International Management

1. Introduction

Sony is a multinational conglomerate corporation headquartered in Minato, Tokyo, Japan. It was

founded in 1946 by two engineers, Masaru Ibuka and Akio Morita, with only 20 employees and
capital of just 190,000 yen. It started as a research and manufacturing company of
telecommunications, which grew to become what Sony stands for today over the years
(En.wikipedia.org, n.d.). The corporation primarily focuses on the Consumer Electronics (such as
laptops, TV products); Game and Network service (such as PlayStation); Smartphones;
Entertainment (such as music and picture production) and Financial Services (such as insurance
and banking) sectors. In order to understand why Sony has been successful in such a competitive
market, this essay is going to analyse Sony’s strategic capability and generic strategy; the role of
Sony's corporate culture in the first part. In the second part, I am going to examine Sony's
growth strategies during the last 20 years and identify its problems.

2. Question 1

A strategic capability of an organisation contributes to its long- term survival and competitive
advantages. There are two components in a strategic capability: resources and capabilities.
"Resources are the assets that organisations have or can call upon and capabilities are the
ways those assets are used or deployed" (Johnson, Whittington, Regner, Scholes and Angwin,
2017: 98). Resources can be both tangible resources, such as physical properties, technology,
financial assets and intangible resources like skills, intellectual capital, etc. While Sony has
always determined clearly its core value is being a pioneer and doing impossible things, it is
necessary for the corporation to have unique capabilities. These distinctions can be
illustrated by the table below:

Same as competitors’ or easy to Better than competitors’ and

imitate difficult to imitate

Resources Threshold resources Distinctive resources

Competencies Threshold competences Distinctive Competences

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Sony has shown that they have superior economics performance, thanks to their distinctive
resources. Firstly, they have many valuable properties like lands, building, machinery, and
equipment which are worth 741,844 million yen in 2018 (Sony.net, 2018). By 1990s, Sony had
already had 600 subsidies globally. These subsidies significantly support Sony in accessing
easily raw materials and gaining more local knowledge to improve their innovation. Secondly,
the corporation also has a strong financial asset. 2018 Financial Statement showed that Sony's
total liabilities and equity are 20,325,450 million yen (Sony.net, 2018), which allow them to be
able to generate large internal fund and increase borrowing capability. Moreover, as Sony
electronics was first in many areas such as camcorders, Trinitron, etc. so there is no doubt that
they are advanced technologically than its competitors. The strong technological resources like
patents, trademarks, and copyrights ensure that the delivery of corporate services is effective.

However, it seems that the unique strengths of Sony are its intangible resources. Firstly, Sony is
one of the most recognized brands in the world. The brand reputation of Sony has been built
up over years and it can affect the customers' perception of product quality, durability, and
reliability. Customers trust in Sony products and services; hence, it supports the corporation in
increasing the barrier to entry and decreasing the potential threats. Furthermore, Sony also
has a high reputation towards the suppliers and gains strong distribution of network for
marketing. The power of reputation increases the efficiency, supportive relationship and
beneficial interactions between Sony and its partners which is also a unique competitive
advantage. Secondly, an underlying strength for Sony is its rich history in designing, innovative
manufacturing and selling miniaturized technology. Combining the historical experiences with
other intellectual capabilities like organizational cultures, creative environment, and
managerial capabilities; Sony has been able to respond or even create numerous market
opportunities.

Besides, in order to effectively exploit above resources, Sony needs to maintain its distinctive
competencies through different business activities. There are five primary activities and three
supporting activities in a corporation to deliver the core values to customers. For instance, in

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the service activity, Sony has more than 3,700 Customer service locations worldwide,
including Sony customer service stations and authorized repair agents to reduce the
number of days required for repair, improve its responsiveness (Sony.net, 2018). In the
human resources management, Sony has different policies to motivate its employee and
create the best environment to work, such as establishing the Diversity Committee,
operating hotlines and other avenues for employees to get consultation on a broad
range (Sony.net, 2018). Meanwhile, in order to increase the ability to differentiate and
miniaturize, Sony actively has different programs like Sony Innovation Fund, Seed
Acceleration Program with Research and Development center (Sony.net, 2018). Those
programs encourage and sponsor for start-up projects, hence, enhancing the innovation
of the corporation.

However, the key strategic challenge for a corporation is to find a way of achieving
sustainable competitive advantages and profitability. According to Porter's generic
strategic model, Sony uses differentiation as its intensive growth strategies (Meyer,
2017). Differentiation strategy focuses on the novelty and uniqueness of the product, for
instance, the outstanding features of PlayStation. In applying this generic strategy, Sony
aims to make its products attractive and profitable. Moreover, Sony also wants to
increase their market share by selling as many units of product as they can. Hence, they
emphasize technological and managerial innovation to reduce the cost of production,
increasing the quality and efficiency in competing for their competitors like Nintendo
and Microsoft. An alternative way of addressing Sony generic strategy is adopting the
strategy clock model where Sony applies 12 o'clock hybrid strategy - differentiation
without the premium price. Hence, Sony can attract more new customers while retaining
existing users, therefore, boosting their sustainable competitive advantages. The circular
design of the model allows for incremental adjustments in strategy rather than a stark
choice.
Nevertheless, no doubts that the role of Sony corporate culture also plays an important key
in the success of the corporation. Howard Perlmutter identified a way of classifying four
types of management orientations, which is called the EPRG framework (Management Study
HQ, n.d). According to this model, Sony Corporation is classified as a geocentric orientation,
in contrast to the major of Japanese traditional corporations like Mitsui and Mitsubishi who
are very centralized, ethnocentric systems. While ethnocentric companies believe that the
home country is superior and there is no need to adapt and research the international
market

