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Evaluation of Sony Corporation’s strategy
Sony have successfully created an incredible brand name previously, however,
its legend seem to be falling apart recently. In fact, Sony’s net profit for the JulySeptember quarter for 2006 falling 94% to 1.7 billion Yen, compared to 28.5 billion
Yen for the same period last year (Benson, 8th Nov 2006). The major reasons for the
declining profit are affected by the critical strategic issues faced by Sony which
became a main drawback for them.
The first strategic issue faced by Sony was the inefficient manufacturing
structures which decrease Sony’s quality that badly affects their reputation and caused
a decline in product competitiveness. DeWit & Meyer (2004: p192) argue that “the
essence of most uniquely Japanese management practice will be they productivity
improvement, TQC (Total Quality Control) activities, QC (Quality Control) circles, or
labour relation – can be reduced to one word: Kaizen”. They also argue that “the
implication of TQC or CWQC (Company Wide Quality Control) in Japan have been
that these concepts have helped Japanese Companies generate a process-oriented way
of thinking and develop strategies that assure continuous improvement” (p192).
However, in the case of Sony, they did not make any improvement or perform well in
Kaizen or implement an efficient manufacturing structure that ensure high product
quality which affect their product quality and caused a massive damage to the
company. For example, there is the recall of 9.6 million Sony Laptop batteries which
were liable to overheat and potentially burst into flames where Sony even failed to
fully study the problem (Forbes.com, 2nd October 2006) and there are complaints
from Japan’s consumer about PS3’s new system (Wonova.com, 15th Nov 2006) which
will affect the compatibility and status of Sony badly.
The failure of Sony in effectively implements Kaizen or sustain an effective
manufacturing structure to ensure that they have high quality products had damage
their strong brand name and reputation which caused them to lose their product
competitiveness and competitive advantages in the market. As Johnson et al (2005:
p125) argue, “it is important to emphasize that if an organization seeks to build
competitive advantage it must meet the needs and expectations of its customer”. The
fact that Sony’s product qualities are unable to meet the needs and expectations of
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their customer had completely decreases the confident of the market and swipes away
its reputation. Finlay (2000: p295) also argue that “a good reputation is something
that all business would like to have but in some cases a good reputation is much more
valuable than in others”. Reputation is one of the significant intangible resources
(Collis & Montgomery, 1999) for Sony that differentiates themselves from the
competitors for them to charge a premium price for their excellent product and quality,
as Kotler & Keller (2006) argue, good reputation can create a positive prejudice in the
mind of the customer which make customer prefer the brand. Therefore, the
diminishing of Sony’s reputation will create a negative prejudice and weaken their
core competences which will directly affect their competitive advantages and become
a major threat for Sony.
Besides than quality and reputation issues, Sony are insufficient in responding
to the shift of market demand and losing of its competitive advantages. The delays for
the European launch of PS3 due to manufacturing problems (BBC.co.uk, 6th
September 2006) caused Sony to become incapable of fulfilling the increasing market
demands which increase the stake for Sony as there are other strong competitors such
as Microsoft and Nintendo to have a head start in gaining market share and enjoy first
mover advantages. Besides, Sony also responds slower than others in the increasing
demand of Plasma TVs and lost ground for key growing area. As Mintzberg et al
(1999: p96) suggest, “first mover may gain advantages in building distribution
channels, in typing up specialized suppliers or in gaining the attention of customer”
and “the first product of a class to engage in mass advertising tends to impress itself
more deeply in people’s minds than the second, third or fourth”. Therefore, Sony lost
its competitive advantages and large proportion of the market shares in the game and
electronic industry; they are also unable to benefit from the first mover advantages
which left them behind of their competitors.
Currently, Sony are implementing emergent strategies from both “inside out”
– Resources Based View (Hamel & Prahalad, 1990; Barney, 1991) and “outside in” –
Positioning view (Porter, 1980 and Mintzberg et al, 1998), or so called Market Based
View (Finlay, 2000) to secure its current position. Johnson et al (2005), Finlay (2000),
Lynch (2006) and Thompson & Strickland (2003) all suggested that an integrated
approach of the resources-based and positioning view can maximize the capabilities
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of organization and sustaining more competitive advantages. Penrose (1959), Selznick
(1957) and Hatch (1997) also suggested that competitive strategy requires both the
exploitation of existing internal and external firm-specific capabilities and of
developing new ones. In the changing business environment, Sony needs to cope with
the external changes and find the right ways to deal with it by their own capabilities or
resources. Markides (2004: p9) also agreed that “unless organization take a holistic,
big-picture approach in designing the activities of the company, their efforts will
backfire”.
As for “inside out”, also called the competence-based view (Hodgson, 1998),
Sony has been green-lighting asset sales to free up cash so they can rebuild the
company around a tighter core of businesses. In December, Sony sold part of its 49%
stake in retailer StyleLife Holdings to a group of investors (Hall, 30th January 2007).
This managing for value strategy which “concerned with maximising long-term cashgenerating of an organization” (Johnson et al, 2005: p468) by disposal of assets to get
more funds and reinvest back into different business units such as R&D, production
and others can help Sony to strengthen its core competencies. As DeWit & Meyer
(2004: p326) suggest, “the real sources of advantage are to be found in managements
ability to consolidate corporate-wide technologies and production skills into
competencies that empower individual businesses to adapt quickly to changing
opportunities”.
Another strategy that Sony implement to boost its core competence is
miniaturization (DeWit & Meyer, 2004). To bring miniaturization to its product, Sony
must ensure that technologists, engineers, and marketers have a shared understanding
of customer needs and of technological possibilities in order to become more
customer-orientated with the aim to increase competitive advantage, as well as create
more value added activities. Sony also implement a related diversification stategy
which involve adding businesses whose value chains possess competitively valuable
strategic fits with the value chain of the company’s present business. Related
diversification among the different businesses provides Sony with sharper focus for
managing diversification and is a useful degree of strategic unity across the
company’s various business activities (Thompson & Strickland, 2003). Lynch (2000:
p71) also argue that “it is the combination of resources that delivers competitive
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advantage, because such a combination takes years to develop and is therefore
difficult for others to copy”.
Besides, in order to regain Sony’s competitive advantages, they appoint the
first foreign chairman, Howard Stringer to head the company with the aim to secure
Sony’s main ground and hope that an outsider will assist Sony to think outside the
box. As Hamel & Prahalad (1994) suggest, intellectual leadership are essential to
develop industry foresight, anticipating which trends are likely to emerge, so it is
important to build Sony’s new core competence to shape the industry.
However, Priem and Butler (2001) have shown that the Resources Based
View, as currently constituted, contains a theory of sustainability but not a theory of
competitive advantage (i.e., value creation).They argue that “simply advising
practitioners to obtain rare and valuable resources in order to achieve competitive
advantages and, further that those resources should be hard to imitate and nonsubstitutable is not very helpful in providing practical help” (Johnson et al, 2005:
p155).
On the other hand, as for “outside in” which is the Positioning view,
Mintzberg et al (1998) argue that positioning is important and had develop the
Positioning School. Sony also believes that the external business environment will
shift the strategy of the organization. Finlay (2000; p11) suggest that “organization
alter itself and the products and services it offers in order to match the needs of
customers in its chosen marketplace which is a market-based approach, so called
because the organization looks to the marketplace to see how it should act and how it
should evolve”. Besides, based on the environmental factors, Mintzberg et al (1998)
developed the environmental school which argue people in strategic management
must consider the range of decisional powers available, given the forces and demands
of the external context. Sony insufficient in responding to the external market had
caused them to lost ground in key growing areas and their strategy must be able to
cope with the external environment.
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Moreover, Porter (1991) strongly believe that making choices about how
organization position their company in its competitive environment is what strategy is
all about and emphasize on the importance of positioning view. He argues that
organization can sustain competitive advantages by implementing the generic
strategies by position themselves either being cost-leadership, differentiation or focus
(Porter, 1985). Sony had positioned themselves with a differentiation strategy which
seeks to provide products or services that offer benefit different from those
competitors and that are widely valued by buyers (Johnson et al, 2005). Sony are
rewarded with a premium price with its uniqueness (DeWit & Meyer, 2004) that help
them to gain greater competitive advantages.
However, Bowman & Asch (1996: p36) critics that “a final criticism of
Porter’s approach stems from our experience of trying to use these concepts with top
management teams wrestling with the strategies of their organization. In addition to
the lack of clarity surrounding the generic strategies, the generic strategies present an
essentially static approach to competition”. Hamel & Prahalad (1994) also argue that
“the traditional competitive strategy paradigm (e.g. Porter, 1980) with its focus on
product-market positioning, focuses only on the last few hundred yards of what may
be a skill-building marathon.”
(Removed)
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Finally, Sony is still in a critical position where they need to be extra caution
about all the potential crisis that they will be facing in the future. Finlay (2000: p451)
argue that “crisis control relies on both pro-active and reactive control. It is pro-active
in that, although the precise form of the crisis will be unknown, broad elements of
many crisis situations will be, and these can be planned for through risk management
and particularly contingency planning. Crisis control is also reactive in that the
specifics of the situations must be dealt with as they unfold”. Thus, risk management
and crisis control are also essential for Sony to implement in order to stay alert and
increase their awareness to potential threats.
In conclusion, Sony must learn from their mistake and implement more
effective and efficient strategies if they want to get out from this current unfavarable
situation. Besides than their current strategies, alternatives strategies suggested above
should become another major concern for Sony to ensure that they can effectively
rebuilt their poor reputation and regain more market share in the future.
(2177 words)
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References
Textbooks

