Sony Corporation in 2004: Managing a Global Corporation

Abstract

Sony is today one of the most global corporations in the world. Right from its inception, Sony anticipated that its success would be determined by competition in the international markets, rather than that at home. To manage its global operations, Sony has put in place a sound management system, restructured its operations time and again, and strengthened its technological capabilities through strategic alliances with other global players. Currently, Sony faces major concerns. Companies like Apple and Samsung have launched breakthrough products in their respective markets. Under an onslaught of competition from Korean and Chinese electronic goods manufacturers, as well as new rivals like Dell, Gateway and Hewlett- Packard, Sony is now facing pricing pressures. The case discusses the growth of Sony as a global company, its various initiatives to maintain its leadership in international markets and its various restructuring exercises to keep up with the pace of growth and revitalise the organisation.

"We shall welcome technical difficulties and focus on highly sophisticated technical products that have great usefulness for society regardless of the quantity involved: we shall place our main emphasis on ability, performance and personal character so that each individual can show the best in ability and skill."

- Masaru Ibuka, Sony founder.

In 2004, Sony, the world's number one consumer electronics firm, recorded revenue of $72 billion and a net profit of $851 million. The company made a host of other products, including PCs, digital cameras, Walkman stereos, and semiconductors. TVs, stereos, and other consumer electronics products. Sony's entertainment businesses included recorded music and video (Epic and Columbia), motion pictures, DVDs, and TV programming (Columbia TriStar). Sony's PlayStation 2 dominated the game console market with about 70% of global sales (Nintendo's GameCube and Microsoft's Xbox controlled about 15% each).

Morita, who passed away on 4th October 1999, was not only one of the best-known business personalities in the world, but also an international ambassador for the Japanese business community. Incumbent Chairman, Noboyuki Idei (Idei), was also a firm believer in globalization. In April 2003, Idei stunned investors by announcing that the consumer-electronics giant had suffered a quarterly loss of about $1 billion. Sony's share price plunged nearly 25% in two days.

Profit margins on electronics products had plunged to around 1%, down from 10% a decade ago. With easily available components, other players were also offering CD players, digital cameras, and other gadgets, which became commodities almost as soon as they hit the market.

In April 2003, Idei announced he would cut 20,000 jobs, close down plants, and overhaul the ailing electronics division. He also gave the approval to invest $4.5 billion in the development of new chips, including a super high-powered microprocessor for Sony's next-generation PlayStation game console.

Background Note

Morita, who had been expected to join his family's sake brewing business, had different ideas. He teamed up with Masaru Ibuka and Tamon Maeda to set up Tokyo Tsushin Kogyo Kabushiki Kaisha (Tokyo Telecommunications Engg Co) in 1946. The high ideals of the founders were documented in the founding prospectus:

"The establishment of an ideal factory, free, dynamic and pleasant, where technical personnel of sincere motivation can exercise their technological skills to the highest level."

 

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        Case Code   BSTA116
   Case Length    21 Pages
              Period    1946 - 2004
 Organization     Sony Coporation
        Pub Date     2005
Teaching Note    Not Available
     Countries    Japan
      Industry    Consumer Electronics

Issues

Sony; Akio Morita; Noboyuki Idei; Nintendo; Electronics; Restructuring activities; Matsushita; BMG (Bertelsmann Music Group); Globalisation; Production locations; Research and development; Research centres; Global co-ordination; Corporate governance; Worldwide production shipments