CHAPTER 1 INTRODUCTION

Sony Corporation is a multinational conglomerate corporation headquartered in Tokyo, Japan, and one of the world's largest media conglomerate with revenue of US$88.7 billion (as of 2008) based in Minato, Tokyo. Sony is one of the leading manufacturers of electronics, video, communications, video game consoles and information technology products for the consumer and professional markets. Its name is derived from Sonus, the Greek goddess of sound. Sony Corporation is the electronics business unit and the parent company of the Sony Group, which is engaged in business through its five operating segmentselectronics, games, entertainment (motion pictures and music), financial services and other.

These make Sony one of the most comprehensive entertainment companies in the world. Sony's principal business operations include Sony Corporation (Sony Electronics in the U.S.), Sony Pictures Entertainment, Sony Computer Entertainment, Sony BMG Music Entertainment, and Sony Financial Holdings. As a semiconductor maker, Sony is among the Worldwide Top 20 Semiconductor Sales Leaders. The company's slogan is Sony, Like no other. Teens had begun buying portable transistor radios in huge numbers, helping to propel the fledgling industry from an estimated 100,000 units in 1955 to 5,000,000 units by the end of 1968.

Sony's headquarters moved to Minato, Tokyo from Shinagawa, Tokyo around the end of 2006.

The consumer durables industry can be broadly classified as consumer electronics and consumer appliances. The consumer appliances category can be further segmented as white goods and brown goods.

With a presence spanning 36 countries, Sony has not only touched the lives of millions but also has made a difference in their lifestyles. Visit Sony across the world and discover how a name, synonymous with technology, has given a totally new dimension to entertainment.

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Throughout the world today, Sony stands for innovation, state of the art technology and superior quality. Leading into its next fifty years, Sonys vision is to offer people exciting new products and new lifestyles and remains committed to the challenge of creating and realizing these dreams.

The Indian consumer durables industry has witnessed a considerable change in the past couple of years. Changing lifestyle, higher disposable income coupled with greater affordability and a surge in advertising has been instrumental in bringing about a sea change in the consumer behavior pattern.

This industry consists of durable goods used for domestic purposes such as televisions, washing machines, refrigerators, microwave ovens, mobile phones etc. The growth in the consumer durables sector has been driven primarily by factors such as the boom in the real estate & housing industry, higher disposable income, emergence of the retail industry in a big way coupled with rising affluence levels of a considerable section of the population.

COMPANY PROFILE In a burnt-out department store in Tokyo in 1946, just after World War II, Masaru Ibuka and Akio Morita, running a company then known as Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering), attempted to produce a simple electric rice cooker. It did not work too well, but it kicked-off their desire to produce products for everyday life.

In 1958, the company name was changed to Sony Corporation and since then, Sony has become one of the most recognised brand names in the history of the modern world. From the outset, Ibuka and Morita strove to develop exciting products to fulfill people dreams. From its first transistor radio in 1955, to the Trinitron, Walkman, Betacam, Handycam, the Compact Disc and the floppy disc .Sony has continually made things better, smaller and more innovative than ever thought possible.

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Sony Corporation now spans a range of industries including audio visual electronics, information technology, broadcast, telecommunications, entertainment, satellite broadcasting and even insurance and finance.

Throughout the world today, Sony stands for innovation, state of the art technology and superior quality. Leading into its next fifty years, Sonys vision is to offer people exciting new products and new lifestyles and remains committed to the challenge of creating and realizing these dreams. SONYS HISTORY Sony was founded in 1946 by Masaru Ibuka and Akio Morita. The two complemented each other with a unique blend of product innovation and marketing savvy, and formed a company that would eventually grow into a more than $60 billion global organization. In 1950, in post-war Japan, Ibuka and Morita created Sonys first hardware device, a tape player/recorder called the G-TYPE recorder. Materials were in such high demand that the first tapes were made of paper with hand painted magnetic material applied by Sonys first engineers. Ibuka was a practical visionary who could foretell what products and technologies could be applied to everyday life. He inspired in his engineers a spirit of innovation and pushed them to reach beyond their own expectations. Ibuka also fostered an exciting working atmosphere and an open-minded corporate culture. In the founding prospectus, he wrote of his wish to build a company whose employees gained satisfaction and pleasure from their work and his desire to create a fun, dynamic workplace. Through Ibukas persistence, the magnetic tape recorder evolved from the G-TYPE recorder into the Model P (for "Portable"), which became the companys first profitable product.

In 1953, the company earned licensing rights to the transistor from Western Electric. Ibuka urged his engineers to improve production methods with the goal of creating a [Type text] Page 3

consumer product, the transistor radio. In 1955, the TR-55, Japans first transistor radio was launched. And, in 1957, Sony released the worlds first pocket transistor radio, establishing a market leadership position for the company. Akio Morita was a true marketing pioneer who was instrumental in making Sony a household name all over the world. He was determined to establish the Sony brand. In fact, he turned down an order of 100,000 radios from Bulova because they wanted the radios to carry Bulovas name. Morita responded to Bulova saying, "Fifty years from now, I promise you that our name will be just as famous as your company name today." His words could not have been more prophetic. And it was after Moritas first trip to the United States that he suggested to Ibuka that the company name be changed from Tokyo Tsushin Kogyo to one that was easily pronounceable and recognizable. The company name "Sony" was created by combining two words. One is "sonus" in Latin, which is the root of such words as "sound" and "sonic." The other is "sonny" meaning little son. The words were used to show that Sony is a very small group of young people who have the energy and passion toward unlimited creation. Video innovation was also a priority for Sony engineers. The road towards building a high quality color television set was quite a struggle, but on October 15, 1967, a new cathode-ray tube was completed. The new color television was named Trinitron derived from the word "trinity," meaning the union of three, and "tron" from electron tube. Since its introduction in 1968, the Trinitron television has set the standard for picture quality and design.

