SONY CASE - Strategic Management

8/10/2019 SONY CASE - Strategic Management

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STRATEGIC MANAGEMENT & PLANNING

ASSIGNMENT HELP: SONY

CORPORATION: RESTRUCTURING CASE

STUDY

STRATEGIC MANAGEMENT & PLANNING ASSIGNMENT HELP: SONY

CORPORATION: RESTRUCTURING CASE STUDY

Question Asked??

Write a case study description on Restructuring case study for Sony Corporation?

Solution Proposed:: Introduction

Sony Corporation is the parent organization of the Sony group of companies. The companyis mainly engaged in the designing, manufacturing, developing, and selling of several kinds of audioand video related products, communication products, semi conductors, televisions and so on. Thecompany mainly deals in five main segments i.e. games, electronics, pictures (televisions and films)and other products. The company operates through several subsidiaries and has major operations inJapan and across many other countries in Asia, North America and Europe. The company has awide network of business in more than 200 countries across the world. The company has itsheadquarters in Tokyo, Japan. The company is a famous for its high end technology it provides from

time to time to its customers. The company is highly innovative and has built its business empireusing its innovative products and services (History 2012).

The following report includes the little introduction of the company and analysis of thecompany frequent restructuring and its adverse impacts on the company operations. The report alsoincludes the company efforts of restructuring in the year 2005 and also the reasons of companyshowing healthy profits in the year 2007 and 2008. The report also discusses about the planproposed by stringer in the year 2009. Some recommendations related to Sony for sustaining thegrowth and success in future has also been mentioned in the report. Finally a conclusion has beendrawn from the overall analysis.

Adverse implications of frequent restructuring

The company has gone through several restructuring programs initiating from the year 1994.The main aim of the company behind these regular and frequent restructuring programs was toimprove the financial performance of the company and its competitiveness in the market. However,more of the restructuring initiatives of the company have failed to attain the desired and expectedresults. The main adverse impact of these frequent restructuring is the differences in the companydepartments and the silo culture within the organization which prevented the organization to

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cooperate and communicate effectively with each other related to the issues and problems in thecompany (DePamphilis 2011).

Due to these factors the company revenue stream has reduced in several years. Due to the regularrestructuring of the company the company management was not effective to handle the issues of thecompany from time to time. The company also does not managed to increase its revenue streamdue to frequent and regular restructuring which is also due to the adverse impacts on the company’semployees performances. The adverse impacts of the frequent restructuring include the impact ofthe change in the staff which directly and indirectly impacted the existing staff and their operations(Städtler 2011).

Significant changes in the organization have impacted the organizational structure from time to timeand have also affected the employee’s psychological contract. It has also impacted the relationshipin between the employees and employers. There is also lot of costs incurred in the restructuringprocesses which impacted the profitability and operations of the company. The company has gonethrough several restructuring since from the year 1994. The primary and the adverse impacts of

these frequent restructuring is also related to the company internal and external factors. Recentrestructuring has led to the company losing the loyalty of customers in its operations and in itsstrengths (DePamphilis 2011).

The reliability of the company was also questioned by the customers. The customers also lost thedependability on the company operations during the time of the company and corporate crisis. Thecompany frequent restructuring has also increase the cost of company operations as restructuring isvery expensive affair, so these initiatives are highly expensive for the company and is the risk factorwhich impacts the company economically (Frisch 2003).

The level of the jobs cuts and new recruitment impacts the business and also creates the negativeimpact on the unemployment rates of the company. The company also has to bear higher expenses

which makes the company profitability turns into losses due to heavy expenditure on therestructuring activities. The company also has the adverse impact on the employee’s morale andalso on the company image in the market. The company goodwill is also impacted and will beaffected for long term the company also finds it difficult to face competition as the companyoperations is highly impacted due to the frequent restructuring (Städtler 2011).

Sony restructuring efforts in 2005



In the year 2005 Stringer become the CEO of the company. He identified five major factorsand challenges that needs to be rectified by the company in order to overcome from the challengesfaced. The five challenges includes attaining profitability across all the business and subsidiaries,getting rid of the company long run silo culture, making and providing customers with products in linematching with the industry standards, diversifying the company operations into non strategic assetsand investments, improving the company competencies in the service and software. The company

new CEO announced another round of restructuring in the year 2005. The company planned tobreak the silo walls and also tried to eliminate the decentralized structure of the company which hasbeen maintained by the company since long (Nathan 2001).

