Part III: Market and Financial Analysis
Prepared by : ASC Consultants Inc.
Cathren Isid
Sofiane Ferchichi
Abdulrahman Alhussaini
Table of Contents
EXECUTIVE SUMMARY ............................................................................................................ 3
MARKET ANALYSIS ................................................................................................................... 4
Industry Analysis ................................................................................................................................ 4
Target Market ...................................................................................................................................... 6
Customer Profile ................................................................................................................................. 7
Major Competitors and Participants ........................................................................................... 9
Market Segmentation ..................................................................................................................... 11
Projected Market Growth and Market Share Objectives ................................................... 12
Sales forecasts .............................................................................................................................................. 14
Product and Service Offering ...................................................................................................... 15
Music ................................................................................................................................................................ 15
Mobile .............................................................................................................................................................. 15
Digital Cameras ............................................................................................................................................ 16
Computers and Tablets ............................................................................................................................. 16
Television and Projectors ........................................................................................................................ 16
Home Theater ............................................................................................................................................... 17
Video Cameras .............................................................................................................................................. 17
Computer Entertainment......................................................................................................................... 17
Product and Service Uniqueness ............................................................................................... 17
Product and Service Descriptions ............................................................................................. 19
Competitive Comparisons ............................................................................................................ 21
Research and Development ......................................................................................................... 21
Patents and Trademarks............................................................................................................... 24
License Agreements ................................................................................................................................... 25
FINANCIAL ANALYSIS ........................................................................................................... 27
Cash assessment............................................................................................................................... 28
Working capital as a percentage of revenue:................................................................................... 28
Current Ratio: ............................................................................................................................................... 29
Quick Ratio: ................................................................................................................................................... 30
Account Receivable Turnover: .............................................................................................................. 31
Inventory Turnover: .................................................................................................................................. 31
Account Payable Turnover:..................................................................................................................... 32
Cash From Operations as a Percentage of Revenue: .................................................................... 33
Profitability Assessment ............................................................................................................... 34
Return On Equity: ....................................................................................................................................... 34
Net Profit Margin: ....................................................................................................................................... 36
Earning Before Tax Margin: .................................................................................................................... 36
Operating Income Margin:....................................................................................................................... 37
Gross Profit Margin: ................................................................................................................................... 38
Assets Turnover: ......................................................................................................................................... 39
Earnings Per Share: .................................................................................................................................... 40
RECOMMENDATIONS ............................................................................................................ 41
APPENDIX A ............................................................................................................................. 43
REFERENCES ............................................................................................................................ 44
EXECUTIVE SUMMARY
This report performs a marketing and financial analysis for Sony Corporation.
The market contains powerful firms that might make it tough for Sony to recover
from the financial meltdown that it is going through. The high tech industry
requires the firm to be innovative in order to be able to compete in the market;
Sony lost its competitive advantage as being the leader of innovation. Based on
our sample of nine companies, as the major competitors of the industry, Sony
holds 9% of the total market share. So, we believe if Sony strongly targets the
US and Chinese markets, especially, with its smartphones this might positively
impact the market share.
Sony’s business operates with a wide range of products, which is why the target
market is based on the individual products. Sony intends to produce products
that target a diversified range of ages and add features to their products to target
different demographics.
For the financial analysis, we focused our comparisons on two types of ratios:
cash assessment and profitability assessment. We decided to compare Sony to
two of its direct competitors (Samsung and Panasonic). However, we also
decided to compare the company to the industry average. As a matter of
efficiency, we calculated our averages based on our statistics knowledge
acquired from the last three years of our post-secondary education. We then
made a sample of 7 companies for this analysis and collected data from their
financial statements. We found that Sony has critical financial issue.
It is basically very difficult for the company to raise new capital through shares
due to their low profitability (EPS of -1.1935). It is also very difficult to obtain
sales on credit due to their lack in cash assessment (current ratio of .879).
The situation might be complicated for the company if it keeps having negative
trends for the coming years. We wouldn’t be surprised to learn that Sony goes
bankrupt if no drastic changes are made in the near future.
MARKET ANALYSIS
Industry Analysis
The competition in the electronic industry is intense; as competition increases in
the market, it has an affect on Sony’s profitability. In the high tech industry it is
hard for any company to be ahead of competitors unless it has innovate ideas
that makes its products unique and in high demand. There are approximately
nine major companies in this industry, which contribute to determine the size of
the market. They are: Sony Corporation, Samsung Group, Apple Inc., LG
Electronics Inc., Panasonic, Microsoft Corporation, Sharp, Siemens, and Philips.
The market share for the electronic industry, based on our estimation is
$812,524,292 billion (the total revenues for the nine companies in 2013). Based
on 2013 figures, Sony holds only 9% of the total market share, and its biggest
rival, Samsung Group, accounts for 27% of the total market share. The following
table shows the trend of market share among all nine rivals, and gives us an idea
of each company’s performance, displaying whether the market share has been
constant, increasing, or decreasing since 2011.
Company
Sony
Samsung
Panasonic
Apple
LG
Microsoft
Sharp
Siemens
Philips
Proportion
2013
9%
27%
8%
21%
7%
10%
3%
12%
4%
Proportion
2012
10%
24%
9%
20%
7%
9%
4%
13%
4%
Proportion
2011
10%
22%
12%
17%
4%
11%
6%
14%
4%
Trend
Decrease
Increase
Decrease
Increase
Increase
Constant
Decrease
Decrease
Constant
However, Sony’s market share is based on a sample of 9 companies that we
assume to be the major competitors in the industry; this raises an issue about the
true proportion or market share Sony holds. The exact value that we found based
on our calculation was 0.08807. The only way to find the true Proportion of
Sony’s market share is to perform a confidence interval.
The following formula is what we used in order to find the confidence interval: 1
pq
π
πΜ ± π§√
Where:
P= the proportion of Sony’s market share in our sample (0.08807)
T= the t score calculated based on the confidence level (95%)
N= the sample size (9)
Q= the rest of the proportion 1-.08807
Therefore, the interval found is (0.03391- 14609) which means that we are 95%
confident that the true market size of Sony lies between 3.39% and 14.61%.
In 2013, Samsung had the highest proportion; followed by Apple and LG (See
figure 1). These three companies are the only firms that recorded an increase
that year. In order for Sony to compete and be ahead of the competition, it needs
to increase its market share and be at least close to the major competitors, Apple
and Samsung. The market’s average growth is estimated to be 12%, in contrast
with Sony’s average growth at 5%. As the market grows, it will slightly impact on
Sony’s market share.
Figure 1. Market share of major competitors in 2013.
1
McClave, J. T., & Sincich, T. (2009). Large-Sample Confidence Interval for a Population Proportion . Statistics
(11th ed., p. 327). Upper Saddle River, N.J.: Pearson Prentice Hall.
In the long term, Sony has the opportunity to expand and market their products in
all regions, instead of focusing on a specific region for each product. This is one
of the reasons why major competitors are leading the market. For example, in the
US and Chinese markets, Samsung and Apple are the leaders in mobile
business, while Sony is focused on the Japanese and European markets to
promote its smartphones. 60% of Sony’s phone sales were derived from these
two regions2. Sony needs to needs to expand to the US and Chinese markets in
order to increase their market share and be able to compete with Apple and
Samsung.
Target Market
Sony's business is involved in a wide range of products, including electronic
businesses such as digital imaging, gaming, mobile, televisions, entertainment
businesses, pictures, music, as well as financial services. With this variety of
products, Sony's target market depends on the product itself. Sony has targeted
North America and Europe to promote its new gaming device, PlayStation4.
These two regions are considered the most profitable for Sony since only
620,000 units have been sold in Japan for PlayStaion3, and only 619,500 back in
2012. The reason why Sony is not focusing on the Japanese market is because
the consumer trend in Japan shows that consumers tend to use Smartphones
and tablets more than gaming devices.
Sony's target market is not only gamers for their Playstation4; the age range of
Sony is between nineteen to mid thirties. This wide-range in customers can be
explained by the various features that Sony introduced with Ps4. Other than
solely playing games, one of the features of Ps4 is streaming entertainment,
such as TV services. Consequently, by introducing this and other features, Sony
can target more customers as their base is extended to other groups of users
than just gamers. Japanese consumers do not have this additional reason for
buying the Ps4 because it is not the same as North America and Europe, where
streaming services are already established; streaming services are not available
in the Japanese market yet which makes it even harder for Sony to promote the
features of its devices in this market. 3
Sony is considering targeting a new market for its gaming products; the Chinese
market. For years the Chinese government has banned the video game
consoles. With the opening of this market, Sony has the chance to reach around
500 million gamers. The CEO of Sony mentioned that the Chinese market could
be significantly profitable for the company and may recover the losses that the
firm is going through now 4. However, some government regulations could limit
Spence, E. (2013, October 13). Sony Has No Plans For The US Smartphone Market In 2014. Forbes. Retrieved
from http://www.forbes.com/sites/ewanspence/2013/10/13/sony-has-no-plans-for-the-us-smartphonemarket-in-2014/
3 Yin-Poole, W. (2014, July 11). Why PS4 is struggling in Japan. Eurogamer.net. Retrieved from
http://www.eurogamer.net/articles/2014-07-11-why-ps4-is-struggling-in-japan
4 CTVNews. (2014, May 27). Sony to sell PlayStation consoles in newly opened China market. Retrieved from
2
the profitability of the market. When the government banned the video games in
the beginning, it was because it was felt that some of the games might be violent
for children, therefore, government legislations might be a barrier for Sony's
success in this market. Moreover, since the video games were banned for a long
time, the consumers in China have become adapted to the PC games, which are
free to access. Therefore, in order to be successful in this market, Sony needs to
assess the market carefully. 5 The difficulties the Company faces in the Japanese
market with selling Ps4 is likely to happen in the Chinese market as well because
the scenario is quite the same; both consumer and the market trends in each
country show that consumers have become adapted to using mainly PCs and
smartphones.
