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Sony Corporation, Research Paper Example

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Since the economic downturn in 2008, Sony Corporation of Japan set the platform for a three year revitalization strategy meant to advance the Company’s goals to: 1) further strengthen its core electronics businesses through product expansion, cost reduction measures, and internal and external organization; 2) expand network and wireless connectivity services across the electronic devices product line(s); 3) capitalize on growth in emergent markets – and especially BRIC countries with targeted annual sales of 2 trillion yen in those regions by 2011; and 4) establish a 5% baseline profit margin (S & P, 2010). As part of this strategy, Sony has implemented reforms within its operational structure toward realization of those goals connected to production to market speed, and profitability. Precision in the Company’s chain operations has led to restriction of inventory levels to as close to recommended ‘zero surplus’ goals, with additional cost cutting provisions in advertising and marketing expenses, as well as reduction in human resources by approximately 8,000 employees. The restructuring efforts are set to offset 110 billion yen in costs.

Sony Corporation is a truly global corporation, with sales aggregation divided almost equally between the national and regional markets of Europe at 26%, Japan at 24% and U.S. at 24% markets, with remaining revenues generated from 26% of the total worldwide sales (S & P, 2010). Challenges raised by shifts within the Corporation have been across the board, and deterioration of Sony’s return on invested capital to -2.5% from 5.7% has impacted stakeholder confidence, yet performance is still above industry average of -12.0% in 2009. Recuperation of Sony Corporation’s position in the market; and especially in terms of long-term stockholder incentives must be shored up by way of deepened cost savings, and increased profitability on returns (Sony, 2010). As of June 24, 2010 the NYSE Index for SNE (Sony Corporation) reported little change to the FY09 Company Profile Quote:

Competitive Landscape

KEY: Best of Group. Companies listed are Top Competitors. www.hoovers.com

Key Numbers	Sony	Panasonic Corp	Philips Electronics	SANYO
Annual Sales ($ mil.)	77,824.6	80,025.2	66,469.0	19,159.0	—	—
Employees	—	—	115,924	86,016	—	—
Market Cap ($ mil.)	27,656.6	33,435.1	30,092.4	798,378.0	—	—
Profitability	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
Gross Profit Margin	26.77%	27.02%	18.36%	17.73%	28.92%	28.77%
Pre-Tax Profit Margin	(2.26%)	(4.93%)	2.12%	(8.84%)	2.74%	8.48%
Net Profit Margin	(1.28%)	(4.88%)	1.42%	(9.55%)	1.32%	5.53%
Return on Equity	(3.1%)	(11.6%)	4.5%	(102.7%)	3.9%	10.1%
Return on Assets	(0.8%)	(5.5%)	2.1%	(10.3%)	1.1%	1.5%
Return on Invested Capital	(2.1%)	(9.8%)	3.5%	(24.4%)	2.5%	4.4%
Valuation	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
Price/Sales Ratio	0.35	0.38	0.52	0.15	0.38	3.31
Price/Earnings Ratio	(16.23)	(5.61)	35.71	(1.54)	29.76	24.27
Price/Book Ratio	0.85	1.09	1.66	7.50	1.18	6.42
Price/Cash Flow Ratio	2.46	8.61	12.97	(16.29)	8.35	20.53
Operations	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
Days of Sales Outstanding	50.57	40.70	30.56	76.34	45.08	34.66
Inventory Turnover	6.2	6.9	4.6	5.0	7.3	8.1
Days Cost of Goods Sold in Inventory	59	53	80	73	50	45
Asset Turnover	0.6	1.1	1.5	1.1	0.8	0.3
Net Receivables Turnover Flow	7.2	9.0	11.9	4.8	8.1	10.5
Effective Tax Rate	—	—	39.9%	—	—	37.9%
Financial	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
Current Ratio	0.95	1.60	1.48	1.31	1.16	1.33
Quick Ratio	0.5	0.9	1.0	0.8	0.7	1.2
Leverage Ratio	4.05	2.30	2.09	—	3.85	7.13
Total Debt/Equity	0.37	0.28	0.29	(130.96)	0.73	1.37
Interest Coverage	16.30	(18.74)	3.99	—	11.13	17.33
Per Share Data ($)	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
Revenue Per Share	79.78	35.82	62.42	885.91	45.22	7.60
Fully Diluted Earnings Per Share from Total Operations	—	—	0.72	(84.60)	0.60	1.08
Dividends Per Share	—	—	0.59	—	0.07	0.25
Cash Flow Per Share	11.18	1.58	2.50	(7.99)	2.03	1.22
Working Capital Per Share	(189.60)	486.85	4.15	32.20	2.84	0.64
Long-Term Debt Per Share	657.84	265.51	3.92	49.71	5.97	4.06
Book Value Per Share	32.61	12.49	19.47	17.34	14.44	3.91
Total Assets Per Share	11,971.55	2,610.34	32.87	219.07	55.21	27.90
Growth	Sony	Panasonic Corp	Philips Electronics	SANYO	Industry²	Market³
12-Month Revenue Growth	(12.5%)	(14.0%)	75.8%	(10.5%)	(13.3%)	31.9%
12-Month Net Income Growth	—	—	—	—	—	(27.7%)
12-Month EPS Growth	—	—	—	—	—	(50.0%)
12-Month Dividend Growth	74.3%	(28.7%)	(13.1%)	—	(35.3%)	—
36-Month Revenue Growth	1.0%	(4.5%)	19.8%	(9.9%)	3.4%	14.3%
36-Month Net Income Growth	—	—	(57.6%)	—	—	(5.6%)
36-Month EPS Growth	—	—	(16.1%)	—	—	(14.7%)
36-Month Dividend Growth	(3.8%)	6.9%	10.6%	—	27.5%	—