As a proponent of global localization, Morita familiarized himself with local economies and set up manufacturing plants all over the world. When Sony constructed a Trinitron color television assembly plant in San Diego, California, in 1972, it became the first Japanese-based consumer electronics manufacturing facility in the United States. Further, without Morita, the world would never have known the Walkman personal stereo. His excitement and faith in the products future success was the true driving force behind its existence. [Type text] Page 4

At first, the Walkman was poorly received by retailers. Eight out of ten Sony dealers were convinced that a cassette player without a recording mechanism had no real future. However, the products compact size and excellent sound quality attracted consumers and, ultimately, ignited the personal audio revolution. Kazuo Iwama was a detail-oriented person, admired for his scientific knowledge and discipline. He was made president of Sony in 1976, and became thoroughly involved in developing the "charged coupled device" or CCD which paved the way for the camcorder and digital still camera. While he was president, Sony launched the Betamax video cassette recorder. His tenure ended with his passing away in 1982, but not before the launch of the compact disc player another Sony innovation that changed the way people listened to music. Norio Ohga was responsible for bringing Sony into the modern age and injecting it with a unique sense of style through product planning, stylish product design and innovative marketing. During his tenure from 1982 to 1995, Sony was transformed from an electronics company into a total entertainment company through the establishment of the music, pictures and gaming businesses. Sony acquired CBS Records in 1988 and Columbia Pictures in 1989, which today form Sony Music Entertainment (SME) and Sony Pictures Entertainment (SPE) two of the worlds largest content producers. SME has produced a string of best-selling albums from artists such as Michael Jackson, Bruce Springsteen, Mariah Carey, Celine Dion, and Pearl Jam. Blockbuster films from SPE include Sleepless in Seattle, Jumanji, Air Force One, Men in Black and Stuart Little. Through Ohgas persistence, the Sony PlayStation game console was launched in Japan in 1994 with only eight titles. (It was launched worldwide in 1995.) Software companies were initially reluctant to support Sonys new format because Nintendo and Sega were already firmly established. However, with PlayStation and, most recently, PlayStation2, Sony has become the most successful game manufacturer ever. Nobuyuki Idei, current Chairman and CEO, played a key role in moving Sony into the digital network era by emphasizing the integration of AV and IT products. He was responsible for Sonys image campaign, "Do you dream in Sony?" and helped coin [Type text] Page 5

the term "digital dream kids." The premise of the campaign was to provide shareholders, customers, employees, and business partners who come into contact with Sony with the opportunities to create and fulfill their dreams. Idei is credited with reinventing Sonys business model for the networked society. By complementing Sonys core competencies with partnerships and collaborations from other companies, Sony is on its way to becoming a Broadband Entertainment Company. Sony Corporations current President and COO Kunitake Ando is in charge of Sonys global electronics operation. Previously, he was responsible for Sonys introduction of the VAIO personal computer in 1996, and helped Sony become one of Japans leaders in information technology products.

The Leader in Product Innovation The new millennium is here and Sony has plenty to celebrate. The companys approach doing what others dont has paid off, in the form of great products that people covet. Throughout its history, Sony has demonstrated an ability to capture the imagination and enhance peoples lives. The company has been at the cutting edge of technology for more than 50 years, positively impacting the way we live. Further, few companies are as well positioned to drive the digital age into homes and businesses around the world for the next 50 years and beyond. Sony innovations have become part of mainstream culture, including: the first magnetic tape and tape recorder in 1950; the transistor radio in 1955; the worlds first all-transistor TV set in 1960; the worlds first color video cassette recorder in 1971; the Walkman personal stereo in 1979; the Compact Disc (CD) in 1982; the first 8mm camcorder in 1985; the MiniDisc (MD) player in 1992; the PlayStation game system in 1995; Digital Mavica camera in 1997; Digital Versatile Disc (DVD) player in 1998; and the Network Walkman digital music player in 1999.

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Today, Sony continues to fuel industry growth with the sales of innovative Sony products, as well as with the companys convergence strategy. Examples include: VAIO notebooks that raise the bar in both form and function; digital cameras that capture pictures on a floppy disk, CD-R or Memory Stick; a handheld device that lets you store and view photos as well as moving photo; MiniDisc recorders with a digital PC Link to marry high quality digital audio with downloadable music; DVD/CD multi-disc changers that playback both audio and video; digital network recorders that pause, rewind and fast-forward "live" television using a hard-disc drive; and Hi-Scan flat screen TVs that deliver near HDTV picture quality through Digital Reality Creation (DRC) circuitry. But Sony is not just the market leader in consumer electronics.

Through research and development, the company has made considerable inroads in the areas of professional broadcasting (with the creation of the Betacam, DVCAM, HDCAM and 24P formats); mobile communications (with digital phones and the CLIE handheld); PCs (with VAIO notebook and desktop computers); storage and media (with the invention of the floppy disk, AIT and DTF drives, and the Memory Stick) and, now, the Internet. Sonys future brand success will be determined by how the company meets the challenges of change. Sony has always led the market in terms of innovation. But in a digital networked world, products will no longer be developed with just hardware in mind. The convergence of technologies consumer electronics, computing and telecommunications is a reality, with new competitors forming and consumer mindshare up for grabs.

SONY IN INDIA Sony is not new to India. Whether it was the television, or the walkman, a Sony always remained a must in the wish list of any Indian, returning home from abroad This love for the brand culminated in a new relationship when inspired by a reform friendly Indian business environment, Sony Corporation decided to set up a 100% subsidiary called Sony India on 16th January 1995.

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COMPANY MISSION Sony India focused towards making a difference in the lifestyles in the Indian market and open up new vistas of entertainment in the country. Sony India remains committed towards offering new age technology and digital concepts while working hand in hand with the Indian industry to produce and sell excellence. Their consistent commitment towards service has brought the company quite closer to the Indian customer. BROADBAND NETWORK ERA Sony is a corporation with convergence at its very heart. Driven by an integrated business model, the company is well positioned to bring new benefits to consumers by combining hardware, software, content and services. Sonys approach is to make it possible for consumers to enjoy various forms of content on both "home networks," consisting of connected electronic devices, and "mobile networks" that are accessible through mobile terminals.Products such as the i.LINK interface and Memory Stick digital storage media provide greater connectivity between digital devices and will help create seamless home and personal networks.

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CHAPTER 2 ANALYSIS I SONY ELECTRONICS OVERVIEW For more than 40 years, North America has had a love affair with the Sony brand. During that time, Sony has created numerous products and technologies that have helped make consumers' lives easier, more enjoyable and more productive. At the same time, the company has earned a solid reputation for quality, reliability, innovation and stylish design. In fact, the Harris Poll has identified Sony as a top brand in America, as the company has held the top three positions over the past 12 years including the number one position for nine years.

