Corporate Resources
Marketing
As a subsidiary of Sony Group, Sony Computer Entertainment enjoys a well-recognized brand name that gives the subsidiary a competitive advantage and allows for them to charge a premium on their products (S1). Like all competitive advantages however, SCE will still have to be strategic in maintaining their competitive advantage of having a reputable brand name. This initiative is especially important now that the PlayStation 3 has lost its reputation as the leading innovation in console gaming (W2) and the thrice-breached PlayStation Network (PSN) network security systems.
Consumers position the Sony brand in their minds as the leading innovator and provider in digital entertainment (S1). To encourage this positive brand position, Sony takes on a variety of steps that can be analyzed accordingly through a Four P’s Analysis.
Product – Consumer Solution
Consumers view Sony as their solution for an innovative and unique experience for digital entertainment (S13). The current marketing strategy takes into account that customers already have a broad range of options for gaming. Instead, Sony emphasizes the versatility of their products in their “It only does everything” marketing initiative versus the pure gaming marketing that other competitors such as Nintendo and Microsoft focus on. As a business strategy, Sony markets its PlayStation line as devices that can do anything, including the ability to play high-definition blu-ray movies, host video chats, and play music (S14). In the short term, this strategy is effective because of the limited scope of current electronics. For example, blu-ray players are still priced at a high premium, making the PlayStation 3 a viable substitute for a blu-ray player. However, Sony needs to remain focused on the main purpose of their gaming products and not lose sight of the value of gaming because technology will likely adapt in the long run to make these extra features less attractive in a gaming console.
Sony’s corporate strategy for fulfilling consumer needs is to go beyond just providing an innovating gaming experience. Instead, Sony believes that “consumers are finally ready to network all of their devices in the home together via the web” (Sherr & Osawa). Therefore, instead of focusing purely on gaming, Sony hopes to be the next game changer and revolutionize the way consumers enjoy their various platforms of home entertainment (S15). The idea “is that the walls of the living room are getting knocked down, and the hope is that Sony can launch devices that lead the consumer to engage in new ways of having fun that the consumers didn’t know they wanted” (Sherr & Osawa).
Price – Consumer Cost
In the past, Sony had the luxury of being able to command a premium for their products due to their reputation as a leading innovator in digital entertainment. Consumers associated the high prices that Sony charged with value in the quality individuality of products. However, due to the decline in innovative growth and the thrice-breached security to the PlayStation Network, Sony will find it difficult to continue charging a premium on their products. If Sony continues to charge a premium on their products, they risk losing market shares to competitors (W1). If Sony chooses to lower prices, they risk indicating to consumers that their brand is no longer the digital innovator that it used to be.
Place – Consumer Convenience
Sony takes advantage of convenience by distributing their products throughout a multitude of distribution outlets including Sony retail stores, electronics distributors such as Best Buy, one-stop shops such as Wal-Mart, as well as online retailers. By distributing in many channels, Sony saturates its brand name to become well known by consumers as a brand that is wanted globally (S16). Sony can improve their positioning by opening more Sony retail stores to indicate to consumers that they are not just another brand in an electronics stores, but a global corporation that can offer its products directly to consumers without the need for a downward vertical distributor.
Promotion – Consumer Communication
Consumers translate all the different distribution outlets that saturate Sony’s brand as a key indicator that Sony is one of the top digital entertainment electronics providers in the industry. Sony tries to communicate all these aspects about themselves to position themselves in consumer minds as the leading innovator in digital entertainment. Sony recognizes that its target market is huge and involves consumers from all nearly all demographics. Therefore, Sony takes a simplistic approach to promoting its products and communicating with its consumers through advertisements and promotions through various medias such as television, banners, magazines and Internet ads. Additionally, Sony receives lots of publicity feedback at their gaming conventions and press releases. Finally, their main source of communication lies in their PlayStation Network. The PlayStation Network has a wealth of data that can be mined to analyze consumer satisfaction, future needs and trends in the gaming industry (S17).
