Introduction
Sony (Sony Corporation) is a Japanese consumer Electronics Company founded in 1946 by Akio Morita and Masaru Ibuka whose headquarters is located in Minato, Tokyo1. Sony was originated from ‘Sonus’ a Latin term for sound, and also from ‘Sonny’ an English slang for personable and smart young man. The company deals in manufacture, design, development, electronic equipment sales, instruments, and devices both for industrial and consumer markets. Sony has a wide variety of interests which range from business solutions, electronics, music, television and movies, robots, and internet service applications/ solutions. These products and services are offered globally in over 204 countries located in Europe, North America, and Asia.
Operations in Sony are divided into five segments which are2: Pictures (film and TV), financial services, Electronics, Games, others. The major segment is electronics and consists of mobile phone manufacture, portable audio, semi-conductor components, computers, recordable/ storage media, and handhelds. The games segment is operated by its subsidiary which is Sony Computer Entertainment and it manufacturers and markets Play Station 1, 2, and 3 consoles and their hardware. Motion pictures include Colombia pictures, Screen Gems, TriStar Pictures, Sony Pictures Classic, and Sony Pictures Home Entertainment. Financial services segment consists of Sony Bank, Sony Life Insurance, Sony Finance Institution, and Sony Assurance. Other Segments consists of Sony Entertainment, and an advertisement business both in Japan.
Sony’s growth over the years has largely been as a result of its core competencies in technological innovation and efficiency, and in the production of high quality systems that can easily be distinguished. In the early years, the growth of the company was steady and predictable due to its edge in innovation but of late its competitors have followed Sony into the market segments that the company established. Despite the cut throat competition from companies such as Samsung, NEC, Toshiba, Hitachi, and Matsushita Electrical, Sony has always managed to explore the opportunity of changing technology in the electronics market3.
This paper will illustrate how Sony is dealing with the challenge of changing technologies in order to remain one of the leading industrial and consumer electronic company. The challenge faced by Sony in the ever changing global technology provides an opportunity for the company to reorganize its business and expand its consumer electronic market. An analysis into the company’s R and D department, the product and environmental design will also be done. The financial implication of innovation will be looked into with recommendations offered on how Sony could deal with changing technologies.
Sony’s Research and Development
The company is a leader in innovation by focusing more in imagination than manufacturing. While in the past the focus of the business was in coming up with new hardware, the future for the company is towards a new direction. The electronics team emphasizes on research and development efforts that are geared at incorporating the broad band sphere resulting in fostering synergy between content and hardware4.
In Sony’s R&D labs—called creative centre—there are engineers looking for ways they could touch the lives of Sony’s customers. The main method used in creating new products is through forecasting potential trends3. This really means that they aim to understand customers’ wants and more importantly what they are willing to accept. Timing becomes an issue when they produce products as there is always a tendency of releasing products to the market ahead of time or when needed.
Forecasting potential trends enhances creativity from the engineers through relating both the sexy and functionality of a product in its design. By having a close relationship with their customers they are able to foresee future trends and predict when the same customers will be ready for certain products. For instance, in inventing a robot that will be of help in a house the aim is not just creating it but rather in knowing the exact time in the future when in the future the public will be ready for the product.
However, the company faces the challenge of globalization in implementing the strategy5. The designers are located in South America, Europe, Asia, and America all who need to work together in coming up with new products and innovations designed to for a global market.
There is an approach called BIC (Beyond the Box approach) that Sony has used in uniting the global designers6. In the approach designers are given minimal information and directed to converge at a central location for a specified period to showcase their designs in a competition where the winner is given a token. The approach has resulted in better collaboration of Sony’s designers and in emergence of superior products that have always competed with other top electronic companies.
Product Design
Continuous product innovation in Sony has resulted in making the company what it is today, the fifth largest media conglomerate7. In addition, for any manufacturing industry to improve their product lines, then it is imperative that investment in Research and Development should be done. The various market segment that Sony Corporation competes in have had unique changes in innovation and technology all geared towards diluting the threats of increased raw material process and intense competition. There arises opportunities such as reorganization and expansion of the corporate company when the threats facing Sony are diluted. In the major segments—gaming and electronics—that bring revenue to the company, innovation and changes in technology has been an influence in coming up with the current products8.
