Sony Case Study

Summary – Sony Case Study

Prepared by: Honey Bonny ((‫د‬ ((‫حمد‬‫أبو‬

Sony Corporation – Restructuring Continues, Problems Remain •

Sony in crisis again:

1. Obstacl acles: do don’t question ion itits bu busines ness. 2. Reorg Reorgani anize ze the the pro progr gram amss (fina (financ ncial ial per perfor forman mance ce and and com compe petit titive ivene ness ss of of the the comp company any)) 3. The atte attemp mpts ts fail faileed be because ause of the the silo ilo cu cultur lture. e. 4. Redu Reduci cing ng busi busine ness ss cate catego gori ries es and and prod produc ucts ts mode models ls.. 5. Anot An othe herr reorg reorgani anize ze of of the prog program ram in 200 20099 (redu (reduct ctio ionn in the the emp emplo loye yeee and and manu manufac factu turin ringg sites) make all Sony parts to work together and move to innovation. 6. Did not not giv givee att atteentio ntionn to to the the mark arket rese resear arcch. •

The restructuring efforts:

1. Anoth notheer re re-str -struuctur cturin ingg in 1994 & 1996 996 2. Sony ony org orgaanize nizedd int intoo 10 10 co compan pany str struuctur cturee  no improvement in the financial performance. 3. SWOT SWOT:: anot anothe herr rest restruc ructu turin ringg was was in in 199 19999 whe whenn Son Sonyy trie triedd to exp explo loit it the the opportunities offered by the Internet  PlayStation (p5) 4. New cha chang ngee in in the the top top man manag ageement ment of Son Sonyy. 5. The CEO CEO sugg suggest est that Sony Sony trans transform form into a Broad Broadban bandd Netw Network ork Solutio Solutionn com company pany by launching a wide range of broadband products and services  did not get the expected results. Analysts were of the opinion that the erosion in Sony’s profits was due to the expenses the 6. company had incurred on implementing its many restructuring plans. 7. New Ne w idea idea of of restr restruc uctu turin ringg plan plan call called ed “ Tran Transf sfor ormat matio ionn 60” 60” - 3 years years pla plann- aime aimedd to optimizing manufacturing infrastructure and reducing fixed costs by combining the operating divisions and shifting component sourcing to low cost markets like china. Reduce cost by: - Downsizing and consolidating the manufacturing, distribution and customer service facilities - Streamlining procurement. - 7000 employees were laid off in Japan and 13,000 at other locations in world. - Several corporate and administrative functions which were overlapping were integrated. 8. This This restr restruct ucturin uringg plan plan was was not not succ success essful ful mainl mainlyy becau because se of of the signifi significant cant drop drop in sales sales in some products. 9. In 200 2005, 5, Strin Stringe gerr becam becamee the the CEO. CEO. He identif identified ied five main main chall challeng enges es for Sony: Sony: p6 1) Getting rid of its silo silo culture, culture, 2) Attaining profitability profitability across across businesses businesses 3) Making products products in line with industry standard technolog technologies. ies. 4) Improving Improving the competencies competencies in software and service service 5) Divesting Divesting the company company of its non-strategic non-strategic assets. assets. At the same year, Sony started to adopted the new organizational structure by reorganized the company into five business group: - the electronics business, - the games business group, - the entertainment business group, - the personal solutions business group, - the personal solutions business group and the Sony financial holding group). The results of this new structure: Sony expected to achieve coordination across different areas including planning, technology, procurement, manufacturing, sales and marketing. Eliminate product and design redundancies. along with this new strategy, Sony also announced an internal slogan called “Sony United”. This focused on promo on promoting ting teamwork teamwork and coope cooperation ration and and bringing bringing togethe togetherr key resources.. resources


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Prepared by: Honey Bonny ((‫حمد‬‫أبو‬

The outcome:

1. One of Stringer’s first tasks was to revive Sony’s television business (flat panel televisions). 2. In 2006, nine factories were closed down and over 5700 jobs were eliminated. 3. To focus on the growth markets, Sony discontinued the manufacture of around 600 of the total 3000 products it manufactured. 4. Although the electronics business remained a problem, the sales of flat panel TV improved and so did the sales of PCs and camcorders. 5. Analysts were of the view that Stringer’s efforts had succeeded in putting the company back on the right track . 6. in 2007, Sony announced that to strengthen its product development capability and improve profitability in the electronics segment, some more changes had to be made in its organizational structure. The company established the B2B Solutions Business Group  aim to enhance its B2B business growth. 7. As a result of the joint venture with Samsung for making panels was one of the reasons for Sony doing well in the television market (B2B strategy). 8. In 2007, Stringer announced that after three years of reorganization, Sony had recovered from its past problems. 9. In the fiscal year of 2008 Sony appeared to be on good financial health. 10. Sony had a slew of products in the pipeline including high-end digital cameras and new OLED TV. This slow down was a result of many economic condition such as the recession in the US and the strengthening of the Yen. Besides consumers postponed the purchase of electronics products. the results was that Sony ended up performing badly. •

Problems resurface again:

