Sony ’s Dilemma, Matching Strategy and Structure

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Ch apte r 11. Mini -Case

Sony ’s Dilemma, Matching Strategy and Structure

Launche d in 194 6 in Japan , Son y ga ine d a repu tation for produc ing innova tive produc ts tha t

were so ld throughou t the world. In fac t, the firm’s succes s was ins trumen tal to Japan ’s

deve lop men t as a po werful expo rter du ring the 1960s , 1970s , an d 1980s . Son y was so metimes

“first to marke t” with an innova tive produc t, while so metimes be ing ab le to rap idly enhanc e a

produc t’s capab iliti es by innova ting . Introduce d in 1979 , the Son y W alkman , which was a

pe rsona l stereo tap e deck , is an exa mple of a “first to marke t” produc t from Son y. On the othe r

hand , Son y innova ted the trans istor rad io— initially deve lope d by Regenc y Elec tron ics an d Texa s

Ins trumen ts— in a way tha t mad e the produc t co mm ercially viab le. Rega rdles s of the type ,

innova tion ha s bee n critica l to ho w Son y co mpe tes in multiple produc t areas .

Rea lizing the va lue tha t cou ld be ga ine d by sha ring resou rces , capab iliti es , an d co re

co mpe tenc ies ac ros s type s of bus inesses , Sony ’s succes s for man y decade s was a produc t of its

co mm itmen t to “conve rgence ,” which the firm ope rationa lize d by link ing its ac tivities ac ros s

bus inesse s suc h as film, mus ic, an d digital elec tron ics . In essence , Son y was success ful for

man y yea rs as a resu lt of be ing ab le to effec tive ly implemen t the related cons traine d strateg y.

Bu t as we no ted in the chap ter whe n discuss ing the related cons traine d strateg y an d the

struc ture neede d to implemen t it, an inab ilit y to efficien tly proces s information an d coo rdina te an

array of integ rated ac tivities be twee n un its are prob lems tha t may su rfac e whe n us ing the

coope rative form of the multidivisiona l struc ture. Th is appea rs to be the cas e for Son y. In

respons e to pe rformanc e prob lems tha t hav e plague d the firm for ove r a decade , Son y pu t into

plac e sign ifican t struc tural change s in Octobe r 2015 , intende d to be the founda tion for

improve men ts to Sony ’s ab ilit y to crea te va lue for cus tomers an d enhanc e wea lth for

sha reho lde rs. At the co re of the struc tural change s are efforts to grou p the firm’s bus inesse s in

way s tha t allow Sony ’s uppe r-leve l leade rs to more effec tive ly alloca te financ ial capital. A ke y

ob jec tive is to alloca te cap ital to the bus inesse s with the stronges t po ten tial no t jus t to grow, bu t

to grow profitab ly. In essence , the ne w struc ture is an exa mple of the SB U form of the

multidivisiona l struc ture.

Howeve r, in 2018 , with ne w CEO Ken ich iro Yosh ida (formerly the CFO), Son y is aga in mak ing a

strateg ic sh ift. Yosh ida laid ou t a strateg y sh ift away from ha rdware an d toward con ten t in

ou tlining a three -yea r bus ines s plan . Th is is no t a shock ; Son y so ld 81 milli on elec tron ic dev ice s

in 20 11, bu t on ly ha lf tha t vo lume in 2017 . Th is plan also dispe ls rumors tha t Yosh ida wou ld se ll

Son y Pictures , which ha d successe s in a remak e of Ju man ji, an d con tinue d produc tion of the Sp ide rman mov ie se ries . In fos tering this sh ift, Son y recen tly bo lstered its en tertainmen t asse ts

by buy ing the majority of sha res it did no t own in EMI Mus ic from Mubada la Inves tmen t Co.

Th e prob lem is tha t coope ration amon g the bus ines s un its is go ing to be more sa lien t. One of its

cen tral co mpe titors, Disne y ha s bee n ve ry success ful in integ rating its con ten t bus ine sse s suc h

tha t its mov ies an d TV sho w cha rac ters fee d well into its the me pa rks an d retail sa les of ca rtoo n

an d ac tion figu res (se e the Mini-cas e at the en d of Chap ter 6). Howeve r, Son y ha s no t bee n ve ry

success ful at suc h integ ration attempts. Fo r exa mple, Sony ’s attempt to bu ild a globa l

con ten t-de live ry platform via the PlayS tation ga ming conso le ha s no t bee n ve ry fruitful. As Med ia

Pa rtne rs As ia execu tive direc tor Vive k Cou to sugges ted , “the co mpan y ha s misse d an

oppo rtun ity to leve rag e IP from PlayS tation ga mes for mov ies an d TV.” Son y “also co mes off

poo rly in utili zing prope rties ac ros s divisions : tha t integ ration need s to happen .”

