Sony Electronics has been one of the leading companies in the electronics market for decades. Even though Sony had a later start with their integration into the international market, their business has still spread all over the world in a record amount of time. That being said, Sony was struggling a great deal in the late 1990’s because their model was not compatible with the Internet based technology that became the market norm, (Gupta, V. and Konakanchi, P.). This aspect became Sony’s Achilles’ heel because their lack of proper research and development had made a great impediment for them to move forward as a company, (Gupta, V. and Konakanchi, P.). As a result of being so far behind, Sony’s management kept launching restructuring initiatives that were intended to fix the company and lead them into the 21st century that was the century of Internet; however, many speculated that these restructuring efforts were in fact Sony’s problem, (Gupta, V. and Konakanchi, P.). Thus, the case at hand dealt with the question of whether Sony should be managing their strategic renewal in a different way? (Gupta, V. and Konakanchi, P.).
In order to answer this question properly, it is important to understand the precise history of Sony’s management in order to ascertain where they went wrong. In June 2003, Sony shocked the market when they announced a net profit decline of 98% ((Gupta, V. and Konakanchi, P.). This number was absolutely impossible to many industry experts, which made them speculate how a loss this substantial actually happened? This was absolutely a warranted question and it is believed that Sony’s efforts to keep restructuring their company in order to meet the modern trends was one of the primary causes of this sort of disparity in profits, (Gupta, V. and Konakanchi, P.). The main decline in profits was seen from Sony’s electronic division, which saw many new competitors entering into the market from Asian countries in the new millennium, (Gupta, V. and Konakanchi, P.).
Even though there were new competitors in the market, Sony was historically divided into sales groups for their electronics business, (Gupta, V. and Konakanchi, P.). What this meant was that Sony had separate sectors for their video versus music electronic divisions to divide the workload, (Gupta, V. and Konakanchi, P.). However, it was thought in the late 1990’s that this model was not working and it was decided to switch the managing of the products in groups within the electronics sector to a more vertical management system in which a senior group of managers managed all of the relevant issues pertaining to this sector of Sony’s business as a whole, (Gupta, V. and Konakanchi, P.).The five main goals of this new system were as follows: reduce levels of organization hierarchy, encourage the spirit of entrepreneurs, make authority structure more streamlined, enhance core business activities while developing new ones, and implement a market system where sales and production work rapidly to meet the changing market trends, (Gupta, V. and Konakanchi, P.). It was thought that these goals were going to solve the holes in Sony’s electronic sector of their business. That being said, these measures plummeted and Sony still did not recover, (Gupta, V. and Konakanchi, P.).
As a result of this poor performance, the head executives of Sony decided to integrate R&D, Finance, Marketing, and HR. This enabled the business to focus more on IT development. Due to the failure of the prior proposed model, Sony implemented the ten-company structure in 1996, (Gupta, V. and Konakanchi, P.). The goals of the ten-company structure were to: training young talent into future management positions, consolidation of market functions, appointing new companies to the IT and technological sectors, established Executive Board, and restructured the company overall to promote efficiency, (Gupta, V. and Konakanchi, P.). However, this model was not effective given that Sony’s profits descended by 19.4% in the financial year of 1998-99, (Gupta, V. and Konakanchi, P.). The reason for this rapid decline was due to the Internet issue that was saturating the market, (Gupta, V. and Konakanchi, P.). Sony simply did not have the capability to compete with the new Internet giant that was greatly changing the world of technology, (Gupta, V. and Konakanchi, P.). This caused Sony to restructure the company again to see if they could take a piece of the Internet business due to their prior experience in the electronics industry, (Gupta, V. and Konakanchi, P.).
This is precisely why Sony launched the unified-dispersed management model, (Gupta, V. and Konakanchi, P.). Essentially, Sony divided the Group Headquarters, Corporate Strategy Divisions, Corporate Labs, and Network Business Solutions divisions from the Electronic side of their business, (Gupta, V. and Konakanchi, P.). The Electronic side of the business was designed to try to catch up with the Internet boom, (Gupta, V. and Konakanchi, P.). It was Sony’s goal to privatize their subsidiaries and to strengthen their management capability, (Gupta, V. and Konakanchi, P.).
Similar reconstructions occurred all the way up until the mid-2000’s, but the point remains the same. The reality is that Sony made their major error when the Internet was first becoming an essential share of the market, (Gupta, V. and Konakanchi, P.). They spent so much time planning and spending money on what they “were going to do” rather than just doing it. (Gupta, V. and Konakanchi, P.). As a result, the missed a key market share and innovation potential for their business that they still have not recovered from to date, (Gupta, V. and Konakanchi, P.). Thus, the answer to the question posed by the case is surely, yes. Sony greatly erred in how they restructured their business model so many times.
References
Gupta, V. and Konakanchi, P. Restructuring Sony: Case Study. Classic Case Studies. 2003. Pp. 1-14.
