Sony's Battery Recall Fiasco

            
 
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Case Details:

Case Code : MKTG162
Case Length : 11 Pages
Period : 2005-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : Sony Corporation
Industry : Computer / Consumer Electronics
Countries : USA, Japan

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Sony's Total Recall Contd...

By the end of October 2006, the number of Sony-manufactured batteries to be recalled had crossed 7.7 million units. Some analysts projected that this number could increase to 10 million.10 Sony was the world's second-largest manufacturer of lithium-ion batteries and a leading supplier to many notebook manufacturers. Many felt that the company's image as a manufacturer of world-class quality products was dented by the negative publicity surrounding its battery recall. Analysts opined that Sony had been slow to respond to the problem. This was later acknowledged by the company's representatives when they apologized to customers and vendors for the inconvenience caused on account of the global recall.

Marketing Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

The worldwide recall of the batteries also impacted the company's financial performance. In October 2006, Sony announced that its net profit for the second quarter (July 06 - September 06) had dropped to 1.7 billion yen (US$ 14 million), when compared to 28.5 billion yen (US$ 234.7 million) for the same period of the previous year.

The company said that the costs associated with the global battery recall and the development costs for the PlayStation 3 console11 (PS3) were the reasons for the decline in profits. It was reported that Sony had estimated the total cost of the recall to cross US$ 429 million.12 Sony's rivals like Sanyo Electric Co., Ltd. (Sanyo) and Matsushita Electric Industrial Co., Ltd. (Matsushita) were expected to derive some benefit from clients' unhappiness with Sony. It was also reported that Toshiba, Fujitsu and Hitachi, Ltd. would be claiming damages from Sony for the volume of business they lost on account of Sony's battery recall. However, analysts noted that given the nature of the industry, it would take a couple of years for a vendor to switch over completely to a new battery supplier...

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10] Byron Acohido and Roger Yu, "Sony Plans to Replace up to 10 Million Laptop Batteries," http://www.usatoday.com, September 29, 2006.

11] The PlayStation 3 or PS3 is a video game console in the PlayStation series. It is a successor to the PlayStation and PlayStation 2 console. It was released in Japan on November 11, 2006. (Source: http://en.wikipedia.org).

12] Susan Arendt, "Sony Battery Recall Costs $429 Million," www.pcmag.com, October 26, 2006.


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