Threshold
Resources
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Competences
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Offices and facilities
Customer’s installed base
Networks of suppliers
Appropriate personnel
Manufacturing plants
Management skills
Engineering design skills
Quality insurance and control
Cost control through manufacturing in
low-cost locations
- Capacity to attract customers
Distinctive
- Strong (but decreasing) brand name of both
Sony and PlayStation (PS)
- Strong multimedia support
- Strong network of game licensees
- Strategic alliances and international joint
ventures
- Diverse business assets (consumer electronics,
music recording and motion pictures)
- Best talented engineers
- High reserves
- Brand management ( Vaio, Playstation, Sony
Ericsson, etc.)
- Supply chain management with cost control of
inputs and suppliers selections
- Innovation in miniaturization of electronic
devices
- Put in place a corporate spirit among
employees of innovation and constant product
improvements
Value chain analysis
- Inbound logistics:
Sony has manufacturing plants worldwide and has managed to build around these, sophisticated
networks that the company either posses or outsources.
- Operations:
Sony has a strategy of linked diversification and implements it through strategic business units
(SBU). The SBU form consists of 3 levels comprises the corporate headquarters, strategic business
units (electronic, game, music, picture, finance services, communication network) and SBU
divisions. With this structure, Sony has managed to develop synergies and economies of scope by
sharing and coordinating resources between business units. Sometime, there are direct links
between SBU through the product they offer (ex: DVD in the Playstation) and thereby, it creates
value out of this structure.
However, this enthusiasm should be tampered for several reasons. Firstly, Sony’s music,
advertising and location-based entertainment businesses have not been doing well. Secondly, Sony
is slow for responding to new market demands. Finally, the manufacturing structure of Sony is
inefficient and decreases products’ quality that could have an impact on the brand image and
reputation.
- Outbound logistics:
Sony has a large network of distribution that efficiently reaches local markets. The company has
invested in tracking systems of orders, products and payments for increasing efficiency and control.
Furthermore, there are training programmes specifically designed for managing the complex
outbound logistics of the firm.
- Marketing:
Sony has successfully used marketing through time for positioning itself as an innovator and a high
quality product designer which consequently assures price premiums on its products.
Playstation is one of the succeeding products created by Sony that in turn further strengthen the
parent’s brand. This has been achieved thanks to tacit knowledge and good experience in
marketing.
Sony is ranked 94 in the 2010 list of World’s Most Valuable Brands with an estimated brand value
of 8.147$M. Although it could be viewed as honourable, this value is relatively low compared to its
competitors. Indeed, all Sony’s consoles together (PSP, PS2, PS3) have a brand value of 630$M
compared to 17.833$M for Nintendo (Wii and DS) and to 4.550$M for the Xbox 360 of Microsoft.
Furthermore, Sony has dangerously lost ground in this ranking in which it was at the 26th place in
2006 and at the 21st place in 2001. More than a marketing issue, it could be explained by a failure
in implementing an efficient manufacturing structure.
- Services:
Sony has put in place a panel of platforms (Sony Centers, eSupport, call centers, etc.) where
customers can complain, bring back their purchases, ask for advices, etc.
- Firm infrastructure:
Sony owns about 70 manufacturing plants among which 12 are located in Japan. It provides a high
capacity of production. Moreover, Sony benefits from large synergies between its business units
and limits its exit barriers in every SBU by having the alternatives of reallocating the plants to
others SBU.
At the end of 2009, Sony possessed relatively high reserves that amounted to ¥661bn. This high
reserve can be leveraged to invest in infrastructure. However, Sony faced a drastic decrease of its
net income going from ¥369bn in 2008 to a loss of ¥98bn in 2009 which could dangerously erode
its reserve if not overcome.
- Human resource management:
Sony has designed training programmes that give incentives to its employees and enable them to
develop their skills and knowledge. It includes the affectation of all employees during a certain
period of time on a production line to learn the company’s products and processes. In the same idea,
scientists and researchers spend a few months as sales forces to be learn what makes products
saleable.
Other incentives exist like remuneration packages or awards (such as the crystal and MPV awards).
- Technology:
Innovation at Sony is crucial: «We should focus on highly sophisticated technical products that
have great usefulness in society, regardless of the quality involved». Many previously launched
products have created a market on their own. This is why market studies are often ignored in this
firm. The high expertise of Sony results in the ability of designing compact size and portable
products.
Through time Sony has shown the ability to capture large market share with totally new products.
The first Playstation is a great example of this high rate of penetration.
- Procurement:
Sony has made important efforts in increasing the performance of its procurement systems. It has
been viewed as an opportunity among others to recover from its recent losses. In 2009, third-party
costs were reduced by about $5bn, partly due to huge consolidation of suppliers. Indeed, its parts
and materials procurement sources have been reduced from 2500 to 1200.
One of Sony’s weaknesses, is its high dependence to key components that sometimes reduces its
ambition of production.
Activity
Capabilities
Valuable
Rare
Inimitability
Nonsubstituable
Inbound
logistics
Ability to manage complex networks of
inbound logistics to serve its geographically
dispersed manufacturing plants
Y
Y
N
N
Operations
Linked diversification implemented through
strategic business units (SBU) that leads to
synergies and better product performances.
Y
Y
Y
N
Outbound
logistics
The ability of putting in place training
programmes and IT systems that allows the
firm to reach efficiently local markets
Y
N
N
N
Marketing
Expertise in marketing that have historically
placed Sony as a high valuable brand
Y
N
N
N
Services
Ability of managing different channels of
services to assure customers’ satisfaction
Y
N
N
N
Infrastructure
Possess and manage a worldwide network of
manufacturing plants that can be leveraged
thanks to high reserves in order to control
costs.
Y
Y
Y
N
Human
resources
Particular training programmes that give
awareness to employees of different parts of
the value chain. Incentives and remuneration
systems.
Y
N
N
N
Technology
The historical culture of innovation, strong
R&D and tacit knowledge that enable to
design and produce revolutionary
miniaturised products
Y
Y
Y
Y
Able to consolidate its suppliers and possess a
buying power that leads to inputs at lower
costs.
Y
N
N
N
Procurement