Bowman, C. & Asch, D. (1996), “Managing Strategy”, MacMillan.

DeWit, B. & Meyer, R. (2004), “Strategy: Process, Content, Context”,3rd
Edition, Thomson International Business Press.

Finlay, P. (2000), “Strategic Management: An introduction to business and
corporate strategy”, Prentice Hall.

Hamel, G. & Prahalad, C.K. (1994), “Competing for future”, Harvard
Business School Press.

Hatch, M.J. (1997), “Organization Theory: Modern Symbolic and Postmodern
Perspectives”, Oxford University Press.

“Harvard Business Review on Corporate Strategy” (1999), Harvard Business
School Press.
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
Johnson, G. et al (2005), “Exploring Corporat Strategy: Text and Cases”, 7th
Edition, Prentice Hall.

Kotler P. and Keller K.L. (2006), Marketing Management, 12th Edition,
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
Lynch, R. (2000), “Corporate Strategy”, 2nd Edition, Prentice Hall.

Lynch, R. (2006), “Corporate Strategy”, 4th Edition, Prentice Hall.

Mintzberg, H. et al (1998), “Strategy Safari: The complete guide through the
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
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
Porter, M. E. (1980), “Competitive Strategy: Techniques for Analyzing
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
Thompson, Jr. & Strickland, A.J. (2003), “Strategic Management: Concepts
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
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
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
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
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
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one?”, Business Strategy Review, Vol. 15, No. 2, p5-12.
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
Porter, M. E. (1991), “Know Your Place: How to access the attractiveness of
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
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
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
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
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
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
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
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
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
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
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