As for smartphones and tablets, Sony targets teenagers and adults from mid to
high householder income. With the technical revolution, the age of the
technology users has changed and targets now include even the young
generation as part of the market in this industry. In the smartphone market, Sony
has targeted mainly two regions: Japan and Europe. The sales in these two
territories reached 60% of Sony's overall sales in the phone segment. Sony paid
more attention to these countries and left the American and Chinese markets for
their other competitors. In terms of expanding to these markets, Sony’s current
financial situation does not allow the company to be successful in entering these
markets and supporting the movement financially. However, in order for Sony to
effectively compete and become one of the largest in the industry, they have to
target these two markets, which are considered the biggest among all regions. 6
Customer Profile
Sony operates in the high tech industry. This industry developed during recent
times and has now become an essential part of our life. The generation who
were born back in the 80’s lived without the amount of technology that we use
these days and the numbers of technology users based on genders is absolutely
different nowadays. Today, Sony’s product users and users of technology in
general are different; there is little difference between males and females, both in
technological terms and in terms of knowledge and preferences. Both genders
are using the products that technology has introduced equally. In the following
table, we used the mobile Internet users as an illustration to the equality in use of
technology nowadays.
Percentage of mobile Internet users 2013: 7
http://www.ctvnews.ca/sci-tech/sony-to-sell-playstation-consoles-in-newly-opened-china-market1.1840041
5 Their, D. (2014, July 1). New Country For Sony, Microsoft And Nintendo: China Lifts Game Console Ban. Forbes.
Retrieved from http://www.forbes.com/sites/davidthier/2014/01/07/new-country-for-sony-microsoft-andnintendo-china-lifts-game-console-ban/
6 Spence, E. (2013, October 13). Sony Has No Plans For The US Smartphone Market In 2014. Forbes. Retrieved
from http://www.forbes.com/sites/ewanspence/2013/10/13/sony-has-no-plans-for-the-us-smartphonemarket-in-2014/
7 Statista. (2013). Distribution of mobile internet users in selected countries in 2013, by gender.
Country
United Kingdom
France
Germany
Italy
United States
Japan
Spain
Male
51%
53%
53%
52%
51%
49%
50%
Female
49%
47%
47%
48%
49%
51%
50%
Users of Sony’s products differ from one product to the other according to their
own preferences or to trends. There are products for which the end-users are
consumers (B2C) and other products manufactured for other businesses to sell
to their customers (B2B). Customers who are following the new market trend will
likely be the users of Sony’s products. Sony aims to introduce products that have
more than one feature, so customers will have a second reason to buy these
products. For example, PlayStation4 has other features than just playing games.
Customers can access the Internet and benefit from the streaming service. Also,
most of Sony's new cameras are built with Wi-Fi applications, so customers can
use this feature to share the moment with others via social media within
seconds.8
Sony also supplies cameras for production businesses and professionals who
use these high tech cameras in file production, live TV shows and all other
activities that professionals need to enhance their production. 9 The medical
industry is another user of Sony products, as Sony supplies them with products
ranging from cameras, printers, and records to store images. 10 Sony's
Electronics Security Systems Division produces and distributes security and
surveillance products throughout a diverse network of partners and markets,
including transportation, retail, utilities and education. Their camera technology
has capabilities for high definition pictures through strong light sensitivity and can
image moving objects under low or severe lighting conditions.11
To enhance the company's customer profile, Sony has recently, released a white
paper on their latest 20.7MP camera, which produces high quality images and
videos under severe sports conditions. This new technological advance is
Retrieved from http://www.statista.com/statistics/293021/gender-distribution-of-mobile-internet-users/
Entertainment Lifestyle Guide - Sony. (n.d.). Smart Remote Control. Retrieved from
http://helpguide.sony.net/lifestyle/en/control/
9Sony Corporation Canada. (2014). Sony Professional. Retrieved from
http://www.sonybiz.ca/pro/lang/en/ca/products/broadcast-products-camcorders
10Sony Corporation Canada. (2014). Medical. Retrieved from
http://www.sonybiz.ca/pro/lang/en/ca/products/medical-home
11Sony Corporation. (n.d.). Advantage of the SMOS Sensor. Retrieved from
https://pro.sony.com/bbsccms/assets/files/cat/camsec/solutions/E_CMOS_Sensor_WP_110427.pdf
8
designed to move Sony well up in the Sports market and build their customer
base. 12
Unmistakably, Sony’s business products supply a diverse market network: Sport,
Medical, Media and Security. Their users include customers of different ages
genders, end-users (B2C) and business professionals. They cater to all, from the
average personal device user to professionals in all walks of life.
Major Competitors and Participants
Sony competes in the electronic industry. This industry has grown rapidly due to
the need and the wild range of technological growth, which developed a highly
competitive market. In order to survive in this industry, the company has to be
innovative and remain up-to-date with the latest technology. Most of the
companies that Sony is competing with now are giant and well established in the
market. There is little space for new competitors to enter this market and if there
is a probability of a new company entering the market it will not be able to
compete adequately and will most likely be taken over by one of the large
companies if they felt it formed any threat to them. Samsung, Panasonic, Apple,
and LG are the main rivals for Sony.
The following table shows the profitability of Sony and its competitors. Based on
the profit margin, most of the companies are more profitable than Sony. For
example, in 2013 Samsung had a net income of $0.13 for each dollar of sales.
This will be illustrated in depth in the Financial Analysis.
Profit Margin
Sony
Samsung
Panasonic
Apple
LG
Microsoft
Sharp
Industry Ave
2013
0.006111588
0.133256413
-0.106143122
0.216704698
0.003830453
0.280838546
-0.220023427
0.044939307
2012
-0.070076046
0.118572139
-0.104017529
0.266650906
0.001864969
0.230294481
-0.153134773
0.041450592
2011
-0.036147491
0.083235878
0.00984703
0.239466415
-0.009891363
0.330983801
0.00641999
0.089130609
Sony’s competitive advantage is the innovated technology. In 2009, Sony
introduced the HDR-XR520 and HDR-XR500V, these two cameras where the
first of their kind in the world. This new invention helped Sony to be differentiated
from other competitors who manufacture the same products. Sony also
distinguishes its business from other competitors by supplying image sensors
and parts that cellphone and digital camera firms use in their production. New
12Sony
Mobile. (2014). White Paper. Retrieved from http://www-support
downloads.sonymobile.com/d5803/whitepaper_EN_d5803_d5833_xperia_z3_compact.pdf
innovations like the development of products for content creation in cameras for
professionals and in security cameras have helped to give Sony a strong boost in
sales and reputation. Overall, Sony's main competitive advantage is that the
Company has been able to invent new products and develop new technologies
that have not previously been introduced to the market1.13
Sony’s cellphones run with the Android operating system and its competitor,
Samsung, run their phones with the same system. Samsung’s strength is in the
mobile sector where the company is mostly dominating the sales of android
devices. Samsung’s devices are now counted as the top six android devices
used in the world and 47% of android sales go to Samsung.14
Sony expects to enter a newly opened competitive market. On Jan 6, 2014, the
Chinese government allowed video games to be sold in China after many years
in which they were banned. The Chinese market looks profitable for firms in the
gaming industry. This market will create new competition between Sony and its
rival, Microsoft. While the ban was in effect in China for eight years, console units
were imported illegally and it is estimated that there was 1.2 million units of video
games sold annually. Besides Sony, there are two major competitor firms who
would be interested in entering this market: Nintendo and Microsoft. When
Nintendo first launched the new edition of Wii game, it sold around 500,000 units
in this market, while 450,000 units of Microsoft’s Xbox were sold. However, Sony
continued to dominate the market with the highest number of units sold among all
the competitors. Sony's big “sell” in the Chinese market was the older version of
its PlayStation, and the most likely reason was because Ps2 was able to
accommodate a broader array of game titles, [mostly pirated] and had superior
content.15
Sony and the other competitors might face barriers in their attempt to enter into
the Chinese market. When Chinese consumers did not have the access to video
games, they adapted to and welcomed PC online gaming, which is free. PC
gaming continues to grow today across the country. Moreover, games on
smartphones and tablets are admired there; as a result, consumers might not be
excited about the video gaming and it might not be as profitable for Sony as they
hope. Illegally imported consoles gave the consumers who wanted to have these
video games the ability to purchase them illegally. This could be an issue for
Sony since there will not be a strong profit generated on the last PlayStation they
introduced. Additionally, government regulations could be a big barrier against
Sony's success in this market since the government has not actually finalized the
new regulations and this lifted ban is only temporary.15
13Sony
Corporation. (2014). Investor Relations: Annual Report 2011. Retrieved from
http://www.sony.net/SonyInfo/IR/financial/ar/2011/p06.html
14Jones, C. (2013, July 2). Samsung Dominates Android Devices. Forbes. Retrieved from
http://www.forbes.com/sites/chuckjones/2013/02/07/samsung-dominates-android-devices/
15Hanson, L. (2014, January 21). China's Console Ban Is Lifted -- But What Does It Mean? Forbes. Retrieved from
http://www.forbes.com/sites/lisachanson/2014/01/21/chinas-console-ban-is-lifted-but-what-does-itmean/
Market Segmentation
Sony operates its business with a wide range of electronic products. Sony covers
the needs of customers with varied line of goods, from Televisions and Videos,
Home Audio and Home Theater, Digital cameras, Portable Audio and
PlayStations, to Mobile phones and tablets. Both genders are users of Sony
products while their age range differs from one product to the other. For the
Televisions and Videos, the age of customers likely to purchase starts at around
25 years as householders usually purchase these products. Sony is trying to
introduce the same products with different and added features in order to target
all customers from low to high-income levels. At present, the prices for Sony
Televisions start from $279.99 and go as high as $2,499.991. Also, the main
users for Sony PlayStation are the youth generation who are most concerned
with new technology in games, but the new PlayStation has added features for
consumers who are not interested in playing games but in other features such as
watching movies and browsing the Internet.