Retention of market share by Sony Corporation in 2010 required that the Company continue its brand position through advancement of its high caliber electronics products to the global market, which at present, constitute 65% of the Corporation’s total revenues (Hoovers, 2010). Sony uses a corporate partnership approach to competitive innovation, and purchases LCD panels and Sharp Display Products (SDP) from supplier manufacturers, Samsung and Sharp. Acquisition of Seiko Epson’s LCD assets enhanced Sony’s stake in the market further. Cost cutting measures have also been directed at sale of former holdings to other competitors, such as its 90% stake in its North American television manufacturing company in Baja Mexico which was acquired by Hon Hai Precision. Other acquisitions have been purchased by Time Warner. Sony’s share in the games product segment of the electronics market remains strong, with 13% of its revenues generated from sales of its offerings such as Microsoft’s Xbox 360, Nintendo’s Wii system and PlayStation 3. Entertainment industry interests were reconfigured, as Sony confirmed 50-50 merger with BMG. Attendant market interests include shared manufacturing and distribution with Arvato Digital Services GmbH, Germany. Licensing agreements obtained through consortium company’ partnerships with Comcast and MGM have added to Sony’s investment portfolio in this area, and serve joint ventures with network companies, Discovery Communications and IMAX in purpose of introducing new products like 3D TV networks and additional satellite services to customers.

In 2003, Tokyo based Sony Corporation adopted a U.S. model of corporate governance, responsive to a revision in Japan’s Commercial Code which enabled the corporation to redesign procedural activities and strategic planning into an integrated knowledge sharing network, managed by its CIS Corporation, a Japanese information system consulting firm. Hence, management at Sony now serve the once highly vertical company through a horizontal system of communications, that enables each worker to contribute to the product to market process via designated fiscal, operational, and sales channels. The foregoing Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis provides an assessment of Sony Corporation, with recommendation toward realization of the 2008 management strategy (Hitt et al., 1995). All change management practices from execution of those strategies, cultural changes, and structural outcomes may be based on this approach. Outcomes to qualitative data can be put into quantitative narratives or developed more fully through a company-wide survey.

