Strategic Analysis of Sony

Strategic Analysis of Sony
Table of contents
Table of contents ......................................................................................................... I List of Figures .............................................................................................................. I 1 2 3 3.1 3.2 4 5 6 Introduction .......................................................................................................... 1 Sonys consumer electronics division................................................................... 1 External Analysis.................................................................................................. 2 PESTEL Analysis .......................................................................................... 2 Five Forces Analysis ..................................................................................... 2 Internal Analysis Value Chain Analysis ............................................................. 4 SWOT Analysis .................................................................................................... 6 Conclusion ........................................................................................................... 9
List of references ........................................................................................................ II Appendix.................................................................................................................... VI Statement of Authorship .............................................. Error! Bookmark not defined.
List of Figures
Figure 1: 5-Forces Analysis of Sony's consumer electronics division ......................... 3 Figure 2: Value Chain Analysis of Sony's consumer electronics division ................... 4 Figure 3: SWOT Analysis of Sony's consumer electronics division ............................ 7
1 Introduction
Once Sony was seen as the centre of Japanese innovation and technology, but has rapidly lost ground to its competitors like Apple and Samsung (New York Times, 2012). As the creator of the Walkman, the Trinitron television and the PlayStation, the company suffers since the slowdown of the global economy in 2008 (Sony, Annual Report 2009 - 2011). To remain competitive and operate successfully in the future, it is vital for any company to be aware of its status quo (Body, 2011; Allen, 2001). Thus, the purpose of this report is to analyze Sonys current situation within the electronics industry. The essay tries to evaluate the present most important external and internal factors which affect Sonys electronics business. The macro environment is analyzed very briefly by the PESTEL and Porters Five Forces analysis and the internal analysis is based on Porters Value Chain. Finally the SWOT analysis is used to conclude strategic recommendations.
2 Sonys consumer electronics division

The Sony Group comprises three main businesses: electronics, entertainment and financial services (Sony, 2012c). However, this paper focuses only on Sonys consumer electronics division including the business units television, audio and video, digital imaging, mobile communication and games (Sony, 2012e). Nearly 50 percent of Sonys total revenues, roughly 6.49 billion Yen, are generated through these consumer products (see Appendix 1 and Appendix 2). As Sony recently suffers with declining profits (Financial Times, 2012) in the electronics segment, it aims to reposition itself together with its stakeholders (Sony, 2012c). According to Sonys CSR report in 2012 their most important stakeholders are customers, suppliers, employees and shareholders, as Sony is a publicly traded company (Sony, 2012d).
3 External Analysis
The external environment of Sony includes both, general external factors analyzed by the PESTEL analysis (see Appendix 3) and industry factors appraised by Porters Five Forces. Both analyses help to identify opportunities and threats for Sonys electronics division (Analoui et al. 2003; Cowe et al. 2011). Only those factors which have the most significant impact on Sony are described in the following sections.
3.1 PESTEL Analysis

In terms of economical factors the effect of changes in the exchange rates is a significant external impact. Japans strong currency has been unfavourable for Sony 2007 onwards (Sony, 2010) and deters investors. Moreover, Sony is negatively affected by the current recession which led to a decrease in consumer electronics sales around the world and an increasing price competition (Sony, 2012c). Another crucial external impact on Sony is the fast changing technology. A PWC study in 2010 shows that the demand of consumer electronics is shifting from dedicated toward multi-functional devices like smart phones. Sonys declining sales reflect this movement. On the other hand the 3D-technology, the trend toward linked devices and cloud computing could be an opportunity for the Japan based company (Teulade, 2010; PWC, 2012). On the social and environmental side, Sony faces an ageing population and stricter regulations on electronic trash. Sonys largest market is Japan which accounts for 43 percent of sales (Sony, 2010). However, the average age of Japanese is 45.4 years, which is significantly higher compared to other developed countries like the United States accounting for 37.1 years or the United Kingdom accounting for 40.2 years (Central Intelligence Agency, 2011). Also new regulations on electronic trash (Greenpeace, 2011) require additional procedures and certification which increase costs and affecting supply chains.
3.2 Five Forces Analysis

After analyzing the boundaries of the industry, the Porters Five Forces Model helps to identify the rivalry within the electronics business. The following figure shows the position of Sony in the consumer electronics industry and displays the power of
2
suppliers, buyers, competitors and newcomers (see further explanation in Appendix 4).
Market Entrants
Large economies of scale
Low
Very high capital requirement

Expected price and production retaliation Strong brand loyalty Barriers through patents
Bargaining Power of customers

Low switching costs High price sensitivity
High
Bargaining Power of suppliers Degree of rivalry

