for Sony. With decreasing sales and an almost non-existent presence today, while the start of Sony Ericsson was good – the steam died down.

All The Money Lay In Financials

In 2001, Sony made another unexpected move. It created the Sony Bank. The idea to step into the financial market went back to the 1950s , when Morita had visited the U.S. In Chicago, he was surprised to see the magnitude of the Prudential Building and was in awe of how life insurance companies and financial institutes could build similar facilities. There and then he had decided – Sony would venture into banking one day.

Although Morita’s wish came true after his death, the Sony Bank was created as an online bank facilitating deposits, foreign exchange trading, etc., and continues to turn the wheels of revenue for Sony.

The OLED TV

Staying true to their innovative streak, Sony created the world’s first Organic Light-Emitting Diode television in 2007 called the XEL-1 .

Also, one of the thinnest televisions of the time, the OLED TV had supreme picture quality, consumed less energy, and was incredibly lightweight. It was a success, receiving mainly positive reviews and selling all over the globe including Canada, Russia, Australia, Europe, and the U.S.

A few years later, Sony also released its Ultra-High-Definition TVs (4K), with exceptional pixel and picture quality.

Key Takeaway 4: Become A Risk-Taker

Sony’s experience in becoming a conglomerate teaches that diversification gives a mighty push to a business striving towards success. Although Sony began its journey with electronics, it expanded and ventured into gaming, financial markets, mobile phones, the film industry, and beyond. While some decisions may not have been the best, others – such as the PlayStation – were a risk that paid off well.

In fact, it wouldn’t be wrong if one was to say that the PlayStation is keeping Sony afloat today!

Sony Today – The Battle Uphill Continues

Over its journey spanning over seven decades, Sony has faced its fair share of challenges and setbacks - from the rice cooker to Sony Ericsson. However, the company has always been able to fight back and persevere. This is why, even today, it is counted amongst the most successful conglomerates in the world. By continuously reinventing itself to cater to people’s needs, Sony has evolved into a company that drives the world forward.

Sony is on a purpose to “fill the world with emotion, through the power of creativity and technology.” This is evident from its business centered around people to support and connect them.

Navigating The Pandemic

For many businesses, the pandemic proved to be a rather difficult storm to see off. Initially, Sony too had to bear a huge decline in operating profits caused by the COVID disruption.

But soon, the company found a way to not only stay afloat but take their business to the next level. This was mainly backed by their gaming and entertainment industry.

With people staying indoors, they had more free time and looked towards Sony’s trademark products, such as the PlayStation 5 - over 10 million consoles sold till now – online streaming options, and music production.

Thriving On Digital Platforms

Thus, seeing the huge potential in digital entertainment, Sony has shifted its focus from consumer electronics to entertainment and gaming. Plus, with a long-established reputation and platform in these industries, the change is one the company is fully ready to embrace.

Very recently, the company has completed its acquisition of anime-streaming site Crunchyroll for a whopping $1.175 billion . Although the investment seems huge, it provides Sony access to over 120 million customers spread out in around 200+ countries.

That’s not all though. Sony has also struck deals with streaming platform giants Netflix and Disney Plus to offer Spiderman movies and content.

Key Takeaway 5: Prepare Products For The Future

Good companies provide their customers with products for the present. But great companies have the eye to look beyond, understand what the future holds, and ultimately, lead the way in the industry. Therefore, if a business wants to be a growing brand in the future, it must visualize and plan in the present.

Sony knows the world is changing and people are consuming content digitally. With the resources and platforms it has, the company is fully amped to offer its customers online streaming content and transform the gaming industry.

Strategic Takeaways

Growth by numbers.

Here are our key takeaways from Sony’s inspirational, roller-coaster journey, which of course, continues to roll.

Adaptability Enables Growth

With a capital of merely a few hundred dollars and a handful of men on the team, Sony was tight on resources from the start. Then, it continuously encountered obstacles, such as failed products, branding difficulties, and a rolling out pocket radio too big for a pocket. 

But in every situation, Sony did not take a step back. Instead, it adapted to its circumstances and was not afraid to change or take risks. They pivoted their products, marketing strategies, and even brand name, to find a way to move forward.

As a result, slowly but steadily out of a one-room facility to a building, and now – into an industry giant with a multitude of branches.

Create Your Product’s Worth In The Customer’s Mind

Some of Sony’s most successful products were those that struggled initially due to a lack of customer awareness. Hence, the company implemented various marketing strategies to make its product relatable and establish its unique offerings.

The transistor tape recorder wasn’t considered much until the booklet was introduced as a fantastic marketing strategy. The TR-55 was a great invention, but a result-oriented distribution strategy enabled its successor, the TR-63 to become a phenomenal success. The gaming expansion of Sony was difficult with Nintendo’s backout, but with the image they were able to curate, PlayStation outperformed any other Nintendo or Sony product.

Therefore, Sony’s growth depended on creating the best technology or appliance and informing or enticing its customers of the value it added.

Creativity & Innovation Are The Guides To Success

Sony is one company that realizes what its customers want or need before even the customers themselves know it. This powers continuous creativity and innovation. For instance, the Walkman – a portable cassette player – was a unique gadget people hadn’t seen before. Yet, the idea of having a music player in your pocket connected to headphones was something millions resonated with.

Thus, with an innovative approach, Sony captured an audience and made its mark with a product that at the time did not have a close competitor. Throughout their journey, from the CD player to the PlayStation, Sony’s first-of-their-kind products have been a key factor in the company’s success.

You Need To Take Risks To Minimize Risk

The risk-taking ability and drive of a growing company are what sets it apart from the ordinary company. In order to survive and thrive, Sony did not put all its eggs in one basket. It explored various industries, such as gaming, films, and financial services, diversifying their product portfolio so in case they were not doing well in one sector, others were facilitating the company’s growth.

So, while they were taking risks by leaping outwards of their industry, they were also minimizing the risk of becoming over-dependent on specific products or services. Thus, if consumer demands changed, new competitors entered, or there was a major shock in the market, their business did come tumbling down all of a sudden.

Its heavy investments in anime-streaming Crunchyroll and Disney Plus and Netflix show that the company is ready to divert its resources towards what customers will be demanding more increasingly in the future. Thus, a company focused on growth, like Sony, always looks into the future, keeps itself on top of trends, and embraces innovation and technological changes.

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Case Study - Sony

Sony Corporation is a leading manufacturer of audio, video, imaging, game, communications, key device and information technology products for the consumer and professional markets. Keiko Shiga from Sony’s Quality & Environmental Department tells us more about Sony's science-based targets here.

With Sony's music, pictures, computer entertainment and online businesses, it is uniquely positioned to be the leading electronics and entertainment company in the world. Sony recorded consolidated annual sales of approximately $72 billion for the fiscal year ended March 31, 2016. We spoke to Keiko Shiga from Sony’s Quality & Environmental Department about the company’s science based targets.

Why did you decide to set a science-based target?

We didn’t actually set out to set a science-based target in response to a call from the Initiative. We already had “Road to Zero”, our global environmental plan for achieving a zero environmental footprint by 2050, which we announced in 2010, and we were working towards this. We knew our “Green Management” mid-term targets had to be ambitious in order to put us on track to achieve the radical reduction in emissions necessary by the middle of the century.

We are part of WWF’s Climate Savers Program and we were speaking to them about our targets for 2020 and they said: ‘these look science-based.’ We didn’t realize this but agreed to submit the targets for a quality check and they were approved! We successfully hit our 2015 targets for climate change, and are now on track to delivering more reductions.

We believe it is essential to act on climate change and to do so quickly. It is central to our identity as a company that seeks to make a connection with people. Our customers don’t just look for functional value but deeper and more elusive emotional value. In Japanese culture, we call this ‘kando’. Being environmentally aware and responsible is one of the most important ways to achieve this.

What was the process for setting and implementing the ambitious targets?

The basic foundation of the Green Management mid-term targets was developed by the Quality & Environmental Department, involving business groups and relevant divisions in the discussions as needed. We also talked with some stakeholders about their expectations for Sony and benchmarked what other advanced companies are doing for environmental initiatives. Then we took it to the Group Executive Committee at one of their monthly meetings.

The CEO was instrumental in getting other executives on board. For him, it was central to what Sony is and does.

Without his backing it would have been harder to get other leaders on board.

Across the company, people are behind the targets and agree with the idea that we have to radically reduce our emissions. We provide e-Learning on Green Management mid-term targets to keep awareness and momentum high. Of course, in the shorter-term the specific targets and reductions require negotiation and explanation.

What changed as a result of having an official quality checked science-based target?

In some ways not much changed. We were already working towards the Road to Zero, and so the internal processes were in place to deliver this. However, having targets approved by a global initiative, as being science-based and in line with the level of ambition necessary to prevent dangerous climate change gave us more confidence and greater authority. This was particularly important in the context of COP 21 and the Paris Agreement, which saw an increase in awareness around the need to act.

What benefits do you anticipate or have you already reaped from having a science-based target?

This is something our customers want. It is important for our brand value. We need to fulfill our mission to provide the products customers want. And because these products are more energy efficient we are also helping to reduce global emissions, so it’s a win-win.

It puts us in a good position vis-à-vis our competitors, and also regulators. It means we meet and try to surpass what stakeholders expect of us, keep offering the best to our customers, and in doing so, get ahead of what other companies are doing. We also save money, because of energy efficiency.

Having a science-based target helps keep us on track. It means we know what we need to do in the short and medium term to meet the longer-term vision. And it also helps convince people internally that we are doing this in a logical manner. By being part of the global initiative we know we are part of a bigger movement, and that if we all work together we can deliver the reductions necessary.

Did you encounter any challenges?

Sony’s long-term vision implies a radically new way of doing business. Achieving this vision will demand changes beyond the company’s control and require collaboration with key stakeholders, including shareholders, employees, consumers, suppliers, governments and civil society.For example, we have targets for our supplying partners to meet, which is a challenge. We will have to work with them to convey the importance of reducing emissions in the supply chain. We cannot do this alone and building partnership will be key to get others to act.

Another challenge is that customers want bigger products in categories like TVs, with more vibrant displays, but they also want energy efficiency and lower emissions.

We have to try hard to deliver both. We also have to work out ways to ensure that our emissions keep going down even as the number of products our factories produce goes up.

We have absolute rather than intensity targets, so we have to cut emissions even when we grow. We will have to continue to innovate and work very hard to hit targets but I am confident we will do it – as we always have in the past.

Can you give some examples of innovations that have occurred as a result of the targets?

We have developed new LED displays for our TVs, which are more energy efficient, without compromising on picture quality. For example, the smart screens in the 4K BRAVIA™ TV X85B series adjust LED backlight brightness frame by frame to avoid wasting energy, and use 20% less energy than previous models (compared to X85A series in standard viewing mode).

We have also developed our own recycled plastic, SORPLAS, which is made from up to 99% recycled material and saves up to 80% CO2 emissions during manufacturing. This is used in many of our products and we are now also selling this outside the Sony Group.

Our environmental targets apply to all Sony companies – not just electronics, but also entertainment companies such as music and motion picture businesses. These divisions have the same emission reduction targets for operation, but they also have their own specific target – to “raise awareness and inspire action on sustainability from over 500 million people through entertainment”. For example, the main character from our film Angry Birds has become a UN Ambassador for the International Day of Happiness and is part of a campaign for greater sustainability. The idea is if the earth is happy then Angry Bird is happy. These sorts of creative innovations might not directly drive down emissions but they are really important to drive engagement, which is essential for action at the scale required.

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About The Author

Stefan H. Thomke

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Case Study: Sony

This scholarly case study looks at Sony's participation in the video game industry. Sony provides an example of marketing strategy and strategic positioning of its products in a highly competitive global environment. It illustrates the need for industry competitive data analysis, demographic segmentation, product features, product positioning, and the magnitude of marketing decisions faced by multinational companies. 

In November 2006, with the launch of the Sony PlayStation 3 a mere weeks away, Sony Corporation's CEO Sir Howard Stringer reflected on the past 30-year history of the video game industry, while crossing his fingers that the PS3 would have a successful launch in an increasingly cut-throat industry.

"The stakes for next-generation hardware leadership are enormous. It's about owning the set-top box that may ultimately connect the living room to the Internet".   – Warren Jenson, CFO, Electronic Arts (Financial Times, May 11, 2005)

Sony Corporation Case Study

Company overview, how internal and external factors may affect the firm, swot analysis.

Sony Corporation (Sony) is one of the leading electronics manufacturing and distribution Companies in the world. The company deals with the design, development, manufacture, and sale of products such as communication products, televisions, video and audio products among other electronic components (Städtler, 2011). Apart for this entity, it also offers insurance services through its subsidiaries in Japan. Other business operations include advertising agency and network services.

The company’s operations fall under six reportable segments. They include networked Products and Services; Music; Consumer Products and Devices; Pictures; Financial Services and others. It also operates its subsidiaries across 200 countries inEurope, North America as well as Asia. The Company’s headquarters is in Tokyo, Japan. Its major industry competitors include Dell, Creative technologies, LG, Samsung, Fujifilm Holdings, Philips, Pioneer Corporations, Hitachi, and Casio Computers (Städtler, 2011).

The internal factors are those whose origin and control are within the capacity of the firm. They include strengths and weaknesses. The strengths within Sony shall be material assets that will boost its performance if well administered. This firm may achieve strategic objectives through utilization of its strengths.

On the other hand, external factors entail those influences that emanate from outside the firm. They come as opportunities and threats. Threats are harmful hence; they will impair on Sony’s growth objectives. Such threats may come in form of strong brands, imitation, and changing customer needs.