SWOT Analysis: Sony Corporation

1. Strategy	Comprehensive Strategic Plan based on conservative estimates of both financial and material costs. Effective restructuring plan that approaches downturn with an integrated model of cost reduction.	New strategy relies upon streamlined approach to global recovery. Sale of varied interests will affect the chain of operations, and ultimately impact efficiency which is part of the overall goal.	Seek measures to restructuring plan that will enable total strategic picture to be realized as acquisitions and outsourcing shift chain management practices
2. Structure	Decentralized and ‘local-global’ in structure with regional management on projects promotes expertise in cultural, engineering and legal knowledge where necessary.	Drawbacks to the decentralized structure are that additional fiscal allocation and oversight may be required in order to ensure consistency in agreements.	Sony is already behind some of its competition in terms of growth, as the company attempts to reap market share from mostly ‘developed’ national and regional markets. Operations and logistics in these locations may cost more without outsourcing; which can lead to loss of control over quality and timing.
3. Shared Value	Sony has a strong culture of shared values that extend far beyond what may have been standard in terms of rapid developments in the electronics business in the past several decades. Tradition and quality coincide with the Sony brand name.	Sony Corporation’s social responsibility platform is responsive to1) community contribution; and 2) and support of an ethical business culture. A basis for business conduct, ethics are not always universal.	The shared value is intended to foster good faith relations with parties in agreement with Sony, and to promote the brand’s reputation.
4. Systems	Streamlined and flexible planning within Sony’s business model translates new products to market.	Reduction of local manufacturing facilities means importation of products to locations from a distance. Timing may be impacted. Taxes and tariffs might not support such a decision in the long-run, as regional market legislation may change.	Auditing for cost analysis of total chain operations, and R+D as an evaluation strategy for front-end assessment of potential failures should secure value.
5. Environment	Environmental responsibility is crucial to Sony’s image, as the Company works toward meeting obligations to the planet to mitigate pollution.	Environmental challenges present both ecological and market costs, as the efficacy of such concerns impacts sales in markets where customers have a high degree of ‘green’ product consciousness. Compliance standards might also affect manufacturing and sales.	Dedication to innovative products and services requires a commitment to R+D and to recycling.
6. Design	Sony’s cutting-edge design concept is well known, and the Company is considered a leader in high quality, advanced electronics.	The Company is likely to continue its objectives to retain consumers dedicated to its products based on appearance and reliability.	Competitors copy designs immediately, and provision against ‘corporate spies’ in R+D critical to market timing of new product introduction.
7. Human Aspect	Sony offers comprehensive employee benefits.	Regional distinctions external to the internal or micro corporate environment may create situations where the corporation’s culture impinges upon employees accustomed to different terms.	In the context of downsizing, what is ‘beneficial’ must be reconsidered in change management strategy.

The Sony Corporation SWOT analysis contributes to market derived data for further interpretation of the Company’s performance based upon the specificities revealed in the company’s strengths and weaknesses. Core competencies assist in comparative analysis of product life-cycles, and may be redefined through engagement with portfolio performance. In response to the numerous acquisitions, mergers and sales conducted in the past several years, resource analysis is mentioned, and should be a crucial point of depth analysis for determination of inventory levels (Hitt et al., 1995). Ultimately, integrated knowledge sharing and logistics management at Sony Corporation is dependent upon chain oversight from point of production, and insights into value chain activities related to quality control, and the facilitation of current operations in outbound logistics, marketing, sales and services must be accounted for as expectations in company policy change.

Comparative internal and external analysis of an organization and correlation of its competitiveness in the market assists in definition of strategic scope. Sony Corporation’s ‘company culture’ is well known for its ‘traditional’ hierarchy of highly qualified managers and technical experts. Business development demands have significantly pressured the Corporation to change its former model of operations. A high technology, electronics company, Sony is apt at meeting rapid shifts within the market, and flexibility within the recent history of its investment strategy reflects its commitment to changing according to patterns of profitability. Unfortunately for many former Sony employees this has meant lay-offs or unemployment as the Company struggles to reconstitute its fiscal position. Product innovation has also had some influence on retention of talent, and is linked to the liquidity of products as assets accounted for as: 1) Strategic Business Units (SBU) that are accountable to profit or loss (i.e. low to high futures); and 2) Targets for investment capital. As the life of products decreases, increasing pressure is put on brand identity. The Sony Corporation SWOT Analysis reveals several core issues which might present tensions between the various divisions of the Company, as well as current market challenges. By seeking new potential in existing human talent, and advancement of R+D innovation and operational logistics toward total systems integration, Sony Corporation has implemented a highly effective and efficient sustainable organizational model that should perform according to strategic planning over time.

References

Hitt, Black & Porter (1995). Management. Upper Saddle River: Pearson Education, Prentice Hall.

Sony Corporation (2010). Retrieved from: http://www.sony.com

Sony Corporation (2010). Hoovers. Retrieved from: http://www.hoovers.com

Sony Corporation (2010). Standard and Poors. Retrieved from: http://www.netadvantage.standardandpoors.com