The company is committed to maintaining a leadership position in consumer electronics, broadcast and professional systems and information technology products. Sony is also committed to developing new technologies that reflect the networked convergence of audio, video and information technology.

Sony Electronics is the largest component of Sony Corporation of America, the U.S. holding company for Sony's U.S.-based electronics and entertainment businesses. Sony's principal U.S. businesses include: Sony Electronics Inc., Sony BMG Music Entertainment Inc.; Sony Pictures Entertainment; Sony Broadband Entertainment; Sony Computer Entertainment America and Sony Wonder Technology Lab.

Sony Electronics Inc is headquartered in San Diego, Calif. and is a leading provider of audio/video electronics and information technology products for the consumer and professional markets. Operations include research and development, design, engineering, manufacturing, sales, marketing, distribution and customer service.

The company is noted for a wide range of consumer audio-visual products, such as the BRAVIA HD TV, Cyber-shot digital camera, Handycam camcorder, Walkman personal stereo and Memory Stick flash media. Sony is also an innovator in IT products, including VAIO personal computers; and high-definition professional broadcast and video products, highlighted by the XDCAM HD and [Type text] Page 9

CineAlta lines of cameras and camcorders, and the SXRD 4K digital projector. Sony also co-developed the Blu-ray, Disc, CD, DVD and Super Audio CD technologies.

MARKETING MIX & PRODUCT PROFILE Sony's marketing strategy is to position itself as an innovator and a maker of high quality products which enable it to sell its products at a premium higher than its competitors. To achieve these goals, the companys innovations are commonly backed by massive and zealous marketing efforts which have had helped to create several successful sub-brands such as Trintron, Walkman and WEGA. These successes in turn further strengthen the brand Sony. Sony is very sensitive towards its competitors actions and reactions. To ensure that the company solidifies its image and reputation as well as achieves the desired sales and revenues targets, it has no qualms of incurring exorbitant expenses. For instance, the Walkman brand (MiniDisc format) was re-launched in 2000 at an estimated cost of US$30 million and it was supported by massive broadcast, print and on-line advertising, Internet and dealer events and promotions as well as Grass-roots publicrelations campaigns to target the Generation Y target market. The re-launch was a great success. Sonys marketing shrewdness had to the No. 1 brand rating in the United States by Harris poll (2000). Sony was also named as the world's 21st most valuable brand in the same year. In short, Sonys possession of a world-class marketing acumen that has made Sony a global mega brand is certainly a strength that is hard to imitate and valuable.

SONY PRODUCTS : The first market mix elements Product. A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a need or

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want. Product decision normally base on brand name, functionality, styling, quality, safety, packaging, repairs and support, warranty, accessories and services.

These product attributes can be manipulated depending on what the target market wants. Also, customers always look for new and improved things, which is why marketers should improve existing products, develop new ones, and discontinue old ones that are no longer needed or wanted by the customer. Sony has a variety of products ranging from electronic devices, games and entertainment. So, briefly Sony products can be categorized in the following major product categories:

i. Television and Projectors.(Bravia LCD TV) ii. Home video.( Blue-ray disc player,DVD Player) iii. Home Audio.( Hi-Fi Systems) iv. Home Theatre system.(Accessories) v. Digital Photography.( Cyber-shot Digital Camera) vi. Hand cam video camera.( Handycam high definition video Camera) vii. Computer & Peripheral.( VAIO laptops) viii. Portable Audio.( Walkman mp3 series) ix. Game.( PSP,PS2,PS3) x. Storage and Recording media.( Memory Stick)

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Basic Consumer Durables:

Flaunt your Cyber-shot Make heads turn with the smart Sony Cyber-shot. With chic colours to choose from, this trendy camera lets you capture your special moments in style.

Experience the Real Entertainment Feel true picture, pure sound & smooth action with Sony BRAVIA LCD TV.

Dress up with VAIO CS VAIO CS is an extraordinary blend of elegance, fun and high performance with its irrestible colour range and mystic features.

REFRIGERATOR Side by Side Refrigerator Frost Free Refrigerator Direct Cool Refrigerator

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WASHING MACHINE Dish Washer Steam Washer Dryer Washer Dryer Front Load Washing Machine Top Load Washing Machine Semi Automatic Washing Machine

MICROWAVE OVEN Solar Dom Microwave Convection Microwave Grill Microwave Solo Microwave

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TELEVISION LCD TV Plasma TV Ultra Slim TV Flat TV

HOME THEATRE DVD Home Theatre System Home Theatre Component System Home Theatre System Accessories

COMPUTER PRODUCTS Notebook PC Desktop PC Monitor Optical Storage Devices Projector

MOBILE PHONE KM900 Cookie Secret KC550 Dynamite All Rounder

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SONY PROMOTION Promotion is a key element of marketing program and is concerned with effectively and efficiently communicating the decisions of marketing strategy, to favorably influence target customers perceptions to facilitate exchange between the marketer and the customer that may satisfy the objective of both customer and the company. A companys promotional efforts are the only controllable means to create awareness among publics about itself, the products and services it offers, their features and influence their attitudes favorably.

Sales promotions for example includes free samples, discount, rebates, coupons, contents and sweepstakes, premiums, scratch cards, exchange offers, early bird prizes, etc.

Sony Marketing Communication Mix: Sony India will spend Rs 200 crore in this financial year on advertising and promotion (Promotional Budget) of the entire range of consumer electronics, out of which Rs 60 crore will be spent only on digital imaging products. The major elements of promotion mix include advertising, personal selling, sales promotion, direct marketing, and publicity. Sony Corporation has used all of these marketing communication mix elements.

Sony has promoted its products through different sales promotional strategies. For example after the release of the Sony BRAVIA television sets, Sony promoted them by earl bird prizes by saying that all BRAVIA full HD LCD TVs purchased during July 2008 and registered within two weeks of purchase qualify for a Bonus Playstation 3 as long as the customer claims is one of the first 35,000 received and validated by Sony. [Type text] Page 15

Also Sony has promoted its Sony Ericsson P1i phones by including a scratch cards which gives the customer the offer to download 10 free software application for that mobile phone.