On the other hand, opportunities are external factors that the business can utilize in achieving its objectives. Threats also fall under the external fundamentals that could damage performance of Sony Corporation (Jalan, 2004). Analysis of the company using this tool would be beneficial in diagnosing the external and internal environments in which Sony operates. As such, the information can steer growth and progress within the limits of its goals and aims.

It relates the firm’s performance ratings relative to a laid down aggregate score. The tool employs a factor approach is its analysis of the external opportunities as well as threats in which numerous factors relevant to the firm are established. Allocation of weights depends on the magnitude of their influence on the firm’s performance in order to develop their relative weights (Städtler, 2011). The weights may take ratio or percentage form.

The above analysis of 3.35 aggregate weight score in Sony’s EFE Matrix indicates that it is responding well in respect of its threats and opportunities in the electronics industry.

The analysis depicts the external environment in which Sony operates, and how it is doing relative to the industry participants (Jalan, 2004). It is therefore, important to note that strategic efficiency has capitalized on the opportunities presented by both environments. On the other hand, the company has done well in monitoring and dealing with the threats that may deter its progress.

The ratings used above for individual factors are calibrated on the scale of 1to 4. The total maximum score obtainable by any industry participant is four. The weights and ratings employed in the EFE Matrix demonstrate the effectiveness of a Company’s strategic framework (Jalan, 2004). Below is the interpretation of the weighted scores in order to show the outcome of the performance obtained by Sony.

4 = Excellent Response to factors; 3 = Above Average; Average Response and 1 = Poor Response.

Internal Factor Evaluation Matrix (IFE Matrix)

The IFE Matrix is an audit tool of an organization. This strategic management tool helps the management to evaluate a company’s internal environment in relation to its threats and strengths.

This tool summarizes the strengths and weaknesses of Sony Company in order to observe its performance from the internal space (Städtler, 2011). The methodological approach used in the design of the IFE is similar to that used in EFE. The difference between the two is that IFE deals with the internal factor analysis whereas EFE examines the performance of a firm with regard to external.

Sony’s weighted score of 3.05 represents an average performance and response to its internal factors influencing its operations. It shows a well strategically managed position in a bid to capitalize on the prevailing strengths while at the same time cushioning itself against its weaknesses (Jalan, 2004).

Interpretation of the weights

• Sony has the capacity to develop a high-quality product portfolio for its customers.
• historical results and record show that the company is reputable in the market
• Advanced and technological capacities capable of handling multiplicity of product lines present Sony with a rare opportunity for success. The company engineers have the knowledge of the previous failures and are capable of making up for the lost glory.
• The competitiveness of the company is good compared to its market rivals
• The ability to expand its market share and produce a wide range of products
• Prevailing price wars in the industry are a major undoing to Sony. The company has enjoyed the confidence of being a price leader the recent past, but the emergency of strategic price wars poses a potential threat (Jalan, 2004).
• Minimal diversification in its product portfolio is a critical scenario that may hamper Sony’s strategic growth. Retarded growth of its sales depicts a great slow down in its expansion plans.
• The management of the company seems to have no proper strategic management plan to forge the business ahead.
• Lack of proper formula of communication within the functional departmental network has led to reduced productivity.

Opportunities

• Its originality and creativity is an essential asset for its potential growth. Its reputation may pose a significant platform for its progress.
• Its customer led pricing strategies aimed at winning market loyalty is a huge milestone opportunity presented to it (Jalan, 2004).
• Its technological strength may render its expansion plans possible in order to capture other income streams.
• Strong and robust supply chain- marketing and advertising departments have stepped up their strategies to create new market niches for its expanding product portfolio through strategic partnerships with leading chain suppliers.
• Competitors- The industry is rife with competitors who are equally powerful. They are market participants with strong brands, and they include Samsung, Fujifilm, and LG among others.
• Market surveys and researches indicate that imitation of its products is on the increase. This product proliferation poses a huge threat on the originality of products and customer loyalty developed over many years. This trend occasioned by the emergence of new and cheaper technologies from the Asian region whose proponents have interfered with the brand (Jalan, 2004). Lack of adequate and comprehensive strategy implies that most of its rivals are doing better because their product penetration is doing well.

Summary of SWOT matrix (Analysis)

The SWOT analysis above demonstrates how Sony has been able to nurture is ability to gain a competitive advantage in the market. Although weaknesses and threats are inevitably present, their effects have remained detrimental due to capitalization on opportunities and strengths inherent within the firm. Some of the significant factors greatly responsible for this milestone include a robust and sustainable technology, price leadership, and innovation.

Jalan, P. K. 2004). Industrial sector reforms in globalization era . New Delhi: Sarup & Sons.

Städtler, R. (2011). Strategy Coursework – Sony Corporation . Norderstedt: GRIN Verlag.

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2024, February 28). Sony Corporation. https://ivypanda.com/essays/sony-corporation/

"Sony Corporation." IvyPanda , 28 Feb. 2024, ivypanda.com/essays/sony-corporation/.

IvyPanda . (2024) 'Sony Corporation'. 28 February.

IvyPanda . 2024. "Sony Corporation." February 28, 2024. https://ivypanda.com/essays/sony-corporation/.

1. IvyPanda . "Sony Corporation." February 28, 2024. https://ivypanda.com/essays/sony-corporation/.

Bibliography

IvyPanda . "Sony Corporation." February 28, 2024. https://ivypanda.com/essays/sony-corporation/.

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Case Study: Sony

Description.

This scholarly case study looks at Sony's participation in the video game industry. Sony provides an example of marketing strategy and strategic positioning of its products in a highly competitive global environment. It illustrates the need for industry competitive data analysis, demographic segmentation, product features, product positioning, and the magnitude of marketing decisions faced by multinational companies. 

Table of contents

Learning objectives, the evolution of home video games, the rise and fall of atari, the rise of nintendo, sony enters the arena, fragmentation and consolidation, console wars re-ignite, different strategies for different audiences, public backlash, reason for optimism.

In November 2006, with the launch of the Sony PlayStation 3 a mere weeks away, Sony Corporation's CEO Sir Howard Stringer reflected on the past 30-year history of the video game industry, while crossing his fingers that the PS3 would have a successful launch in an increasingly cut-throat industry.

"The stakes for next-generation hardware leadership are enormous. It's about owning the set-top box that may ultimately connect the living room to the Internet".   – Warren Jenson, CFO, Electronic Arts (Financial Times, May 11, 2005)

To illustrate how network externalities and complementary assets affect strategy and competition.

Sony's Battle for Video Game Supremacy

As Sir Howard Stringer, CEO of Sony Corporation, settled in for his flight back to Japan from New York, a number of pressing issues occupied his mind about Sony's future. At the forefront, Sony's next generation video game console, the PlayStation 3 (PS3), was set to launch worldwide on November 17, 2006, a mere week away. Despite PlayStation 2's (PS2) dominance in the last generation of gaming consoles, Stringer understood that past successes were no guarantee of future success in the intensely competitive game industry.  

Microsoft had launched the first volley in the last console war by releasing the Xbox 360 in the fall of 2005. Within one year, almost 4 million Xbox 360s had been sold worldwide, giving Microsoft a significant head-start in the race for market dominance. Meanwhile, Nintendo, a competitor thought to be dead due to the lackluster sales of its previous console, the Nintendo Gamecube, had generated significant "buzz" around its new entry, the Nintendo Wii (pronounced "we"). Targeting more of a mainstream audience than Sony and Microsoft, the Wii, scheduled to launch just two days after the PS3, posed a serious threat to Sony's market share, particularly due to its $249.99 retail price, half the price of the PS3.  

Stringer also knew that there was much more at stake than winning the console war. The next generation of the DVD market was at stake as well. In addition to being a gaming console, the PS3 was a Blu-Ray disc player. Blu-Ray was a next-generation optical disc format that held more than five times as much information as DVDs and allowed high-definition television (HDTV) owners to watch movies with an unprecedented level of image quality. The PS3 was, in effect, the "Trojanhorse" for the Blu-Ray format. 

Sony found itself in an intense standards war with Toshiba, a well-established Japanese electronics manufacturer, that, in partnership with Microsoft, had developed its own digital video standard, the HD-DVD that retailed for $500. The battle lines were being drawn as companies including HBO, New Line, Intel, and Sanyo aligned themselves with HD-DVD and Fox, Disney, MGM, Lionsgate, Apple, Dell, Pioneer, Panasonic, Philips, HP, and Sharp sided with Blu-Ray. Warner Brothers and Paramount were supporting both formats. 

While winning the digital video format war could prove to be extremely profitable for Sony, the battle would be hard-fought. Sony, meanwhile, had had some disappointments in the past in establishing its own technology formats. In the mid 1970s, it launched the BetaMax, a home videocassette tape recording format which was quickly out-marketed by JVC's VHS format largely due to the fact that VHS tapes held more taping capacity (two hours) compared to Betamax's one hour. In 2003, Sony attempted to establish its own music and movie playing format by introducing the Universal Media Disc (UMD) for its portable gaming device the PlayStation Portable (PSP). Initial PSP units were sold with the UMD version of Spider-Man to highlight the flexibility of the device. But UMD never took hold, in large part due to the lack of UMD titles and the number of other devices that played UMDs.  

Stringer was well aware that replicating the PS2's success would not be easy. The price of the PS3 would be a significant barrier to widespread penetration. At $599, the PS3 could no longer be considered a toy and would not likely be an impulse purchase for the majority of consumers. Although compared to stand-alone Blu-Ray players, which sold for $900-$1,000, the PS3 could be considered a bargain since it could play games as well including some older generation PlayStation games. 

By all accounts, since entering the video game industry in 1994, Sony's ability to capture the attention spans of child and adult gamers had been impressive. However, as technology became more varied and versatile, so did consumer tastes. Stringer knew it was critical that Sony kept consumer appetites both satiated and begging for more.  

During the 30-year history of video games, the industry had experienced significant changes not only in who played video games - the average computer and video game player in the United States was 33 years old while the average age of the most frequent video game purchaser was 40 years old - F2F but in how they were conceived, developed, priced, and ultimately sold, all of which had significant implications for Sony as it prepared for the launch of the PS3 and the competitive response that would inevitably ensue. (Figure 1 breaks down video game players by age and gender). 

Figure 1 Video Game Players by Age and Gender, 2005  

Microsoft, Nintendo, and Sony would all be launching their new generation of video game consoles at a time when the industry was ripe for a new growth spurt. In 2005, the U.S. video game and PC game retail industry - including the sales of portable and console hardware, software and accessories, and PC game software - generated nearly $10.5 billion in revenue in 2005, a 6% increase over 2004 (Figure 2). Of this amount, software sales totaled $7 billion (229 million units), a slight drop from the $7.4 billion generated in 2004.

Figure 2 Video Game Software Sales (in US$ and units) 

The software sales decline was mostly due to the industry's transition to the next generation of gaming hardware. Those consumers interested in purchasing a gaming console were willing to hold off a year until the next generation had arrived, while those with current generation consoles such as the Xbox and PS2 were reluctant to purchase new software for a system that would soon be outdated. Most industry forecasts, however, were very optimistic, with firms such as PricewaterhouseCoopers estimating that the industry would grow to $46 billion by 2010 (11.4% CAGR).

T he industry had traveled leaps and bounds from the days when Atari was providing U.S. households with the newest and greatest inventions in electronic entertainment. 

In 1966, an engineer at Sanders Associates, a small New Hampshire-based electronics company, developed Odyssey, the first home video game system. A ball-and-paddle game that could be played on a TV set, the Odyssey achieved limited commercial success. Its successor Pong, however, did extremely well in arcades and the home market. Nolan Bushnell, founder of Atari, oversaw the development of Pong and introduced the home version in 1975. Atari sold 150,000 copies of Pong in the first year. 

Electronics manufacturers quickly saw the benefits of producing a console that could play multiple games. In 1976, Fairchild, a U.S. electronics company, developed the first console of this kind naming it the Fairchild Channel F. Atari quickly followed suit with its 2600 VCS ("video computer system"). In late 1977, Atari released the VCS for $199 with a library of nine titles. Each cartridge cost $5-$10 to manufacture and retailed for $25-$30. 

By 1979, many other electronics and toy companies were entering the home console market including Mattel, Coleco, RCA, and Philips Electronics. Despite the new entrants, Atari represented two-thirds of the home console market in the United States. Home versions of hit arcade games such as Space  Invaders and Asteroids grew the game industry into a $3 billion business by 1982.  

By the end of 1983, however, the industry had collapsed. The market had been saturated with multiple consoles and poor quality software, killing consumer appetite for games altogether. In one notable example, Atari developed E.T., a game based on Steven Spielberg's hit movie by the same name. With only one month to deliver a game in time for the holiday season, the development team created an extremely poor title. Atari took such an enormous loss on E.T. due to unsold inventory and a large licensing fee that it ended up dumping five million of copies into a landfill in New Mexico. In 1983, Atari posted a $536 million loss and the company was sold at a substantial discount in 1984. The video game market was moribund for several years after the collapse until Nintendo came and took the U.S. market by storm. 

Kyoto, Japan-based Nintendo began as a playing-card manufacturing company. After diversifying into various kinds of electronics in the 1970s, Nintendo entered the home video game market in Japan in 1983 with its Famicom system. In an effort to avoid the quality issues that had plagued other game consoles, Nintendo focused on producing fewer, but higher quality games. The Famicom could display 52 colors at a resolution of 256x240 pixels, superior to the competition of the day. Launched at 24,000Y ($100), the Famicom cost 50% less than the closest competitor.

