Sony Corporation was founded in 1946 in Tokyo by Akio Morata and Masuru Ibaka. Initially known as Tokyo Telecommunications Engineering Company, the company was involved in research and development of telecommunications and measuring equipment. Today, however, the company is involved with the creation, design, manufacture and dealing of electronic equipment and devices including game consoles and software (Berrak, Ferzly, Nguyen, Roach, and Ward 3; Gershon, and Kanayama 105). In addition, the company also engages in the production, marketing and distribution of motion pictures, home entertainment, television products as well as recorded music. Further, the company engages in financial services businesses such as insurance operations through its Japanese insurance subsidiaries and internet-based banking affiliates. Sony has a broad sales network spanning about 200 countries and regions. The biggest markets for Sony's products are in Japan, the U.S. and Europe. Because of their wide reach and magnitude, Sony’s various business activities lend themselves to analysis. This paper presents an extensive SWOT analysis on Sony Corporation.
In terms of strengths, the greatest asset that Sony Corporation has is its human resources. Sony has an advanced group of engineers who work in the R&D department. These engineers are constantly innovating and producing new ground-breaking products (Research and Markets 1; Chang Sea-Jin 10). This innovative value is important for a company which specializes in electronics and audio-visual equipment. Another major strength is that Sony has established an advanced supplier management system. Sony selects suppliers who comply with laws keep solid financials, protect the environment, innovate, control component qualities, and offer competitive prices (You sigma 1). Sony emphasizes on frequent communication with suppliers through e-commerce and standardized procurement processes. In addition, the company has a broad sales network in over 200 countries and territories (Research and Markets 5). Sony has also established a strong brand name which draws customers and business from many clients.
There are several weaknesses faced by Sony Corporation. The company is involved with products which serve too many sections of the value chain in the entertainment industry. Sony is a content provider, aggregator, broadcaster, manufacturer and hardware producer. This “empire-building” strategy has caused operation and innovation to slow down and has impaired competitiveness in the various market segments they operate in (Hao, Misra, and Shanholt 20). This is because the company had not specialized in a particular area and focused on developing it. Current financial numbers are weak, exposing high liquidity risks, slowly recovering profitability, underperforming stocks, low operating efficiency, and decreasing sales. With further expansion into additional segments and geographical regions, the company has become sensitive to economic forces such as interest rates, inflation, unemployment and exchange rates. These are exogenous factors that are beyond Sony’s control, but which affect its profitability (Neha, Bucha, Goyal, and Malik 2).
There are several opportunities available for Sony Corporation to exploit. First, the leadership of the company has changed to Kazuo Hirai, who has extensive expertise in gaming and computer entertainment (Sony Corporation 5). The company is also likely to obtained gains from the recovery from the economic crisis (Hao, Misra, and Shanholt 20). The significant competition offered by Google and Apple may result in increased integration in the software and electronics industry. By acquiring more aggressively, the company may hope to drive their intellectual property and manufacturing costs downwards (Stonehouse and Snowdon 257). Not too long ago, Sony was a market leader in technology. The company can leverage their seasoned engineers and innovators to come up with technology that rivals that of competitors like Apple and Google. Sociocultural forces also favor Sony. The company’s presence in many countries affords it the ability to develop multicultural creative teams which can be used to develop products suited to the market.
Sony also faces a number of threats in its various business segments. The first threat is competition. Competition may be analyzed through the Porter’s five forces model comprising of threat of new entrant; buyer power, supplier power; degree of rivalry and the threat of substitutes. In terms of the threat of new entrant, the threat is low. This is because most of the industries that Sony Corporation is engaged in include of companies that are already well-established. In addition, entry requires huge capital investments, high-scale economy, aggressive innovation, distribution channels; access to raw materials; favorable location and the government policy, which acts as a barrier to entry. The intensity of rivalry from the existing competitors is high, while the exit cost is also high. Among the competitors are Apple, Phillips, Panasonic Corporation, Nintendo, Samsung, Hewlett Packard etc. The buyer power is high because there are no switching costs associated with moving from one brand to another. The bargaining power of suppliers is low because the company has a global reach with many suppliers. The threat of substitutes is low. Most of the company’s varied range of products does not have substitutes. Other threats the company faces are the costly transformation and restructuring processes and increased reliance on business partners from other companies.
Conclusion and strategic recommendations
Sony Corporation has been in the electronics and motion picture business for a long period of time. The company has ventured into various industries and has employed an “empire-building” approach. This has had its fair share of advantages as well as disadvantages. Today, the company is still in a strong position but faces competition from increasingly innovative companies as shown by this analysis. There are various strategic recommendations which may place the company in good stead if implemented. The most significant challenges include competition and economic forces of currency, interest rates, and inflation. First, Sony Corporation should find a segment focus. This will enable the company to apply its resources to its most productive segment. This will enable the company to compete effectively with others in the market. The company should also acquire aggressively to obtain a competitive market share. Thirdly, the company should refine quality control. Sony’s strength lies in its brand name. Consumers believe in the reliability of Sony products. The company should always ensure that this remains true. Overall, these strategies will help Sony Corporation compete effectively and regain its position as a segment leader.
Chang Sea-Jin, Sony vs. Samsung: The Inside Story of the Electronics Giants’ Battle for Global Supremacy, Singapore: Wiley, 2008, 250 pages
Chaurasia, Neha, Mohit Bucha, Rahul Goyal, and Rishi Malik. "Sony Corporation." Business & Economics 4.1 (2011): 1-13. Print.
Dogruer, Berrak, Mazen Ferzly, Hiep Nguyen, Douglas C. Roach, and Rafik Ward. "Report on Sony Corporation." Japan/Korea Trip 11.2 (2012): 3-18. Print.
Gershon, Richard A., and Tsutomu Kanayama. "The Sony corporation: A case study in transnational media management." International Journal on Media Management 4.2 (2002): 105-117. Print.
Research and Markets. "Research and Markets." Analysis of Sony Corporation. Version 1. Sony Corporation, 2 Sept. 2013. Web. 9 Apr. 2014. <http://www.researchandmarkets.com/reports/585757/analysis_of_sony_corporation.pdf
Research and Markets: Sony Corporation - SWOT Framework Analysis." Business Wire Jun 03 2010. ProQuest. Web. 9 Apr. 2014.
Sony Corporation. "Sony Corporation." Report of Foreign Private Issuer 4.2 (2012): 1-10. Print.
Stonehouse, G., and B. Snowdon. "Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness." Journal of Management Inquiry 16.3 (2007): 256-273. Print.
Tang, Hao, Rahul Misra, and Ellie Shanholt. "Sony Corporation." Griffin Consulting Group 5.6 (2012): 1-30. Print.
You sigma. "Sony Corp. (SWOT Analysis)." Sony Corp. (SWOT Analysis). Version 1. yousigma.com, 3 Feb. 2012. Web. 9 Apr. 2014. <http://yousigma.com/comparativeanalysis/sonycorp.html>.