Sony Consumer Segment Marketing Division mission is to “develop an intimate
understanding of Sony's end consumers from cradle to grave.” To accomplish
this, they are categorizing their customers into segments of the Affluent [referring
to CE Alphas (early adopters); the Zoomers who are those over 55; SoHo [those
who have small-offices or home offices]; the young professionals known as
D.I.N.K.S. [double income, no kids, aged 25-34]; Families [age 35-54] and Gen Y
[under 25]. This last segment has become their big focus as they hope to build
brand loyalty early and maintain it throughout the lifetime of each consumer. 16
As mentioned earlier, Sony also manufactures products for other businesses
(B2B); these products include Medical equipment, broadcasting equipment,
Security Cameras, and industrial Cameras. Hospitals (SIC 8060) are the primary
user of Sony medical equipment, Television broadcast station (SIC 4833) for
broadcasting equipment, and Security system services (SIC 7382) for Security
Cameras. 17 Recently, the Swedish Transport Administration became concerned
about the danger of darkly lit tunnels that might increase the number of
accidents. In order to help the authorities monitor the traffic and respond to
accidents faster, they purchased roughly 500 Sony FCB vision cameras to be
used in road tunnels. 18 Also, during the London 2012 Olympics, the UK
government increased the number of the security units around government
buildings and other essential places with Sony Cameras. 19
16Elkin,
T. (2002, March 18). New Approach: Sony marketing aims at lifestyle segments | News - Advertising Age.
Advertising Age News RSS. Retrieved from http://adage.com/article/news/approach-sony-marketing-aimslifestyle-segments/52579/
17Canada: Sony Professional. (n.d.). Broadcast, Professional & Business Solutions. Retrieved from
http://www.sonybiz.ca/pro/lang/en/ca/hub/home
18Canada: Sony Professional. (n.d.). Sony FCB cameras will help to keep Swedish motorway tunnel users safe.
Retrieved from http://www.sonybiz.ca/pro/lang/en/ca/article/industrial-cameras-sony-fcb
19 Canada: Sony Professional. (n.d.). Sony FCB cameras helped to secure London for the 2012 Olympics: Retrieved
from http://www.sonybiz.ca/pro/lang/en/ca/article/industrial-cameras-fcb-london-olympics
Projected Market Growth and Market Share Objectives
The consumer electronics market sales rebounded well in 2010 after the global
economic downturn in the previous year and showed consistent growth since
then (See figure 2)20. This was due to the increased demand for electronics,
especially smartphones. Also, the favorable demographics, such as the rise in
consumer income and consumer spending, change in consumer preferences,
need for technological advancements and more interconnected lifestyles are
anticipated to boost the consumer electronics industry in the future. The market
is forecasted to reach a value of US$1.6 trillion by 2018, primarily supported by
application sectors: analog & digital TVs, tablets, digital cameras, camcorders,
personal computers and video/audio equipment.21
Figure 2. Global consumer electronics sales 2008-2015
Also, geographical analysis forecasts that Asia-Pacific will experience the highest
compounded annual growth rate (CAGR) of 17.6% between 2014-2018, with
growth driven primarily from China and India, followed by the Middle East with a
20Euromonitor
International. (2013). Consumer Electronics: Growth and Analysis. Retrieved from
http://euromonitor.typepad.com/files/consumer-electronics-global-overview-growth-trends-andanalysis.pdf
21Johnson, O. (n.d.). Electronics 2018 Forecasts for 6 Industries Research Reports. Academia. Retrieved from
http://www.academia.edu/5246255/Electronics_2018_Forecasts_for_6_Industries_Research_Reports
CAGR of 17%, Africa at 16.9% and Japan at 13.9%.22 This is a great opportunity
for Sony to enter the Chinese market now.
Research forecasts for 2014-2018 indicate that the consumer electronic devices
are expected to continue to rise up until 2018. Sales for tablets are expected to
rise by 15.3% between 2014 and 2018, while the computers market is forecasted
to have an average of 4.2% drop in sales. At the same time, the hybrid box is set
to take over the digital media box (DMB) segment with a 10% annual growth until
2018.23
The online content is decreasing the sales of the set-top-box (STB) segment,
however, cable STB will experience growth due to upgrades, and Asia-Pacific will
drive the growth for the Satellite STB market. An average annual growth of 6.8%
is forecasted for the IPTV STB between 2014 and 2018.23
As for the TV market, sales are expected to pick up in 2016, where Ultra-HD TV
is set to penetrate in 8.4% of TV households in 2018 and vast majority of TVs
sold in North America and Europe are/will be connectable.” 23
Sony is also well established in the BRIC economies (Brazil, Russia, India and
China). These emerging markets represent 40% of the world’s population and
25% of the global GDP. Goldman Sachs forecasted that “China and India would
become the first and third largest economies by 2050, with Brazil and Russia
capturing the fifth and sixth spot.” 24
Furthermore, a rapid economic growth and demographics are forecasted to give
rise to a large middle class whose consumption will help dive the BRIC’s
economic development and expansion of the global economy. Figure 3 shows
how the increase of the middle class population of these countries is expected to
more than double that of the G7 economies (United States, Canada, France,
Germany, Italy, Japan, United Kingdom and European Union) by 2020.24
Johnson, O. (n.d.). 2018 Consumer Electronics Market: Regional Analysis and Forecast Report. Academia.
Retrieved from
http://www.academia.edu/5235886/2018_Consumer_Electronics_Market_Regional_Analysis_and_Forecast_R
eport
23 PR Newswire. (2014). World Consumer Electronics Market 2014-2018 Research Report. Retrieved from
http://www.prnewswire.com/news-releases/world-consumer-electronics-market-2014---2018-researchreport-276006101.html
24 Global Sherpa. (2014). BRIC Countries. Retrieved from http://www.globalsherpa.org/bric-countries-brics
22
Figure 3. BRIC’s middle class income compared to the G7
Sony is uniquely positioned to take advantage of these geographic and
demographic trends as well as the increase in the consumer electronics industry.
As one of the largest global companies in the industry Sony has the capacity to
tap into changes in consumer demands as they develop.
However, despite the positive industry trends, fluctuations in foreign currency
exchange rates affect the company’s market forecasts in a big way. Recently, the
Japanese yen appreciated significantly against the US dollar and Euro. This
makes “Sony’s products appear expensive in comparison and cuts into the value
of overseas earnings.” 25 Sony has felt this impact in decreased revenues. The
firm recognizes the negative impacts of these fluctuations on revenues in the
future and acknowledges the need for effective hedging strategies moving
forward.
Sales forecasts
To calculate the growth of the sales, we based our estimates on the financial
data that we collected to compute the market shares. Therefore, based on our
calculations the market size was $812,524,292 in 2013. We also calculated an
average growth of 12% for the whole market and an average growth of 5% in
Sony’s revenue. Here are the following calculation operated:
25
Friesner, T. (2014). Sony SWOT. Retrieved from http://www.marketingteacher.com/sony-swot/
2014
Market size Growth
Sony's Sales
2015
909,977,771.62 1,019,119,738.95
80,812,569.73
90,505,161.27
After calculating our market size for the past 3 years we concluded that on
average this market increases at a rate of 12% per year. Assuming that Sony will
keep its market share of 9% we are assuming that its revenue will increase to
$80,812,569 in 2014 and to $90,505,161 in 2015.