Sony ’s ne w strateg y is play ing ou t in vide o ga me con trollers, cu rren tly in its PlayS tation 4

conso le. “Son y ha s bee n sh ifti ng its PlayS tation focu s from ha rdware to on line subsc ription

se rvices , inc lud ing a $6 0 annua l packag e tha t inc lude s ga mes an d multiplaye r fea tures . Tha t

se rvice , PlayS tation Plus , ha d 34 milli on use rs as of March 2018 , fitti ng the ne w CEO’s goa l of

add ing revenu e sou rce s tha t are more stab le tha n vo latile ha rdware an d so ftware sa les .” Th e

leade r of this bus ines s un it, Tsuyosh i Kode ra, ha s no ted tha t Son y will tak e its time in co ming ou t

with the fift h gene ration PlayS tation conso le; “W e’re no longe r in a time whe n yo u ca n think jus t

abou t the conso le or jus t abou t the ne twork like they ’re two differen t things .” Thus , the re need s to

be be tter connec tion s be twee n the ha rdware an d the myriad of con ten t assoc iated with vide o

ga mes , mov ies , an d on line ga mes as well as mob ilit y; the PlayS tation ha s bee n trad itiona lly a

living -roo m conso le an d de man d for man y ga mes sugges ts the nee d to be ava ilab le on mob ile

dev ices .

Source: https://ww w.son y.net/SonyInfo/CorporateInfo/Data/organization.html

Th is ne w strateg ic emphas is obv ious ly will requ ire more integ ration tha n ha s bee n utili ze d in the

recen t pas t with Sony ’s SB U multidivisiona l struc ture. It is impo rtan t to remembe r tha t Son y ha s

othe r bus inesse s bes ide s the ha rdware an d con ten t bus inesse s tha t nee d

inc rease d integ ration to stay co mpe titi ve . It is no w struc tured into three co re sec tors or bus ines s

un its— elec tron ics , en tertainmen t, an d financ e (se e the Son y organ iza tion cha rt). Th e prob lem is

tha t be tter integ ration is go ing to be requ ired be twee n two SB Us, elec tron ics an d en tertainmen t.

Tha t will be difficu lt as all three un its are judge d on a pe rformanc e criterion within the sepa rate

SB Us, which doe s no t insp ire coope ration .

Sou rces : 2018 , Corpo rate Information , Organ iza tion Data, ww w.son y.co m, Accesse d Ju ly 26 ; J.

Becke rman , 2018 , Son y to bu y Mubada la’s stak e in EMI Mus ic Pub lish ing , W all Street Jou rna l, ww w.wsj.co m, May 22 ; G. J. Blair, 2018 , Sony ’s strateg y sh ift shu ts do wn sa le rumors,

Hollywoo d Repo rter, May 30 , 22 ; G. J. Blair, 2018 , W ha t doe s Sony ’s ne w CEO hav e planned? ,

Hollywoo d Repo rter, Feb rua ry 7, 22 ; T. Moch izuk i, 2018 , Son y say s the nex t PlayS tation is three

yea rs off, W all Stree t Jou rna l, ww w.wsj.co m, May 24 ; T. Moch izuk i, 2018 , Son y ch ief hand s ove r

reins after resu rgence , W all Stree t Jou rna l, ww w.wsj.co m, Feb rua ry 3; Y. W ang , 2018 , Tec h

gian ts are crea ting the ir own labe ls to conque r China ’s digital mus ic marke t, Fo rbes ,

ww w.forbes .co m, Feb rua ry 8; 2015 , Here’s Sony ’s ne w bus ines s strateg y, Bus ines s Ins ide r,

ww w.bus iness ins ide r.co m, Feb rua ry 21 ; T. Moch izuk i & E. Pfanne r, How Son y make s mone y off

App le’s iPhone , W all Stree t Jou rna l, ww w.wsj.co m, Ap ril 28 ; E. Pfanne r & T. Moch izuk i, 2015 ,

Sony ’s mob ile un it seek s profit, innova tion , W all Stree t Jou rna l, ww w.wsj.co m, March 2; M.

Sch illi ng , 2015 , Son y strateg y cen ters on sp litti ng bus inesses , no t se lling — for no w, Variety,

ww w.va riety.co m, Feb rua ry 26 .

Cas e Discuss ion Ques tion s

1. To implemen t a co rpo rate strateg y, a firm need s to hav e a stron g se t of capab iliti es to “pa ren t”

the se t of bus ines s un its tha t the firm ha s es tab lishe d or acqu ired . Give n Sony ’s history an d

organ iza tion struc ture, wha t wou ld yo u argu e are Sony ’s stronges t pa ren ting or co rpo rate

capab iliti es ? How will the ne w strateg y utili ze thes e capab iliti es ?

2. Do yo u think tha t Son y ha s the righ t organ iza tion struc ture to fos ter the necessa ry integ ration

amon g its elec tron ic an d en tertainmen t con ten t bus inesse s tha t its reva mpe d strateg y see ms

to en tail?

3. W ha t add itiona l organ iza tiona l struc ture and /or proces s ad jus tmen ts will Son y nee d to mak e to

rea lize its rev ise d strateg ic ob jec tives ?