Introduction
SONY is an internationally known and well-reclaimed manufacturer of electronic goods. Their product line consists of batteries, CDs, cameras, music soft ware, mobile phones, game soft wares, televisions and semiconductors. Their business operations are based upon the designing, development, manufacturing and then selling their products. Many people are unaware of this that SONY also provides few financial services such as credit financing and banking. They are currently operational in Japan, China, Asia, Europe and North America. The head quarter of this company is situated in Tokyo, Japan so basically by origin this is a Japanese organization. Unfortunately, they faced an annual record of loss of 1.2 billion dollars. The main issue is that their product line is serving numerous parts of the value chain.
Environmental Scanning And Trends
Environmental scanning can be explained as the procedure by which information is gathered, analyzed and formatted to use for strategic planning. It consists of some internal and some external factors. The internal factors are the ones existing within the organization and the management has control over them. The external factors are the ones which are outside the organization and the management has little or no control over it(Jain, 1984)
In case of SONY, the internal factors that may affect the planning process will be about the latest machines to use for providing high quality products. Whereas the external factors will be regarding the technological advancements, expectations of buyers for value of money and variations in external trends like changes in the people’s preferences regarding TVs.
Technological Trends
These trends include the changes due to technological advancements and adaptations. This is mainly due to the research and development team. They find out the latest technologies which are being preferred by people such as Google TV, in built Wi-Fi, USB devise and 3D screens. The latest model of television screen by SONY is equipped with all these features.
Demographic Trends
A market can be segmented demographically by distributing it according to age, income, gender and family size. In case of SONY, this can be done by segmentation according to this. It will be an obvious observation that youngsters will prefer 3D experiences. Besides this, customers who have low incomes will not be able to buy latest television screens whether they are with liquid crystal displays or with liquid electron displays. They will be more willing to buy normal flat screen TVs (Gillespie, 2007)
Economic Trends
SONY may need to change its short and long term plans due to any kind of changes in the economic factors like inflation, recession, exchange rates, changes in production costs and levels of unemployment. If any change occurs in the economic conditions, then ultimately it will influence the manufacturing process and decision making (Gillespie, 2007)
Political-Legal Trends
Government has an important role in the decisions of SONY as an organization. There may be some new formulations in tax policies or emissions of taxes. This will also affect the market price of their products. The top management and directors may not agree to the currently used process for manufacturing goods as they will have to change the entire process if any change occurs. Similarly, any changes in the legal trends will also have an impact. These may be in the form of health and safety laws by government.
Socio-Cultural Trends
These trends involve the cultural aspects, social life, income levels and living standards of customers. These trends will affect the demand for SONY’s products and how it is operating. SONY also has low cost TVs for people with lower incomes and below average lifestyles. They want them to be happy by being a part of this technological advancement (Gillespie, 2007)
Global Trends
This includes the international inflation level, global warming issues and other environmental problems. SONY has to be vigilant regarding the byproducts which are emitted throughout the manufacturing process of their products. Due to these considerations, SONY has planned to reduce the emissions of carbon dioxide and other waste materials which are produced during the manufacturing process.
Porter’s Five Forces Model
This model explains the five forces which affect the organizational position of SONY within the electronics industry. It can be useful to understand the competitiveness within the industry and to determine how and where the firm operates (Grundy, 2006). The five forces which influence the positining have been discussed below briefly:
Competitive Threat Of New Entries-Low
Electronic industry is not an easy one to enter. It needs a large amount of capital investments to manufacture expensive luxury electronics. A complex set of technological and intellectual skills are also required. Constant research and development needs to be done for new innovations in the products. Varied governmental policies and patent policies are also a barrier for the new entering company.
Bargaining Power Of Buyer-High
Bargaining Power Of Supplier-Low
SONY has their manufacturers in scattered places all around the world. This means that their suppliers are not concentrated in a specific region. SONY has the freedom to choose any supplier who is offering a comparatively cheaper price quotation. This gives them a bargaining power to keep their input prices low. Due to this global supply chain, they can negotiate with the supplier to get the finest possible price.
Threat Of Substitute Products-Low
Sony always differentiates its own products by unique designs and advanced technology. They have no threats of substitutes because no product can meet their standards. Sony has successfully established a good reputation among its customers. They have built up a strong customer loyalty relationship so they have the trust that customers will not switch or opt for any other substitute.
Intensity Of Rivalry-High
There is a high competition among other players of the industry. Many other competitors are equally good as SONY. Industry rivalry is quite high because of high research and development, slow growth and fixed costs. People of all social classes prefer entertainment for themselves. For this purpose, rival firms are coming up with low cost TV screens and other electronic devices so they can attract their attention (Grundy, 2006)
Competitor Analysis
Sony has many competitors in the electronic industry. They include Toshiba, Canon, Panasonic, JVC, LG, Samsung, Philips, Kodak, Apple, Nokia and Motorola. Due to technological advancements and digitization, the electronic industry has really flourished leaps and bounds. SONY has many rivals because many other competitors are providing almost similar product range of electronic devices. This is leading to higher sales of electronic products. It has affected the usage patterns and buying behaviors of customers. A large number of options are available for all social classes. People prefer to buy a well-known brand so that it is long lasting and reliable.