1. Because of the global recession affecting spending on luxury products, Sony’s sales of LCD TVs (Bravia / OLED) dropped and failed to make its presence in the US market. 2. Analysts said that the product was ahead of its time and Sony was taking the risk of coming into the market too early. 3. Sony faced problems on several fronts. For example: PlayStation 3 did not achieve the expected success and its sales were lower of that of Nintendo Wii and Microsoft’s XBOX 360. The reason behind that was of the high costs of manufacturing PlayStation 3. 4. Another global economic downturn impacted the sales of LCD TV and digital cameras. It is called ‘second Sony Shock’. 5. In Dec 2008, Sony announced that a reduction in the workforce was inevitable along with a re-examination of the businesses which were not profitable. 6. To do so, Sony adopted short-term measures like: - Reducing operational expenses and lowering inventory costs. - Other measures that it planned to take included: Adjusting product pricing to square off the increase due to the appreciating Yen against global currencies. Withdrawing from or downsizing unprofitable businesses Delaying the investment in semiconductors and in a few television plants Realigning domestic and overseas manufacturing sites. Analysts pointed out that by giving more power to the CEO, Sony could be brought back on 7. the recovery path. In their opinion, a radical change was long overdue at Sony. •

Reorganization in 2009:

1. Focus on electronics and game businesses of Sony, aiming to improve their profitability and strengthen competitiveness.



2. Stringer said “this reorganization is designed to transform Sony into a more innovative, integrated, and agile global company with its next generation of leadership firmly in place. 3. The company proposed to form two business groups: The Networked Products & Services Group and The New Consumer Products Group – through the re-organization. 1) Under Networked Products & Services Group: Sony Computer Entertainment, personal computers, mobile products (Walkman) and Sony Media Software and services. The main aim of the group was to bring in new products using Sony’s technologies and also to increase the pace of innovation at Sony that would lead to higher profitability. 2) Under Networked Products & Services Group: Television, digital imaging, home audio, and the video business of the company. The main aim of the group was on achieving profitability and growth through product innovation, and improving efficiency and speed of operations. 4.

As a part of the reorganization efforts, two cross company units were created: a. Common Software and Technology Team which was to develop and implement integrated technology and software solutions. b. Manufacturing / Logistics / Procurement Team which was responsible for ensuring efficient supply chain solutions for the business groups. 5. The reorganization was expected to 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 6. and entertainment divisions and also other divisions like television, digital imaging, home audio and video to work in tandem. This would address the issue of the silo culture in the organization. 7. As a part of the reorganization efforts, the company witnessed a reshuffle of some of the top executives in the company. 8. As a part of the reorganization efforts, in May 2009, Sony came up with extensive measures in its electronics operations. This included consolidation of some of the operations in Japan. •

The aftermath:

1. Brought in a new control structure at Sony, which was expected to be operationally convenient and to unite the different silos that existed in the organization. 2. While restructuring Sony, a lot of young blood had been infused into the top management of the company – this issue break the Japanese tradition of seniority in favor of performance. 3. Through its new restructuring efforts, Sony planned to gain a substantial position in the networked electronics market, and new group – Networked Products and Services Group – was created especially for that purpose, concentrating on products like the PlayStation and the Vaio personal computers. 4. Analysts were of the view that the networked products and services group had a tough task ahead – it had to create digital services that would tie all Sony’s products together. Some industry experts were of the view that the reorganization would result in sustained profitability and a cohesive corporate culture. It was also expected to result in nimbleness in the organization aand in making it ready to face the new age rivals. 5. The creation of cross company units in the areas of logistics and software was also seen by analysts as an effort to bring down the silos in the company. 6. George Bailey, his main responsibility was to accelerate the transformation of Sony into a leading provider of networked products, content and services. 7. Bailey was expected to work closely with different cross-functional teams, business groups and the top management of Sony. 8. Sony also planned to reduce the number of suppliers from 2500to around 1200.


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Analysts responded positively to the reorganization efforts of Sony: It is said “ it’s a positive sign of how Sony is frantically moving forward toward change, including structural changes especially in its TV and other electronics business”. Stringer in several instances mentioned that the silo culture was Sony’s main weakness. In May 2009, Sony announced its first annual loss in 14 years.

Looking ahead:

1. As of June 2009, the proposed reorganization was progressing well and Stringer reaffirmed his intention of making the company’s presence felt in the network electronics market . 2. Sony planned to make 90% of its electronic products network-enabled by 2011. 3. Sony aimed at connecting all its devices to one another and to the proposed Sony network, through which digital content like movies, games and TV shows could be downloaded. 4. Industry experts opined that the next revolution in the realm of electronics would be centered around television several companies were in the process of bringing out web-based content on to televisions. Sony already had a considerable presence in the television market and could take advantage of this emerging trend by bringing out products that helped in downloading content from the Internet on to the television, display and edit video sharing, storage, etc. ( the company planned to more deeply integrate its television and computer entertainment products ). Analysts believed that Sony needed to invest in cutting edge technologies in video games 5. and television, as these businesses accounted for a quarter of its revenues . Industry analysts opined that while Sony had announced several restructuring exercises in 6. the recent past, none of them had been able to deliver sustainable positive results .

Sony Case Study

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