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(Management Study HQ, n.d), a geocentric system like Sony is a truly global player. Sony
clearly displays its “think globally, act locally” ideology by seeking the similarities
between its home country and the overseas. It serves worldwide consumers and
significantly emphasizes the role of overseas subsidies for global strategies. Sony is one
of the earliest Japanese companies to integrate cross-functional American and European
organizations. Sony tried to decentralize the decision- making while also promoting non-
Japanese employees. Some main differences between Japanese culture and American
culture that Sony seeks to combine are shown by the below digraph:

Japan USA

(Hofstede Insights, 2018)

The difference in the rate of uncertainty avoidance is obviously the reason explaining
why Sony is a pioneer. Sony is willing to take the risk while other Japanese corporations
aim to reduce any risk factors before any project. At 88, Japanese scores as one of the
most long-term oriented societies as they seek to do the best thing in their lifetime and
their goal is the benefits of the society while Western corporations seek to maximize the
profit. Sony is the combination, for instance, its constant high rate of investment in R&D
for the long-term goal even in economically difficult time (Hofstede Insights, 2018) while
aggressively attempting to gain market share.

3. Question 2
The term of globalisation as standardisation may be an over-simplistic strategy to
analyse a multination corporation like Sony. Hence, it is necessary to categorize which
strategy choice that Sony adapts by applying the international strategy mode.
Apparently, Sony adapts the transnational strategy. The transnational strategy means
increasingly complex globalisation and localisation strategic adopted. By applying this
growth strategy, Sony can increase its

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economies of scale, flexibility, specialisation, decentralisation as well as a formal

coordination mechanism. However, such a complex strategy is hard to achieve since
there are three dimensions when considering: responsiveness, learning, and efficiency.
In order to achieve competitive advantage, Sony, as a transnational business, needs to
be simultaneously, highly responsive to different global customer needs and global
integration while ensuring the company is a leading innovative. Despite the golden years
during the 1980s and 1990s, Sony continued to struggle in the 21st century. This decline
is the result of strategic issues in the intensive growth strategy of the corporation.

On the one hand, Sony adapts the market penetration & market development as their
primary growth strategy. The company uses differentiation generic strategy to create a
competitive advantage to support market penetration (Meyer, 2017). For instance, in 2016,
Sony invested approximately 3.5 billion U.S dollars in advertising (Statista, 2017). The
objective linked to this strategy is to flexibly adjust marketing campaigns in the business
segments. The product development is Sony’s secondary intensive strategy by producing
better products than its competitors. The constant innovation is a key growth driver in such
a competitive market like technology. Also, during the last 20 years, it is seen that Sony has
grown by entering new markets or creating new segments. For instance, Sony’s strategic
response in the new century was its acquisition with Ericsson in 2001, forming the joint
venture SonyEricsson and entering the mobile phones market. It could be argued that
diversification was one of the important growth strategies of Sony as it was an innovative
challenge to the traditional industry boundaries to achieve competitive advantages.
According to Das.B (2013), diversification will allow Sony to gain market share and higher
pricing power, to have economies of scale and higher productivity, and have access to new
technologies and patents (Das, 2013:32). Hence, the growth strategy seems to reduce the
risk for Sony.

On the other hand, even for a maverick pioneer like Sony, the diversification in some
business segments was still an enormously risky step. Diversification means more
fragmentation of managerial attention and higher investments in innovation in different
areas. Additionally, Sony also faced the problem of the cultural distance between corporate
Japanese culture and Californian movie makings when it entered the Entertainment
business segment. Besides, focused firms might be able to outperform diversified company
like Sony as they have more experience, more effort and more spending on the
development of products. Even though

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Sony has strong financial resources to support their intensive strategy, a misleading step
in diversification could lead to the backwardness in such a rapid growth of the
technology industry. In fact, SonyEricsson stuck in gaining the attention of customers
while during those years, the mobile phone market saw the revolution of smartphones.
Later, even though Sony kept on catching up the race of smartphones with its Sony
Xperia series, the corporation couldn’t compete against competitive giants like Apple,
Samsung with its product development strategy. The problematic internal structures,
lack of leading innovation, while having more expensive products in comparing with
Chinese and Taiwanese budget producers like Huawei, Oppo make Sony’s smartphone
business shrink by almost half in 2018 (Savov, 2018). Sony was inefficient to exploit its
strong resources and core competencies, leading to the unsustainability of its
competitive advantage in many business segments. Nevertheless, it is seen that Sony
decided to no longer pursue growth in business areas where intense competition puts it
at a disadvantage (Business Insider, 2015). Instead, Sony focuses on fewer products have
a higher competitive advantage in the product mix. For instance, the company now
concentrates on three main business: Game and Network Services, Pictures and Music
(Meyer, 2017). This intensive strategy can lead to the strategic objectives of suitability,
feasibility, and acceptability to expand the business.

4. Conclusion

Overall, there is no doubt that Sony has been extremely successful in creating a
powerful brand reputation with many valuable contributions to the technology industry.
It has been always one of the most maverick pioneers of innovation and creativity in the
global market. However, it seems that Sony’s leadership and intensive growth strategic
need different approaches to improve its performance in comparing with various of
innovative corporations in such a competitive market. The new millennium has seen
significantly rapid changes in the global economic cycle and complex environments. If
Sony is unable to exploit its resources and core competencies, it might not be able to
maintain its sustainable competitive advantages.

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