Marketing Conclusion
Sony’s marketing strategy is heavily dependent on product lifecycles and their managers understand this (S18). Sony is currently nearing the end of the innovative phase of their current products and begun to market upcoming developments such as the PlayStation 4 and New Generation Portable (NGP). Currently, Sony has been losing market share to competitors Microsoft and Nintendo due to their late entry into the interactive gaming market (W9). However, as Sony nears the release of its new upcoming products, marketing will play a large role in the success of these products, especially considering the need for public relations to counteract the negative response of the security breaches to the PlayStation Network.
Finance (All analysis are conducted under the assumption that gaming sales consist of approximately 12% of Sony sales)
Sony’s current financial objectives, strategies and policies are not clearly stated and are implied from performance, which has recently slipped in 2011, ending the first quarter with a $3.13 billion loss in net income (W10) (Hoovers). On June 2, 2011, Sony’s share price closed at $26.54 and taken together with the negative net income, Sony’s current PE ratio is at (9.56). Unless Sony improves its PE ratio, this negative ratio will indicate to investors that the company reflects a bad investment, especially for an innovative company that emphasizes growth (W11).
Despite weak investor indicators, Sony has been able to maintain its market capitalization, leading amongst its major competitors with $414.86 million market capitalization (S19). This is reflective of their increase in revenues from $77.82 billion in March 2010 to $86.66 billion in March 2011 for an overall increase of 11.36%.
Sony’s financial structure also indicates that growth is slowing down. With a debt-to-asset ratio of 80.23%, Sony is limited in its ability to expand because they have already exhausted most of their debt financing capabilities. Fortunately for Sony, they have $12,240.92 million sitting in cash that they can use for new opportunities or fixing issues such as the thrice-breached PlayStation Network (S20). However, the high level of debt as well as the unused cash will indicate to investors that Sony does not have many options for growth (S21). This is highly disadvantageous to Sony since they are known for their innovations and innovation is positively correlated with growth.
With finances in disarray and falling back to a functional level, Sony’s finances do not provide a competitive advantage. Sony’s large reserve of cash is left unused and their high debt-to-asset ratio indicate that this company, who is known for being innovative, is in a period of limited growth. Hopefully, Sony will be able to report stronger financial after they begin a new product life cycle with the PlayStation 4 and NGP systems.
Research and Development
The Research and Development department (R&D) of Sony has as its main objective to create new value based on connecting the concepts of “inspiration” and “shared experience”, and to, as a result, improve the company’s products and applications. This objective is clearly stated and it is consistent with the company’s mission and vision regarding the external and the internal environment.
As the company states on its website, “Many new forms of enjoyment are emerging where people can share their personal content with others over the network or automatically organize their content according to their personal profile.” Therefore, Sony understands the important role the R&D plays for the corporation in terms of developing new products that would allow the company to continue to success on the video-game industry.
Sony’s Background on R&D
To understand better Sony’s R&D, we need to look at the integration and development of the same-especially from the globalization prospective. Sony is a Japanese company, which established its first overseas R&D unit in San Jose, California in 1977, and the second in Basingstoke, United Kingdom in 1978. Since then, Sony has grown to maintain 11 major labs and other minor labs in foreign countries.
Sony has globalized its R&D activities since the late 1970s because the company wanted to deal with problems that could not be resolved by the internationalization of manufacturing and sales alone and because it knew that such approach would give the company a competitive advantage against domestic competitors of the countries in which Sony was expanding its operations.
R&D Looking Forward-PlayStation 4(S22)
Once Sony announced that it began to develop its new game console-the PlayStation 4, many market observers began to state their opinion regarding his or hers expectations on the overall performance of Sony’s new game console. However, not all the analysts believe the PlayStation 4 will be as successful as the PlayStation 3 was-at least not from the technological point of view.