Sony Ericsson has also promoted its Sony Ericsson K550i Mid-Range Cyber-shot Phone that if you buy it you get a free Bluetooth headset with one year manufacturers warranty

ADVERTISING Advertising is any paid form of non-personal mass communication through various media to present and promote product, services and ideas etc. by an identified sponsor. So far, SONY has advertised its products through many different ways and media.

Through TV we have seen different advertisements of its products such as Bravia televisions or Sony wega TV. Sony also advertise its products by targeting those favorable television programs, like sports, series and also it has its own channel called Sony TV channel. Sony uses some events like Miss India 2008 to promote its products. Also, Sony has advertised its games like Playstation 3, Playstation 2 and PSP using sports like football in England premiere league.Through newspapers like Times of India, Sony has advertised a wide range of products it offers to its customers. And also through Posters a message has been sent to a lot of people to be aware of the products which Sony offers.

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Sony also uses direct response advertising. This is type of advertising that encourages the consumer to respond either by providing feedback to the advertiser or placing the order with the advertiser either by telephone, mail or the internet. Such advertising is done through direct mail or catalogues. Sony incorporates co-operative advertising in its advertising process. Sony corporation provides the dealers (e.g. Sony World) with the materials and guidelines to develop ads

. PUBLIC RELATIONS AND PUBLICITY Public relations is a broad set of communication activities employed to create and maintain favorable relationship with employees, shareholders, suppliers, media, educators, potential investors, financial institutions, government agencies and officials and society in general.

Through its website, Sony Corporation has its provided contacts for those customers who will be in need of any information from the company. In this way Sony can create a mutual relationship with its customers and ensure that it serves the wishes and demands of its customers.

Unpleasant situations arising as a result of negative events may precipitate unfavorable public reactions for an organization. To minimize the negative effect of such situations leading to unfavorable coverage, the company has policies and procedures in place to manage help any such public relation problems.

For example, Sony released an ad depicting a man smiling towards the camera and wearing on his head a crown of thorns with button symbols (., O, X, .). At the bottom, the copy read as "Ten Years of Passion". This supposedly took advantage of the publicity from the Mel Gibson film The Passion of the Christ. The advertisement outraged the Vatican as well as many local Catholics, prompting comments such as "Sony went too far" and "Vatican ex-communicates Sony". After the incident, the campaign was quickly discontinued. [Type text] Page 17

Another example is that, In July 2006, Sony released a Dutch advertising campaign featuring a white model dressed entirely in white and a black model garbed in black. The first ad featured the white model clutching the face of the black model. The words "White is coming" headlined one of the ads. The ad has been viewed as racist by critics. A Sony spokesperson responded that the ad does not have a racist message, saying that it was only trying to depict the contrast between the black PSP model and the new ceramic white PSP. Other pictures of the ad campaign include the black model overpowering the white model. So its the duty of the public relation department of Sony to solve such issues as mentioned above so as to ensure that it maintains a good public relation with the public.

SONY PLACE (DISTRIBUTION) Decisions with respect to distribution channel focus on making the product available in adequate quantities at places where customers are normally expected to shop for them to satisfy their needs. Depending on the nature of the product, marketing management decides to put into place an exclusive, selective or intensive network of distribution, while selecting the appropriate dealers or wholesalers.

Sony being the company which positions itself as a seller of durable and high-end products, it is practicing selective distribution of its products from the selective dealers i.e. SONY World. Apart from this there are grey-markets in India and other countries where a practice of intensive market coverage is practiced, and the products in these kind of markets normally do not posses all the features and benefits which Sony offers e.g. warranty and guarantee.

Sony distributes its products in various channels. It uses Zero-level channel, one level channel and two-level channel.

In India, Sony has used the method of one-level distribution channel. This means that, customer buys their Sony product from the retailers recognized by Sony, and these retailers buy the products directly from the company itself. [Type text] Page 18

MANUFACTURER RETAILER CUSTOMER

Through the internet, Sony has helped its customers to find the nearest retail shop where they can buy the Sony products. All you have to do is to go to their website e.g. www.sony.co.in/section/shop and specify the product and location. Then it will display all the nearest retail shop available.

SONY PRICE Pricing decisions are almost always made in consultation with marketing management. Price is the only marketing mix variable that can be altered quickly. Price variables such as dealer price, retail price, discounts, allowances, credit terms etc. influence the development of marketing strategy, as price is a major factor that influences the assessment of value obtained by customers.

Customers directly relate price to quality, particularly in case of products that are ego intensive of technology based. Sony being a company which emphasize product quality, it tends to sell its products with price range from moderately-high to high prices, depending on the use and the targeted customers.

For example, Lets consider Sony series of VAIO laptops. Sony has tried to categorize the laptops according to style, user, purpose, mobility and performance, and each a corresponding price.

The laptops sold by Sony in India include a series of Sony VAIO, this are VAIO SR, VAIO FW, VAIO tokage, VAIO CR, VAIO NR, VAIO TZ and VAIO SZ.

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VAIO SR, boast on the excellence in mobility and perfection in performance. This laptop was designed for businessmen and its price is around Rs. 75,000/

VAIO FW, boast of theatrical experience and world class performance. This model was designed mainly for home user or casual user of laptops who aims on media playback. The price of it is around Rs. 80,000 and Rs.1, 25,000.

VAIO CR, boast on style and texture. Depending on the configuration, the prices are from Rs. 40,000 to Rs. 65,000..

VAIO NR, boast of natural, chic design. It was designed to meet customers ambiance and lifestyle. For this reason the Sony corporation has decided the price of the laptop to be Rs. 40,000 and Rs. 50,000 depending on the configuration.

VAIO TZ, boast of elite lifestyle, and high class performance. The laptop was designed purposely for business as it is light weight, high processing speed, and flash memory storage and longer backup power. For all this facts Sony has priced it to be between Rs. 1,15,000 and Rs. 1,40,000.

VAIO SZ, boast of premier mobility and executive excellence. This laptop was developed by Sony to target executives and business people who are mobile. The laptop is fitted with hybrid hard disk drive and motion eye camera and Bluetooth compatible headset with applications for increasing mobility and video conferencing. Its price is about Rs. 1, 24,000.