Gaming Segment
In the mid-nineties there was an increase in the market of games. Every major electronics company had their own console hence the field was very competitive. In 1994, Sony launched its product Play Station that was the first 32 bit game at the time. The innovation proved that the company had a vision of being a leader in technological changes. However, that was not the end as Nintendo produced Nintendo 64 console and Microsoft own X-box. This threat was turned to an opportunity for Sony to chuck the second series of its console, Play Station 2 that uses 64 bit technology. The console was released to the market in 2000, and has earned the reputation of becoming the most successful video console of all time, reaching sales of 140,000 units9. The success was further explored by extending the technology to the portable games market which had been controlled largely by Nintendo. In 2005, the product that was released was PSP (Play Station portable) that used the Universal Media Disc (UMD). The product was a success as the market share in portable gaming is now shifting towards Sony10.
The gaming technology changed in favour of blue ray and HD-DVD and so in 2006, the company released Play Station 3 an upgrade of play station 2. The game utilized the latest technology of blue ray and offers users unique functions such as motion controllers. Even though Toshiba is ahead in next generation DVD technology with its HD-DVD, Sony insists on its own unique technology which is the blue ray. To prove that Sony was ahead in the gaming segment, apple borrowed the technology so as to make an iMarc version allowing users of computers to play games11.
Electronics Segment
In the electronics segment, the 1979 launch of the Sony Walkman marked the beginning of innovatory leadership. The walkman—a portable audio gadget—introduced a new way of how people listened to radio and pre-recorded music. It was a useful gadget when travelling, jogging and even just strolling. The gadget propelled Sony into almost monopolizing the portable-audio market. The innovation used to make the walkmans was extended to other electronics such as radio receivers, Sand proof and Waterproof sets, and Compact Disc players.
At the beginning of the new millennium, the world was computerized and it was imperative that Sony had to explore the computer market.
The company had withdrawn from the computer business in the eighties to concentrate on marketing its audio-visual electronic segment. In 2002, there was a re-entry into the market in the form of Sony VAIO product. The product was a laptop that was intended to compete with Apple’s sub-desktop computers which had been released at the same time. Portability was important for Sony’s innovation as it competition was less portable12.
When improving the design of the VAIO laptop, the company realised that the batteries overheated faster than they should hence could explode any time. In 2006, the company was forced to recall all batteries of its products, a large scale procedure in the computer industry ever13. Over 4 million batteries were replaced during the operation and this strengthened the notion that the company really cared about customers’ safety. Considering the cost involved in carrying out the recall, many companies would not have done that. The long term effect of the procedure is that Sony laptop batteries are long lasting compared to other battery manufacturers.
Digital cameras from Sony are also part of products that are specifically designed to compete with other competitors. The cameras are of various types ranging from point- to- shoot models to digital SLR’s providing customer and industries with numerous choices. Since most cameras use CCD (Charge Coupled Devices), problems exist when used in hot weather. Sony was the only company amongst leading digital camera producers that recalled eight of its products between 2003 and 2005 to redesign them. The innovation move marked the beginning of Sony digital cameras as the best in all weather applications.
Environmental Design
The current global trend is towards producing green technology which is producing electronics that provide less health risks and can be recycled. Sony has adapted to the changing tend and produced innovations geared towards green technology. In recognition of the company’s efforts towards the cause, Greenpeace—international body for green technology guide—ranked Sony 6th in its policies regarding toxic chemicals, and recycling of its products14.
Currently most of Sony’s products are free from PVC and BFR chemical which are usually non- recyclable toxic chemicals. The projection is that by April, 2011 (this year), none of its products will have the two chemicals15. The company launched green TV in 2008 which would offer ecological solutions in terms of energy consumption to prove that it is a leading electronics firm in this category.