All games that were produced for the Famicom (known as the Nintendo Entertainment System in the United States) had to go through Nintendo's approval process in order to receive the Nintendo "Seal of Quality". A security chip was installed into every console to ensure that only Nintendo-approved games could be played on the system. Manufacturing of the Famicom was subcontracted out to numerous companies. Wary of giving any one manufacturer too much information about the overall production process, Nintendo used up to 30 different suppliers and completed final assembly of the system at its own production facility.

Due to its popularity, Nintendo licensed out the development of games. Nintendo charged licensees 20% of the 6,000Y ($30) wholesale price for every game sold. In addition, licensees had to pay the manufacturing costs of the system in advance, with a 10,000 unit minimum order. Once Nintendo entered the U.S. market, in 1985, the minimum order was raised to 30,000 units. Nintendo also added an exclusivity clause that prevented licensees from producing games on competing consoles for two years. Companies such as Namco, one of the first licensees, complained that Nintendo's monopoly over the market was hurting the industry, but eventually backed down and agreed to Nintendo's terms.

Nintendo had a tight grip on retailers as well, requiring them to place orders, take delivery, and pay in a matter of months, as opposed to the year time-frame they were used to. The company also exercised strict inventory management, quickly removing games that were not selling well and, at times, restricting supply to maintain the appearance of scarcity. Atari filed a number of lawsuits against Nintendo contending the company used monopolistic practices to shut out competitors including withholding merchandise from retailers that sold competitors' products or attempted to discount the price of the system.

By 1990, with hit titles such as Super Mario Bros. and The Legend of Zelda, Nintendo represented more than 90% of the U.S. home console market. Approximately 30 million NES units had been sold, about one for every three American households.

Nintendo's next system, the Super Nintendo launched in September 1991, did not capture the market like its predecessor. Super Nintendo's lack of backwards-compatibility prevented Nintendo from taking full advantage of its existing catalog of games. Meanwhile, Sega, another Japanese home console manufacturer, had successfully entered the U.S. market two years earlier with the Sega Genesis console and effectively fought Nintendo to a draw. Strong internal game development at Sega coupled with relatively favorable terms for software licensees (in comparison to Nintendo) paved the way for an extremely competitive library of titles for the Sega Genesis.

By the mid-1990s, Sega was the least of Nintendo's worries as Sony entered the video game market with a bang.

Believing that a three-dimensional (3D) game could provide a more immersive experience than a traditional two-dimensional (2D) game, the Sony PlayStation, launched in 1994, was designed as a fully three-dimensional machine. Ken Kutaragi, the lead architect for the PlayStation, believed game players were eager to navigate 3D environments that were more life-like than 2D, side-scrolling games such as Super Mario Brothers. Ready for the jump in complexity, gamers rushed to purchase the PlayStation. Within two years of launch, PlayStation revenues reached $700 million with profits of $70 million.

Sony opted for the compact-disc format instead of the traditional cartridge format that Nintendo historically utilized. CDs held up to 20 times more information than a standard cartridge and allowed game developers to create the more intricate characters and environments required for a 3D experience. The potential downside of the CD format was the "seek time" needed for information to be read from the disc, making CDs 50 times slower than a cartridge. Advanced data formatting, however, minimized disruptions to the game-play experience. CDs were also attractive to Sony and its licensed developers because their production costs were falling below costs for cartridges. By the late 1990s, the manufacturing cost for a CD game was about $1.50 per unit compared to $12.00 for a cartridge game.

When it came to the library of games that were available for the PlayStation, Sony took a much different approach than Nintendo and was less restrictive about the number of games that were released for the PlayStation. Sony recognized that competing with Nintendo on a game-to-game basis would be difficult. Nintendo had the very best game developers in the world. Sony believed that a greater selection of titles for the consumer would be the best chance to topple Nintendo. While still maintaining a detailed approval process for game developers, Sony succeeded in creating a robust library of titles. Retailers such as GameStop and Electronics Boutique soon had entire walls dedicated to PlayStation titles. 

With the PlayStation, Sony succeeded in capturing 60% of the U.S. market by 1999, dwarfing Nintendo's 30% share and Sega's 5%. Kutaragi, now president and CEO of Sony Computer Entertainment Interactive, was charged with improving on the PlayStation's success with its successor, the PlayStation 2 (PS2). With powerful graphics and a loyal following of experienced game development studios, the PS2, launched in October 2000, was again a resounding success. One of the main features responsible for the PS2's success was the additional functionality the console provided for consumers. The first PlayStation's ability to play audio CDs was considered a minor feature as many people already had CD players. But the PS2 had the ability to play DVDs. Launched in 1996, DVD players had yet to become a mainstream device and at the end of 1999 could be found in just 11% of U.S. homes. At $299, a price on par with DVD players, the PS2 gave users access to this new technology at a reasonable price. The PS2 enabled consumers to upgrade their movie-watching experience while getting a cutting-edge video game console. 

By early 2006, Sony's PS2 dominated the video console market with a 55% market share, followed by Microsoft's Xbox with 24%, Nintendo Game Cube with 15%, and the newest entry, Microsoft's Xbox 360 with 6%. Meanwhile, eight of the top 10 selling video games in 2005 were for the PS2 (Figure 3).

Game Development and Publishing

Gaming manufacturers made their money not from the sales of consoles - in fact most consoles were priced below cost - but rather from software. It was widely believed that Microsoft's Xbox console, launched in 2001, was sold at a $100 loss per unit and estimates indicated that each Xbox 360, launched in 2005, lost close to $130 per unit. F A number of industry analysts believed Sony's PS3, even at $599 for the premium version, would sell at a loss of $250 per unit. (In 2006, Sony earned about $8 on each PS2 sold.) 

Acting as gatekeepers for developing and selling games on their respective systems, gaming manufacturers typically received between $5 and $7 for every unit of software sold for their particular console. On average, video games sold between 200,000 to 300,000 units; a blockbuster was any title that sold over 5 million units. 

Over the 30-year history of the video game industry, the role of game developers and publishers had evolved to the point where companies like Microsoft were paying large sums of money to bring the talent in-house. 

When Atari introduced its 2600 VCS in 1977, all games were developed in-house by Atari engineers. Despite Atari's rapid success in the late 1970s, the company did not adequately compensate its engineers. In 1979, four of Atari's top engineers left to form a new company called Activision, which became the first independent developer for the Atari 2600. 

The formation of Activision marked the industry's first move towards specialization, whereby independent companies focused solely on software development. The model became increasingly popular during Nintendo's rise in the 1980s. While many of the top titles were developed by Nintendo, independent titles such as Konami's Castlevania and Capcom's Mega Man played a significant role in securing Nintendo's grip on the market. As Nintendo sold more consoles, more independent game companies entered the market while established developers increased staff to handle multiple projects at once. 

In time, independent game companies sought greater control and began to self-publish their titles. They funded projects, developed and tested games, built up marketing departments, and negotiated terms with retailers. Independent publishers, including Capcom and Tecmo, which published games for multiple platforms came to be known as 3rd-party publishers, whereas console manufacturers that published games for their own platform were 1st-party publishers. 

When publishers released a game that struck a chord in the market, they often seized the opportunity to build a franchise around the game. Capcom's Street Fighter, released in 1989, was one such example. While Street Fighter was a moderate success, over the next eight years, Capcom released a series of spinoffs including Street Fighter II, Street Fighter II Champion's Edition, Street Fighter II Turbo, Super Street Fighter II, Street Fighter Alpha, Street Fighter EX, and Street Fighter III. The entire series sold 500,000 coin-operated units and 24 million console games were sold worldwide, generating over $1 billion in revenues for Capcom. 

Lucrative franchises like Street Fighter certainly made publishers very happy, but the engineers and staff that produced the titles tired of incremental improvements to existing titles. Many developers entered the industry because they had game concepts of their own to develop, not to spend years making minor changes to an existing product. Teams of developers began to leave publishers to form their own independent development studios. Starting a new company was risky, but talented teams placed a high value on creative freedom and recognized the financial reward that high-quality innovative titles could bring. 

By the early to mid-1990s, the software video game industry was largely fragmented. While only a few console manufacturers existed at any one time, there were dozens of 3rd-party publishers and three to four times as many independent game developers. New business models were emerging to reflect the movement of creative resources. Third-party publishers were no longer solely funding internal projects, but were also entering into contracts with independent developers. For the developers, publishers typically funded development (which normally took 12-18 months), obtained approvals from manufacturers to release the game on their console, and handled the sales and marketing of the title. In return, publishers received all revenues of the title upon release (less the retail markup) until the cost of development had been recouped. Once the break-even point was reached, developers received a small royalty per unit sold. The royalty would normally increase as agreed-upon sales milestones were met. 

Publishers also insisted on owning the game's brand, or the intellectual property (IP). Owning the IP could be another major source of revenue as a game's brand spread to other markets such as comic books, action figures, and feature films. 

By 2001, sales of video games topped $6 billion in the United States. While the retail cost of games had stayed the same, development budgets were increasing, schedules were lengthening, and production values were at their highest level. On average, 20 to 30 people worked for 18 months to develop a game for the PS2 and each game cost upwards of $5 million to develop. The industry was becoming a blockbuster-driven market. The top three selling games in 2001 (Grand Theft Auto 3, Madden NFL 2002, and Metal Gear Solid 2) totaled over $240 million in sales. 

As more hit titles were created by independent developers, publishers found themselves paying royalty fees that ranged from 10% to 40% of the retail price of software once development costs were recouped. In an effort to avoid paying royalties, publishers began acquiring talented development studios. In 2001, UbiSoft, acquired Red Storm Entertainment, the developer of Tom Clancy's Rainbow Six games, for $43 million and a year later Microsoft purchased Rare Ltd, known for its James Bond titles, for a sizable $375 million. As publishers' pockets got deeper, acquisitions became more commonplace (Figure 3). In time, purchasing talented development studios became a defensive measure for publishers to prevent competitors from acquiring top talent. By 2006, the largest publishers owned several studios including Activision (11 studios) and THQ (14 studios). 

Game Developer Acquisitions 1991-2004

(2003 data reflects jan-mar).

Figure 3  Game Developer Acquisitions 1991-2004

The launch of the Xbox 360 in November 2005 marked the beginning of the first console war in which Internet connectivity was a core component of all the major hardware manufacturers' strategies. Prior to Internet gaming, a major reason to purchase the most popular console was that it made it easier to trade games with friends. Internet gaming created the opportunity for a much deeper experience among owners of the same console. Users could now play together online, create groups of friends with whom they enjoyed playing, and monitor friends' progress through various games. Social networks on game consoles had never been stronger. 

Although PC gamers could play multiplayer games online throughout the 1990s, console gamers did not have an opportunity to play with each other online until the year 2000 when Sega released Phantasy Star Online, the first "massively multiplayer" online game for consoles. One year earlier Sega had launched the Sega Dreamcast with a built-in modem. This marked the first time thousands of console gamers could meet online, chat, and complete game objectives with each other. 

Sega also made a play into one of the most popular video game genres, releasing NFL 2K1, the first football title with online play. NFL 2K1 featured real players and teams licensed from the National Football League. Despite Sega's best attempts to highlight connectivity as the reason for gamers to choose Dreamcast, hardware sales lagged as a mediocre software library and the impending release of the PS2 in 2000 dissuaded gamers from switching. By early 2001, Sega announced that it would be exiting the hardware business, Dreamcast production would stop, and the company would focus purely on software development. 

Sony and Nintendo made efforts to establish online play on their respective consoles, the PS2 and GameCube, but moved hesitantly due to limited broadband penetration in key markets such as the United States where it was about 24% in 2001. Broadband Internet connectivity was the obvious choice for game companies as it allowed developers to reliably transmit more information across the network in comparison to dial-up connections. Dependable data transmission reduced the likelihood of lag or disruptions to gameplay caused when game machines needed to synchronize game data, a key attribute particularly for games involving sports or a lot of physical movement. A Nintendo executive stated in 2001 that the company was more focused on providing a good gaming experience and reaching a broad audience than being first to offer a state of the art online experience: "We still see online as a small number (of gamers). There's still lots of questions about online. For kids who are 13, 14, 15, are their parents ready to set up a broadband or modem connection? There are costs and hurdles involved". 

For PS2 owners, Sony released a network adapter, sold separately for $39.95, which allowed users to connect via dial-up or broadband. It was then up to individual game developers to provide a seamless online experience for players despite significant variation in connection speeds. Sony gave developers enormous freedom in shaping the online experience as they saw fit. Developers could integrate online play as much, or as little, as they wanted and could implement their own pricing models (although few charged users for online play). However, with great freedom came great responsibility, and for many developers designing the online components of their game was just one more substantial task that needed to be accomplished in order to complete the title. 

Microsoft, which released the Xbox in the fall of 2001, adopted a much different approach. The company wanted to unify the online experience for developers and players alike by providing a consistent experience with the service Microsoft named Xbox Live. Microsoft actively encouraged developers to incorporate online features into games to show off the features of Xbox Live. Microsoft distributed code libraries to developers, hosted online games on its own servers, and created a uniform online interface that focused on allowing users to easily build a community of "friends". Two highlights of Xbox Live were the microphone headset that enabled real-time voice communication among gamers and the ability for friends to contact one another even if they were playing different Live-enabled games. The headset was part of the retail Xbox Live package that sold for $49.99 and gave gamers a one-year subscription to the service. 

In addition to providing a unified online experience, Microsoft made the controversial decision to require broadband connectivity for the Xbox. While this decision improved online play for those with broadband Internet service, it also severely limited the number of potential users for Xbox Live. The commonly held belief, however, was that Xbox was part of Microsoft's long-term strategy to gain significant knowledge about the game industry. 