MARKETING & CUSTOMER SEGMENTATION

Sony invests aggressively in marketing predominantly through extensive advertisements and promotions. Through TV we have seen different advertisements of its products such as Sony TV. Sony also advertises its products by targeting those favourable television programs like sports series as well as its own channel called Sony channel TV. Sony uses some events to promote its products as well. Through posters and newspapers like Times, Sony advertises a wide range of products it offers to its customers. In addition, Sony also advertises its Playstation through the English [Type text] Page 20

Premiere League. Unlike other consumer-electronics companies, Sony positions itself as a global media and technology company that provides total entertainment products and services (with compromise to quality and reliability) for teenagers and adults in both developed and emerging economies. WHAT ARE SONYS SUCCESS FACTORS? There are four success factors that helped Sonys ascent to global supremacy in the consumer electronics sector and they are: a) Visionary Leadership

Sony is a classic case to prove the strategic importance of a visionary leader in carrying a brand to dizzying heights. Sonys management team along with the CEO was responsible to create an environment that nurtured experimentation and innovation. Sony was also one of the early Asian brands to recognize the importance of branding, which was again supported and lead by the management team.

b)

Religious Zealous to Innovation

Innovation defined the brand character of Sony. Sony grew to global prominence due to its ability to constantly create products before other companies could conceptualise them. Sony also possesses the ability to sense the hidden consumer demand and create an entire product category through its innovative products. For instance, when Walkman was introduced, there was no existing market for portable music but it went ahead to became a very successful innovation. Sonys innovative culture will help differentiate the company from its competitors for a very long time.

c)

Pioneer Advantage

Given the innovative edge, Sony emerged as the pioneer in almost every sector that it was operating in. Being the first mover (or inventor) in many cases, Sony has a great leeway in defining the rules of the game. In addition, the brand image was enhanced every time a competitor imitated Sony as it became an indirect way to accept Sonys leadership position.

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d)

Human Capital

The greatest asset of Sony is of its human capital, especially its engineers which make up the R&D department. Their constant innovation is crucial for a consumer electronic firm which specialises in audio-visual equipment and aim to generate higher profit margin to cover the higher cost needed for its primary and support activities. Subsidiaries are well established in many parts of the world which give Sony hands-on knowledge of the local market. Being an international corporation, Sony also has good access to talents and brings them into the company.

CAN SONY SUSTAIN ITS SUCCESS? The large and untapped markets in some regional areas coupled with Sonys difficult to imitate resources and capabilities would ensure its future success.

a)

Conducive Environment for Growth

The major macro environment factors suggest a promising environment for the growth of electronics and network service businesses amidst global slowdown. According to XXX (2002), the demographic fundamentals of large populations that include rising middle classes with increasing disposable incomes as well as the desire for innovative electronics and network centric products, paint an extremely encouraging demand picture in the long run. The XXX (2002) confirmed that the U.S., China, Europe and Asia would continue to offer attractive conditions for the consumer goods, including electronic industry. It estimated that the demand for innovative electronics and network centric products will double by 2010.

b)

Strong Finance Resource

Although Sony had not been profitable, its 2002 annual report still showed that the company possessed huge cash and cash equivalents balances of 683.8 billion. Sonys long-term financial status is stable according to credit rating that the Standard & Poor's Ratings Services Company awarded. This is why between 1998 and 2002, bankers had provided funds to help the company in its joint ventures and investments despite global economic slowdown and terrorist threats. Sonys strong finance [Type text] Page 22

resource is vital for growth and ready to wrestle any economic crisis. This in turn sustains success.

c)

Obsession with Innovation Culture

One of the most important requirements to sustain success in the electronic and networked service industries is to possess a genuine innovation culture. Unlike other electronics and networked service companies, Sony preached innovation with religious zeal. For example, Sony has relentlessly innovated and brought an array of trend-setting electronics products such as Walkman, Compact Disc and PlayStation into the market. All these innovations had created new markets of their own. To further innovate, the company was the first to launch the first entertainment robot, the dog-like Aibo, which became a runaway success. Following the success, Sony engineers are now working on intelligent humanoid robots. With such as an obsession with innovation, Sony is certainly poised to sustain its success.

d)

Disciplined Approach

Sonys disciplined approach has assisted the company to avoid setbacks. Sony was able to implement cost-focused operations in the media business fast that in turn allowed its TV-series production and movie business to achieve handsome profit margins. The ability to ensure that the central objective of achieving bigger cost advantages than the companys rivals (by continuously implementing cost reduction measures along its value chain more effectively) allows Sony to achieve continual success.

e)

Prowess in Marketing

Sonys prowess in marketing will help sustain the companys success. The company possess the tacit knowledge and know-how to accompany product launches with highly effective marketing and positioning efforts and this often earns Sony handsome premiums. Sonys marketing shrewdness had led the company to acquire the No. 1 brand rating in the United States by Harris poll (2000). Sony was also named as the world's 21st most valuable brand in the same year. In short, Sonys possession of a world-class marketing acumen that has made Sony a global mega brand is certainly a [Type text] Page 23

strength that is hard to imitate and valuable.

As the global electronics, media and networked service company that constantly lead innovation and create new markets, Sony is certainly well poised to sustain its success. Moving forward, in order to continue to gain market share and sustain its competitive advantages as an electronics, media and networked service company in the high demanding environment, Sony must develop new ways to manage both customer relationships and suppliers or partners to optimise customer loyalty, supplier relationships, and revenue.