The company adopted the new organizational structuring in the year 2005, in the month ofOctober the company has been reorganized into five business segments. This mainly includes,games business unit, electronics unit, personal solutions business unit, entertainment group andfinancial holdings group or unit. Through this new structure the company aimed towards achievingcoordination across all business areas including mainly technology, planning,manufacturing, marketing and sales. The company has been aided by this new structure and haseliminated the problems of product designing and their redundancies. Apart from this newbusiness strategy of the company the organization has also announced an internal slogan i.e . “Sony

uni ted ” this is mainly aimed at promoting the company team work and cooperate the business

practices and bring them together using the key resources (Frisch 2003).

The company has also discontinues its robotic unit due to its lower revenue generation. Thecompany another unit named as Sony’s Qualia which mainly deals in luxury electronics has alsobeen discontinued. The other several businesses which are discontinued by the company includemail order shopping company, cosmetic makers and chain of restaurants. More than one third of thecompany subsidiaries businesses were involved in the businesses other than electronics andentertainment business of Sony Corporation. The company restructuring efforts in year 2005 alsoincluded reviving of its television business (Nathan 2001).

The company launched its Bravia brand of the LCD televisions in the year 2005; this move includedheavy expenditure on advertisement in order to face the competitors like LG and Samsung etc. after

the restructuring in the year 2005 the company by the end of 2006 has improved its revenue streamand reported a net profit of 123 billion. This was highly attributed to the Bravia LCD television brandof the company launched in the year 2005. The efforts put in the year 2005 by Stringer put thecompany back on the right track and this also led to the strengthening of the product developmentcapability and improved capability of the company (Aswathappa and Dash 2007).

Reasons of Sony showing healthy profits in 2007 and 2008

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By the end of the year 2006 the company profitability has improved due to the launch and thesuccess of the Bravia televisions brand launched by the company in the year 2005. On March 2007the company launched and announced the strengthening of its products and its development of theproducts and their capability and an improvement in the profitability in the electronic marketsegment. The company tried to make more changes into its organizational structure in these years.The company also in this year established its Business 2 Business solutions business group which is

aimed at enhancing the B2B business growth (Carter 2003).

This business group of the company is aimed at uniting and streamlining its existing broadcastingbusiness, FeliCa15 business, B to B solution business. In the same period the company by theefficient utilization of the brad based research and developments success in the B2B solutionbusiness the company has hoped to develop several new businesses in order to drive its sales andgrow its profitability in the B2B business area. During the reorganization of the business in thisperiod 2007-2008 Chubachi has been appointed as the president of the B2B solution business, twonew business group has been developed during that period i.e. video business group and TVbusiness group (Nathan 2001).

The company announced that in the year 2007 the profitability of the companies will increase six foldfor the year 2008 and this announcement has raised the shares of the company to the five yearhighest level. With the announcement of the company results in the first quarter of 2007 the resultshas been very high from the expectations of the analysts. The sales of the company have shown arise of 13 % as compared to the previous year results. The operating revenue of the company hasgrown by 250 % and the operating income by the 77%. This success has highly been attributed by



the company to the Bravia Television brand whose sales revenue has increased extremely morethan that of the competitors like LG and Samsung (Hitt, Ireland and Hoskisson 2009).

The joint venture of the company of making joint panels is also one of the reasons for the success ofthe company in the television market. In the year 2007 the company also launched its first ever ultrathin television screen which is specifically made up of OLED’s. This television was only five

millimeter thick. This was said to be as the company come back. The company sales of the playstation in Japan has overtook the sales of Nintendo in the year 2007 and this led to thereorganization of the company after three years the company has overcome its issues andproblems.

Restructuring plan proposed by stringer in 2009

In the year 2009 in February the company announced a major reorganization which hasbeen made effective in the month of April in the same year. This reorganization of the businessmainly concentrated on the gaming business unit of the company which is highly aimed towardsimproving the profitability of the company and improving its competitiveness. Stringer said that thisreorganization is mainly designed to transform the company into more and more innovative and agile

global company with the next generation of the company business firmly into the place. Thecompany announcement of the actions is related to the acceleration of the company business whichhas begun four years back. Now the company is trying to make work all the parts together and incoordination worldwide and to attain worldwide leadership (Hitt, Ireland and Hoskisson 2009).