Market share Growth
Sony's sales
2014
75,855,219.20
2015
79,741,875.88
As for market share, after calculating the market shares for the past 3 years, we
concluded that on average Sony’s revenue increases at a rate of 5% per year.
Therefore, its revenue would increase to $75,855,219 in 2014 and to
$79,741,876 in 2015.
We believe that the Market share growth method is the most accurate since we
actually know the real revenue recorded in 2014 ($75,421,000). Therefore, we
believe that sales in 2015 would be close to $79,500,000.
Product and Service Offering
Music
Sony's MP3 Players deliver more music with no cables- offering wireless freedom
and comfort.
Sony Walkman NWZ-E384 8GB MP3 Digital Player boasts a 1.77inch QQVGA
Screen, WMP Drag & Drop, FM radio, i-Tunes and great, clear audio.
In Headphones, the new MDR10s are Sony's promise of everything great in
audio with 7.1-channel surround sound. 26
Mobile
Sony smartphones run with the Android system. The system gives the consumer
the opportunity to customize his/her phone. Sony has introduced the 4K features
26Adorama.
(n.d.). Sony Walkman NWZ-E384 8GB MP3 Digital Player, Red NWZE384RED. Retrieved from
http://www.adorama.com/SONWZE384RD.html?scpid=37&scid=scsho6163540&utm_term=Other&utm_medi
um=Shopping%20Site&utm_campaign=Other&utm_source=dealtime&cvosrc=cse.dealtime.SONWZE384RD
for it new smartphone Xperia Z2, which enable customer to take pictures with
high resolution, 4-times more than normal phone camera. 27
Digital Cameras
Professional photographers or home picture taker, Sony has all you need for
superior filming. Sony provides better focusing and less pictures noise with wide
range lenses that give users the opportunity to choose the best for individual use.
Sony carries a great line of accessories for cameras; cases, bags for flash,
batteries and memory cards. 28
Computers and Tablets
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AIO Pro – 11.6” or 13.3” size, considered the world lightest Computer
VAIO Flip Laptop – “play, work or display by flipping” comes with flexible
screen that can be flipped and used as a Tablet.
VAIO Fit Laptop – considered as the entry level among the VAIO laptops.
VAIO Tap 11 Tablet – gives you great performance as a PC but with all
the convenience of a Tablet.
VAIO Duo – Great convertible design, Full HD laptop that can be
transformed to touchscreen tablet
Xperia™ Z2 Tablet is the newest in waterproof, slim and lightweight
tablets to place Sony's latest TV and sound technologies at your
fingertips.29
Television and Projectors
Sony is redefining the home entertainment experience through delivering high
quality “natural image” pictures and building new technologies into its products.
Sony's BRAVIA TV has the 4K features, which display resolution 4 times more
than regular televisions.
Sony’s projectors feature a super strong case for both protection and noise
reduction. Projectors deliver high quality image suitable for both home and
business use. 30
27Sony
Corporation. (2014). Mobile Phones & Tablets Sony Store. Retrieved from http://store.sony.com/allandroid-smartphones/cat-27-catid-Android-Smartphone
28Sony Corporation. (2014). - Sony Standard CA Sony Store: Digital Cameras. Retrieved from
http://store.sony.ca/digital-cameras/cat-31-catid-Digital-Cameras
29Sony
Corporation. (2014). Computers & Tablets Sony Store. Retrieved October 29, 2014, from
http://store.sony.ca/all-vaio-pro-ultrabooks/cat-31-catid-All-Ultrabook-Pro
30Sony Corporation. (2014). - Sony Standard CA Sony Store: Televisions. Retrieved from
http://store.sony.ca/televisions/cat-31-catid-Televisions
Home Theater
Sony provides products that offer their consumers the best private home theater
experience possible. From speakers that are easy to set up and can be
controlled from your smartphones devices through Bluetooth to streaming and
blue ray players. Consumers have options to watch movies or TV shows over
blue ray disc or stream online from the Internet and have access to Sony
Entertainment Network, Netflix, Pandora, Amazon Instant Video and YouTube. 31
Video Cameras
Sony's new Action Cam mini, the POV HD Camcorder with Live View Remote
features “SteadyShot” stabilization, quality sound recording by built-in stereo, pro
quality ZEISS lens-super wide and 5 video modes, 2 for slow motion. Also
features in this model are Ustream live broadcasting of videos, high quality still
images in photo mode and excellent low light performance with the Exmore
CMOS sensor. 32
Computer Entertainment
PlayStation 4 introduced with new graphics and speed technologies. The highspeed processor with 500GB storage reduces the load time and increase
excitement. Wi-Fi Controllers with share button to broadcast and share your
game with friends online through Facebook and YouTube. PS Vita: remote play
on PS4 through PS Vita Dual-Stick with 5-inch screen. 33
Product and Service Uniqueness
With many competitors trying to capture a greater percentage of the electronics
industry’s market share, Sony was able to differentiate itself from its competitors.
In the consumer electronics market, Sony is one of the most recognized brands,
due to a legacy of innovation and quality.
One of the things that make Sony stand out from the competitors is that the
company takes a variety of initiatives that aim to improve the environment. The
company strives to achieve a zero environmental footprint throughout the
lifecycle of its products and business activities to deliver environmentally
conscious products and services that enrich the consumers’ lives.34 For example,
the new BRAVIA 4K LCD TV (X85B series) uses 20% less energy than the
31Home
Theatre. (2014). - Sony Standard CA Sony Store: Home Theatre. Retrieved from
http://store.sony.ca/home-theatre/cat-31-catid-Home-Theatre
32Sony US. (2014). POV HD Camcorder + Live View Remote | HDRAZ1VR/W. Retrieved from
http://store.sony.com/gsi/webstore/WFS/SNYNA-SNYUS-Site/en_US//USD/ViewProduct-Start?SKU=27HDRAZ1VR%2FW
33Sony Corporation. (2014). PS4, PS3 & PS Vita, Video Game Consoles. Retrieved from
http://store.sony.com/playstation/cat-27-catid-PlayStation
34 Sony Corporation. (2014). CSR Reporting: Environment. Retrieved from
http://www.sony.net/SonyInfo/csr_report/environment/
previous TV models. The series also saves resources as some of the internal
parts of the TV are made with SORPLAS – recycled plastic developed by Sony.35
Sony’s environmental efforts definitely make the brand stand out from the
competitors.
As for product uniqueness, Sony works very hard to deliver the most unique
products to their customer. For example, Sony’s new smartphone, Xperia Z1 has
many unique features that make it stand out from the competition. The phone
“delivers the world’s best camera in a sleek waterproof smartphone with a unique
and durable design.” It is also the first US flagship smartphone that comes
preloaded with applications called Xperia® Camera Apps, including the latest
app called background defocus.36
However, Sony’s uniqueness does not primarily lie in their products but in the
way they deliver them as well. Sony modifies their marketing strategies for
different countries and cultures, which shows that Sony understands and
respects the cultural differences and addresses each country with respect to the
culture and values.
Also, Sony uses very unique packaging to market their products. An example of
this would be the way they packaged and sold the waterproof NWZ-W273
Walkman earphones in water bottles (See figure 4). The product is sold in
vending machines in pools and gyms across New Zealand.
Sony’s unique packaging provides value and quality for customers and
differentiates the brand from its competitors.
Figure 4. Waterproof NWZ-W273 Walkman
35Sony
Corporation. (2014). Sony and the Environment. Retrieved from
http://www.sony.net/SonyInfo/csr/SonyEnvironment/products/X85B.html?s_tc=eco000054_top
36Sony Corporation. (2014). Sony Mobile innovates with new product introductions and unique user experiences at
CES. Retrieved from http://blogs.sonymobile.com/press_release/ces-2014-new-products-new-experiencesfrom-sony/
In terms of service uniqueness, Sony is continuously working hard to improve the
customer satisfaction levels. Sony has more than 6,200 customer service centers
around the world to respond to customer inquiries.
Product and Service Descriptions
Sony has a variety of different products and services; therefore, this section will
be divided into the different product categories offered by Sony:
Music – An extensive range of personal audio products,
combining high resolution and audio, including radio, voice
recorders, audio docs, portable MP3 players, compact
MP3 players with Bass Boost, headphones, waterproof
earphones, etc. 37
Mobile – As mentioned earlier, the new smartphone,
Xperia Z1 has many unique features that make it stand
out from the competition. The phone is waterproof and
has a unique and durable design and comes preloaded
with many applications.
Digital Imaging – Sony offers a wide
range of digital cameras that are loaded with features and
interchangeable lenses.