WHAT ARE THE REASONS THAT CONTRIBUTED TO SONYS DECLINE? a) Unrelated Diversification

Many Western and Asian companies such as GM Motor and Samsung that have become global forces to reckon with started from trimmed to become bloated conglomerates. But these companies seem to have learnt the importance of focusing on core competence and trimmed down, channelling its resources around one or two dominant businesses. But Sony still seems to have stuck up in multiple businesses. This sort of unrelated diversification not only drains the resources to a great extent but also diverts the brand focus from the core of the brand.

b)

Innovation Dearth

The case of Apples iPod explains this point very well. Walkman made Sony the undisputed leader in portable music player category. As is the usual case, success breeds corporate complacency and Sony did not follow up with any outstanding and innovative product line to sustain the initial success. Apple came out with iPod that appealed to the younger generation worldwide. This helps established Apple as the undisputed leader in mobile music market and possibly dented Sonys brand reputation. The innovation dearth is probably the result of Sonys lack of consumer oriented innovation.

c)

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For Sony to continue to be successful in the current ultra competitive globalised market place, it has to make itself very relevant to the current customer segments. Harping back on past laurels and expecting the customers to still support the brand due to its past glory will be a grave mistake as has turned out in Sonys case. Sony has not been very successful in evolving as the brand for the new masses of the twenty first century. Apple, Samsung and a few others have hijacked that from Sony.

d)

Lack of Cooperation

With Sony entering markets such as the VTR with no standards, it might be more beneficial for the company to cooperate with some of its competitors as opposed to competing on conflicting software that supports the system. The new entrants and existing competitors are much stronger than 20 years ago and invariably Sonys strength will be weakened if the company would to act alone.

e)

Lack of Strategy

Product development, manufacturing and marketing are all well established but the firm lacks any formal long-term direction. The original mission statement of Sony is also outdated as it references to W.W.II. Its short-term strategy is also lacking as there is little emphasis on profit and accountability of R&D efforts. As s result, Sony although possess strong components but is unable to coordinate in a coherent way to achieve its maximum potential. WHAT ARE SONYS FUTURE CHALLENGES & WHAT CAN IT DO TO OVERCOME THEM? a) Achieving Seamless Cooperation Between Business Units

The biggest challenge that Sony faces is achieving total cooperation between its business units and buy-in of its network vision. There is little cooperation between the content people in the U.S. and the technical wizards in Japan. As such, the CEO, Idei, works tirelessly to achieve organisational integration by starting an initiative to bridge the hardware and content businesses. He also carried out extensive reorganisation to change organisational mindset. In addition, to foster cooperation between SBUs, Sony could increase the frequency of direct contacts between division managers, establish [Type text] Page 25

liaison roles in each division and form temporary work teams or task forces around projects that also focus on extracting and sharing competencies that are embedded within several divisions. To ensure that the various initiatives mentioned early are successfully executed, Sony should also evaluate its divisional managers performance on the basis of how well they have facilitated interdivisional cooperative efforts. Sonys reward systems should also emphasise on the overall companys performance, besides the outcomes achieved by individual divisions to help overcome problem associated with strategic business unit form.

b)

Dilemma: What Sony Should Do To Counter Low-Cost Imitators

Low-cost imitators also produce Sonys mainstream products. To counter them, Sony tries to keep at the forefront of innovation by making innovative interconnected digital multimedia products. Although this helps in mitigating the situation, it brings another set of problems. The content business, already plagued by piracy, is concerned about the implications these new devices for its copyrighted content. The result of using innovative interconnected digital multimedia products to counter lowcost imitators also prevents Sony in making many devices that its competitors already produced.

c)

Winning The Standards War

In the age of digital convergence, winning the standards war is vital as it can be a winner-takes-all situation. As such, there will be fierce competitions. Sonys broadband dream can only be a reality if its own standards prevailed. To avoid failure, Sonys should explore joint alliances for joint standard specification.

d)

Competition vs Collaboration with Conventional & Non-Conventional

Competitors The world of digital convergence means that Sony has to compete with conventional and non-conventional rivalries. On one hand Sony has entered the terrains of these companies in the media, computer, gaming and networking markets. On the other hand it has also witnessed these very players enter Sonys traditional fortes. In the age of convergence, it is unlikely that a company can do everything itself but to [Type text] Page 26

cooperate selectively with its competitors. The model that involves consumerelectronics companies in operating manufacturing plants also has to be taken by outsourcing that they can concentrate on their core businesses. Sony has already started outsourcing and collaborating with its competitors and it should explore if it can do more.

e)

The Scourge of Piracy

The proliferation of the Internet and digital gadgets translated into easier piracy of digitised copyrighted content. Despite an increase in demand, global music sales paradoxically fell by 9% in 2002. Illegal copies and sales were estimated to cost movie and music companies US$7 billion a year. If this trend continues, Sonys content divisions may go out of business. In order to stop this trend, Sony teamed up with others to form an association to urge the U.S. government to step up antipiracy measures.

f)

Technology Adoption

Despite elaborate preparation for the next generation of networked entertainment, the networks themselves remain conspicuously missing. By mid-2003, not a single product from Sony has incorporated any of the next-generation features. There are no elaborate broadband networks in place to support the next-generation features and products. In 2002, about 30% of Sonys Walkman sales are units that still used the traditional cassette tape, for which the Walkman was first launched in 1979. Sony, having no relationships with telecom companies, can only wait but not forever. Perhaps, Sony should form alliances with some telecom companies and find ways to expedite progress. Defining the Redefined Sony

g)

Sony still faces the daunting task of selling its broadband vision and new identity to the customers due to the complexities of the digital convergence industry. An example is Sonys highly innovative product Airboard, a combination of TV and PC with and LCD screen. Customers do not know what it is, whether it is a PC or a TV or something else. Dealers do not know how to sell it. To accomplish this uphill task, [Type text] Page 27

Sony must first shed the customer-electronics company image and explain to its stakeholders what digital convergence means and how the companys product fit into it. Secondly, the company must convince its shareholders and employees of Sonys grand vision through coordinated buy-in activities.

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CHAPTER 3 ANALYSIS 2
STRATEGIC ANALYSIS OF SONY CORPORATION.

1.

PESTL ANALYSIS - MACRO ENVIRONMENT

a)

Political

Government policies are important drives for the success of almost every country in the world. In the late 1990s, there was increase privatisation and deregulation of the consumer-electronics as well as media and technology industries globally. It was noticeable that many countries established open trade agreements while others had lowered the entry of foreign direct investments. However, as of mid-1990s, governments intervention and regulation remained substantial. For instance, being a Japanese company, Sony was not allowed to set up broadcast networks in the United States due to the policies established by the government. In some countries such as Russia, China, Brazil and Ukraine, the government also failed to take effective interventions to address the piracy matter and thus caused movie and music companies to lose billions of dollars a year.

b)

Economics (Global-Geographic)

The era of globalisation in the 1990s has the interconnectedness of the various markets, thus leading to emergence of worldwide production markets. Consequently, it allows a broader access to foreign products for consumers and companies. This helps fuel demand for consumer products globally. A study by the XXX (2002) confirmed that the U.S., China, Europe and Asia would continue to offer attractive conditions for the consumer goods, including electronic industry. It estimated that the demand for innovative electronics and network centric products will double by 2010. Although rapid growth and increased trade and businesses may intensify competition (entrance of other competitors) and even lead to non-standard competitors enter into

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the industry to complete, it can present opportunities for consumer-electronics companies like Sony to enlarge their markets.