For instance, Asif Khan, an analyst with Panoptic Management Consultants, reported on the Industry Gamers website “I have always wondered if Sony would be able to make another console, so I guess it is good news that they are working on PS4. I am not sure that Sony is in a position to lose as much money on console system sales anymore and this undoubtedly puts Microsoft in the driver’s seat for the next console cycle as they can take a bath on systems and make it back from software sales and XBL. It could mean that Sony isn’t going to invest too much in developing from scratch by using more existing parts.”
Sony invested lots of money into PlayStation 3 game consoles, which is currently still the worst selling system in the current generation behind Nintendo Wii and Microsoft Xbox 360. However, that is not going to happen to the PlayStation 4. The company is going to try to cut research & development as well as manufacturing costs. Partly, those expenditures should be reduced because the firm no longer plans to make major chips itself using proprietary manufacturing processes on its own trends. In addition, the firm does not seem to have plans to create a new microprocessor for the console from scratch.
Operations and Logistics
Sony has as its major objective on operations and logistics to have a business model of constant innovation, according to global market demand rather than according to Sony’s plans to revitalize the production. This objective or initiative is tied to the company’s overall mission and vision.
Major Components-Operations and Logistics
The main strategy over the past years has been to own and operate the productions of the company’s goods and services. Some important facts about Sony are that it currently has 75 factories in the world and more than 200 global sales network. According to the International logistics experts estimate that in the electronic products, so far Sony Group’s annual global container cargo has more than 160,000 TEUs, is the world’s large-scale production of one of the manufacturers and shippers. In order to give full play to the leverage of multinational operations, expanding its ability to compete on the international market, the current logistics company of the group is working with carriers and their agents to start global negotiations to further improve the logistics supply chain, improve the economic benefits of the Sony Group.
Sony Group requires each company within the logistics system try to make sure they make every effort to reduce the time it takes to ship products to the customer mainly to reduce cross border transport and ensure that there will be zero additional cost and zero risk. Sony’s logistics and supply chain services always try to maintain a smooth flow of digital information exchange contracts, so that there will be an increase in revenue from the logistics department.
(S23) The company also has a multi-country consolidation approach. By this approach, Sony puts a half tank of a cargo container from a certain origin or one that was sent to Singapore, where the personnel decides what products to add into another box full of boxes of goods into the container, and then continue to transport until a destination port in North America or Europe. The greatest advantage of the logistics approach is that it reduces wait times and clearance.
Another very important objective besides of the increase in sales of logistics services is to reduce the waste of Sony’s logistics resources. For instance, Sony logistics companies throughout the United States finished with 106 distribution centers and only 700 employees; but to win with fewer, the company had to create a remarkable logistics performance. Therefore, Sony now and Chinese companies in the United States work in close collaboration and with the support, spare parts and operating in the U.S. average annual income of logistics products reached 27.6 billion U.S. dollars.
Future Objectives on Operations and Logistics
One important fact that Sony is evaluating to improve its efficiency on logistics is the high cost of storage. Currently, Sony has an average of almost $20,000,000 on warehousing costs, which not include the high cost of inland road and rail transportation, container cargo, cargo damage arising from theft poor stock compensation costs, and container cargo transportation insurance costs. Therefore, as a major initiative the company plans to reduce logistics and warehousing which will inevitably reduce logistics costs, speed up the supply chain, logistics, operation speed and to ensure safe operation.
Human Resources
Sony’s current objective or policy regarding Human Resource Management is to work on personnel development. As the company states on its website, “the development and vitality of Sony’s employees drives dynamic growth for Sony. Sony recognizes that the growth of the people who support it is its most important management asset.” This objective is clearly stated and it is consistent with the mission and goals of the corporation of achieving superior results on all business sectors.
In addition, “Sony strives to further enhance motivation and encourage personal growth for its employees worldwide through on-the-job learning, as well as access to a variety of programs tailored to local needs, including education for engineers, management skills training, and training aimed at enhancing the abilities and skills of individual employees. In particular, Sony Corporation’s Human Resources Development Department is engaged in Groupwide efforts aimed at fostering business leaders as well as recruiting and developing good personnel.”