Xbox Live introduced new revenue streams for Microsoft and its partner companies. While some content could be downloaded for free, including demonstrations of new games, and stored on the Xbox hard drive, premium content such as extra levels and characters for games could be purchased for $5 to $15. A set of new multiplayer maps for Call of Duty 2, a World War II title, was priced at $15 and was one of the most popular downloads on Xbox Live in 2005. 

Companies such as Cadillac took advantage of the marketing opportunities that the Xbox Live Marketplace provided. In an effort to target the male 25-35 year old demographic, the company developed video game versions of its cars for the hit racing game, Project Gotham Racing 3. The site included a message that read: "If you're a fan of Cadillac and Project Gotham Racing 3, it's time to break out of your dancing shoes to celebrate the arrival of the new Cadillac V-Series downloadable content". 

In an attempt to appeal to more casual game players, Microsoft created Xbox Live Arcade, an area of the Marketplace where simpler games such as Pac-Man and Uno could be downloaded and played. 

Adopting a popular model from the PC casual game industry, demos of Xbox Live Arcade games could be downloaded for free with the full version available if purchased. In addition to nostalgic titles such as Frogger and Galaxian, new titles such as Geometry Wars were very popular as well. The game development community praised Arcade and were hopeful that it would hearken a return to the days of innovative, smaller, and less financially risky games. Microsoft, however, was very selective and restrictive in releasing games on Arcade, so it was unlikely that many developers could be sustained by the Xbox Live Arcade alone. 

Nintendo, with its new Wii console, looked forward to launching the first Nintendo console with well-integrated online functionality that, among other things, provided Wii owners with weather updates and email and web browsing services. Named the Virtual Console, the online service's most compelling feature was access to the enormous library of high-quality Nintendo titles dating back to 1984. Classic games for the original Nintendo, the Super Nintendo, the Nintendo 64, and the GameCube would be available for download at prices ranging from $4 to $8. Nintendo hoped that the pull of nostalgia would bring older gamers back to Nintendo. 

Sony would be entering the online video game arena with the PlayStation Network Platform, described as an "ecosystem" comparable to Microsoft's Xbox live which would be launched simultaneously with the PS3. The platform would allow players to connect to the Internet so that they could play against each other online as well as communicate through email and live voice chat. PS3 owners would also be able to purchase games although it was not known if the back catalog of PlayStation and PS2 games would be available for download. Unlike the Xbox 360, the PlayStation Network Platform would allow licensees to connect their own game servers to the network. As one analyst opined, "Sony sees online as more of a loyalty builder for their audience rather than a money making strategy. Microsoft sees it as both". 

Many industry analysts speculated that the new generation of video game consoles - the Xbox 360, the Nintendo Wii, and the Sony PS3 - would overshadow the role of the PC in many homes. As one technology analyst pointed out, the games console was becoming the focus of breakthrough technology: "It suggests the platform of growth (in home computing) is shifting away from the PC to the games machine". As the CFO of video game publisher Electronic Arts put it, "The stakes for next generation hardware leadership are enormous. It's about owning the set-top box that may ultimately connect the living room to the Internet". 

Up until the 1990s, video games were thought to be toys primarily for children and teenagers and the goal for console manufacturers was simple: target children. Eventually the popularity of games grew to the point where entire generations were labeled the Atari or Nintendo generation. But by the late 1990s, the first generation of video game players was graduating from university, entering the workforce, and spending its income on video games. Sony owed much of the PlayStation's success to an effective campaign that targeted maturing gamers looking for edgier, more sophisticated games that tested their gaming skills. As Sony claimed industry dominance, a new mantra spread over the industry: target the core gamers – males in their 20s. The strategy worked extremely well for Sony which sold over 100 million of its PS2 units worldwide. This would continue to be the strategy for Sony and Microsoft as both heavyweights rolled out powerful hardware in 2005 and 2006. 

Meanwhile, Nintendo had not kept up with shifting consumer tastes and its games were viewed as too "kiddy" for older gamers. In 2001, Nintendo's GameCube accounted for 18% of the console market in the United States, behind Microsoft's Xbox with 24% and Sony's PS2 with 55%. Nintendo found itself in a difficult position as the company wanted to continue to create fun, simple, kid-friendly games, but saw older gamers moving on to different types of games. Many wondered if Nintendo's time had passed and questioned its ability to compete against companies like Sony and Microsoft. But when asked if Nintendo would leave the hardware business, the company's CEO responded, "When we withdraw from the home game console, that's when we withdraw from the video game business". 

As GameCube sales leveled off just two years after the system's launch, Nintendo began to reformulate its strategy. Willing to let Sony and Microsoft battle it out for the core gamer demographic, Nintendo adopted a strategy to expand the market believing that simple, fun games with intuitive control schemes would appeal to people of all ages and genders. Nintendo first attempted this strategy with its portable gaming device, the Nintendo DS (Dual-Screen), which was launched in 2004. The DS had a clamshell design with two screens, one on top of the other. The bottom screen was touch-sensitive and could be pressed by either finger or stylus. The first breakout title for the DS, Nintendogs, proved Nintendo's intuition about the market correct, and was a runaway success. Nintendogs was a game where owners could care for a virtual puppy by using touch-screen controls or voice commands. By fall of 2006, Nintendo had sold over 4 million copies of Nintendogs in the United States.

Confident that its strategy was sound, Nintendo moved forward in developing its next home console, the Nintendo Wii, bringing to market a new type of controller that could detect three-dimensional motion and acceleration. In a tennis game, for example, players no longer pushed a button to swing the racquet, but swung the controller like a real racquet to hit the ball. Consumer anticipation was  very high as the Wii's launch date approached. What was thought to be a two-company battle between Sony and Microsoft was shaping up to be a hard-fought three-way struggle for the hearts and wallets of gamers the world over. 

In addition to competing head-on with Nintendo and Microsoft, Sony, as did all video game manufacturers, faced a public relations challenge that, although not new, was not showing signs of subsiding any time soon. The issue was violence. 

As gaming hardware became more sophisticated, so did video game characters and their surrounding environments. By the mid-1990s, game players were navigating characters through three-dimensional worlds with a true sense of depth. Game developers strove to create the most immersive, realistic experience possible. Environments were becoming more detailed, the play between light and shadow more subtle, and character animations increasingly life-like. 

Violence in early video games was often quite comical as players had to use their imaginations to figure out how a particular attack actually caused damage to an enemy. But as game environments became more real with the help of 3D technology, characters' attacks became more life-like. Eventually, gamers were taking careful aim with sniper rifles at the heads of Nazi soldiers and using piano-wire to strangle uncooperative mobsters. Bestseller Grand Auto Theft 3 involved stealing cars, killing cops, and beating up prostitutes. 

Certain groups, particularly politicians and parents of gamers, began to raise questions about violence in video games: Did playing violent video games desensitize children to real-world violence? Did children become more violent after playing violent video games? Were comparisons to violence in movies inappropriate since game players were participants in violence instead of spectators to it? 

The furor over video games peaked after it was discovered that the 1999 Columbine High School shootings, which took the lives of 12 students and 1 teacher, were carried out by two students who were frequent players of Doom and Wolfenstein 3D, first-person shooting games. Some argued that constant exposure to violent imagery in these games desensitized the shooters to violence. Families of victims filed a lawsuit against game makers stating that "absent the combination of extremely violent video games...and the boys' basic personalities, these murders, and this massacre would not have occurred". U.S. District Judge Lewis Babcock said that there was no way the makers of violent games (including Doom) could have reasonably foreseen that their products would cause the Columbine shooting or any other violent acts. The lawsuit was dismissed. 

Still, many felt that games had become too violent and laws should be passed to ban the sale of violent video games. To preempt federal regulation, the Entertainment Software Ratings Board (ESRB) was established in 1994 to assign ratings to inform consumers about the content in games. Similar to the Motion Picture Association of America, which rated films, the ESRB described itself as an independent, self-regulatory body whose goal was to help consumers make educated decisions about purchasing games. Funded by game makers, the ESRB had slowly but steadily gained momentum; sales associates at game retailers such as GameStop and Electronics Boutique were well versed with the ratings system and quick to educate consumers about the system. 

Yet the ESRB had its critics. Confidence in the rating system was undermined when it was discovered that a sex mini-game (nicknamed "Hot Coffee") was uncovered in Rockstar Games' Grand Theft Auto: San Andreas. Although special hardware was needed to access the game for the console versions, the mini-game highlighted the ease with which unrated content could be published. The "Mature 17+" title was re-assigned an "Adults Only" rating until Rockstar Games removed the content. 

  Dr. Kimberly Thompson of Harvard University's School of Public Health was a vocal critic of the ESRB's rating process. In 2004 Thompson published the results of a study she had conducted analyzing the relationship between game content and ESRB content descriptors. She discovered that ESRB raters did not actually play the games they were rating. Instead, game publishers sent video clips of the game, and ESRB raters determined rating and content description based on those brief excerpts. Thompson's assessments based on actual gameplay indicated games in the initial E, E-10+, and T categories were much more violent than the ratings suggested, with an average of one death per minute in T-rated games. The study concluded that "a significant amount of content in T-rated video games that might surprise adolescent players and their parents given the presence of this content in games without ESRB content descriptors". Thompson pushed the ESRB to require that raters play the games they rated in an effort to improve rating accuracy. The ESRB had taken some of Dr. Thompson's recommendations into account. In 2005, the ESRB introduced the "Everyone 10+" rating to fill the gap between children and teen-rated titles. 

 A number of states had attempted to introduce laws that banned the sale of violent video games.  Michigan claimed that the interactive nature of video games made them less entitled to First Amendment protection. Illinois attempted to fine stores that did not add warning labels to mature-rated games (despite already having ESRB ratings on the box). However, all attempts had been deemed violations of the First Amendment. 

At the federal level, Senators Hillary Rodham Clinton and Joseph Lieberman introduced the Family Entertainment Protection Act in November 2005. The bill sought to prohibit the selling of "Mature" or "Adults Only"-rated games to anyone under 17. Retailers would be fined for violations. The bill would also allow private citizens to file complaints against the ESRB if ratings or content descriptions failed to accurately describe a game's content. The bill was in the first stages of the legislation process and would likely undergo significant changes in subsequent legislative sessions.

As the launch date approached, Stringer recognized that the holiday season of 2006 would be critical to PS3's success. He hoped that the enormous popularity of the PS2 would help the PS3 in its early days. 

Some industry analysts believed the PS3 would put Sony on top of the video game market for the foreseeable future. In-Stat, a communications services research and analyst firm, predicted that through 2010, the Sony PS3 would account for just over 50% of the installed base of next-generation consoles, while the Microsoft Xbox 360 would have 28.6%, and the Nintendo Wii, 21.2%. 

But getting there would not necessarily be easy. As one industry analyst opined, "Microsoft has driven a stake in the ground. They will have 10 million units by the time Sony ships the PS3. Sony is going to have to respond in a big way". 

In October, just one month before the public unveiling of the PS3, 235,000 PS2s were sold in the United States compared to 217,000 Xbox 360s.

Exhibit 1a Sony Corporation Operating Performance by Business Segment 2005-2006

Exhibit 1b sony corporation operating revenue by business segment.

Exhibit 1c Sony Corporation Game Business Operating Performance 2004-2006

Exhibit 2 nintendo income statement, 2001-2006 (in us$ millions), exhibit 3a     microsoft home and entertainment division,                 revenues and operating losses, 2002-2006 (includes xbox division), exhibit 3b     microsoft revenue and income statement by business division, fy 2006, exhibit 4a developer acquisitions (1991 - 2003), exhibit 4b developer acquisitions (2003 - 2005).

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Sony pictures.

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One of the biggest players in entertainment, Sony's Hong Kong team explain how they analyzed international content uptake at a regional level.

In 1946, Tokyo Tsushin Kogyo K.K. started as a small company with capital of just 190,000 yen and approximately 20 employees. Today, Sony owns the largest music entertainment business in the world.

It’s also one of the leading manufacturers of electronic products for the consumer and professional markets, and a leading player in the film and television industry.

With a mission to “inspire and fulfil your curiosity”, it’s a brand that needs to understand its consumers, inside and out.

Within its Hong Kong arm, the teams needed to uncover more revealing insight that would point their strategy in the right direction and justify their spend.

Here’s how they did it.

The challenge 

Getting a regional view of international content.

Looking to create and roll out Korean TV drama content in the U.S., the team needed deep insight into those who consume this type of content in order to reach them effectively.

Michael Rogers, Vice President Research at Sony Pictures Entertainment,  says, “ The market for Asian content is growing, and the producers on the ground in Asia are aware of the significant and growing opportunity to distribute their products globally .”  

But since Korean drama content hasn't historically aired on national linear TV channels in the U.S. they had no traditional ratings to gather a profile of these consumers, leaving them without much in terms of readily available research that wasn’t secondary or dated.

Amrita Roy, Research Analyst at Sony, says, “For this specific project, there’s no traditional hard data on who these people are, what they’re watching or how much they’re watching.”

The situation was clear: the team needed truthful, tailored answers straight from the consumers they were targeting.

Using custom research to get to the right answers.

Having used GWI as a data source for four years, the team were no strangers to the capabilities of the platform, but this time they needed to go deeper, faster.

Some of the questions they needed answered were:

Who are the U.S. consumers who enjoy watching international content (and Korean dramas in particular)?

How do they consume this content?

Do they prefer the content in its original language and subtitled or dubbed into English?

