Restructuring Sony|Business Strategy|Case Study|Case Studies

Restructuring Sony

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Case Details:

Case Code : BSTR063
Case Length : 19 Pages
Period : 1994 - 2003
Organization : Sony Corp
Pub Date : 2003
Teaching Note : Available
Countries : Japan
Industry : Consumer Electronics

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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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The Implications

From 1995 to 1999, Sony's electronics business (on which the restructuring efforts were focused) grew at a compounded annual growth rate (CAGR) of 8.55% (Refer Table VI). 

The music business had a CAGR of 10.5% while the pictures business had a CAGR of 17%. Significant gains were, however, recorded by the games and insurance business. The games business registered a CAGR of 215%, while the insurance business registered a CAGR of 31%. In the late 1990s, Sony's financial performance deteriorated. For the financial year 1998-99, its net income dropped by 19.4%. During that period, Sony was banking heavily on its PlayStation computer game machines. It was estimated that the PlayStation (Games business) accounted for nearly 42% of Sony's operating profits and 15% of total sales for the quarter-ended October-December 1998. In the late 1990s, many companies across the world were attempting to cash in on the Internet boom...

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The Unified-Dispersed Management Model

In April 1999, Sony announced changes in its organization structure. Through the new framework, the company aimed at streamlining its business operations to better exploit the opportunities offered by the Internet.

Sony's key business divisions - Consumer Electronics division, Components division, Music division and the Games division - were re-organized into network businesses. This involved the reduction of ten divisional companies into three network companies, Sony Computer Entertainment (SCE) Company and the Broadcasting & Professional Systems (B&PS) Company (Refer Exhibit I). SCE Company was responsible for the PlayStation business while the B&PS Company supplied video and audio equipments for business, broadcast, education, industrial, medical and production related markets. The restructuring aimed at achieving three objectives - strengthening the electronics business, privatizing three Sony subsidiaries, and strengthen the management capabilities...

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Restructuring Efforts in 2001

Sony announced another round of organizational restructuring in March 2001. The company aimed at transforming itself into a Personal Broadband Network Solutions company by launching a wide range of broadband products and services for its customers across the world. Explaining the objective of the restructuring, Idei said, "By capitalizing on this business structure and by having businesses cooperate with each other, we aim to become the leading media and technology company in the broadband era." The restructuring involved designing a new headquarters to function as a hub for Sony's strategy, strengthening the electronics business, and facilitating network-based content distribution...


Exhibit I: The Unified-Dispersed Management Model
Exhibit II: Sony Organizational Chart
Exhibit III: Sony Organizational Chart (As of April 1, 2003)
Exhibit IV: Responsibilities of Network Companies and Business Groups
Exhibit V: Breakup of Sony's Businesses (March 31, 2002)

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