SWOT Analysis
The internal environment of SONY is quite similar to other competitors in the electronics industry. Their strengths and weaknesses are very important for deciding the marketing and business strategies. SONY’s strengths include their high market share, positive perceptions, brand image, public relations and people (Hill & Westbrook, 1997). This enables SONY to have a competitive edge over other competitors. On the contrary, SONY has a few weaknesses too but they are out shadowed due to their high number of strengths.
Strengths
- SONY has an established supplier and management system. They only select those suppliers which abide by the laws, maintain a good financial position, have technological innovations, protect their environment, offering competitive prices and controlling qualities.
- SONY emphasized on their numerous exchanges of information with their suppliers through the internet. They have a similar procurement process.
- SONY has successfully built up a wide network of sales in around 214 countries.
- They always welcome after-sales services happily.
- All products manufactured by SONY are sold with a warranty. Besides this, they maintain contracts of product support with their customers.
- SONY is now well-established as a strong brand name in the electronics industry. The customers perceive their products of high quality and best outlook design.
- They have the advantage of having numerous Japanese and foreign licensed patents. They consider this as their competitive advantage over other firms.
Weaknesses
- SONY is expanding their operations into many parts linked to the entertainment value chain. They are only focusing on expansions and market shares. Due to this strategy, there is no new innovation in their products and their business operations have also slowed down.
- Recent financial results show negativity in the statements. They have a high risk of liquidity, low sales, very slow profitability, low operational efficiencies and low confidence levels of investors.
- SONY has poor skills when it comes to marketing and advertising of their own products.
- Their product line is too narrow. No innovation has been made recently. It only seems to focus on the video gaming industry rather than other electronics like commercial use and personal use products.
- When SONY expanded in new geographic locations, they had to become sensitive to their respective interest rates and exchange rates.
Besides the above mentioned strengths and weakness, an external analysis also needs to be done. It is considered to be very important as it studies the effects of external environmental changes and SONY’s ability to deliver value to their target market customers. These will include the external changes that occur in the environment due to market growth. Besides this, the economic, legal, environmental, technological, political and socio-cultural aspects are also to be studied.
Opportunities
- In 2012, a new CEO of SONY was appointed. It is expected that he might bring some prosperous changes in the long term growth of the organization. He is an expert of computer related entertainments and gaming. This might bring an extension in their product line.
- SONY has a very elastic and sensitive impact on their operations. If there is a recovery from any economic crisis, it shall definitely impact on their profitability and sales.
- There is an increased competition by Google, Samsung and Apple. This will be taken as a positive opportunity for SONY to focus more upon their manufacturing costs and competition.
Threats
- SONY should overcome the intense competition among other rival firms by specializing in the available resources. Otherwise it can be a threat for them by other competitors who may succeed.
- Exchange rates of other countries, where the manufacturing and selling process takes place, will also affect upon the financial results of SONY.
- SONY has comparatively high costs for transformation and re-structuring. This will not help them to achieve their goals.
- If the prices of raw materials or other parts increase, then the cost of production will also rise.
- Nowadays the manufacturers working in the electronics industry will try their best to struggle with the black market and smuggled goods. SONY is now facing a high amount of threats due to low priced, low quality counterfeit products. These counterfeits will not just destroy the overall revenue but it will also damage the brand image.
Strategic Formulation
SONY is now very stable in the electronics industry and has large market share. They are persistent in innovation and they are ready to formulate some new strategies. These strategies include the need to boost up their business operations, they need to reorganize their electronic products and start using information technology to improve their businesses (Yuksel, 2012)
SONY has to establish a unique lifestyle with the help of internet technology. They want their digital electronics to be connected with the latest information technology. For this purpose, SONY has introduced few new products like VAIO, mobile terminals, Play station 2, personal computers and digital TV boxes.
Strategic Implementations And Recommendations
According to the above mentioned analysis, the most important and major challenges for SONY are micro-risks and competition. I am going to discuss a few recommendations for SONY below. They aim to develop its competitive advantage.
Quality Control
SONY has a huge strength of its well known and commonly recognized brand name. Customers have now developed a positive perception about their products. They believe that they are reliable and of best quality. Although they have already made a remarkable improvement in their system, I would suggest a decentralized system of monitoring and evaluation mechanism in the manufacturing process. Almost all quality issues are inter-linked by some small component. So for this purpose, a decentralized system will be quite helpful to complete the efforts.
Macro-Economic Risks
SONY has an international presence all over the world. They are very sensitive to any kinds of changes in the exchange rates or local economy functioning. Although SONY does not have a direct control over any of these factors but still they can use their services of financial analysts to lessen any possibilities of risks. This strategy can be implemented by SONY to enter into any contracts of derivatives like interest rate swaps or currency swaps. They may even prefer to take short term position until the laws are made clear in writing.
References
- Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.
- Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213-229.
- Hill, T., & Westbrook, R. (1997). SWOT analysis: it's time for a product recall.Long range planning, 30(1), 46-52.
- Jain, S. C. (1984). Environmental scanning in US corporations. Long Range Planning, 17(2), 117-128.
- Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p52.