Tablets – Xperia® Tablets are slim, light and splash-proof
tablet for great entertainment anytime, anywhere. The
different models have many unique features that
differentiate them from the competitors. For example, the
new Xperia® Z2 tablet is the world’s slimmest and lightest
waterproof tablet. 38
37Sony
Asia. (2014). Explore the Range of Personal Audio Products. Retrieved from http://www.sonyasia.com/productcategory/portable-audio
38Sony Corporation. (2014). Tablets. Retrieved from http://store.sony.com/tablets/cat-27-catid-TabletseReaders
Televisions – every Sony BRAVIA® TV is quipped with
easy-to-use personalized functions as well as many
additional unique features, including Quick Start &
Viewing, Photo Frame Mode and S-Force Front
Surround 3D. “These additional features and
technologies promise entertainment that only a Sony
BRAVIA can deliver.” 39
Home Entertainment - A range of home theatre system
products that create a cinematic experience at home.
BRAVIA Sync controls compatible devices with one
remote.
Computer Entertainment - Sony’s famous PlayStation
consoles focus on the gamer, putting them first with an
amazing launch lineup and over 180 games in
development.40 They also feature Wi-Fi Controllers with
share button to broadcast and share your game with
friends online through Facebook and YouTube.
B2B and Professional - A range of products and solutions for
businesses, such as system cameras, camcorders,
broadcast solutions, projectors, medical products, networkbased video security products for surveillance applications,
etc. These products have many unique features that will help
grow your business.
Asia. (2014). BRAVIA™ LED TV / LCD TV / HD TV / 4K TV. Retrieved from http://www.sonyasia.com/TVP-LCD-TV/feature/Other-Unique-Features/494750
40Sony Computer Entertainment America LLC. (2014). PlayStation®4: The Best Place to Play.
Retrieved from http://www.playstation.com/en-us/explore/ps4/
39Sony
Competitive Comparisons
As discussed earlier, Sony offers a variety of products and services; therefore, in
this section we will compare Sony’s most successful product currently, the
PlayStation4, to two of its major competitors, Microsoft’s Xbox One and
Nintendo’s Wii U. The PS4 has been selling really fast and has outperformed
both of its direct competitors since its launch. The console provides amazing
value to the consumers as well as extra features including streaming
entertainment, such as TV services. These features enable Sony to target more
consumers and different demographics than just the gamers. The following table
compares the PlayStation 4 to its direct competitors currently, Xbox One and Wii
U.
Product Quality
Price
Image
Target User
Distribution
Warranty
Promotion
Sony - PlayStation
4
High quality
$399.99
Similar
Young adults &
people of all ages
who enjoy gaming.
Retail & Online
Limited hardware
warranty
Similar
Microsoft - Xbox
One
High quality
$399.99
Similar
Gamers &
Television
watchers
Retail & Online
Limited warranty
Similar
Nintendo – Wii U
High quality
$349.99/$299.99
Similar
Gamers as well as
kids and families
Retail & Online
Standard 12months
Similar
Research and Development
Sony’s research and development organization consists of four research centers
and three development groups:
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Technology Development Group.
Display Device Development Group.
Core Technology Development Group.
Materials Laboratories.
Information Technologies Laboratories.
A-cubed Research Center
Sony Computer Science Laboratories Inc.
The research and development process at Sony includes a sequence of
processes from development and design to production and sales (See figure 5).
“The knowledge generated in research is fed into all the phases of the
development process.” 41
Figure 4. R&D process at Sony Corporation.
Sony established its first overseas R&D unit in San Jose, California in 1977, and
the second in Basingstoke, United Kingdom in 1978. Since then, Sony has built
major R&D labs around the world. The main reason for the establishment of this
R&D network was to tap foreign technology, provide technological support to
foreign plants, and modify the products and services to fit the needs of overseas
markets.42
Sony’s mission has always been to provide high-quality customer-orientated
products and services that exceed the customer’s expectations. Sony has a
quality management system in place to improve the quality of its products and
services by utilizing customer feedback (See Figure 5).43 The organization relies
heavily on the feedback from customers to improve their products and services
and provide the best quality products for their customers.
Rafinejad, D. (2007). Innovation, Product Development and Commercialization: Case Studies and Key
Practices for Market Leadership. J. Ross Publishing Inc.
42ProQuest. (2014). How Matsushita electric and Sony manage global R&D. Retrieved from
http://astro.temple.edu/~rmudambi/Teaching/BA804/F-F_09/How-Matsushita-and-Sony-manage-R&D.htm
43Sony Corporation. (2013). 2013 Annual Report. Retrieved from
http://www.sony.net/SonyInfo/IR/financial/ar/2013/shr/pdf/AnnualReport_E.pdf
41
Figure 5. Sony's quality management system
Sony has also established joint R&D ventures with other companies. One
example of this is the recent joint venture with Hydro-Quebec “to research and
develop a large-scale energy storage system for power grids” utilizing the
strengths of both companies. The company was established in June 2014.44
Another example is the agreement Sony executed to establish a new company
with Panasonic, Innovation Network Corporation of Japan (INCJ) and Japan
Display. The new company, JOLED, will be launched in January 2015 and will
integrate Sony and Panasonic’s R&D functions for organic light-emitting diode
display panels.“ INCJ and Japan Display will respectively hold 75 pct and 15 pct
of the voting rights in JOLED, and Sony and Panasonic will each hold 5 pct.” 45
In terms of the company’s spending on R&D, Sony invests heavily in research
and development for a long-term approach. In 2013, a global management
consulting firm, Strategy&, ranked Sony Corporation among the top 20
companies with the most spending on R&D in the world. Sony was ranked #20
with $US 5.7 billion spending, accounting for 7% of revenue in that year.
44Hydro-Quebec.
(2014). Hydro-Québec and Sony Announce the Establishment of a Joint Venture to Start
Development of a Large-Scale Energy Storage System for Power Grids. Retrieved from
http://news.hydroquebec.com/en/press-releases/546/hydro-quebec-and-sony-announce-the-establishmentof-a-joint-venture-to-start-development-of-a-large-scale-energy-storage-system-for-power-grids/
45Reuters.
(2014). Sony Corp to establish joint venture with Japan Display and Panasonic Corp. retrieved from
http://in.reuters.com/finance/stocks/6758.T/key-developments/article/3039979
However, competitors such as Samsung, Panasonic, IBM and Nokia were
ranked higher on the list, spending more money on R&D.46
Figure 6. Sony's R&D spending
Figure 6 shows Sony’s annual spending on R&D.47 The company plans to
increase the spending for Research and Development in the upcoming years.
Since the Global Smart watches market is expected to double over the period
2014-2018, Sony Corporation is among the companies that have increased their
investments in the R&D for smart watches.48
As mentioned earlier, major competitors have been spending more on R&D.
Samsung, for example, was ranked as the second in R&D spending for 2013,
with an investment of $US10.4 billion. The company recently initiated a project to
build five new research and development centers in the home country of South
Korea, totaling a cost of $US 4.5 billion. The construction will be completed by
2016.
However, Sony does not require substantial R&D spending in order to be
successful, but may require a change in the focus of its R&D efforts. The
company’s R&D spending hasn’t been leading to products, sales and profits.
Patents and Trademarks
Sony Corporation has a long history of innovation and invests in research and
development as well as an incredibly diversified field of business operations. The
company has many recognized brands, such as BRAVIA ®, VAIO ®, PlayStation
®, WALKMAN ®, HANDYCAM ®, and Cyber-shot ®. Therefore, the company
has many patents and trademarks to protect its brands, products and services.
46Rediff
Business. (2013). 20 Companies spending most on R&D in the world. Retrieved from
http://www.rediff.com/business/slide-show/slide-show-1-special-20-companies-spending-most-on-rd-inthe-world/20131028.htm
47Sony Corporation. (2014). 2013 Annual Report. Retrieved from
http://www.sony.net/SonyInfo/IR/financial/ar/2013/shr/pdf/AnnualReport_E.pdf
48Reuters. (2014). Research and Markets: Global Smartwatches Market Forecasts & Opportunities, 2018: Samsung,
Sony, Qualcomm, Pebble Tech & Martian Dominates the Market. Retrieved from
http://www.reuters.com/article/2014/02/18/research-and-markets-idUSnBw186509a+100+BSW20140218
Sony Corp. was issued the 4th most U.S. patent grants from the USPTO in 2013
with 3098 patent grants that year, trailing Canon and leading Microsoft.49
However, the company also files patents under other assignee names, such as
Sony Computer Entertainment, Sony Electronics Inc., Sony Mobile
Communications, Sony France, Sony Europe, etc.
Sony’s strategy is “developing and patenting key enabling technologies, and then
using those technologies across multiple products,” 49 which is a smart move
given Sony’s broad product strategy.
