Strategic Management: Sony Change of CEO Essay Sample

the measurement of growth among Japan's top 10 exporting multinationals. Sony experienced a major setback when Apple introduced its popular digital music player to the market, replacing Sony's consumer electronics appliances. Nobuyuki Idei acknowledged that the company's performance is much worse than previously believed, which prompted him to pass on his position to Howard Stringer. The value of Sony's stocks has decreased by approximately 75% over the past five years.

The value of Sony's trade name has decreased from $16.4 million in 2000 to $12.8 billion in 2004, while competitors such as Panasonic and especially Samsung were experiencing rapid growth. Despite Sony founder Akio Morita envisioning Sony as a global company, it is not perceived as solely Japanese.

The direction manner of the Japan civilization still greatly influences Sony. It is often described as being too complacent, leading to setbacks. The company's stagnancy is a result of not introducing enough innovation or making necessary changes to compete with rivals. The price war also played a role in the company losing market share rapidly. Additionally, Sony failed to recognize the potential of flat-panel TVs, allowing Samsung and Sharp to gain the upper hand.

All hopes are placed on Howard Stringer to turn the company around. Howard wants every Sony employee to understand their roles and shared responsibility to ensure the company does not face hostile acquisition.

Introduction

Sony, whose main business is the manufacturing of electronic consumer goods, currently oversees several subsidiaries and affiliates specializing in specific sectors such as films, music content, video games, and financial

services. The current management team of Sony Corporation has proposed the establishment of a new management structure aimed at expanding upon its core strengths as a global electronics company.

Sony, an amusement and engineering company, has announced the appointment of Howard Stringer as their new CEO. Notably, Stringer is a non-Japanese non-engineer and is 63 years old. He is known for being a skilled corporate diplomat and media figure, having impressed the previous CEO (who was also a former PR professional). Stringer will assume his new role at Sony on June 22, 2005. However, Sony's brand value has declined significantly due to fierce competition from other industry players like Panasonic and Apple.

Unknowingly, Sony has fallen from a leading position to either last or near last in multiple areas of growth among Japan's top 10 exporting multinationals. Nobuyuki Idei has announced his intention to hand over the reins to Howard in hopes of revitalizing the company and achieving profitable growth. Six corporate officers, who currently serve as board managers, will support him in this transition.

Many individuals are eagerly anticipating Howard to lead the company to new heights.

SWOT analysis

The SWOT analysis is valuable in aligning the company's resources and capabilities with the competitive landscape it operates in. Consequently, it plays a critical role in strategy development and selection.

( Bradford. Robert W. . Duncan.Peter J. Tarcy. Brian ( 2000 ) Simplified strategic planning )

Sony SWOT analysis as follows:

Strength Weakness

• Broad scope of merchandises
• Internal sourcing of cardinal constituents
• Strong strategic confederations

Weak exposure to consumer electronics’ section

Opportunity Threat

• Traveling into new market sections that offer improved net incomes
• Faster respond to market demands
• Related variegation
• Lack of invention
• Strong competition
• Piracy
• Price wars with rivals

Key countries pertinent to effectual Strategy Management

Monetary value WarsThe one time unthinkable diminution of many of the world’s largest corporations has become all excessively common in recent old ages.

In the consumer electronics market, competing houses face intense competition. The danger lies in their inability to adapt quickly to technological changes. Sony has been negatively affected by price wars for electronics products like flat-screen TVs and appliances, which has impacted its financial results due to the rapidly changing market environment. Sony's problem stems from its failure to create a successful business level strategy that includes sustainable competitive advantage through cost leadership and product differentiation. Technology companies must position themselves to embrace radical changes in order to gain a first-mover advantage and competitive edge.

In today's fiercely competitive era, organizations must consider multiple factors, including price, as a key component of their marketing strategy. Price greatly influences the success of a marketing mix and implementing an effective mix can enable companies to gain a larger market share. Sony should consistently analyze market opportunities, the consumer electronics market,

and economic factors to comprehend product demand and sales trends.

Jr. ( 2000 )

Strategic Management

Formulation

Execution and Control

No Product distinctionElectronic merchandises such as CD participant. TVs, icebox, digital camera and washer in most electrical shop like Harvey Norman. Courts and Best Denki do non hold a clear merchandise distinction between competitions.