Sony has distinguished itself from other electronic companies by showing it has the capacity to innovate products that are both environment and health friendly. The company has also made sure that the customers who form part of its environment are also taken care of through the global Sony stores.
Innovation Consequences
In the year 2010, Sony recorded an increase in operating income (67 billion yen) from the previous year where there was a loss16. The positive trend is a sign that the company is healthy in the midst of current technological changes. In exploring the opportunity of business reorganization, the company plans to realign its portable segments in the first fiscal year starting April 1, 2011. The plans include17: consumer services and devices segment to be changed to consumer, professional, and devices segment; B2B and manufacturing segment to be included in the CPD (Consumer Professional Devices) segment and together they would be termed as professional solutions; and finally the Blue-ray disc, DVD, and CD disc manufacturing business to be moved to other segment category.
The total sales and operating income as of the year 2009 improved significantly compared to values recorded in 2006 despite the global crisis. The increase was by 2.157 which is a commendable result in light of losses recorded by Sony’s competitors. The total sales and operating income of 2006 was 7159.6 billion Yen compared to 7314.8 billion Yen of 200918. Furthermore, there was stability in sales of products in the consumer electronics and gaming segments since 2009 showing that Sony has remained relevant despite the numerous competitions (see appendices).
Sales in semiconductors have been on the rise since the merger of operations with Toshiba in 2004. The merger was a business agreement where Sony got the deal of fabricating semiconductors for Toshiba. This would also involve Sony making batteries for Toshiba because of their good reputation of producing long lasting batteries as seen in Sony VAIO models. Since 2006, LCD and semiconductor sales have been consistent with low sales recorded only in 2008 largely because of the global financial crisis.
Conclusion and Recommendations
Sony’s strategy of using imagination in producing new technologies and innovation seems to be working as the brand is still recognized universally and the technology used in designing have a unique sign of being of its own kind. The future success of the corporate depends on how well the company would react to future changes in technology. The future innovative ideas for Sony could be pegged on three issues which are: Environmental where both competitors and environment require better innovations in this category; Time to market where there is a need for innovation in introducing products to market so that consumers could familiarize with the new technologies; and Customer service which enables one to retain customers at the same time adding value to products and services.
For Sony to remain innovative and improve in the weak areas of its strategy, it is recommended that:
They find a plastic substitute in producing their products such as recyclable thermosetting plastic. This is because most of the products of Sony are made using hard plastic that is not recyclable and can be toxic if burned.
They should use a new marketing concept where they would agree with other manufacturers to incorporate Sony products in other manufacturers’ products. Sony has a weakness of not having such deals with any of their products. For instance, Sony should plan for a deal where they would agree with car makers such as Volkswagen or Land Rover to incorporate Sony speakers and sound systems in their vehicles as a standard feature.
As a result of their strength of having a strong brand presence, they should open up a Sony centre plant in developing countries, especially in
Africa where they would tap in the market. The market in developed countries is shrinking by the day and it is important that Sony takes advantage of the growth of consumer electronics in developing economies.
Bibliography
Berrak, D., Ferzly, M., & Roach, D., 2005. Report on Sony Corporation. At:
www.web.mit.edu/course/15/15.249c/sony.pdf
BLU-RAY: Third time lucky for Sony? 2006. Marketing Week, September 14, 26-27.
Dariush, R., 2007. Innovation, Product development and Commercialization: case studies and key practices for market leadership. New York: J. Ross Publishing. Pp. 161-163
Sony website at:
www.sony.net
Sony 2010 consolidated financial Report at:
www.sony.net/Sonyinfo/IR/investors/..att/copy/_of_nt591.pdf
DATAMONITOR: Sony Corporation' 2010, Sony Corporation SWOT Analysis, pp. 1-9, Business Source Complete, EBSCOhost, viewed 6 March 2011.
Yukari Iwatani Kane. 2008. Business Technology: Sony to Emphasize Innovation, High-Def Devices. Wall Street Journal, January 8, Eastern Edition.