Patent classifications 50
The following are the current patent classifications used by Sony Corporation:
H04N (Television)
G06F (Digital Data Processing)
H01L (Semiconductors)
G11B (information Storage)
G06K (Recognition of Data; Presentation of Data; Record carriers)
G09G (Display Devices)
H04L (Transmission of Digital Information)
H04B (Transmission)
H01M (Batteries)
G02B (Optical Elements)
License Agreements
Sony currently has many licensing agreements with other companies, some of
these agreements include:
ο·
49IFI
Comprehensive patent license agreement with Personalized Media
Communications established in January 2013. The license “draws upon
the strong rights of the new PMC portfolio made up of 58 patents all with
either 1981 or 1987 priority dates issued since 2010.” 51
CLAIMS Patent Services. (2014). Sony Corporation Patents: 2010-2013. Retrieved from
http://www.ificlaims.com/index.php?page=news&type=view&id=lcady-s-blog%2Fsony-corporation
50Patent Buddy. (2014). Sony Corporation. Retrieved from
http://www.patentbuddy.com/Company/Profile/SONY-CORPORATION/173351
51Business Wire. (2014). Personalized Media Communications Completes a Patent Licensing Agreement with Sony Corporation.
Retrieved from http://www.businesswire.com/news/home/20130114005022/en/Personalized-Media-CommunicationsCompletes-Patent-Licensing-Agreement#.VE8vAZPF-RM
ο·
Cross license agreement with Aptina, established in February 2013. The
agreement provides each company with full access to the other’s patent
portfolio. 52
ο·
Patent license agreement with Rovi Corporation. The agreement provides
Sony with a “license to Rovi’s guide patent portfolio for its consumer
electronics devices worldwide and the ability to use related Rovi guide and
metadata technologies.” 53 The agreement was announced in April 2012
and was renewed earlier this year, January 2014.
ο·
Cross license agreement with Technicolor, signed in February 2014 for
the use of Technicolor’s patents for Sony’s digital TVs.54
ο·
Multi-year license agreement with WiLAN covering WiLAN’s portfolio of
television technologies, including “V-Chip parental control, display
conversion and closed captioning technologies.” The agreement was
announced in July 2014.55
ο·
License agreement with SENSIO Technologies Inc., established in July
2014. This agreement includes “rights granted to Sony under SENSIO’s
patents covering its SENSIO® S2D Switch (“S2D Switch”) technology.” 56
52Aptina
Imaging Corporation. (2013). Aptina Enters Into Patent License Agreement With Sony. Retrieved from
https://www.aptina.com/news/press/aptina_enters_into_patent_license_agreement_with_sony/
53Rovi Corporation. (2014). Rovi Renews Patent Licensing Agreement with Sony. Retrieved from
http://www.rovicorp.com/company/press-releases/2014/1/20/rovi-renews-patent-licensing-agreementwith-sony.html
54Technicolor. (2014). Press Release: Technicolor Signs New Patent License Agreement With Sony for Digital TV.
Retrieved from http://www.technicolor.com/en/who-we-are/press-news-center/press-releases/technicolorsigns-new-patent-license-agreement-sony-digital-tv
55Morning Star Research Inc. (2014). WiLAN and Sony Enter License Agreement. Retrieved from
http://cawidgets.morningstar.ca/ArticleTemplate/ArticleGL.aspx?s=Acquire&r=MWR_0956830001&culture=
en-CA&IdType=CS&Id=USA%3AWILN&MaxCount=10&popup=true&_=1404864000000
56SENSIO Technologies Inc. (2014). SENSIO S2D Switch Patents Licensed to Sony by WiLAN. Retrieved from
http://sensio.tv/medias/press_releases/sensio__s2d_switch_patents_licensed_to_sony_by_wilan
FINANCIAL ANALYSIS
For investors it is important to know how a firm is performing financially in order
to invest. However how can someone compare two companies if the firms are
different in size? It is the reason why financial ratios are helpful to compare two
corporations proportionally to their size.
We collected the data from financial statements of several companies in order to
perform this analysis. We first compared Sony to the two direct competitors,
Samsung and Panasonic, and found where the firm is lacking or outperforming.
We also compared Sony to the industry average. We chose a sample of seven
companies selected randomly in order to perform the industry average.
According to the central limit theorem, we can conclude, after assuming normal
distribution, that a population average is equal to the sample average if the
sample is selected at random. 57
The following are the seven companies that we collected data about to calculate
our industry averages:
1.
2.
3.
4.
5.
6.
7.
Sony
Samsung
Panasonic
Apple
LG
Microsoft
Sharp
Some financial statements were given in currencies that were not the American
dollar. Therefore, we had to adjust them to the exchange rate. The following are
the rates chosen for the currencies needed:
ο· Japanese Yen per US dollar: 0.00924/$ Oct 24 20:28 UTC 58
ο· Korean Won per US dollar: 0.00094/$ Oct 24 20:28 UTC 2
Ratio analysis is of course used by investors, as previously mentioned, but also
by creditors who lend money or by managers internally in order to position their
company in the industry. For this research we will focus on only two types of
ratios: Cash assessment and Profitability assessment.
Due to a lack of information, we could only compare the performance of the past
three years for all companies (2011-2013). However we found 2014 figures for
Sony and Panasonic and they will be both compared in this research.
Hanke, J, E. Reitsch, A, G. (1998). Sampling Distribution. Understanding Business Statistics. (p 227). Toronto:
Irwin.
58 The World's Favorite Currency Site. (n.d.). XE. Retrieved from
http://www.xe.com/currencyconverter/convert/?Amount=1&From=JPY&To=USD
57
Cash assessment
These ratios focus mainly on the balance sheet part of the financial statements.
With these ratios we know how a company deals with its liabilities and equity in
order to finance its assets.
Working capital as a percentage of revenue:
Working capital is the amount left to a company after paying its current debt with
their current assets. However due to different sizes we found the working capital
proportion according to the revenue.
πΆπ’πππππ‘ π΄π π ππ‘π − πΆπ’πππππ‘ πΏπππππππ‘πππ
π
ππ£πππ’π
Working Capital
2013
2012
2011
Sony
-0.0984
-0.1194
-0.0394
Samsung
0.2599
0.2006
0.1647
Panasonic
0.0077
0.0034
0.0739
Industry Average
0.1440
0.1198
0.1126
From this table we can clearly see that for the past three years Sony has had
negative values, which means that they have more short terms liabilities than
assets easily convertible to cash. This means that with their current assets it is
not possible to pay back the liabilities payable within a year. On the other hand,
all of their competitors and the industry average have positive figures. However
Panasonic is almost over-leveraged, we can see that for the past three years
their working capital is less than a percent of their revenue. We can conclude that
it might be harder for Sony to ask for a loan than anyone else in the industry.
For 2014 we found the following figures for Sony and Panasonic:
Sony: (.0745)
Panasonic: .03
We can tell that the competitor once again outperforms Sony. Moreover, Sony
has a negative working capital, which means it cannot pay its short-term debts
with its current assets.
Current Ratio:
The current ratio tells us about the size of the current assets of a company
according to its short-term debts. It is a common measure of short-term solvency.
It is mostly used as creditworthiness for lenders. The conclusions of this ratio
should be the same as the working capital since we are using the same data.
However its method of calculation is different.
πΆπ’πππππ‘ π΄π π ππ‘π
πΆπ’πππππ‘ πΏπππππππ‘πππ
Current Ratio
2013
2012
2011
Sony
0.8451
0.8289
0.9314
Samsung
2.1584
1.8594
1.6133
Panasonic
1.0231
1.0092
1.2258
Industry Average
1.4624
1.3489
1.2949
From this table, we can see that Sony is the only company with a ratio less than
1 (.845) for last year. This makes sense since we know that the company was
the only one with a negative working capital. Moreover they have a value that is
less than one for the last 3 years. We can also conclude that Samsung has
current assets that are 116% bigger than their current liabilities (2.16), they are
way above the industry average. And Panasonic is of course almost overleveraged with a ratio almost equal to one for last year. In other words, Sony is
still underperforming compared to its direct competitors and the industry average.
This might be due to a high amount of debt. We can conclude that if the company
is looking for a loan or to buy on credit, a lender might refuse or charge higher
interest due to the riskiness of the company. 59
The following are the figures for 2014:
Sony: .879
Panasonic: 1.089
There is a slight improvement since last year for Sony however this value is still
an underperformance for the company. Panasonic improved since last year and
is then doing better in 2014.
59
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 59).
Toronto : Nelson. (Original work published 2011)
Quick Ratio:
The quick ratio has the same purpose as the current ratio, except that we
subtract the least liquid current asset (inventories) in order to figure out a quicker
solvency. We are assuming that it is harder to convert inventory into cash. We
can conclude this since our industry is not selling products that are quickly
obsolete like food. Therefore, inventories are of course the least liquid of Sony’s
current assets.