Making use of a special custom study run by GWI, which collects tailored survey responses within 24 hours, the team found what they were looking for.  

With the answers they needed, the team could build strong, granular consumer profiles that would make a clear difference to the project’s outcome.

“I went through the results and easily found a couple of interesting consumer profiles,” Amrita says.

“For example, people who don’t consume international content vs. people who do, and specifically Korean drama consumers. We could then compare the differences between the profiles and determine how one profile is potentially more attractive to our linear TV clients than another.”

The study also yielded insight the team could use to position their offering in the U.S., outlining the reasons why American consumers would watch a Korean drama, for example, and how they want to consume it.

Revealing some surprising results, the study found that despite popular assumptions, viewers in the U.S. prefer content to be shown in its original language, rather than dubbed in English.

It also showed American viewers value the plot of the content above all else.

Backing up hypotheses with reliable data.

By moving away from secondary, static data and harnessing information truly tailored to their project, the team could confidently make recommendations to their colleagues.

“We already distribute some Korean content, so this data really helps us justify its value,” Michael says.

“Secondly, it backs up our hypothesis that we should be producing more Korean dramas to export outside of Asia.”

It also afforded them insight into the more intricate details of the project, including questions around language.

“Internally, we were skeptical about having subtitles and instead assumed a preference for dubbing,” Amrita says.

“So when the study found the majority of people that consume international content do prefer it subtitled in its original language, rather than dubbed, that’s a key data point that develops our audience understanding and informs recommendations for our licensing clients.”

The study supplied them with the insight they were missing, allowing them to guide their strategy in the right direction.

“Using GWI, we were able to disprove the idea that Korean drama is niche and that dubbing would be required in the U.S., which is a pretty cool story,” Michael finishes.

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Home » Management Case Studies » Case Study: Frequent Restructuring at Sony Corporation

Case Study: Frequent Restructuring at Sony Corporation

Sony Corporation is a multinational conglomerate based in Japan. The organisation’s core business is in Electronics and Entertainments. It has grow from barely 20 employees with about ¥190,000 as its capital in 1946 to today with about 150,000 employees worldwide and worth about $15 billion dollars on the share market as of May 2012.

Sony has always put innovation as its main business focus . Due to its innovative business model Sony was able to bring us the very innovative products such as Walkman, Playstation, CD player and Camcorders and others. In the way all these products made Sony become a premium brand in the world, it can command the premium prices for its products. But later on Sony became so big, within there are many different divisions.

The goal of Sony was to improve the financial performance and competitiveness of the company . Therefore, from the year 1994, Sony had gone into a series of reorganization action. Between 1994 and 2004, Sony’s business operations were restructured five times within ten years. However, the most of them failed to achieve the desired results. Hence, in 2005, Sony appointed Howard Stringer , former head of Sony America to become first non-Japanese CEO of Sony group. Sony has gone into Phase II of the new round of restructuring, the aiming implement structural reforms covering electronics, entertainment and other major sectors, with the primary objective of improving its profit structure significantly.

Adverse implications of frequent restructuring at Sony Corporation

In 1994, it had posted first lost in the company’s history. Precisely because of this, Sony Corporation had started several corporation reorganization projects tried to put company back to the right track. However, due to these restructurings have not going far enough, did not break all the internal walls between divisions and changes were too many in a short period of time, the cost involved were huge so all these attempts had not been very successful. The revenue and profit continued to fall.

In October 2003, Idei, the CEO of Sony , announced another reorganization plan called “ Transformation 60 ”, which was a three-year restructuring plan. The plan focused on reducing costs by downsizing and consolidating manufacturing, distribution, customer service facilities and streamline procurement. Through this restructuring plan, Sony aimed to reach cost savings of ¥300 billion at fiscal 2006. The key strategy was to create convergence between separate products. For example, in the electronics group, converging television and games; in entertainment converging movies, music and games, etc. Sony Corporation was reorganized into eight business entities — four network companies, which are Micro Systems Network Company, IT and Mobile Solutions Network Company, Broadband Network Company and Home Network Company; and three business groups, which are Game Business Group, Entertainment Business Group and Personal Solutions Business Group.

However, in 2004, Sony’s electronics business faced losses for two consecutive years. The mainly reason was due to the significant decline in sales of conventional televisions and portable audio products, and the situation is especially significant in Japan, where the demand for Vaio personal computers and cathode-ray-tube televisions fell prominently. At same time, the games division also did not fare well with sales of PlayStation 2 consoles falling rapidly.

By the time, Sony announced its October-December 2004 results; it was evident that the company was far from reaching the goals envisaged in its Transformation 60 plan. According to Sony’s financial reports in 2004, the revenues were 7.5 per cent lower than the revenues during the corresponding quarter in 2003 and the operating income had eroded by 13 per cent. Sony’s profit margins for fiscal 2004-2005 were at 1.6 per cent, far lower than the 10 per cent that Sony planned to achieve by 2006. The restructuring plan of “Transformation 60” was not successful in 2004.

For the company’s problems, combined with competitions and lack of vision, Sony’s revenue and net profit has been in decline. Analysts blamed the “silo culture”, which prevented Sony from communicating and cooperating with each other.

Sony’s restructuring efforts in 2005 were successful

In 2005, Sony appointed Howard Stringer, former head of Sony America to become first non-Japanese CEO of Sony group. In September 2005 he started his first of several corporations restructuring. He identified getting rid of Sony’s old “silo” culture, attaining profitability for all the business, making products in line with industry standard technologies, improving the competencies in software and services, and divesting the company of its non-strategic assets as the main challenges for Sony.

Stringer reorganized Sony into five business groups they are the electronics business group, the games business group, the entertainment business group, the personal solutions business group, and the Sony financial holdings group. The reorganization plan focused on revitalizing the electronics business of the company, aiming on improving profits by reducing business categories and product models. At same time, business processes only focused on resources of the company’s high growth business by removing redundancies and overlaps.

Stringer’s restructuring has been successful, he was able to break some the internal walls and discontinued non-core business like the Qualia line of luxury electronics, a cosmetics firm, a mail order shopping company and a chain of restaurants. It lower the operating cost and put focus back to Sony’s main business electronics, also revitalizing Sony’s TV division with new products.

For the fiscal year 2005-2006, Sony reported net profits of ¥123 billion with the sales of flat panel televisions improved significantly as well as the sales of PCs and video cameras. The analysts viewed the efforts that the Stringer’s reorganization had succeeded in putting the company back on the right track.

The main reasons for Sony showing healthy profits during 2007 and 2008

According to Stringer’s annual report by March 31, 2008 “we achieved nearly ever goal that we had set for ourselves three years ago. We successfully re-engineered our company by dramatically reducing operating costs, streamlining our operations, and reducing headcount and the number of our product categories — all of which contributed to a significant improvement in operating results. As a result, on an annual basis and compared to three years prior, sales and operating revenue rose 23% to nearly ¥9 trillion, and both operating income and net income more than doubled to ¥375 billion and ¥369 billion” The results of report, notably, it represented the culmination of reorganization initiative in 2005. Sony was showed healthy profits during 2007-2008. The restructuring was successfully achieved across many of products.

The primary reasons of restructuring success due to the new strategies were announced on 20 September 2005 which met the market requirements.

Firstly, the new strategy concentrated mainly on three sectors — electronics, games and entertainment. The electronics business of Sony was to be revitalized through structural reforms, which focusing on high-growth businesses, such as HD products, mobile products and semiconductor/key component devices, and network-enabled products and appliances. For example, Sony Group successfully make Blu-ray Disc the de facto standard for high definition recording and playback. To March 2008, more than 15 million Blu-ray Disc players, recorders and Blu-ray Disc-enabled PLAYSTATION 3 systems have been sold. According to Sony 2008 report, in the Electronics Segment, the operating income rose from approximately zero of three years ago to more than ¥350 billion at the end of March 2008; Sony LCD television business has moved from having a limited presence three years ago to being one of the marker leaders today on the strength of the BRAVIA brand. Sony was the first to market with the next generation television-the organic light- emitting diode or OLED. The benefits from the home entertainment released a number of successful titles and the continued vitality of the television business, the Pictures segment recorded more than ¥50 billion of operating income in fiscal year 2007.

Secondly, the new strategy of restructuring plan also considered reducing costs by downsizing and consolidating the manufacturing, distribution, customer service facilities, and streamlining procurement. Sony aimed at optimizing manufacturing infrastructure and initiating disposal of assets in 15 business categories. To reduce fixed costs by combining the operating divisions and shifting component sourcing to low cost markets like China. At same time, about 7000 employees were laid off in Japan and 13,000 at other locations across the world. Sony achieved reducing the annual fixed costs by ¥330 billion by the fiscal year 2006-2007.

For the fiscal year ending March 2007, Sony’s sales and operating revenue increased by 10.5 per cent to ¥8.29 trillion. In June 2007, Sony reported its sales had increased by 13% as compared to the first quarter of the previous year to ¥1,976.5 billion. The operating income grew by over 250% to ¥99.3 billion during the same period and the operating income of the electronics division increase by 77%.

Analysts were of the view that Stringer’s efforts had succeeded in putting the company back in the right track. To enhance its product development capability and improve profitability in the electronics segment, some more changes had to be made in its organisational structure.

On March 2007, the new restructuring plan was established by Sony — “B2B Solutions Business Group”. That reorganization plan is another reason which helps Sony showing the health profit during 2007 and 2008. Announcement was “The B2B Solutions Business Group will unite and streamline Sony’s existing Broadcasting/Professional equipment businesses, B to B solution services, and FeliCa business. At the same time, by utilizing Sony’s broad-based research and development achievements in its B2B Solution Business, Sony hopes to develop new business that can drive sales and profit growth in the B to B business field.” At the same time, two new groups — the TV Business Group and the Video Business Group, were also established.

The new restructuring plan started to show encouraging efforts. Sony’s sales and operating revenue were increased by 10.5% to ¥8.29 trillion. The upward trend continued over the next year with revenues up to ¥8.87 trillion and profits up to ¥369 billion by the fiscal year ending March 2008.

The numbers revealed Sony was showing healthy profits during 2007 and 2008.

Latest restructuring plan proposed by Stringer in February 2009 and its efficacy

In early 2009, Sony found itself facing in a financial crisis again. On 1st April 2009, Stringer assumed responsibility as the President of Sony, in addition to his existing positions of CEO and Chairman, Chubachi resigned from his post as President of Sony and CEO of the electronics components unit and became the Vice-Chairman of the company, this time restructuring which infused into the top management of Sony with young blood. After the reshuffle, Stringer directly managed the electronics division. New major reorganization plan was announced by the new management of Sony.

Under the reorganization, effective on 1st April 2009, the reorganization concentrated on the electronics and game businesses of Sony, aiming to improve their profitability and strengthen competitiveness. Therefore, Electronics and Game businesses were merged and reconfigured as two new groups: the Consumer Products & Device Group and the Networked Products & Services Group. The first Group represents Sony traditional and vital hardware; the second will provide new network differentiation which combined to Sony hardware, to speed up the production of networked products and services.

To support these two new business groups in terms of software development and manufacturing, procurement and logistics operations, the two cross company platforms have been created. One was the Common Software which was to develop and implement integrated technology and software solutions; the group was also required to provide coordinated software development services. The other platform was and Technology Team which to provide the Manufacturing, Logistics, Procurement team responsible for ensuring efficient supply chain solutions for the business groups.

The reorganization also involved a new organisation structure for Sony that closure of eight of its 57 manufacturing sites by approximately 10%, a reduction of the workforce by 16,000, and furthering the shift to manufacturing in low-cost areas and with OEM/ODM partners. Through that plan, Sony expected to reduce costs by ¥300 billion.

However, the global economic crisis in 2009 gave Sony a difficult period; the intensified price competition and the continued appreciation of the yen also harshly affected the Sony’s businesses operating environment Operating in such circumstances, Sony broke new ground by unifying procurement activities across its businesses, strengthening operations, reducing costs and developing products, services and content.

According to Sony annual report of 2010, in the Consumer Products & Device Group, the recorded an operating loss of ¥46.5 billion, an improvement of ¥68.6 billion year-on-year. The operating loss narrowed due to an improvement in the cost of sales ratio and a reduction in selling, general and administrative expenses; the result was partially offset by a decline in gross profit due to lower sales, unfavorable foreign currency exchange rates and an increase in restructuring charges.

The contribution to the improvement in operating results, we can see, the sales of Sony LCD television for the fiscal year totaled 15.6 million units, exceeding Sony’s initial forecast for the period by 600,000 units owing to and expanded line-up of models including those with LED back-lights. The highlight of Sony was the 3D technology has been developed, which brought Sony products to life in the digital age. The launch of new models featuring a wealth of exclusive technologies supported Sony’s continued leadership of the video camera market in fiscal year 2009. Total sales were 5.3 million units, and achieved 42% of the global market share. Home video marked a momentous advance in Sony’s Blu-ray Disc recorder and player business. Sales of Blu-ray Disc player in the period amounted to 3.3 million units, a year-on-year increase of 1.1 million units; sales of Blu-ray Disc recorders totaled 700,000 units, up 200,000 from fiscal year 2008.

According to Sony annual report of 2009, in the Networked Products & Services Group, the operating loss improved ¥4.4 billion year-on-year, to ¥83.1 billion. The operating loss narrowed despite a deterioration of operating income in the game business under a result of unfavorable foreign currency exchange rates, due to an improvement in the profitability of Walkman digital music players and other products. Sales of Walkman digital music player were approximately 8 million units, an increase of 14% from the previous fiscal year. The unit sales of VAIO PCs in the fiscal year also rose 17%, to approximately 6.8 Million units.

