SONY SWOT

MB103: Marketing case assessment

Done by:Goh Lin Hui GareenHerawati TellyLim Hui ling jacquelineTan zheng yi sam

Introduction about SONY

•Founders : Akito Morita and Masaru Ibuka

•Current CEO : Sir Howard Stringer, who was previously heading Sony’s Entertainment division

•Headquarters : Tokyo, Japan

•Brought in 1st Transistor Radio to Japan

•Seen as entrepreneurial, creative, pioneering and at the forefront of the technology.

•Core Business : Electronics Department ( 66.9 % of entire business segment)

•Current Most Profitable Business : Sony Music Entertainment

Still as good??

Consolidated Statements

Quarter 3 FY07 Quarter 3 FY08 Variance

Sales 2,069.4 1,462.1 -29.3%

Electronics Operating Income 200.6 -15.9 - 

Sales 581.2 393.8 -32.2%

Games Operating Income 12.9 0.4 -97.0% 

Sales 223.8 175.1 -21.8%

Pictures Operating Income 14.1 12.9 -8.3% 

Sales 135.9 103.1 -24.1%

Financial Services Operating Income -4.2 -37.4 - 

Others  Sales 96.0 198.6 +106.8% (including Sony 

Music Entertainment) Operating Income 22.2 24.5 +10.0%

Overall Performance Financial Year 2008 3rd QuarterFY08 Consolidated Results  

Quarter 3 FY07  

Quarter 3 FY08

Sales & Operating Revenue   8,871.4    7,700Operating Income    475.3    -260Nett Income    396.4    -150

Sony Computer EntertainmentCurrent Performance.

Consolidated Statements  

Quarter 3 FY07  

Quarter 3 FY08

VarianceSales

581.2 393.8 -32.2%

Games

Operating Income

12.9 0.4 -97.0%

•Overall Segment Sales Decrease•Unit Sales Decrease•Operating Income Decreased• But Stay Profitable

The divisions of Sony are as follows:

1.Sony Computer Entertainment

2.Sony BMG Music Entertainment

3.Sony/ ATV Music Publishing

4.Sony Ericsson

5.Sony Pictures

6.Sony Electronics

7.Sony DADC

SONY Computer Entertainment( Play station 3)•PS3 was aimed to give Sony a much needed

Boost against competitors.

•6 years since PS2 was launched

•Equipped with latest technology, cell computer processor and Blue ray Disc format.

•Better graphics than Competitors

•PS3 can continue to evolve without the need for additional parts or expenses

Problems Faced:•Launch Date Delayed Numerous Times

•Gave Competitor ( Nintendo, Xbox 360) a head start into the every-changing gadget industry.

•Big Price Tag

•Research by the Nielsen Group shows that the PlayStation 3 was the least played of all major consoles in the US during 2008, even being beaten by the original Xbox console, which is no longer in production

What causes the problems?

Macro-Environment 1. Demographics. Market Target : Gen X – Gen Y.

Different type of Buyers has different purchasing power and different needs.

Gamers : Technology enhancement of consoles.

Availability of GamesPerceived Value as compared to Competitors

2. Economic Depreciation of the Yen against the US dollars. Profit Margin decreaseMicroenvironment1. Company Analysis• Financial Capabilities : 786.8 Billion in

Cash• Past Strategy : Focus on technology

enhancement and Innovation• Present Strategy : Similar. Increase the

number of games available. Improve on graphic imaging and sound cards of Play station 3.

2. Suppliers :

•Problems procuring blue-laser diodes for the PlayStation 3's Blu-ray Disc drive.•Result in the delay in launch of PS3

3. Competitors:Sony Wii XboxMost number of games least number

competitively more games

expandable

requires constant upgrade

requires constant upgrade

     games must be purchased  

games can be downloaded

   consumers may thus prefer

   an xbox, as they see it as a gadget

   that complements with their existing computer

     highest price tag    

Strength and Attractiveness of Market

•Market Share : Share almost equivalently with Xbox and Wii.•21% more than Xbox when PS3 was first launched.•High Flexibility : Technological Changes occur fast. Introducing new games

Suggested Solution•Lower price tag

•Improve on value proposition

•Improve on Advertising

•More family interactive games (compete with Wii)

•Connect with customers

SONY BMG Music Entertainment

•2nd largest music publisher in the world

•50:50 joint venture with Bertelsmann AG

•Initially Sony Music Entertainment had market share of 11%, currently merging with BMG which has 12% market share

• The combined group is now the 2nd largest music label behind Universal Music Group

SWOTStrengths

•Combined group has a large market share

•Has an impressive rooster of talent with popular artists such as Beyonce, Jennifer Lopez under its label

•Owns a huge catalogue of master works including Elvis Presley, Louis Armstrong

Weaknesses

•Probability of disharmony between 2 companies might be created

• Some commentators view the entertainment division as an unnecessary distraction for Sony

•The distraction curtailed the development of digital technology for SONY

Opportunities•The demand for music is ever growing

•Able to come up with new technology to beat its strong rival, Apple Ipod

Threats• Arch rival, Apple Ipod

•Other digital music landscapes such as Limewire

Problems Faced:•The vision and successful integration of both sony’s integration of both hardware and entertainment division remains elusive.

•Causing sony to lose focus on its central business, electronics

•Success is not definite, dependent on unreliable blockbuster movies, success is unpredictable

•Rifts created between the 2 parent companies regarding the future direction of the company

•curtailed the development of digital technology as it was too concerned with the effects of piracy and copyright of the entertainment division

•one main challenge facing sony is to leverage the content it owns through its entertainment ventures with its hardware

Suggested Solution:

•to leverage the content it owns through this digital platform, “Sony Connect”

•this platform will be used for distributing sony’s digital content such as a array of movies and games.