πΆπ’πππππ‘ ππ π ππ‘π − πΌππ£πππ‘πππππ
πΆπ’πππππ‘ ππππππππ‘πππ
Quick Ratio
Sony
Samsung
Panasonic
Industry Average
2013
0.7017
1.7855
0.7003
1.2567
2012
0.7101
1.4813
0.7209
1.1257
2011
0.7608
1.2587
0.9109
1.0625
Looking at the table, we can see that Sony’s ratio is lower than 1 (.702). This
means that with its most liquid current assets it is not possible for the firm to pay
back its current debt. This value is then of course way lower than the industry
average (1.26) for last year. In contrast, Samsung is doing way better with a
constant increase since 2011, and this year after paying its current debt they
would still keep 79% of their most liquid assets. On the other hand, Panasonic
has now a value lower than one, this is due to a very large inventory that the
company is holding. They have a value that is practically equal to Sony (.7).
Once again these number are not in favor of Sony in order to buy on credit. 60
The following are the figures for 2014:
Sony: .7256
Panasonic: .78
After subtracting the least liquid assets we even found worse figures. It is
impossible for both companies to pay their current liabilities. The ratio is even
lower for Sony, which means that the company would have greater solvency
troubles than Panasonic.
60
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 59).
Toronto : Nelson. (Original work published 2011)
Account Receivable Turnover:
The account receivable turnover is a ratio that represents the amount of
receivables according to the sales made on credit. This ratio explains how a
company deals with its receivables and how well they are collected.
πππ‘ πΆπππππ‘ πππππ
π΄ππππ’ππ‘ π
πππππ£πππππ
A/R turnover
Sony
Samsung
Panasonic
Industry Ave
2013
1.0956
0.9785
1.0049
1.0065
2012
0.9461
0.9143
1.0192
0.9643
2011
1.0048
0.9411
1.1016
0.9883
We can see that it is harder for Sony to collect their receivables, however in 2012
they had an encouraging figure (.946), but this value increased to (1.096) in
2013. This means that they have more receivables than sales on credit.
However, the industry in general had a hard time to collect its receivable for 2013
as well (1.007). Samsung is doing well overall despite a little increase of 6%
between 2012 and 2013. Panasonic is having the same trouble as Sony and is
having a hard time to collect their receivables since 2011.
The following are the figures for 2014:
Sony: .9809
Panasonic: .9661
This year we noticed a drop since last year for Sony, which means that the
company sold less on credit. It is a good improvement, however the company is
still underperforming compared to Panasonic.
Inventory Turnover:
The inventory turnover shows how many times per year the inventory is sold and
restocked (or turned over). We can make conclusion about how obsolete or if a
company is holding inventory for too long.
πππππ
πΌππ£πππ‘πππππ
Inventory Turnover
2013
2012
2011
Sony
10.99
12.07
10.20
Samsung
11.95
11.33
10.50
Panasonic
9.28
9.45
9.70
Industry Ave
27.04
44.44
33.20
This table shows that for the year 2013 Sony turned over its inventory 11 times
per year, Samsung had a similar figure of 12. They tend to outperform Panasonic
that sells and restocks its inventory around 9 times per year. However, all three
are far behind the industry average that turns over its inventory 27 times per
year. This means that these three companies are holding their inventory for a
longer time than the industry. This might question the reliability of the current
ratio; it is then the reason why the quick ratio would be a better way to compare
the solvency of the firms. 61
The following are the figures for 2014:
Sony: 10.58
Panasonic: 10.31
We noticed a slight drop since last year in terms of inventory, which means that it
takes more time for the company to sell its inventory. Sony is even getting
reached by Panasonic and has comparable figures. Therefore, both companies
change their inventory above 10 times per year.
Account Payable Turnover:
The account payable turnover is a measurement of how much purchases are
made on account. However, the amount of payables is at a specific date in time,
whereas the purchases are for a whole year. This is why we divided the amount
of payable by 365 in order to have them per day.
πππ‘ππ ππ’ππβππ ππ
π΄ππππ’ππ‘ πππ¦πππππ /365
A/P Turnover
Sony
Samsung
Panasonic
Industry Ave
61
2013
642.97
2821.46
2696.27
1923.33
2012
644.81
2664.36
2855.48
1790.31
2011
2523.91
2165.07
2638.43
1799.39
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 60).
Toronto : Nelson. (Original work published 2011)
From this table, we can see that Samsung and Panasonic are doing way better.
For instance, Sony gets around $600 of purchases for each dollar spent in
payable per day. This value is then way lower than Panasonic and Samsung
that have almost $3,000. Sony is still outperformed by the industry average and
therefore needs to reduce the amount of payables in order to reach its
competitors. This value significantly dropped for Sony for the past 3 years. In
2011, Sony made more purchases with its payable than nowadays. This is due to
a significant increase in account payables that occurred in 2012 that led to
Sony’s underperformance.
The following are the figures for 2014:
Sony: 684.09
Panasonic: 2,811.89
No changes occurred in 2014, Sony did not improve its payables. The company
is still a lot more outperformed by Panasonic.
Cash From Operations as a Percentage of Revenue:
Cash from operations is crucial in order to define the amount of cash generated
by the company’s usual operations. In order to adjust for companies’ sizes we
divided the value by the revenue generated during the period.
πππ‘ ππππππ‘πππ πΆππ β πΉπππ€
π
ππ£πππ’π
Cash from operations
Sony
Samsung
Panasonic
Industry Ave
2013
0.0701
0.2042
0.0464
0.1537
2012
0.0795
0.1888
-0.0047
0.1425
2011
0.0858
0.1389
0.0540
0.1579
We can see from this table that Samsung as well as the industry average is
outperforming Sony and Panasonic. The cash flow from operations represents
only 7% of Sony’s revenue. For Panasonic it is only 4.6% of their sales, these
values are far from 20% for Samsung and 15% for the rest of the industry.
Moreover, we can observe a clear decrease in cash from operations for Sony for
the past three years. On the other hand, a significant increased occurred for
Samsung since 2011.
The following are the figures for 2014:
Sony: .0855
Panasonic: .07522
Sony has increased its operating cash flow ratio for this year; it is still doing
better than Panasonic that had a drastic change. We believe that it is a pleasant
improvement for the company, even though Samsung would still have a better
ratio at year ending.
Profitability Assessment
These ratios are helpful to determine how profitable a firm is relative to a
predetermined part of the balance sheet or the revenue. These ratios show the
effectiveness of a company’s operations.
Return On Equity:
The return on equity is how much of the net income an investor can claim for one
dollar of equity. This ratio is used to determine the amount of income
proportionally to the equity size.
πππ‘ πΌπππππ π΄π£πππππππ π‘π πΆπππππ πβπππβπππππ
πΆπππππ πΈππ’ππ‘π¦
ROE
2013
2012
2011
Sony
0.0189
-0.2243
-0.0790
Samsung
0.2031
0.1963
0.1349
Panasonic
-0.6133
-0.4229
0.0334
Industry Ave
-0.5488
-0.0596
0.1187
Despite the fact that the industry average shows a negative value for 2013 (.5488), Sony is still underperforming (.0189) compared to Samsung with a net
income that represents almost 20% of their equity. On the bright side Sony is
doing better than Panasonic while comparing ROE for 2013. The trend for the
past three years shows an improvement since 2011 since the values were
negative. These values might be due to a greater use of debt than Sony’s
competitors that we noticed in the cash assessments ratios.
The following are the figures for 2014:
Sony: (.0568)
Panasonic: .0786
Sony is clearly doing worse than Panasonic this year. We can see a negative
return on equity this year; Sony is now facing a similar performance as 2012. In
contrast, Panasonic finally sees an end to its negative returns on equity that it
had for the past 2 years62.
Return On Assets:
The return on assets shows the proportion of the income compared to the total
assets. It basically shows how much is generated by a firm for one dollar in
assets.
πππ‘ πΌπππππ π΄π£πππππππ π‘π πΆππππ πβππβππππππ
πππ‘ππ π΄π π ππ‘π
ROA
2013
2012
2011
Sony
0.0035
-0.0405
-0.0202
Samsung
0.1424
0.1317
0.0882
Panasonic
-0.1436
-0.1236
0.0109
Industry Ave
0.0114
0.0291
0.0734
Looking at this table, we can see that Sony is still outperformed by Samsung and
this time by the industry average too. The whole industry shows a clear decline
over the years, this might explain the poor results of Sony and Panasonic.
However, Samsung shows the opposite with an increase year after year of its
ROA. Once again Sony uses a greater amount of debt than the rest of the
industry it is then logical to see an underperformance of this ratio.
The following are the figures for 2014:
Sony: (.0084)
Panasonic: .0233
It is normal to see similar result in the ROE. Panasonic once again outperforms
Sony this year. In other words, Sony loses $0.0084 for every dollar in assets,
whereas Panasonic makes $0.0233. 7
62
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 67).
Toronto : Nelson. (Original work published 2011)
Net Profit Margin:
The net profit Margin is calculated to know what proportion of the revenue is
made into earnings. It basically tells us how much of income is generated per
dollar of revenue.