As the expectation of restructuring, the aim is to provide new network differentiation which combined to Sony hardware, and speed up the production of networked products and services.

Analysts were of the view that it would help different divisions in Sony like the PC, mobiles and entertainment division, and also other division like television, digital imaging, home audio, and video to work in tandem. This would address the issue of the prevailing silo culture in the organisation.

According to Jonathan Nelson, Head of private equity firm Providence Equity, “the challenge of changing the culture of an iconic Japanese company is even more difficult than dealing with the current challenges of the consumer electronics industry. He’s doing as well as anyone can under the circumstances.” The reorganization resulted in sustained profitability and a cohesive corporate culture; it also expected to result in nimbleness in the organisation and in making it ready to face the new age rivals.

Sustain Growth and Success in the Future

The core aim of SONY is to improve the financial performance and competitiveness of the company . Sony could utilize its strengths to gain advantage over their competitors , and be a market leadership in the future.

Firstly, Sony enhances supply chain management , to maintain a steady stream of raw materials coming in for production because of their long-term good standing with their raw materials supplier. Their highly coordinated logistics system handled by outsourced firms also form part of their core competencies, leading to excellent inventory management and always on schedule production activities.

Secondly, Sony improves its ability at the moving assembly line. Being the pioneer of such mass production system , they were able to get ahead of the competitors manufacturing processes-wise and were also able to save on costs and time.

Thirdly, Sony should focus on its product development technology. Set up single product-information-management program through standardizing and incorporating them. If sustainable development is to achieve its potential, it must be integrated into the planning and measurement systems of business enterprises. And for that to happen, the concept must be articulated in terms that are familiar to business leaders. Many observers believe that more stakeholders will insist that companies to take environmental and social costs as seriously as they take purely financial costs.

In order to sustain its growth and success in the future, Sony should timely adjustment its strategy and improves the operational standards to adapt the changes in the market such as stiff competition, globalization , technological innovations, etc.

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Sony and PRINCE2 Agile® Case Study

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June 26, 2017  |

  7  min read

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based workflow programme. The driver behind the project was the need to be more responsive to customers’ demands.

As Sony was already a PRINCE2®-aligned organization and wanted to adopt a Scrum-based agile approach, PRINCE2 Agile was chosen as the project management method.

This case study is also available to read in Japanese (PDF, 754KB) .

Introduction

The organization.

Sony Corporation is a multinational organization with its headquarters in Japan. The business includes consumer and professional electronics, gaming, entertainment, and financial services and is one of the leading manufacturers of electronic products for the consumer and professional markets.

The Media Solutions Department is part of Sony Professional Solutions Europe and delivers broadcast equipment, software and media solutions into organizations across Europe. The Media Solutions Department has three key business areas:

• live production, incorporating studios, outside broadcast vehicles and production facilities
• news, covering newsroom editors, agency newswire systems and playout systems
• content management and archive solutions.

Summary of the project and its outcomes 

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based work flow programme. The driver behind the project was the need to be more responsive to the Media Solutions Department’s customers’ demands.

The system was built around Sony’s Media Backbone Conductor and Navigator products. An infrastructure with base functionality was delivered in the early phases of the project and Sony wanted to continue the development of the product with enhanced features and services. They identified a requirement for a more flexible way of selecting the next features to be developed that would ensure that the needs were always assessed and prioritized.

What was the problem?

Keeping pace with change .

The initial phases of the project involved a long design period, followed by delivery and then deployment of the software. This was usually three to six months after the requirements had originally been agreed, during which time some had changed.

The need for process and technology transformation was driven by the need to realize the benefits of the true end-to-end file-based operation. It was very important to keep all stakeholders involved and part of the process. This included prioritizing features with the user community, measuring return on investment (ROI) and introducing changes in a controlled manner. Key to the success of this project has been the creation of a culture of continuous improvement.

It was essential to improve the sharing of content and automate some of the processes to free up valuable user time for core production activities.

The proposed solution 

As Sony had identified a need to be able to respond to user requirements faster, they decided to consider an agile-based methodology.

The solution had to ensure that:

• new developments are always relevant to the current business needs
• there is flexibility to reprioritize future software deliveries without the need to raise change requests and seek top management approvals.

Project Governance 

The project followed the PRINCE2 governance structure and had a project board with user, supplier and business representation, see Figure 2.1. The structure illustrates how local role names can be mapped onto the overall PRINCE2 governance framework, retaining customer/business supplier representation. For example, the Director of Technology effectively approved decisions around the backlog and was ultimately responsible for acceptance of the product.

Figure 2.1 Project governance structure

Communications, progress and issue reporting were strongly based on the management by exception principle and PRINCE2 reporting guidance. End stage and highlight reports were still used as communication channels between the project manager and the project board.

Aims and objectives

The major objective for the Media Solutions Department was to reduce project delivery time and reduce project risk by increasing product quality. The aims of this work were to create and adopt a workable agile approach under PRINCE2 and to prove it on a real project.

Sony already had PRINCE2 elements in place and delivery teams familiar with agile development. The approach was to combine the two, using the PRINCE2 Agile approach, to make sure that the strengths of PRINCE2 were not lost in using agile: in particular, the governance, communication and quality management aspects.

The adoption of a PRINCE2 Agile approach has been phased into the organization, partly through training and partly through adoption and implementation of the method.

We started by involving the delivery project managers, but then realized that all the stakeholders across the business needed to be engaged to achieve the desired improvements and flexibility in delivery.

The approach required more user involvement during development than the previous development method, but provided better business value because the solutions solved the business problems of the user stakeholders. Frequent demos took place involving the user stakeholders which encouraged discussion of the product features during development. The user acceptance process was much easier than in previous projects as the users were already familiar with the products and had been involved in their evolution through the project.

The development team used automated tools to support agile activities such as backlog management (Figure 4.1), progress tracking (Figure 4.2, sprint report) and Kanban boards (Figure 4.3).

Figure 4.1 Backlog velocity chart

Figure 4.2 Sprint report

Figure 4.3 Kanban board

The project used the PRINCE2 Agile guidance about contracts to help build agreements with their clients based on throughputs rather than end products alone. Traditional fixed price and scope or time and materials contracts were not suitable, so a new model based on throughput of functionality was established. Developer estimates based on planning poker sessions fed directly into this mechanism, and the customer was directly involved in the sessions to ensure confidence and integrity in the process.

Sony has been a PRINCE2-aligned organization for some time and is used to delivering predominately hardware/software application solutions in a traditional design, build, and commission approach.

We quickly realized the limitations of this process, as our software offerings became more customizable and projects started to exceed a three to six month turnaround. Therefore we needed to look at:

• the end-to-end lifecycle
• how we identify agile-based opportunities, and when agile might not be applicable
• contracts for agile projects
• manage the sprints of specification and delivery
• supporting a continuously evolving live environment through new services, changes in workflows, partners or integrated systems.

One of the key challenges was setting up a commercial and legal framework which supported the scope not being fixed until the start of each sprint, and without the overhead of using the existing change control process. This was addressed by using an agile approach to building agreements based on throughputs.

What was the biggest success factor?

From a Sony prospective, PRINCE2 Agile has enabled us to better manage the changes delivered to the users. The methodology has allowed us to reduce the overheads of change requests/impact assessments and to focus on delivering exactly what is needed and ultimately supporting the acceptance of the delivery and faster release back into the operation.

Benefits already realized

The project has already resulted in reduced delivery costs because of:

• less upfront design
• simpler contracting of projects
• shorter time to completion, roll out
• minimized rework
• reduced administration through the use of automation tools.

All of which have contributed to increased customer satisfaction because of:

• better customer engagement during the project
• better alignment to business needs
• more of the required features being delivered.

Lessons learned

1. Initially we took the decision that going agile would be mainly for project managers involved in product delivery and our in-house development teams. This proved to be far from reality. It is key to involve everyone from account management and sales, bid teams, architects, support, legal and procurement teams, so that the entire lifecycle can be assessed.

2. All parts of the organization need to understand the agile approach, not just the delivery project managers.

3. Sales and bid managers, support managers and engineers, need to agree on how to sell the approach and then support the solution as more features are being developed.

Axelos’ view

Combining the governance strengths of PRINCE2 with the flexibility of agile delivery was the driving force behind AXELOS’ development of PRINCE2 Agile. The Sony experience is a very good example of how the benefits of both PRINCE2 and agile can be brought together to provide a delivery solution that matches the project environment.

As experienced PRINCE2 users, Sony recognize the need for good project governance and have retained the strengths of PRINCE2’s controls but adapted for agile working. Agile was identified as the appropriate delivery approach to improve delivery times and engage with users. The synthesis PRINCE2 and agile has provided a delivery approach that is already realizing benefits.

About the author

Yucel Timur is Head of Project Management for Sony Professional Solutions Europe, with over 15 years’ project delivery experience in the Broadcast and Media Industry. Yucel has built a Project Management group that is delivering a variety of complex projects across Europe. As Sony’s solutions have become more customizable, the Project Management group continues to adapt processes, techniques and skills to improve project delivery and quality. This supports Sony with the objective of always being at the forefront of delivering solutions into the broadcast industry and is leading the way in providing feature rich tools and applications to customers across the globe.

For more information, visit pro.sony.eu

Camilla Brown has 15 years’ experience in software product development and solution delivery in the broadcast and media industry. During the last few years, Camilla has ventured into the world of project management while still holding on to agile software development processes, bringing change to the way Sony delivers some of its professional solutions.

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SAFe Case Study: PlayStation Network

Playstation network stays top of its game with safe.

The following summary is based on a public presentation by Tripp Meister of PlayStation Network. To watch in full, visit https://www.youtube.com/watch?v=0K97pzff3as&feature=youtu.be

“I personally believe we have delivered more in the two years we’ve been using SAFe than we did in the four years prior-not in raw code, but in value. Our downtime went down and that saved the company about 30 million over the course of the year. That’s real money and a really positive outcome.”

— Tripp Meister , Director of Technology, PlayStation Network

Since 1994, millions around the world have chosen to game with PlayStation. Today, the gaming console made by Sony Interactive Entertainment (SIE) continues to lead with more than 150 million users globally. And most recently, it took the top spot among competing consoles in holiday sales.

PlayStation customers eagerly await new releases. Delivering a quality product on time requires tight collaboration across more than 1,000 SIE engineering team members. Co-located teams reside in eight different cities.

In meeting its targets, the SIE engineering organization found Waterfall and Agile Scrum fell short in bringing together hundreds of team members cohesively. These approaches failed to address the many dependencies across the organization and resulted in less than desirable business results. What’s more, disparate teams were able to plan only one or two iterations in advance.

“It can take 700 people to make one screen available,” explains Tripp Meister, Director Technology, PlayStation Network. “Coordinating this work and having it well organized so the company can release new features and updates is critical to success. If we just follow processes like Scrum and Agile, things can fall through the cracks, especially with the highly connected systems we build at PlayStation.”

SAFe: Enabling Value Delivery

In early 2014, SIE leadership chose to deploy the Scaled Agile Framework® (SAFe®) to bring greater organization and collaboration to development.

“SAFe gives us top-down prioritization based on senior management direction, pulls disparate groups together into common timeframes, and enables us to manage dependencies much better,” Meister says.

SIE engaged a SAFe coach and began with the 2-day Leading SAFe® training for managers. By February of 2014, the company launched its first Agile Release Train (ART), and then followed that with ART launches every 12 weeks.

For every launch, team members come together in person. “Every 12 weeks, about 500 people coalesce in San Diego,” Meister says. “While it’s not cheap to bring everyone together, it’s what allows us to deliver value because you walk out of there and know you can get your work done. For 12 weeks, you are unimpeded.”

Prior to adopting SAFe, cadence varied across groups. Some iterated daily, while others did so weekly or bi-monthly. Now, SIE consistently adheres to a cadence of two weeks with 12-week iterations or PSIs, potentially shippable increments (identified now as Program Increments (PIs) in SAFe 4.0). They run six or seven iterations at a time, which comprise a major release.

SIE program managers serve as Release Train Engineers (RTE), which Meister refers to as the “ringmasters.” They oversee designers, user experience developers, systems architects, systems engineers, and product managers in executing on work in manageable increments and in adhering to the vision.

With the move to SAFe, the company made demos optional for developers. And when they do attend, demos remain high-level and limited to just 5-10 minutes—compared to all-day demos presented previously. “If developers do attend demos, it’s an opportunity to read the face of the product manager they delivered to,” Meister says.

Clearer Vision, Predictability and Priorities

At SEI, SAFe has fundamentally changed the culture of the engineering organization:

• Greater visibility/transparency —Developers have more insight into broader company initiatives and activities. “Now, every planning session we do, every single employee practicing SAFe knows our financial results,” Meister says. “The work we do isn’t usually visible, so when you see that you impact the bottom line, it resonates better.”
• Better coordination —Prior to SAFe, collaboration wasn’t necessarily constructive. Now, from Tokyo to San Diego, everyone speaks a common language when it comes to Agile. Disparate groups work together more cohesively, and SEI has enhanced coordination between Portfolio and Program management activities.
• Dependency management —In an environment with many dependencies, SAFe serves as a dependency management system, improving predictability.
• Clearer priorities —With weighted shortest job first (WSJF), SAFe brought a new approach to prioritizing. “SAFe has really allowed us to work on the most valuable thing at the moment,” Meister says.

