Sony Corporation - Losing Competitive Advantage

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Case Details:

Case Code : BSTR192
Case Length : 20 Pages
Period : 1998-2005
Organization : Sony Corporation
Pub Date : 2005
Teaching Note : Available
Countries : Japan
Industry : Consumer Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Analysts were not too impressed with the new plan, commenting that the plan did not present any formula for growth and it did not differ much from Sony's earlier restructuring plans. As Carlos Dimas of CLSA Asia-Pacific Markets commented, "His (Stringer's) business model is just a continuation of Idei's formula for growth, which meant he doesn't have a new business model. It's a business model that has been made obsolete by the digital era, and if the company is not able to change this model there is no way they will survive."5

Background Note

Sony was started in 1946 as Tokyo Tsuchin Kyogo by Mararu Ibuka and Akiro Morita (Morita)6 in war-ravaged Japan. Initially, the company had 20 employees and capital of 190,000. Since its inception, Sony focused on product innovation and high quality. Sony started off manufacturing telecommunications and measuring equipment and went on to manufacture transistor radios and tape recorders. The company decided to call itself Sony, as Morita felt that the name was in accordance with its global expansion plans. Sony set up a subsidiary in the US in 1960 and was listed on the New York stock exchange in 1970. It was the first company to set up manufacturing facilities in the US, in 1972.

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Sony's products were always innovative. The company firmly believed that such products had a huge demand for them, and did not attach much importance to market research. Sony suffered a major setback in 1975 on account of the Betamax video cassette, to be used in its home video cassette recorder.

However, before the Betamax technology could establish itself in the market, it lost out to VHS, which was backed by top studios in Hollywood. This incident made Sony enter into the content development business, as it was of the view that the technology used was largely determined by the content owners. In 1988, the company acquired CBS records and renamed it as Sony Music Entertainment. In 1989, it acquired Columbia Pictures (which included Tristar) and renamed it as Sony Pictures (Refer Table II for details of Sony's Businesses). In 1968, Sony had introduced Trinitron Color TV, which was highly successful. Another highly successful product was the Walkman launched in 1979...

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5] "Markets Yawn at Sony's Restructuring,", September 26, 2005.

6] Akio Morita was a graduate in physics, while Masaru Ibuka had a degree in electronic engineering. When Morita joined the Japanese navy as a Lieutenant, he met Ibuka at the navy's Wartime Research Committee. They became friends and planned to float a company.


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