πππ‘ ππππππ ππ£πππππππ π‘π ππππππ π βπππβπππππ
πππππ
Profit Margin
2013
2012
2011
Sony
0.0061
-0.0701
-0.0361
Samsung
0.1333
0.1186
0.0832
Panasonic
-0.1061
-0.1040
0.0098
Industry Ave
0.0449
0.0415
0.0891
From this table, we can conclude that Sony has a relatively low profit margin that
is under a percent (0.61%) for 2013. However, it is an improvement for Sony
since it faced net losses for the prior two years. It doesn’t change the fact that the
company is still underperforming compared to Samsung (13%) or the rest of the
industry (4.5%). The bright side is that Sony is doing better than Panasonic that
shows a negative profit of -11% for 2013.
The following are the figures for 2014:
Sony: (.0165)
Panasonic: .0157
Sony faces a negative profit this year, which means that the company is selling at
a loss. Panasonic however, improved and even outperforms Sony. 63
Earning Before Tax Margin:
This ratio shows how much of the earning before paying any tax is generated per
dollar of sales. We can determine how the percent of the revenue that is profits
before paying any tax.
πΈππππππ π΅πππππ πππ₯
πππππ
63
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 66).
Toronto : Nelson. (Original work published 2011)
EBT Margin
2013
2012
2011
Sony
0.0356
-0.0125
0.0285
Samsung
0.1678
0.1488
0.1040
Panasonic
-0.0546
-0.1036
0.0206
Industry Ave
0.0873
0.0861
0.1243
Looking at this table, we can have the same conclusions as the previous ratio,
which means that Sony is underperforming compared to Samsung and the
industry average. However the firm is still doing better than Panasonic that is
facing a negative earning before taxes. However, Sony is doing better than the
past three years and an improvement has been made in order to become more
competitive.
The following are the figures for 2014:
Sony: .0033
Panasonic: .0267
This year Panasonic outperforms Sony; the ratios are very low for both
companies though. We concluded that both companies are facing difficulties in
term of earning before paying taxes. 64
Operating Income Margin:
This ratio tells us how much of the gross profit after paying expenses (excluding
Interest and tax) are proportional to the Revenue. In other words, how much of
the operating income per dollar in revenue. This ratio might be helpful for the firm
in order to determine its pricing strategy.
ππππππ‘πππ πΌπππππ
πππππ
Operating Margin
2013
2012
2011
Sony
0.0333
-0.0101
0.0278
Samsung
0.1608
0.1444
0.0985
Panasonic
0.0220
0.0058
0.0061
Industry Ave
0.1157
0.1136
0.1214
64
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 64).
Toronto : Nelson. (Original work published 2011)
From this table, we can see that Sony is once again underperforming (3.33%)
compared to Samsung (16%) and the industry average (11.6%). And once again
the company is doing slightly well compared to Panasonic (2.2%). It is an
improvement compared to the previous year. However, it is not enough in order
to compete with the giants of the industry that show a constant improvement year
after year like Samsung (from 9.85% in 2011 to 16% in 2013).
The following are the figures for 2014:
Sony: .0034
Panasonic: .0394
For the operating income margin once again, we can see that Sony is again
underperforming with an income margin that is less than a percent. On the other
hand, Panasonic is not doing better with 3%.65
Gross Profit Margin:
The gross profit Margin is the amount of money made after paying the costs of
sales for the year. It is another ratio utilized by firms in order to determine their
pricing strategies.
πππππ − πΆππ π‘ ππ πΊππππ ππππ
πππππ
Gross Profit Margin
2013
2012
2011
Sony
0.2142
0.2113
0.0259
Samsung
0.3979
0.3702
0.3203
Panasonic
0.2579
0.2526
0.2650
Industry Ave
0.3317
0.3480
0.3088
According to the table above we can conclude that the costs of Sony are higher
than any of their competitors (conclusion made by reading this table only). This
deduction is made after analyzing a lower margin from Sony (21%) than any
competitors (40% & 26%) and the industry (33%). The margin is decreasing year
after year while it is actually increasing for Samsung and the industry average
since 2011.
65
Brigham, E. F. (2014). Analysis of Financial Statements. Financial management: theory and practice (p. 66).
Toronto : Nelson. (Original work published 2011)
The following are the figures for 2014:
Sony: .2332
Panasonic: .2711
For 2014 both companies have positive gross profits. They are both facing an
increase in gross profit, and Panasonic is still outperforming Sony. We can
conclude that the issue for both companies is the number of expenses they both
have. 8
Assets Turnover:
It measures the turnover of all the firm’s assets. In other words how many times
per year it takes to the assets to be replaced. It tells if a company is creating a
satisfactory volume of business for a certain total asset investment.
πππππ
πππ‘ππ π΄π π ππ‘π
Assets Turnover
2013
2012
2011
Sony
0.5655
0.5773
0.5582
Samsung
1.0683
1.1106
1.0602
Panasonic
1.3530
1.1886
1.1112
Industry Ave
1.0261
0.9855
0.8774
After analyzing the table above we concluded that it takes a little bit more than
two years for Sony to turn over its assets. In contrast, the competitors and the
industry average turned over their assets in more than a year for 2013. It is clear
that the company is not generating enough money from its operation in order to
turn over its assets. Sony has been overall constant since 2011 as well as
Samsung. However, Panasonic shows a clear increased for the past three years.
The following are the figures for 2014:
Sony: .5065
Panasonic: 1.484
We can notice a drop in assets turnover for Sony in 2014, which means that their
sales decrease proportionally to their assets size. This year Sony’s sales are
about half of the total assets. On the other hand, Panasonic declared a solid
assets turnover with sales that are almost 50% higher than their assets.
Earnings Per Share:
Earning per share is the amount of claim on the income an investor has after
paying preferred dividends.
πππ‘ πΌπππππ − πππππππππ π·ππ£ππππππ
ππ’ππππ ππ πΆπππππ ππ’π‘π π‘ππππππ πβππππ
EPS
2013
2012
2011
Sony
0.44
-5.50
-2.39
Samsung
215.91
168.10
88.90
Panasonic
-3.10
-3.26
0.33
Industry Ave
35.84
28.83
16.83
From the above table ,we can see that Sony with $.44 of earning per share is
clearly outperformed by Samsung ($215.91). The industry average is also
showing higher earnings than Sony ($35.84). However, it is still better than
Panasonic that is facing a loss per share for 2013. Moreover, we can notice an
improvement since 2012, since the company recorded a net loss per share.
The following are the figures for 2014:
Sony: (1.1935)
Panasonic: .445
We can conclude for 2014 that Sony is having a loss per share of $1.19 which is
probably far behind its shareholders predictions. Once again, we believe that
Sony needs drastic changes in order to improve their profitability. The efforts
made in 2013 were clearly not enough to provide any earning this year. Sony is
even outperformed by Panasonic that reported $0.445.66
66
Horngren. Harrison. Johnston. Meissner. Norwood. (2013). Financial Ratios. Accounting: Volume 2 (p 876).
Upper Saddle River: Pearson.
RECOMMENDATIONS
Sony is loosing its entity where it used to be the leader of innovation; it needs to
be engaged in development of new technologies in order to remain competitive.
When Sony did work out a way to cut the costs for PlayStation 4, the company
sold more units than its rival Microsoft. Sony should continue to cut cost on other
products as well improve the financial situation of the firm and increase its market
share since Sony only captures 9% of the market.
We recommend that Sony should not promote its gaming products in the
Chinese market for now. It is a risky market since the regulations have not been
finalized yet, and it is a temporary opening. Additionally, the consumers, who use
their PC and smartphones to play games, have increased during the period when
consoles were banned in China; therefore, there might be less demand for
Sony’s gaming products.
Also, Most of Sony’s smartphones sales have been generated from the
European and the Japanese markets. This left Apple and Samsung leading the
US and the Chinese markets, we strongly recommend investing more in these
two markers to increase the company’s profitability.
Sony should also continue to make valuable partnerships and patent license
agreements with other companies to reduce costs and achieve more successful
operations in foreign countries.
Furthermore, Invest more in R&D and work on changing the focus of the R&D
efforts to achieve more sales and profits, as well as continue to invest in
environmentally responsible operations. These efforts will continue to create
product uniqueness and improve the image of the brand in the industry.
Finally, Sony is obviously being outperformed by most of their competitors by
comparing financial ratios. Even though there was some improvement in 2013 for
most of the figures, the company is still performing very poorly this year. We
believe that if the company keeps moving in this negative slope it will face
bankruptcy in the coming years.
The company is far behind their competitors in the industry in both cash
assessment and profitability assessment. The earning per share is the biggest
representation of this underperformance, since it is the first ratio compared by
investors.
In order to perform better, we believe that the company should cut their expenses
and costs. This would have an immediate result on the company’s income.
Moreover, creditors might not be encouraged to sell credit to Sony. Cash
assessment ratios are not in favor for Sony, when comparing their current ratio or
working capital, we can see that the company can’t afford their current debt.
Therefore, other than cutting costs and expenses, we also believe that the
company should reduce the amount of purchases on credit in order to lower
these ratios as well.
APPENDIX A
Figure 1. Growth rate of Sony & Major competitors
Figure 2. Market share for Sony and major competitors
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