Presentation overview

Introduction of Sony

Introduction of assignment question

Diversification strategy Sony

Sony’s Paradigm shift

Questions

Conclusion by Maria Kalieva

Introduction Sony

Multinational Corporation (Anno 1946)

Headquartered in Tokyo, Japan

One of the leading manufacturing companies for:

• Video Media Electronics,

• Information Technology

• Communication Technology for both the consumer and professional markets.

Introduction A.Q.

“Outline and evaluate Sony’s diversification strategy, in

the period 1987-2003”

&

“Do you consider the strategy changes involved to be

evolutionary or a more dramatic paradigm shift in

terms of Sony’s definition of the business it was in?”

The Diversification Strategy

What is a Diversification

Strategy?

A corporate strategy to enter into a new market or

industry

Creating a new product for that new market.

This is the riskiest section of the Ansoff Matrix, as the

level of know-how is likely to be low.

Objectives of

Diversification Strategy ?

Offer a wider range of products and services to the

public

Manage Risk – No matter how diversified, risk is

never eliminated completely

Make money in high profit businesses

A medium between risk & return : achieve financial

goals whilst getting a good night’s sleep.

Diversification Strategy

Movie Industry

Music Industry

Gaming Industry

PC Industry

Mobile Phone Industry

The Movie Industry

1989: Purchase of Columbia Pictures (movies, media)

Abandoning projects in development

Lawsuits

Contract claims

Low Know-how in Film Production: a service business based on creativity.

Sony’s poor judgment over Film Production Management.

The Movie Industry

“Was the diversification from Consumer electronics to Film Production a failure?”

1995: 3,3 billion USD NETLOSS

Sold MCA & Universal Studios in 1995

Columbia Pictures –> Sony Pictures Entertainment (more successful ‘Men in Black & Spiderman’)

The Music Industry

Acquisition in 1987 of CBS

Successful recording artists: Michael Jackson, Oasis and Will Smith.

‘All record music companies faced difficulties’

Artist Personal problems

Music Piracy

Technical change

Gaming Industry

1994: The PlayStation I

Success despite late market

Entry (Sega & Nintendo)

Why? Superior technology,

processor power and great

marketing (name example).

1998: 50 Million + unites

sold (55% world games

market)

PC Industry

1995: Partnership with US Intel

Intel: Processors & Pentium Boards

Sony: Monitors & Disk drives

1997: VAIO

1998: Revenues increased by 70% - Profits highest level ever

Diversification Strategy

Not only product level Management level

“sony the most westernized country of Japanese

companies has been the most pioneering in developing

cross functional Americal and European organisations

and in integrating non-Japanese into top management

posts.”

Diversification Strategy

Other examples of Management Diversification (comp.

Jap)

Decision making delegated to regional

organizations.

Sony UK reports to Sony Europe in Germany

Non-Japanese people in the SONY Board.

Organizational restructuring

1999: MAJOR restructuring – All 10 divisions

reorganized into three groups:

Home Network Company: TV, Video, Audio

Personal IT Network company:

telecommunications, VAIO, camcorders

Core Technology & Network: Semi-conductors,

disc drives and storage media

Revolutionary ?

Sony’s diversification was an innovatory rethinking of traditional industry boundaries to achieve competitive boundaries

Vision: A multimedia future in which Sony controls the high value software products (Music & Movies) running on their hardware products.

Example: Provide the Videocassete recorder & library of films

Transnational Structuring: Subsidiaries are doing their own decision making.

Dramatic

Enormous & risky step

Massive Cultural difference between USA & Japan

Thank you for listening

Questions ?