The early 2000s recession although was not as bad as many predicted it would be, nonetheless it still affects peoples buying power. Globally, Sony was severely affected by the slowdown in the IT industry during 2000-01, which led to a decline in the demand for its computer-related products. As a result, in spite of a 9.4% increase in revenue in the fiscal 2000-01 (mainly due to the improved sales of the PS games console) Sonys net income dropped significantly from 121.83bn in the fiscal 19992000 to 16.75bn in the fiscal 2000-01. Despite the opportunities the era of globalisation, the overall economic prospect does not look promising in the near future as it is being dampened by the impact of recession. This is likely to affect Sonys sales and revenues negatively.

c)

Socio-cultural & Demographic

Socio-cultural. A survey by Goldman Sachs revealed that 60% of Americans played video games and 61% of these game-buffs were adults; 43% were women and their average age was 28, implying that this form of entertainment was now mainstream. Similar trends were observed in Europe and Japan too. In fact, it was stated that price and quality of the products were the two most important considerations that influenced consumers decisions and of course this included without having to compromise on quality and service. In addition, increasingly over the years, the more adventurous Y-Generation is also looking to make their possession of innovative product increase further. This presents an opportunity for all media and technology companies to increase their revenues by offering innovative products and services at reasonable prices.

Demographic. Based on the XXXs records, the worlds population stood at close to 5 billion as of 2002 and is expected to increase. The average disposable income has also increased over the last 30 years. With the expected increase in the working population globally, [Type text] Page 30

it can be anticipated that the disposable income will continue to growth. This spells good news for all companies as they can look forward for more opportunities to improve their sales and revenues.

d)

Technological

New services such as Internet Telephony and the increase in the use of telecommunications services (such as online shopping) provide Sony with the opportunity to leverage on new technologies to increase their sales. In addition, ecommence and internet-based activities (such as online banking and insurance purchases) are other areas where Sony can derived ancillary revenues from. Better still, in some instances, technology advancements also means having opportunities to reduce operation costs such as savings on commissions for sales agents when sales are done online. Sony also needs to be cognisant with the fact that other electronic firms would be able to copy Sony's technology in a much shorter time while offering more competitive prices. Typically, a product usually takes a few years to develop but the time is left to reap the results and profits may be much less. As seen in the VTR example, both the VHS and Beta were developed by Sony. However, in a short time, Matsushita came up with a competitive product based on Sony's technology. The margin for technology advancement is therefore diminishing.

e)

Legal

Intellectual property and intellectual property rights creation as well as commercialisation and protection have given Sony a significant source of comparative advantage of enterprises.

2.

ANALYSIS OF INDUSTRY

Sony has a strong business case to support its foray into the game business. Goldman Sachs has predicted the global sales of games to be US$17.5 billion and consoles to be US$8.7 billion in the year 2002. The former is expected to equal the total box [Type text] Page 31

office revenues of the firm industry and eventually catch up even with the saes of music CDs. The sales of games are expected to overtake music CD sales in Europe in 2005. Given Sonys strong presence in the games industry, this presents vast opportunities to enlarge the companys market shares.

The consumer-electronics businesses are closely linked to economic activities in the world. As such, Sony needs to be cognisant with the business cycle so that it can to take full advantage of such effects especially when there are changes in discretionary income and consumer spending patterns. As a matter of fact, the music and film companies are losing money as the global economy slowdown due to recession that hit many countries in 2001. Growing digital piracy also compounded the problems and these companies saw their profits further eroded. Apprehensions of terrorist attacks and an unstable geopolitical landscape are set to test the industry as well as Sonys resilience as a global corporation. From the Porters Five Forces analysis, it is also deduced that competition in the consumer electronics industry is intense and therefore will not be attractiveness (i.e. profitability) to potential entrants. However, the overall industry attractiveness does not imply that every company in the industry will return the same profitability. If Sony is able to apply its core competencies, business model or network well, the company can still achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average.

Moving forward, there is still a silver lining in the gloomy sky. Due to its recessionproof nature and lucrative prospects, the gaming industry is the next big frontier for many entertainment companies, including Sony. In addition, despite the economic slowdown, Sony's Pictures business still managed to record 15% increase in sales and more than sevenfold increase in operating income suggest that firm business may be a defensive industry.

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3.

ANALYSIS OF COMPETITIVE FORCES - PORTERS FIVE FORCES ANALYSIS

a)

Threat of Substitute Products (LOW)

The possibility threat of substitutes is moderately low; since there are few substitutes from other industries (if any); and most of them are seemed to be obsolete or have on foot out of the door, e.g. digit camera in the place of film camera and fax machines in place of overnight mail delivery. Consider that Sony has built a good reputation and strong customer loyalty, it effectively position the companys products against product substitute to some extent; this is a surplus for the company.

b)

Bargaining Power of Buyers (HIGH)

The power of buyer is high due to almost no switching cost for customers to switch from one brand to another. The access to the internet also allows customers to have all the information on prices charged by the different companies. The possession of this information may cause price sensitive buyers to switch to buying from companies that offer cheaper prices. On-line shopping has also increased the bargaining power of buyers.

c)

Bargaining Power of Suppliers (LOW)

The suppliers do not have an upper hand (low bargaining power) due to large number of suppliers and customers. Moreover, Sony operates in big global supply chain management and its suppliers are not concentrated. Comparatively, they are also much small in size and thus normally have weak bargaining power. Sony usually engages in direct negotiation with its suppliers in order to secure reliable supply at lower prices.

d)

Threat of New Entrants (LOW)

Threat of new entrants is low as the entry into the industry requires high capital, economies of scale, product differentiation as well as technology and innovation know-how. Moreover, the industry is regulated that every potential entrant is required [Type text] Page 33

to obtain approval from the relevant authority of the particular country before the company is allowed to be operated. Every new entrant that infringed into the big players territories can expect strong retaliation from them. Therefore, it also serves as a deterring effect to potential entrant.

e)

Intensity of Rivalry (HIGH)

Industry rivalry is high due to relatively intense competition and high exit cost. The high intensity of rivalry is also largely due to the numerous and equally balanced competitors in the markets, generally short product life cycle as well as high R&D, fixed and storage costs. The industry growth is slow and thus further heightens the intensity of competition

From the analysis above, it can be deduced that competition in the consumer electronics industry is intense and therefore will not be attractiveness (i.e. profitability) to potential entrants. However, the overall industry attractiveness does not imply that every company will return the same profitability. If Sony is able to apply its core competencies, business model or network well, the company can still achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. PRODUCTS LIFE CYCLES ANALYSIS BCG MATRIX

4.