During the reorganization Stringer proposed to form two business groups i.e. the newconsumer products group and the networked products and service group. Under thenetworked products and service group the company would sell the mobile products, walkman, Sonymedia software, and computers and so on. The main aim behind development of this group is tobring in the new products and services in the Sony technologies brand name and increase the paceof development and innovation of products that would lead the company towards profitability. While

under the new consumer products group the company would deal in digital imaging, televisions,audio systems and also including the video based products. The aim of this group is attainment ofprofitability and growth through the innovation of new products in this segments and improving theefficiency of operations of the company.

As the part of the reorganization of the company two cross units by the company wascreated. The one unit was the manufacturing, logistics and the procurement team which isresponsible for the management of the supply chain of the business products and another group isthe common software and technology team which will be responsible for the implementation ofthe integrated technologies developed by the company and the providing of the software relatedsolutions.

This reorganization in the year 2009 was mainly done in order to speed up the productionactivities related to the networked products and services. This was done in order to help differentdivisions of the company like, mobiles, PCs, televisions, gaming’s and so on. This was also done inorder to get rid of the silo culture adopted by the company in the past. The reorganization done byStringer also included some reshuffle of some top executives in the organization. Stringer has takenitself the position of the president along with the position of a CEO and chairman of the company.The reorganization suggested by stringer also includes the consolidation of the company operationsin Japan in order to speed up the performance of the company and attain the desired objectives(Flügge 2008).



Recommendations to Sony for sustaining growth and success in future

It can be recommended to the Sony Corporation that the company must make the companyoperationally convenient and unite the operations of different departments of the company and try toget rid of its silo culture which is preventing the company to grow with pace and coordination. The

company is also suggested to drop the silo culture and plan the coordination and cooperation of allthe departments and subsidiaries of the company in order to perform in unity and attract goodnumber of efficient employees in the company (Hitt, Ireland and Hoskisson 2009).

The company must stop the restructuring the company after this long period and bring stability in theorganization and hire a higher number of the young blood which is enthused towards working withzeal and bring in good and positive results. It is also recommended that the company must alsobring in more research and innovation into its products in order to trap the market and customersand redevelop its image as a strong company having operations in several parts of the world. Thecompany must also set the example of being an innovative, integrated and agile organization withthe next generation to be in place for the development of the company in the coming period of time.The company will be moving with the young generation and is innovating new and advanced

technology products of high quality.

It is also recommended that the company must also try to gain substantial position in the electronicsmarket and also in the new group market i.e. the networked and service group which mustconcentrate on the products like play station and Vaio (PCs) personal computers. The company isalso recommended that they must finally stop the reorganization and restructuring activity as thecompany has reached the growth phase and now can easily attain the growth path in short run. Thecompany is also recommended that they must launch new and innovative products like Bravia andplay station which has helped the company to move from the period of crisis to the growth path. Thecompany must also keep a watch on its different department and subsidiary activities which will helpit to recover from its silo culture and gain from the cooperation and coordination of differentdepartments (Hitt, Ireland and Hoskisson 2009).



Conclusion

From the analysis of the company restructuring and other activities it can be concluded thatthe company has gone through several reorganizations and restructurings which has affected theoperations of the company in long run and has also impacted the company goodwill. It can also beconcluded that the stringer has done a proper reorganization of the company and has taken several

appropriate decisions which has helped the company to move from the adverse condition to thegrowth path. It can also be said that the company has effectively reorganized its operations and hasdeveloped efficient groups and structured the company into two groups which is highly effective inhandling the tasks of the company in long run. It can also be concluded that the company willimprove its business and good will by the management of the company activities by propercoordination and cooperation’s and by the removal of the silo culture which has benefitted theorganization a lot. It can also be concluded that the company in now in the growth path and nowmust try to keep the operations and management active and innovate products and services withspeed and innovativeness in order to attain a grip in the market.

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SONY CASE - Strategic Management