Sony is considered a model company for all the embryo firms in pursuing a global strategy of leadership and innovation. To sustain its position as a global leader, it is necessary for Sony maintain the market share particularly in developed markets (Sony, Sony Annual Report 2009, 2009). For this, Sony is capitalizing on diversification as its corporate growth strategy. The reason for this strategy is to maintain the market position and to increase its overall share in the market. Sony should keep producing innovative technological produces. Furthermore, Sony may also create novel technologies to cater to developing markets to accomplish higher levels in sales growth, which would eventually lead to a bigger market share in the long run. Technology is one of the few arenas which sell it-self and consumers quickly become adaptable to it. Sony’s business strategy encompasses the need to penetrate through various international trading blocs such as BRIC which will be a source of huge lucrative business opportunities in the future.
However, diversification may also bring in a few drawbacks for Sony. If a new product line fails to penetrate into the market, this might damage the brand name of Sony. Secondly, through diversification in many geographical locations may lead to loss of control by the original management. Furthermore, diversification can have a negative effect on the financial state of the business as the employment expense will increase. Therefore, Sony should have ample cash at hand or foreseeable investment opportunities before working in line with this growth strategy.
Companies like Sony do not come out of blue. Their success lies in aggressive competing abilities and the capability to collaborate in an intricately complicated business environment. The unique ability of Sony to understand the nature of the business environment has led the company to embrace success as a global leader. Consequently, Sony managed to get highest fraction of market share. SWOT analysis will give deepest insights into the business strategy of Sony as it explains many valuable aspects of the organization including the decision making (Thompson & Strickland, 1998).
Sony exemplifies a model of great business strategy; however, the firm has many downsides. Firstly, products produced by Sony are very expensive. This implies that many potential customers in developing markets are not able to enjoy Sony’s products. Therefore, Sony is losing on a big portion of realized market share (Cook, 2003).
Secondly, Sony does not provide a very attractive model in supply chain. Many business strategists have called Sony’s model of supply chain as “inefficient”. Sony has still not been able to compete with technological giants such as Amazon or Apple due to its heavy operating costs which consequently lead to inefficient and unproductive supply chain.
Like any other company, Sony faces the biggest threat of new businesses entering the market. Barriers to enter technology business have been reduced significantly because of the swing to digital technology. Moreover, emerging markets are considered a very risky business place due to political instability and economic uncertainty. These markets include China, Russia, India and Western Europe.
It is very critical for Sony to analyze, evaluate and develop its strategy according to the changes affecting the industry. To understand these changes in the industry, it is necessary to conduct Porter’s five forces model. This model demonstrates five forces that form every industry and market. These forces define the business competition and indicate the investment attraction and business potential in an industry. Furthermore, this model also complements the SWOT analysis and other factors related to the external environment. Hence, this model is one of the most appreciated analytical tools for developing any business strategy.
The implications and analysis of the model is illustrated below.
Sony does not enjoy a high degree of bargaining power with its suppliers because suppliers involved in the technology business are high in number and easily available. Companies conducting business in electronics and technology business are finding ways for inexpensive imports from countries like China or Taiwan (Armstrong & Kotler, 2008). Furthermore, companies are shifting their manufacturing plants to less developed countries as the industry moves towards price business instead of volume business. The throat cut competition has led the suppliers to reduce their prices; otherwise the supplying business may go bankrupt because there are other suppliers available in the market who are willing to provide goods and services at lower rates.
As a result, this has led to other companies from parallel industries as well as new businesses to easily enter into this market. Therefore, it can be deduced that Sony does not enjoy the bargaining power over its suppliers. Resistance would lead to huge losses for Sony.
Second group of buyers consists of independent customers who have restricted purchasing power. Such customers do not have any direct influence on the organization. These customers mostly buy directly from the retailers. Therefore, they have more influence on the sales of the retailers than the company.
High degree of threat from substitutes prevails in the technology business. This can be validated by observing the trends that took place in the market of digital cameras. For instance, camera mobile phones are perfect substitutes for the digital cameras. According to the results of a research, phones with a camera have outpaced the sales growth of digital cameras. The research stated that camera phones have reached remarkable sales of 1.5 billion units during the year 2010 (Corporation, 2006).
It is concluded that Sony is diversifying its business as a growth strategy. The main goal of this strategy is to increase overall market share by expanding its business in the emerging markets to enhance growth in sales. Furthermore, Sony should also increase its budget for research and development to come up with new innovative products by understanding the needs and requirements of its customers to gain competitive advantage over its competitors.
Armstrong, G., & Kotler, P. (2008). Principles of marketing. New Jersey: Pearson Prentice Hall.
Cook, B. (2003, August). Sony Powered Brand Channel. Retrieved from http://www.brandchannel.com/features_profile.asp?pr_id=128.
Corporation, L. R. (2006). Mobile Phones.
Sony, C. (2009, December). Sony Annual Report 2009. Retrieved from http://www.sony.net/SonyInfo/IR/financial/ar/8ido180000023g2o-att/SonyAR09-E.pdf.
Sony, C. (2009, December). Sony Website. Retrieved from http://www.sony.net/SonyInfo/IR/financial/ar/8ido180000023g2o-att/SonyAR09-E.pdf.
Thompson, A., & Strickland, A. J. (1998). Strategic Management. Journal of Global Management, 12-24.
ZD, N. (2009, November). Sony is a Leading Consumer Electronics and Entertainment Company Globally Top Tech Index. Retrieved from http://www.zdnetasia.com/toptech/2008/0,3800017271,62048727,00.htm.