The market growth axis correlates with the product life cycle paradigm and predicates the cash requirement a product needs relative to the growth of that market. Reference to the BCG Matrix appended in Diagram 1, the vide-game console produced by Sony is definitely in the Star sector since the companys business has achieved high growth rate as well as acquired comparatively larger market share.

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Diagram 1: BCG Matrix However, although generally Stars are leaders in high growth markets and tend to generate large amounts of cash, Sony must be mindful that they also use a lot of cash because of growth market conditions. In addition, Sony also needs to be aware that market growth is not the only factor or necessarily the most important factor when assessing the attractiveness of a market as growth markets attract new entrants. For instance, if capacity exceeds demand, then a particular market may become a low margin one and therefore becomes unattractive. The positions of Sonys existing products are elaborated below:

a)

Dog

A product becomes a dog due to low market share and a low growth rate and when the product neither produces nor uses up bulky amounts of cash. Walkman and CD players fall under this category. Some analysts opined that Sonys excessive focus on the maturing consumer electronics business (profit margin below 1 per cent in 2002 03), coupled with increasing competition in the consumer electronics industry was severely affecting its profitability.

b)

Question

A product becomes a question when they have a lower market share and they do not generate much profit or cash. Sony products that fall under this category include semiconductor, music player, VAIO computer and CRT-TV. Due to aggressive competition from its competitors such as Samsung Panasonic and Matsushita, these [Type text] Page 35

products could not make as much sales as they expected and their market shares now range between 10-14%, comparatively lower the competitors.

c)

Star

A star is when huge quantities of profit are produced because of the powerful market share and high growth rate. Sonys digit camera, LCD TV, DVD player and play stations fall under this category. Their market shares range between 25 to 40%, way ahead of its competitors.

d)

Cash Cow

Sony Ericsson W980 from Sony walkman series is a cash cow. We say a product is a cash cow when the product show signs of that the return on assets is better than the market growth rate, and makes more cash than they use. In case of Sony Ericsson W980, its a phone with touch sensitive music controls and 8 gigabytes of internal memory. This means one can store up to 8000 songs. Sony Ericsson W980 helps to position Sony Ericsson as a market leader in the music world.

5.

COMPETITORS ANALYSIS

Sony starts facing increased competition not only from a stable set of rivals (such as Philips, Matsushita, Toshiba, Sharp, LG and Samsung) but also new adversaries as follows:

BUSINESS CATEGORY

COMPANY

Computer makers network-equipment makers software makers media companies game makers photographic-equipment makers mobile phone makers

HP, IBM, Dell, Apple and Palm Cisco and 3Com Microsoft and Sun Microsystems AOL-Time Warner and Vivendi Universal Nintendo Kodak and Fuji Nokia and Motorola

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This complex, multidimensional competition is a bitter reality of the world of digital convergence, where boundaries between traditional industry segments have disappeared although new opportunities open up. Competition between the companies is likely to be intense as most harbour grand broadband visions and have also staked their futures on them. Fortunately, most of the competitors at this point in time do not possess completely the same tangible and intangible resources as that of Sony. With that, based on the competitor analysis framework appended in Diagram 3 below, most of Sonys competitors are concentrated in quadrant II, III and IV.

Samsung LG NEC AOL-Time Warner Vivendi Universal II III Motorola Kodak Fuji Cisco 3Com Nintendo Sega I IV

Matsushita Toshiba Sharp Philips

Apple Microsoft Nokia Dell IBM Sun Microsystems Palm

Diagram 3: A Framework of Competitor Analysis Technically, any firm or competitors in quadrant I will use their similar resource portfolios to compete against each other. This lead to the conclusion that Matsushita, Toshiba, Sharp and Philips modelled in quadrant I are direct competitors of Sony. In [Type text] Page 37

contrast, the other competitors modelled in quadrant III share few markets although they all possess comparable resources. As such, these companies do not directly pose as strong rivalry to Sony at this point in time. Sony does need to monitor companies that modelled in quadrant II and quadrant IV. The companies that modelled in quadrant II share a high degree of market commonality with Sony and if they eventually manage to acquire similar equitable resources, they may become direct competitors. Similarly, the companies modelled in quadrant IV may become direct competitors if they diverse their businesses in Sonys fortes.

Moving forward, Sony must be cognisant with the fact that competition is very intense in the game console market. Although PlayStation 2 have managed to sell well, Sonys top competitors like Nintendo and Microsoft in the gaming industry are not letting their guards down. Microsoft launched the Xbox in 2001 and has managed to sell 10 million units by the year 2003. Though it is a far second in console market share, nonetheless it posts serious challenge to Sonys forte. In the television market, although Sony excels but still faces some strong competition, particularly from Samsung, LG, Sharp and Panasonic. Many of these same brands also appear in the DVD player market that Sony is in. As their products and features closely resemble that of Sonys, the only way customers can differentiate them from their competitors would be on the product prices. In order to maintain or increase market shares, any of these companies may consider lowering product prices to achieve their objectives. However, if this happens, the profit margin of the remaining players will be compressed and the weak one may be drove out of the market (also known as the vicious cycle). In order to cushion stiff competition, Sony should continue to set up alliances with the fellow electronic manufacturers/ competitor so that win-win situation can be achieved to allow the company to continue to sustain its operations.

From the analysis of Sony, it can be deduced that the operating environment is highly competitive and filled with many uncertainties which means that the company has to prepare themselves well during good times. However, amidst the challenges, there are still many opportunities for Sony to explore and exploit so that it continues to lead and be the most profitable media and technology company in the world.

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