$30 Million in Savings

Today, approximately 700 team members across 60 Scrum teams actively use SAFe. Since 2014, the company has launched six trains globally, shipped more than 350 production releases, completed 22 PSIs, over 125 sprints and 250 features. With the Framework, SEI also cut initial planning time by 28 percent. Instead of 1550 man-days to plan, it now takes 1125.

“I personally believe we have delivered more in the two years we’ve been using SAFe than we did in the four years prior—not in raw code, but in value,” Meister says. “Our downtime went down and that saved the company about 30 million over the course of the year. Before, we had done similar things, but they were not nearly as effective as SAFe.”

Organization

PlayStation Network, part of Sony Interactive Entertainment

Software/Gaming Challenge

Co-located teams across eight different cities found Waterfall and Agile Scrum fell short in bringing together members cohesively.

• Delivered double the value compared to before practicing SAFe
• Cut initial planning time by 28 percent
• 700 team members across 60 Scrum teams actively using SAFe
• In two years, launched six trains globally, shipped more than 350 production releases, completed 22 PSIs, over 125 sprints and 250 features

• Work toward a common theme —”We base our milestones on an objective set that goes across all thousand people doing this, giving them a common theme to work toward,” Meister says.
• Decentralize decision-making —Empower individuals to negotiate decisions together, at all levels.
• Gain full buy-in —”SAFe worked because everyone bought into it, top to bottom,” Meister says.

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Sony Company Case Study

Strategy and Leadership (LB 5215) Course: Master of Business Administration(SP 51-‘12) Case Study Report on Sony Corporation

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY3 .INTRODUCTION4 Objectives4 Relationship between Mission Vision Statement and Performance of Sony4 Report Usability6 Methodology6

I. COMPANY PROFILE Ownership6 Overview and History8 Product-Market Strategy10 Products10 Market Segmentation11

IV.ANALYSIS ON THE COMPETITIVE FORCES OF SONY12 Five Poster Analysis12 1.Bargaining power of Suppliers12 2.Bargaining power of Customers13 3.Threat of new Entrants13.Threat of substitutes13 5.Competitive rivalry within an industry14

V. SWOT ANALYSIS14 Strengths14 Weaknesses15 Opportunities15 Threats16

VI.ANALYSIS ON PERFORMANCE OF SONY16 Measurement of Performance16 Reasons for increasing and decreasing Sony’s financial index18

V. CONCLUSION23 VI.REFERENCE24 “Sony’s inspirational cutting-edge to next generation”

EXECUTIVE SUMMARY: This report provides a comprehensive analysis of Sony Corporation, including its history, products, market segmentation, competitive forces, SWOT analysis, and performance measurement. It also examines the relationship between Sony’s mission vision statement and its overall performance in the industry.The purpose of this report is to analyze Sony’s competitive position in the market and evaluate the effectiveness of its product-market strategy. It aims to assess how bargaining power from suppliers, customers, new entrants, substitutes, and competitive rivalry impact Sony’s operations. Founded by Akio Morita in 1946, Sony Corporation focuses on developing innovative multimedia products while keeping its vision and mission statement intact to gain a competitive advantage. The analysis section evaluates five competitive forces that affect Sony – supplier and customer bargaining power, threat of new entrants and substitutes, and industry rivalry. These factors have a significant influence on Sony’s market position. The SWOT analysis examines Sony’s strengths, weaknesses, opportunities for growth, and potential threats to its operations. It identifies both internal strengths contributing to success as well as areas needing improvement. Additionally, it analyzes various financial indices to measure trends in Sony’s performance and explores the reasons behind any increases or decreases in performance. In conclusion, this report provides valuable insights into Sony Corporation’s business strategies through an examination of competitive forces analysis results from the SWOT analysis and evaluation of performance measurement. The text explains how Sony has maintained its competitiveness in the industry by aligning with its vision and mission statement.The text discusses the success of multimedia products like televisions, tablets, video cameras, and PlayStation among customers. These products have been distributed to various market segments based on geographical regions. Japan is specifically mentioned as the country with the largest share in one of these market segments. The purpose of this report is to explain how this success will be utilized and provide background information on the topic. It also examines competitors’ strategies and their performance in terms of market share up until now. To achieve this, a comprehensive analysis of Sony Corporation has been conducted using Porter’s Five Forces Analysis and SWOT analysis. Porter’s Five Forces Analysis looks at Sony Corporation’s competitors such as Sony and Samsung, as well as factors that affect its competitive position like customer power and supplier power. On the other hand, SWOT analysis focuses on identifying Sony Corporation’s strengths, weaknesses, opportunities, and threats. Additionally, a financial analysis covering the period from 2007 to 2011 indicates unsatisfactory progress for Sony Corporation during those years. However, Sony remains confident that their future product called ‘Four Screen Strategy’ will bring significant positive changes for them. This report aims to explain the growth rate and reasons for fluctuations in Sony’s financial report by focusing specifically on ROS (Return on Sales), RD expenses (Research & Development expenses), working capital, and capital turnover.Sony’s current condition and development strategy are analyzed in this report. The objectives include clarifying purpose, adhering to core values, and defining mission and vision. The impact of Sony’s mission and vision on its overall direction is highlighted. Research shows that companies with mission and vision statements tend to perform better. Porter’s five forces analysis

is used to identify competitive advantages, evaluate market attractiveness, and assess strengths and weaknesses. Combining SWOT analysis with Porter’s model reveals opportunities and risks in untapped markets. In a highly competitive environment with lower profits and shorter innovation cycles, Sony needs to make changes while maintaining their spirit of innovation. The relationship between Sony’s mission and vision statements is significant as the mission defines the present goals while the vision outlines aspirations for the future. Drastically correct grammatical errors have been made in order to unify the text without changing the html tags or their contents.Maathai K. Mathiyazhagan explains that the organization’s mission reflects its purpose, activities, beliefs, and values held by staff members. It inspires employees and guides their actions, while the vision statement represents the desired future state. To achieve this vision and fulfill their mission, Sony’s strategy should align accordingly. Sony Corporation’s vision statement serves as an example of this alignment as it focuses on creating innovative digital entertainment experiences through advanced products combined with cutting-edge content and services. Furthermore, Sony’s mission revolves around developing a diverse range of groundbreaking products and multimedia services that redefine how consumers access and enjoy digital entertainment. The company strives to create synergy among its businesses in order to provide captivating entertainment experiences across various devices. This not only establishes Sony as a leader in technology but also aims to offer customers seamless experiences from one generation to another. With this belief in mind, Sony is actively working towards gaining market share by planning to release a pioneering “Four Screen Strategy” product in the near future. The ‘Four Screen Strategy’ combines mobile phones, tablets, PCs, and ipTV to create innovative multimedia products that offer customers an exceptional technology-driven entertainment experience.Sony remains true to its vision and mission statement, which focuses on developing innovative products. This dedication has earned the trust of society and created demand for future product development, giving Sony Corporation a competitive advantage and resonating with consumers. The purpose of this report is to serve as a learning tool for studying Sony Corporation’s case specifically. It offers step-by-step guidance on creating a case study centered around Sony Corporation, while also serving as a comprehensive resource for those interested in learning about Sony Corporation’s background, vision and mission, recent product launches, current offerings, challenges faced by the company, financial performance over the past five years, and upcoming product releases. Ultimately, this report provides insights into Sony’s cutting-edge performance in meeting the needs of the new generation. Not only does it provide information on Sony’s current situation, but it also serves as a source of insight for competitors looking to develop strategies to compete with Sony and increase their market share. Furthermore, this report can be utilized to predict Sony’s future prospects.The analysis of Sony Corporation’s financial report and company background allows clients interested in collaboration to evaluate the company. The methodology used in this report includes database analysis, which involves analyzing SWOT and Porter’s five forces, as well as examining Sony’s financial standing over a period of 5 years.

I. COMPANY PROFILE Ownership: Sony was founded by Akio Morita, who was groomed from an early age to take over his family’s prominent sake-brewing business in Nagoya. However, driven by an entrepreneurial spirit, he chose to leave behind a life of comfort and privilege and started Tokyo Telecommunications Engineering in 1946 during postwar Japan’s turmoil. Mr. Morita believed that having a brand was crucial for a company’s success – a concept now widely adopted by most companies today. This idea was revolutionary at the time in Japan when many companies were manufacturing products under different names for others. For example, Pentax manufactured products for Honeywell, Ricoh for Savin, and Sanyo for Sears.

In 1958, Mr. Morita changed the company’s name from “Tokyo Telecommunications Engineering Corporation” to “Sony Corporation” due to his belief in the importance of branding. He introduced Sony’s American Depositary Receipts (ADR) in 1961, making it the first Japanese company to do so. Additionally, he played a vital role in getting Sony shares listed on the New York Stock Exchange in 1970.In 1966, Mr. Morita wrote a book called “Never Mind School Records,” which emphasized the importance of focusing on individuals’ capabilities rather than their academic background and history. This viewpoint sparked significant debate in Japan and raised questions about employment practices and personnel development. The founders believed that through research and development, as well as product innovation, new forms of enjoyment could be brought to customers. The Walkman is an example of this belief, as it emerged from Mr. Morita’s curiosity and introduced the concept of enjoying music anywhere and anytime, including outdoors.

Additionally, Mr. Morita served as co-chair for several conferences such as the Japan-U.S Business Council, The Trilateral Commission, and the World Economic Forum in Davos. He played a crucial role in improving Japan-U.S relations through his involvement with organizations like Keidanren and the “Wise Men’s Group.” Through these organizations, he also played a key part in reducing trade conflicts with the U.S.

In 1998, Time magazine recognized him as the only Asian member on its list of the 20 most influential businesspeople of the 20th century. Until his death on October 3rd, 1999, Akio Morita led various aspects of Sony’s management including product development, marketing, overseas operations, and personnel growth.

Sony Corporation is globally involved in expanding its presence by designing manufacturing and selling electronic equipment and devices.Sony is a company that engages in various businesses such as game consoles, software, motion pictures, home entertainment products, television goods, and recorded music. They also have financial services involving insurance operations and banking operations in Japan. Sony manufactures its products primarily in Asia but has a wide sales network across approximately 200 countries and territories. Their main markets are Japan, the United States, and Europe. The history of Sony dates back to the early 1950s when they moved their head office and factory to Shinagawa in Tokyo. During this time, they successfully introduced the G-Type power megaphone and completed their first magnetic tape recorder prototype. Additionally, the founder of Sony traveled to the United States where he discovered Bell Labs’ transistor invention. He

negotiated with Bell to obtain a license so that his company could use this technology for communications purposes while most American companies were focused on military applications. In 1955, Sony launched Japan’s first transistor radio called the TR-55 which gained commercial success not only in Japan but also internationally in Canada, Australia, the Netherlands, and Germany.The TR-55 continued to sell well until the 1960s. In 1957, Totsuko (later known as Sony) introduced the TR-63 model, which became a worldwide sensation as it was the smallest commercially produced transistor radio at that time. This breakthrough allowed them to enter and dominate the American market, leading to the establishment of Sony Corporation in January 1958. The name “Sony” was chosen by combining two words: “Sonus,” derived from Latin meaning sound or sonic; and “Sonny,” an informal term used during that era in America referring to a boy. Subsequently, Sony Corporation of America (SONAM) was founded in 1960 within the United States. Sony’s shares were listed on the NYSE in 1970. Throughout its history, Sony has emerged as a global leader in technological advancements and has released numerous iconic products. Instead of imitating other manufacturers, Sony has a history of creating their own in-house technology standards. One notable example is the Betamax system they introduced for VCRs in the 80s, which competed against JVC’s VHS format. Unfortunately, VHS gained more market share and Sony lost that battle. Despite this setback, Sony has achieved many victories and several products we use today can be traced back to them.In the mid-60s, they expanded their product line to include televisions from transistor radios and tape recorders.In 1973, they received an Emmy award for developing the Trinitron color TV system, becoming the first Japanese company to do soSony achieved global success with the release of the iconic “Walkman” in 1979. This was followed by their introduction of the world’s first CD player, known as the “Discman,” in 1982. Throughout the 1980s, Sony expanded into cameras and produced a range of consumer-use still cameras and camcorders. In the 1990s, they entered the market of home-use PCs with their popular “VAIO” series. Around this time, Sony also launched their immensely popular PlayStation gaming consoles initially as a collaboration with Nintendo but later as an independent product line.

Today, Sony is recognized as a technology company that offers a wide range of products including their original items, home audio systems, recording media solutions, and robots. Over the years, Sony has experienced significant growth through various means such as joint ventures, acquisitions, and accumulating subsidiaries.

In 1989, they acquired Columbia Pictures Entertainment Inc., which later became Sony Pictures Entertainment Inc. Additionally, in 1993 Sony established Sony Computer Entertainment Inc., followed by the establishment of Sony Communication Network Corporation in 1995. In 2004, both Sony Financial Holdings Inc. and Sony BMG Music Entertainment were formed.