Global Initiatives-Developing Business Leaders and Employee Training Programs (S23)
Another important sector of the HMR of Sony is to develop business leaders in this competitive market place. Therefore, the company has understood the importance of developing programs that would help to improve the skills of the leaders of tomorrow. “Sony, a company that does business in a variety of countries and regions around the world, recognizes the importance of cultivating talented employees with leadership potential, as well as an international outlook and appreciation for diverse cultures and working environments.” As a result, “Sony is implementing a variety of initiatives aimed at bringing the capabilities of such employees into full play and cultivating next-generation global business leaders.”
For instance, we could look at some important facts regarding the results of the leadership development programs that the company listed on its corporate website. “In fiscal year 2008, for example, Sony appointed global talent directors from among its regional human resources managers. Global talent directors are charged with identifying promising individuals in all businesses and regions and developing them into future business leaders. To this end, Sony launched a job rotation project. As of March 31, 2010, 73 individuals are rotating through a schedule of job assignments designed to give them exposure to a variety of businesses and regions. In March 2010, Sony Corporation introduced a global recruiting system into its Global Sales and Marketing Platform and invited applications for more than 10 positions from Sony Group employees worldwide. More than 100 applications were received from employees in 25 countries. Individuals selected to fill the positions — all of whom showed a strong willingness to engage new challenges — are currently exercising their abilities in new environments. Through initiatives such as these, Sony aims to facilitate optimal placement of its human resources from a global perspective. These initiatives are also helping to foster a pool of individuals with the breadth of experience and network of contacts required of global business leaders.”
Moreover, the company has an employee-training program, which is also a very important aspect of the HRM department. “Sony organizes various training programs for employees of all levels, from new graduates to senior executives, suitable to each region and business. In Japan, the Sony Group offers more than 300 training programs, such as technological training and business training, that use various approaches, including group training sessions, e-learning and correspondence courses, depending on objectives. Around 230 Sony employees with frontline technological expertise who develop curricula and textbooks in each fields support these training programs. The employees work as instructors to teach engineers about technologies directly related to their specialist fields. In fiscal year 2009, approximately 13,000 employees took part in technological training programs.”
Information Technology
“Information technology (IT) has been and continues to be applied in a wide range of economic activities. One of the latest and potentially most significant advances in IT in relation to organizational performance is the development of innovations in information technology that hold the potential to influence the structure of strategic management systems in organizations (Cohen, 1995).” About 37 percent of companies are already using cloud infrastructure, or web-connected data centers, to run their information technology operations, according to a survey by Advanced Micro Devices.
Sony current strategy in IT is to continue with the company’s ability to capture the imagination and enhance people’s lives. This strategy is consistent with the mission of the company (W12). However, resent technological issues, such as, the PlayStation network attack has demonstrated that the company needs to re-evaluate and improve its information and technological position.
Information is critical to organizational performance in the contemporary knowledge-based economy. Therefore, information systems have become a primary organizational resource. The management of information systems in contemporary organizations is in a period of transformation (Balaban & Rothschild, 2002).
To better understand the importance of strategy on IT, we need to see what a well-planned and implemented strategy might produce for a particular company. “An effective strategy is not necessarily one that promises maximum efficiency or least total cost, but rather one that fits the needs of the organization and strives for consistency between the organization’s capabilities and the competitive advantage being sought by the organization.” In Sony’s prospective, the company needs to reshape its IT objectives and programs, so that the risk of network failures or network attacks are minimized giving the customers the security that they expect from the products and services that the company offers.
Currently, Sony has an important global IT and Internet presence, which makes it relatively easy for the company to get its products and services to most places in the world. However, most customers, either retailers or end consumers expect that Sony will be able to restore the security on its gaming products, and that expectation will only be fulfill if the company improves its IT department.