In the quest to capture market share, firms frequently evaluate their competitors who manufacture similar products. A case in point is Sony's CD player which shares many similarities with Panasonic's offering. Hence, Sony should allocate resources towards research and development of innovative core products such as the PlayStation. This strategic move enabled them to outperform Sega and Nintendo in the video game market. It is imperative that these products possess complexity, uniqueness, and captivating qualities to establish a competitive edge over their adversaries.

According to the text, the new Apple iPod music player has surpassed the Sony mini phonograph record player in popularity and user friendliness. The iPod allows users to download music from legal websites or CDs without needing to purchase additional memory. This is because the iPod comes with built-in memory. In contrast, the Sony mini phonograph record player requires users to buy a separate memory card before they can begin using it to record or download music.

By creating new Sony merchandise, the company is able to establish a barrier of entry for its competitors, as the products are difficult to replicate. Additionally, being a first mover gives Sony the advantage of implementing pricing strategies during the initial stage. In most electrical stores, Sony products are considered premium brands that consumers trust

due to their high quality and reliability compared to other brands.

While Sony has achieved cost efficiency through economies of scale in its production level, it has not achieved cost leadership in terms of its plasma and LCD TVs and other electronic appliances compared to its competitors from various brands like TCL, Enzer, and Hyundai, etc.

For example, Sony is retailing a 32' plasma TV at $2999, while Hyundai is retailing the same 32' plasma TV at $1399, which is equivalent to half the price cheaper. However, as the economy is bad,

most consumers will tend to go for products that are cheaper in price, even if they may not have the same level of trust in that product. Therefore,

To address this issue, Sony needs to reduce its costs significantly, as emphasized by the new Sony head, Howard Stringer, who states that "if you don't take action, you will destroy the company." One example of cost-cutting is through resizing the company's internal infrastructure and modifying distribution methods.

and search for more affordable natural items.

Acquisitions & Restructuring

In January 1988, Sony acquired CBS Records and established Sony USA Inc (now known as Sony Corporation of America ("SCA")) as a holding company to oversee Sony's investment in the acquired company, which was subsequently renamed Sony Music Entertainment Inc.

(“Sony Music”). In November 1989, Sony USA acquired Columbia Pictures Entertainment, Inc.

Sony Pictures Entertainment Inc. ("Sony Pictures") was formed through the acquisitions of Columbia Pictures for $3.4 billion and Guber-Peters Entertainment Company for $200 million. This joint venture now includes two film studios (Columbia and Tristar), a theatrical exhibition company (Loews Theaters), and specific telecasting production installations.

Sony took on a debt of approximately

$1.2 billion and designated around $3.8 billion for goodwill when it acquired its gesture image operations.

Sony's financial projections showed losses for five years, including costs for amortization and acquisition financing. However, Sony's business plan was based on the belief that as electronic distribution platforms for entertainment expanded, Sony Pictures and its movie inventory would become a more valuable source of content. As events unfolded, this proved to be accurate.

Despite accounting for amortization and acquisition financing costs, Sony Pictures suffered substantial losses in its first four years under Sony's ownership. These losses consistently surpassed Sony's internal projections and were evident in the company's overall financial outcomes. Surprisingly, investors were not informed about the projected or actual losses specifically attributed to Sony Pictures until the conclusion of Sony's fiscal year on March 31.

In 1994, Sony Pictures caused net losses of around $967 million for Sony's consolidated results. Sony recently announced the elimination of the existing company system (referred to as "Network Companies") and will introduce reorganized operational units named Business Groups, which will focus on specific product categories. Corporate Executive Officers will have defined responsibilities at the Electronics Headquarters level to oversee cross-divisional functions related to product planning, technology, procurement, manufacturing, and sales & marketing. They will also provide direct support to the Electronics CEO.

The purpose of this structural change is to eliminate the corporate silos that have hindered Sony from focusing their vast resources on their most competitive products, and to promote coordinated and efficient decision-making. This reorganization will also allow Sony to prioritize their R&D efforts where they will maximize growth while avoiding duplication. Sony will accordingly reorganize the existing laboratory structure. Management

at Sony needs to alter their management style as well. Sony has traditionally thrived on a hyper-competitive culture that encouraged engineers to outperform each other rather than work together. Different groups within Sony were responsible for different areas of the company's operations, and they did not work well together.