Furthermore,in 2005 they participated in a consortium that acquired Metro-Goldwyn Mayer (MGM). They also collaborated with Samsung to establish S-LCD Corporation for manufacturing TFT LCD panels in 2006 and later partnered with Sharp in 2009 to sell these panels. Sony’s strategic decisions have established its prominence in the global technology industry. An important milestone was reached when Howard Stringer became the first non-Japanese leader of a prominent Japanese electronics company, succeeding Nobuyuki Idei as Chairman and Group CEO of Sony Corp. However, Sony has faced difficulties in recent years due to fierce competition from Apple Inc. and Samsung Electronics Inc., leading to substantial financial losses of around $5 billion over a span of three years. In May 2011, Sony anticipated a loss of $3 billion.Paraphrased and unified text: Presently, Sony is renowned as a technology company that offers a broad range of products, including their original inventions, home audio systems, recording media solutions, and robots. Over the years, Sony has achieved substantial growth through various means such as organic expansion, joint ventures, acquisitions, and accumulating subsidiaries. One notable acquisition occurred in 1989 when they purchased Columbia Pictures Entertainment Inc., which was later renamed Sony Pictures Entertainment Inc. Furthermore, in 1993 Sony established Sony Computer Entertainment Inc., followed by the establishment of Sony Communication Network Corporation in 1995. In 2004, both Sony Financial Holdings Inc. and Sony BMG Music Entertainment were formed. Additionally, they participated in a consortium that acquired Metro-Goldwyn Mayer (MGM) in 2005. Collaborating with Samsung in 2006 led to the creation of S-LCD Corporation for manufacturing TFT LCD panels; later on in 2009, Sony partnered with Sharp to sell these panels. These strategic actions have positioned Sony as a prominent player within the global technology sector today.Howard Stringer became the first foreigner to take over as Sony Corp. Chairman and Group CEO, replacing Nobuyuki Idei. However, Sony has faced challenges in recent years due to tough competition from Apple Inc. and Samsung Electronics Inc., resulting in significant financial losses of around $5 billion within a span of three years. In May 2011, Sony projected a loss of $3 billion, which was further impacted by the Japanese earthquake causing them to revise their profit projection for the year from $857 million to a substantial decrease. By September 2000, Sony’s net worth was $100 billion but dropped to $18 billion by December 2011. Despite implementing joint ventures and outsourcing strategies to mitigate losses, Sony has not seen significant returns. This has raised concerns about the company’s future growth and sustainability. Sony aims to achieve its vision through its product-market strategy by incorporating information technologies into various aspects such as product design, production, distribution, and sales in order to enhance its core Electronic business. By doing so, divisions like music, pictures, games, and financial services can become more accessible through networks and increase their value. To implement this new approach effectively, Sony is introducing network-focused products in four categories: digital TVs and set-top boxes, VAIO home-use PCs PlayStation 2 consoles, and mobile devices.Sony has released a number of notable products throughout the years, including Umatic (1968), Betamax (1975), Betacam (1981), Compact Disc with Philips (1982),

5 inch Floppy Disk (1982), Video 8 (1985), DAT (1987), Hi8 (1988), Mini Disc (1990), Digital Beta cam (1990), Mini DV (1992), DVD with others (1995), DV CAM(1996), Memory Stick(1998), Digital8(1999) Universal Media Disc(2003) HDV with JVC(2004) Blu-ray Disc with Panasonic(2006). Sony also offers various other products such as VAIO COMPUTERS, TABLETS, TELEVISIONS, HOME THEATER systems, COMPACT CAMERAS, NEX AND DSLR CAMERAS, VIDEO CAMERAS, E READERS, PERSONAL AUDIO devices and PLAY STATION gaming consoles. Sony has successfully established itself as a leading company in consumer and industrial electronics and entertainment. They manufacture audio-video equipment, televisions, information and communication equipment, semiconductors, and other electronic components. Furthermore, Sony is involved in the music and image-based software markets through Sony Music and Sony Pictures. They have also expanded into the insurance business through their subsidiary Sony Life Insurance Co., Ltd. In terms of revenue breakdown for fiscal year 2000, Electronics made up 66%, the music business accounted for 10%, game console and software business accounted for 9%, motion-picture and television business accounted for 7%, insurance business accounted for 6%, while other sectors accounted for 2%.Sony has a strong global presence, with 1,152 subsidiaries and 107 affiliates worldwide. In fiscal year 2000, it consolidated 1,080 subsidiaries. Its main manufacturing plants are in Japan, Europe, Mexico, and the US.

However, Sony faces high competition from rivals like Samsung, LG, and Panasonic. These competitors offer similar products at lower prices, giving customers more options. Aggressive marketing strategies by competitors can also attract customers away from Sony.

On the other hand, new entrants into the market face challenges entering the electronics industry due to Sony’s strong brand reputation and customer loyalty. Additionally, significant capital investment and research and development efforts act as barriers for new players. Sony also holds patents and intellectual property rights that protect it from new competition.

The threat of substitutes for Sony is moderate because there are many alternatives available in the electronics industry such as smartphones and tablets.Advancements in technology may lead to the emergence of new alternatives, but Sony’s strong brand and reputation can help counter this threat. The high entry barrier for new competitors is due to the substantial capital required to establish a large industry, as well as potential obstacles created by government policies. While the need for technological expertise and innovation to differentiate products is low, Sony faces significant competition from LG and Samsung who offer cheaper alternatives in the electronics sector. However, Sony remains dominant in markets such as music, gaming, and picture industries where major substitutes are lacking.

Intense rivalry exists within the industry due to numerous competitors offering similar products. Furthermore, the fast-growing technological environment necessitates high research and development (R&D) investment for product development, with short product life cycles. There has also been a significant increase in technology imitation among companies and a rise in counterfeit product production. Additionally, intense competition has resulted in low profit margins for companies while exit strategies and barriers have become more challenging.

Moving on to the SWOT analysis of Sony Corporation, understanding its strengths, weaknesses, opportunities, and threats is crucial.

Strengths: i.Sony Corporation is a globally recognized and well-established electronics company known for its groundbreaking products. In addition to the electronics industry, Sony also operates

in gaming, music, mobile communication, and movie making sectors, allowing them to target diverse markets and customers. Sony is ranked among the top 20 semiconductor manufacturing companies worldwide and has a presence in over 180 countries, solidifying its position as a global marketing powerhouse. The company is committed to promoting environmentally friendly practices and is listed as one of the top ten companies in this regard. With extensive technological expertise, Sony excels in developing cutting-edge technologies. One of their most popular inventions is the highly sought-after PlayStation. As part of their sustainability commitment, 75% of Sony office buildings are powered by geothermal energy. They also provide multiple recycling drop-off points for product disposal in the USA alone. One of their notable achievements includes creating an incredibly powerful biobattery that operates on sugar and carbohydrates.

In conclusion, Sony’s dominance in the entertainment and music sectors brings numerous advantages for the company. They have achieved unparalleled growth thanks to their unique strengths. However, there are some weaknesses that require attention.Sony’s media products, particularly television production, have been unprofitable due to low demand and high costs. In addition, a lack of innovation in the media industry is causing Sony to lose market share to competitors like LG and Samsung. Furthermore, Sony’s diversification across all electronics fields has diminished the brand value and resulted in a decline in core competency. Moreover, recent natural disasters have caused delays in product launches as alternative manufacturing plants are not available.

However, there are opportunities for growth that Sony can seize upon. Firstly, leveraging the success of the music and movie industries as well as gaming can enhance the value of their product chain. Secondly, with these industries’ achievements, Sony has the potential to effectively integrate and support its products. Thirdly, Sony can swiftly introduce their research project “Four Screen Strategy” into the market before Apple does so. Fourthly, acquiring the Sony Ericsson joint venture presents an opportunity for innovation in smartphones and tablets while marketing them independently.

Sony Corporation has the opportunity to strengthen its position as a leading corporation by addressing weaknesses and capitalizing on growth prospects in various sectors of its business portfolio, including entertainment and electronics. This will not only enhance Sony’s brand reputation but also solidify its presence in today’s competitive market landscape.Sony has an opportunity to expand into the healthcare and imaging sector by acquiring a 30% stake in Olympus. Leveraging their expertise in camera technology, Sony can explore new growth avenues. Additionally, their purchase of Sharp will bolster their market share in the electronics industry, especially in televisions. This strategic move will enhance sales and expand their reach.

To improve sales, it is crucial for Sony to promote unique offers tailored for each country and market they operate in. This targeted approach will cater to customer preferences and increase competitiveness.

However, there are threats that Sony must address. LG and Samsung offer electronic products at lower costs than Sony, posing a serious challenge. To counter this threat, Sony needs to differentiate itself from these competitors.

Furthermore, Apple’s upcoming release of Apple TV presents another potential competition for Sony.

It is important for Sony to closely monitor this development and respond with innovative strategies.

Lastly, hackers pose a significant threat to Sony’s security systems as seen with the breach of secure information such as credit card details on their PlayStation network.Sony needs to prioritize strengthening its cybersecurity measures. Additionally, the company has lost its appeal in the eyes of customers, who are now more inclined to seek products from other companies. Therefore, it is crucial for Sony to focus on revitalizing its brand image and reconnecting with consumers through compelling marketing initiatives. By addressing weaknesses, seizing growth opportunities, and effectively managing threats, Sony can reinforce its position as a leading corporation in today’s competitive market.

The financial performance of Sony over the past five years, measured in yen (in millions), has been unfavorable. According to the Sony Annual Report 2011, the net profit figures are as follows: – In 2007: ?126,328 million – In 2008: ?369,435 million – In 2009: -?98,938 million – In 2010: -?40,802 million – In 2011: -?259,585 million.

Based on this data, it is evident that there was a significant decline in Sony’s financial condition by the end of 2011. This marked it as the worst profit made by Sony within that five-year period. However, there was a notable increase in Sony’s net profit in 2008 compared to the previous year; it nearly tripled during this time. Furthermore, there was slight growth between 2009 and 2011 before experiencing a sharp decline in 2011.According to Sony’s financial annual report, Graph 1 illustrates the net income based on Return on Invested Capital (ROIC). This metric will be used to assess the growth rate of Sony’s corporation. The results for this measurement over a five-year period are as follows:

– The growth rate from 2007 to 2008 is ((369,435-126,328)/126,328) x 100 = 192.4419. – The growth rate from 2008 to 2009 is ((-98,938+369,435)/369,435) x 100 = -126.7809. – The growth rate from 2009 to 2010 is ((-40,802-(-98,938))/(-98,938)) x 100 = -58.76. – The growth rate from 2010 to 2011 is ((-259,585-(-40,802))/(-40,802)) x 100 = -536.2066.

Graph2: Growth Rate

Reasons for both increasing and decreasing Sony’s financial index can be identified by examining its Return on Sales (ROS), which is calculated using the following formula: Return on sales (ROS) of Sony from years ranging between [Year] and [Year] based on Source: Sony’s annual reports.

Return on sales (ROS) serves as an insightful measure of a company’s operational efficiency and profitability since it indicates how much profit is generated per dollar of sales. An increasing ROS signifies improved efficiency while a decreasing ROS may indicate financial troubles for the company.

The ROS ratio is important for comparing a company’s performance to its competitors. According to the chart provided in the report, Sony’s ROS declined significantly from 6.91 in 2008 to (2.46) in 2009, suggesting a decrease in sales volume.The decline in Sony’s performance can be attributed to both external and internal factors. External factors include the appreciation of the Japanese Yen, which affected the purchasing power of non-Japanese customers for Sony products, as well as the global economic crisis that resulted in reduced customer spending. Additionally, an earthquake presented challenges for the company. On the other hand, increased competition in the electronics and

game industry internally contributed to difficulties in maintaining market share.

However, starting from 2010, Sony saw a recovery in its operations with a growth rate of 0.43 reaching 3.25 in 2011. This improvement can be credited to Sony’s effective restructuring plan aimed at reducing production overhead and SGA costs.

RD expenses are operating expenses used for improving and developing new products or services. The table below displays RD expenses for Sony between 2007 and 2010 based on data from Sony historical statistics (2001-2011). The chart illustrates that Sony devoted significant resources to research and development in order to advance technology and meet growing customer demands.

In 2007, Sony invested 520.6 billion in RD, resulting in the creation of their innovative product, the organic light-emitting diode (OLED) display. This display is thinner and more efficient compared to traditional LCD displays.

Starting from 2008, Sony’s research and development (RD) expenses decreased from 497 billion to 426.8 billion by 2010. The reduction in Sony’s working capital from 2007 to 2010 can be attributed to several factors. These include a decline in operating profit due to losses in the TV business, margin erosion in digital cameras and PCs, appreciation of the yen, and floods in Thailand. In order to reduce costs and increase gross profit, Sony made the decision to decrease RD expenses. The table provided demonstrates Sony’s working capital during this period. Working capital is a measure of a company’s ability to meet short-term debts by calculating the difference between current assets and current liabilities. A positive working capital indicates that a company can fulfill its short-term liabilities, while negative working capital suggests insufficient funds for these obligations. According to the data, Sony’s working capital showed a downward trend during this period. It decreased from 994,871 million in 2007 to (190,265) in 2009 with a further decrease of (282,933) in 2010. As a result, Sony did not have enough assets to cover its short-term liabilities. In such a situation, Sony would either default or take on more debt to address its current debts. A prolonged decrease in working capital could be due to declining sales volumes for Sony or the need for additional capital for research and development purposes as they strive to enter new markets. The capital turnover ratio is used to calculate total revenue divided by average stockholders’ equity and measures the return on common equity. The text below has been paraphrased and unified, with grammatical errors corrected while keeping the HTML tags and their contents.

It also determines how efficiently a company uses its shareholders’ equity to generate revenue. A higher ratio indicates effective capital utilization. According to the chart sourced from Sony’s annual reports, Sony’s capital turnover decreased from 2.61 times in 2009 to 2.43 times in 2010. However, there was an improvement in this ratio between 2010 and 2011 (2.82 times), surpassing the level seen in 2009. This suggests that Sony has successfully managed its current invested capital to generate revenues.

When comparing Sony Corporation and Samsung Group, both conglomerate companies using the above chart, we can gather information on their net revenue generated from 2007 to 2011. This comparison provides insights into Sony’s slight decline in the market and may inspire them

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