•-for this to work effectively, sony needs the buy in of other content providers to make the proposition more meaningful.

•SONY should perhaps, alter its image to the masses. For example, setting a trendy yet reliable and affordable digital platform.

•This will cater to not only the younger population but also the working adults.

•SONY should also focus on developing on the weaknesses of its rivals yet not forgtting to strengthen its strengths.

SONY Ericsson

•Ericsson: In March 2000, a fire at the Philips (source on chips) factory contaminated the sterile facilityproduction compromised for monthsNokia had alternative sources and cheaper.

•Sony: in 2000, share <1 percent struggling with losses.

•Both want to focus more in this area joint venture.

Problems Faced:•Losses :mobile phone sold

4th quarter 2007: 30.8 million. 3rd quarter 2008 25.7 million.4th quarter 2008 : 24.2 million1st 3 months 2009 London-based company said it expects to sell 8m fewer phones

•less money on every. Price €120 – €1 < last year, increasingly complex devices.

•a net loss of €73 million in 2008

•SE solution: cut cost 2000 jobs

•Sony Ericsson blames the global economic slowdown. However the loss is worst.

•No expertise in each market:market dividing (high end smart phones and

cheap low end phones). Either is not goodhigh end , few choice, expensive.

•No outstanding product: dividing the phones in camera, music.

•Not fast enough to catch up with the market demand:delay in adopting touch screen devices, downloading applications, email device

SWOTStrengths• Diversity among products

• Sony as band name.

Weakness• Lack in understanding customer preferences

• Less technology advancement

• Lack of user centered design

• Lack of brand awareness globally

Opportunities •Mobile phones market in developing

• High % of young market.

• Strong customer demand for innovative product

• High disposable income in emerging markets??

• Network capabilities and low tariff of service providers

Threats • Landline penetration and introduction of sky phones for rural areas

• Intense competition

• Bargaining power of consumers

Suggested Solution:•SE should be more focus on developing outstanding devices on each market by differentiating according to price.

•SE should make the best combination of the product which has the highest technology to compete with iphone but in faster phase.

Sony pictures:

•In the December quarter, revenue at Sony Picture fell 8% to $1.9 billion on lower DVD and TV program sales.

•Under pressure of its parent company

•Strength: combining technology with the best entertainment content. Emerge of hardware and software

•Weakness: perception that technology firm is not specialized in entertainment industry.

•Opportunity : Set standards, provide content that works on its devices.

•Threat: Lose focus on its central business, success not constant depend on blockbuster movies and superstars

SONY Electronics and DADC

Summary of Current StrategyIn particular, the company will focus on strengthening core businesses, enhancing network initiatives and leveraging international growth opportunities to build for the future and drive further growth and profits.

1)Expand our PC, Blu-ray Disc-related products and component/semiconductor businesses into "trillion yen businesses**,“ joining LCD TVs, digital imaging (digital cameras and camcorders), game and mobile phones and raising the total number of "trillion yen businesses" to seven.

2)Ensure that 90% of our electronics product categories are network-enabled and wireless-capable by the fiscal year ending March 31, 2011 ("FY2010"). - Roll out video services across key Sony products by FY2010, starting with the summer 2008 launch on the PLAYSTATION®Network.

3)Double annual revenue from BRIC (Brazil, Russia, India, China) countries to 2 trillion yen*** by FY2010.

Key Facts

•66.9% of sales derived from electronics 6613.8 Billion Yen

•(8.9% growth from previous year) - Annual Report 2008

•Electronics operating income 356 Billion Yen (121.8% growth from previous year)

•Achieved victory in DVD format war, making Blu-ray disc the standard in high definition recording and playback.

Electronics – Proportion of sales

•Audio – 9%•Video 22%•TVs – 23%•Information & Communications 19%•Semiconductors 4%•Components 14%•Others 9%

Electronics Market Share – AR 2008

•LCD TV – 12%

•Camcorder – 43%

•Compact Digital Camera – 23%

•Digital Music Player – 7%

SWOTStrengths•Established brand identity •Diversified client base by geography reduces business risks

Weaknesses• High cost manufacturing base leading to lower margins

• Legal Proceedings

Opportunities

•Growth opportunity in BRIC Economies (Brazil Russia India China)

•Reorganization

•FIFA Partnership – World Cup 2010

Threats

• Unfavorable foreign exchange rates likely to impact margins

• Impact of the global economic slowdown

Recommendations1)Restructuring of manufacturing operations in Japan to reduce the current high production costs.

2)Focus on achieving superiority in design and produce products that appeal across the generations.

3)Seize opportunity to gain growth and market share in the attractive markets of emerging BRIC economies.

4)Senior management to alleviate the role of marketing to theboardroom, allowing marketing to take on a more significantrole when making key business decisions and formulating strategies.

5)Increase customer oriented innovation.

6)Improve collaboration between R&D, design and marketing

departments. Enabling current products to remain relevant

to constantly evolving trends and customer needs.

CITATIONS•http://en.wikipedia.org/wiki/Sony_Ericsson•http://www.trustedreviews.com/mobile-phones/news/2008/04/24/Sony-Ericsson-Profits-Crash-48-/p1•http://www.scribd.com/doc/6365157/Marketing-Plan-and-Strategy-of-Sony-Ericsson-Nepal• http://www.sony.net/SonyInfo/News/Press/200806/08-080E/•http://blogs.barrons.com/techtraderdaily/2009/03/04/sony-pictures-reportedly-to-cut-300-jobs/

•http://seekingalpha.com/article/35771-sony-f4q06-qtr-end-3-31-07-earnings-call-transcript

THANK YOU