Despite the need for change, a significant number of employees at Sony still take pride in their defiance towards orders they do not agree with. The majority of individuals within the company recognize the necessity for change but are reluctant to undergo personal transformation due to Sony's benevolence and positive attributes such as lifetime employment.

Strategic Leadership

The rivalry between Norio Ohga and Nobuyuki Idei serves no purpose as they have divergent objectives regarding Sony's strength as a company.

Norio Ohga firmly supported Ken Kutaragi's promotion to president and exerted influence over Sony's operations, sending a misleading message that Idei could be undermined through Ohga's support. This has significantly increased the challenges faced by Idei in maintaining fairness and order.

Former CEO Nobuyuki Idei successfully led Sony through a three-year major restructuring effort, which aimed to reduce fixed costs by over $3 billion by rationalizing production, streamlining procurement, and cutting jobs. However, the focus of the company is misplaced. Instead of solely concentrating on cost reduction, Sony should prioritize regaining its leadership position and creating world-class products. Howard leads Sony Electronics U.S.

During his tenure, Howard's strategic decision to bring on Robert Wiesenthal as his Chief Strategy Officer, enabling him to engage in various business bets, has impressed Idei with his capabilities. Under Howard's leadership, Sony Electronics U.S. has successfully reduced operating expenses by $700 million annually. To further transform the company,

Howard should consult with Carlos Ghosn (Nissan CEO) and Lou Gerstner, who have successfully turned around their own companies. Additionally, Sony has recently appointed a new foreign CEO.

Howard Stringer, the leader of Sony, will bring about changes that will positively transform the Sony culture. Stringer will begin by addressing the culture's conflicts and the company's management politics.

According to the Newsweek article, Stringer believes that Sony has become too bureaucratic and needs to empower engineers in order to regain its position as a leading consumer electronics manufacturer. However, Stringer acknowledges that he is not an engineer himself. This poses a challenge for insiders who have to address issues arising from excessive management, but Stringer is working to change this.

The focus of the growing scheme in electronics resources will be on HD products, mobile products, and the semiconductors/key component devices that can differentiate Sony's products from the competition. Sony will leverage all their resources including motion pictures, music, games, and brand recognition to deliver more appealing products and services as the world's leading electronics and entertainment company. To strengthen their electronics business, Sony will eliminate the existing company system and introduce reorganized operational units called Business Groups for specific product categories. This significant structural change aims to eliminate corporate silos that have hindered Sony from concentrating their vast resources on their most competitive products and foster coordinated, efficient, and rapid decision-making.

This new construction will also enable them to prioritize other R&D, putting resources where they will maximize growth and avoid duplication. Sony must change and adapt as their customers and market change and as their rivals evolve. In my view, leadership is the essence of successful change.

It's not just the company's innovative use of technology that wins favorable reviews. It's also the company's outlook and culture.

Various organizations encounter different tasks in reducing organizational behavior variability. Geographically dispersed organizations face unique challenges compared to those with employees in close physical proximity. Cultural change is challenging and can have ambiguous outcomes, thus it should be cautiously conducted and gradually implemented. The timing of strategic change is crucial.

Successful companies proactively alter their strategies for long-term success. Waiting too long puts them on the defensive, so they must be able to manage change effectively. Additionally, they should strive to develop a culture that is responsive to the constant need for change. Strategic alteration requires a collective balancing act.

Considering the perspectives of stockholders and clients, as well as the pressures from competitors, organizations may need to make trade-offs. Some organizations are confronted with significant and sudden changes that cannot be adequately addressed through gradual and incremental changes. These organizations must simultaneously modify their strategies, structures, and management style. This poses a significant challenge that very few organizations will truly find enjoyable.

Mentions

1. Bradford. Robert W. Duncan. Peter J. Tarcy. Brian ( 2000 ) Simplified strategic planning. Chandler House Press. USA.
2. John A. Pearce II and Richard B.

Robinson.Jr. (2000) Strategic Management.