Sony Ericsson Essay Example

phones.

Moreover, Sony effectively utilized Ericsson's radio frequency technology expertise and global distribution channels to establish strong partnerships with wireless carriers worldwide. This played a crucial role in Sony's re-entry into the U market (Mark V, 2001).

In response to its expansion project, the S and European market faced difficulties competing with Nokia, the leading telecommunications corporation. Due to their small market share, Ericsson and Sony individually struggled to keep up (Electronic Times, 2001). In 2001, Sony and Ericsson formed a joint venture to combine their capital, management, and technological skills in order to increase their market share. The main reason behind this alliance was to merge Sony's expertise in audio, video, and communications with Ericsson's technological leadership. Their goal was to challenge Nokia and Motorola for the position of the world's most advanced global telecommunications corporation (Ericsson Annual Report, 2001). This partnership allowed both companies to access each other's resources and technology. Ericsson excelled in communication systems and protocols while Sony had strengths in consumer electronics production processes such as design and product planning.

According to Ericsson’s 2001 Financial Report, both Ericsson and Sony were in desperate need of a deal to secure skills and tactic knowledge which the opposing company possessed in hope to expand their market share to compete with Nokia and Motorola. It is clear that instead of a joint venture, Sony and Ericsson could have chosen an alternative method to collaborate and form Sony Ericsson, as long as its objectives and motivations were not at any risk.

One method was acquisition where we would see one company acquiring the other. A joint venture is a legal entity formed between two or more parties to

undertake economic activity together (Hill C, 2005). An acquisition on the other hand is when one entity takes legal control over another in the same target market (Hill C, 2005). A joint venture and acquisition experience the same advantages and benefits of access to foreign markets and technology a company may not have. The main feature that distinguishes joint venture from acquisition is the company’s share of profits and losses.

A fifty-fifty joint venture means that both parties will share the profits and losses, while in an acquisition, the acquiring entity is responsible for all losses and gains. It is believed that this aspect of an acquisition alliance is what caused both companies to reject the option of acquiring each other. In the initial stages of strategic planning and formation, Sony Ericsson aimed to expand their individual markets into each other's territories and benefit from each other. Neither Sony nor Ericsson wanted to invest a large amount of money and capital to acquire the other company, so a joint venture could potentially be the ideal form of international alliance between them.

Many mobile-phone companies, including Sony Ericsson Mobile Communications, struggled to keep up-to-date and secure their existing market share in the fast and ever-changing industry (Bowman R, 2006). Since its formation in 2001, Sony Ericsson Mobile Communications has faced numerous problems and overcome them with new strategies and mind-frames. Two challenges and techniques to overcome them are discussed below. One major strategy mistake made by Sony Ericsson was focusing only on a small pool of high-end markets (Strategic Decision, 2004) ;anonymous author;. At first, this strategy seemed effective as mobile phone sales exceeded expectations. However, in the

long-run, Sony Ericsson failed to maintain or increase its market share in the high-end and low-volume market, resulting in significant sales decrease.

According to Strategic Decision (2004), the shelf life and selling price of each handset were decreasing annually. In September 2003, Sony Ericsson had a global market share of only 5.4 percent, while Nokia had 34.5 percent. This choice made targeting a specific market segment a risky strategy for Sony Ericsson. Consequently, the company has increased its investment in Research and Development facilities to enhance product improvement and innovation, as their previous approach failed to generate market share and profit levels.

Sony Ericsson's objective is to enhance its presence in the high-end market by providing superior quality products, which they believe will yield a lasting competitive advantage and foster innovation within an ever-evolving industry. Furthermore, they anticipate that enhancing product quality and production efficiency will minimize unnecessary expenses. Through delivering affordable yet higher-quality offerings to consumers, Sony Ericsson has successfully penetrated the high-volume market and expanded its global market share.

Comparable to other firms, Sony Ericsson has opted for outsourcing non-core competencies as a means of reducing transaction costs and concentrating on core product competencies. While outsourcing production offers advantages like cost reduction and risk mitigation, managing supply chains can be costly. As a result, meticulous calculations are imperative to ensure the investment is worthwhile. It should be noted that Sony Ericsson's approach to outsourcing may differ from Nokia's strategy, leading to contrasting outcomes (Strategic Decision, 2004).

Sony Ericsson made the strategic decision to outsource its production manufacturing facilities, which were taken over by Flextronic in America. This was primarily driven by cost benefits and risk reduction. However,

the company overlooked the hidden costs of outsourcing. In response to this failed decision, Sony Ericsson decided to focus on developing effective management, communication, and training channels. To facilitate communication, they created a corporate intranet to share important information and updates efficiently. They also implemented training programs to ensure consistent product quality standards.

Improved commitment from both parties, as well as with its suppliers, was another response to the failure of this strategy. This commitment aimed to achieve mutual trust and understanding between the parties. Additionally, continuous development and innovation were seen as essential for creating company competence in the Business to Business (B2B) level relationship and within the industry as a whole. This not only resulted in a competitive advantage but also allowed Sony Ericsson to sustain its market share in relevant domains (Strategic Decision, 2004).

By maintaining respectable relationships with its suppliers, Sony Ericsson was able to experience more effective and efficient delivery of programs and processes. This approach also helped to reduce opportunistic behavior not only between Sony Corp. and Ericsson but also among all parties involved in the day-to-day business activities of Sony Ericsson. As a result, it reduced the potential for creating future rivalries. Despite facing numerous challenges, Sony Ericsson viewed them as opportunities for growth, development, and gaining a better understanding of the mobile-phone industry. The strategies and techniques formulated in response to these challenges have allowed Sony Ericsson to maintain a high level of market share to date.

Initially, as a new company, Sony Ericsson faced challenges in the industry, sales, and profits. The formation of Sony Ericsson in 2001 brought many ups and downs due to the changing mobile-phone industry

and ineffective cooperation. However, Sony Ericsson has now developed new strategies to overcome these challenges, leading to brighter outcomes. The question now is whether Sony Ericsson can learn from its strategic mistakes and achieve future growth to compete with other major players in the industry, fulfilling its core objective of forming the alliance. In 2003, the chief executive announced that Sony Ericsson's crisis was over. Since then, the network businesses have been successful, with share prices doubling since April 2003. Cost-cutting procedures will further reduce annual expenses by more than half.

Based on recent performance and figures, Sony Ericsson is poised for long-term success in the industry. The key to achieving this lies in learning from past experiences and failures and avoiding their repetition in the future.