Oligopolistic markets Declining market sales growth Price competition
Low
High Low supplier concentration Various Joint Ventures In-house production of high valuable components Low possibility of suppliers buying forward
Increasing prices through Yen
No forward integration Large number of customers Small number of sellers
High innovation in the industry High exit barriers
Substitutes
Short product life-cycle High R&D costs Lack of Differentiation
Medium / High
All-in-one devices (e.g. smart phones like Iphone)
Figure 1: 5-Forces Analysis of Sony's consumer electronics division1
With various strong competitors (e.g. Samsung, Panasonic, Philips, Apple, etc.), a generally short product life cycle, a high bargaining power of customers and a slow industry growth, the competition within the industry is considered to be intense. The battle for market shares across Sonys vast range of products is mainly based on continuously launching innovative products and on price (Bloomberg, 2012a). As such, Nintendos cheaper Wii gaming console witnessed faster sales than Sonys PlayStation 3, even though Sony offers superior quality (Bloomberg, 2012d). Moreover, convergent devices or rather all-in-one solutions like Apples Iphone are identified as a threat of substitution (Bloomberg, 2012d). As already mentioned in the
1
Own illustration based on Porter (1985)
PESTEL Analysis this is due to the fast technological pace of the industry. However, Sony has a significant advantage over its competitors by having the possibility to gain synergy effects across its business units like gaming, music and films.
4 Internal Analysis Value Chain Analysis

After focusing on Sonys industry structure and key external activities, the Value Chain Analysis helps to understand Sonys key internal operations. In particular, Porters Model is used to identify Sonys capabilities in order to derive strength and weaknesses of its electronics division (Wickramasingeh, 2007). The subsequent illustration shows the internal drivers. Only the key activities which are subdivided into primary and secondary functions are described in the following paragraphs.
SUPPORT ACTIVITIES
Firm Structure Human Resources Management Technology

Procurement M a r g i n
Service
Inbound Logistics
PRIMARY ACTIVITIES
Operations
Outbound Logistics
Marketing & Sales
Figure 2: Value Chain Analysis of Sony's consumer electronics division2
Firstly Sonys financial situation (see Appendix 5), which is a supporting activity, is considered as a key factor for future success. However, Sonys credit rating was recently lowered one level by Standard & Poors (S&P). The rating company put the firms long-term rating from BBB+ to BBB, S&Ps second-lowest investment. The outlook is set negative because of four straight annual losses and concerns about an earnings recovery in the electronics segment (Bloomberg, 2012e; Sony Annual Reports 2009 - 2012). Sonys net sale of 7.2 billion Yen in 2009 dropped to 6.49
2
Own illustration based on Porter (1985)
billion Yen in 2012 and within the same period the net loss rose from 40.8 billion to 456.7 billion Yen. In the segment of consumer electronics, which accounts for almost 50 percent of the companys revenues, sales in 2012 dropped by 23 percent to 3.14 billion Yen compared to 2011. The electronics division reported a loss of 229.8 million Yen, which highlights that Sonys profit margin has been eroded significantly. 3 The negative trend over the last few years is displayed in the stock price (see Appendix 6). On the other hand, being a relatively successful company during the last two decades, Sony has still cash reserves (Sony, 2012c). Secondly, Sony adopted an extensive multidivisional firm structure over the last years. Each division is further divided into smaller, specialized business units, for example electronics in: television, cameras, audio & video, etc. (Sony, 2012c). Thereby, Sony tries to serve customers with a range of diversified products, specific in its function. However, the drawback could be that cooperation and knowledge transfer across the segments might suffer. Sonys empire might also cause a slowdown in innovation. According to the new management team and the CSR report in 2012, one of the key drivers for success is Sonys employees. The official webpage sates that Sony offers a variety of training programs to equip employees with superior knowledge and skills. The Japan-based company not only provides a career-building program for engineers and managers, but also curriculums which are tailored to local needs. In addition, Sony established the Sony University in 2000, an educational institution designed to cultivate global managers. In 2012, a branch of Sony University was opened in Singapore which is specialized in developing global managers for emerging markets (Sony, 2012c). Besides the published facts about Sonys good internal training programs, Sony employees face a workforce reduction of up to 10.000 by the end of 2013 due to the harsh situation in the electronics business (The Verge, 2012). Technologically, Sony was first in many areas such as Trinitron, the Walkman or the Camcorder. Some of these products have created new markets of their own and the
According to Sonys annual report in 2012 this was caused due to the impact of foreign exchange rates, the Earthquake and the floods in Thailand, and the price competition resulting from product commoditization.
3
patents for those innovations are still valuable for Sony. Their R&D department is setting industry standards for video and picture quality and is well established over years (Sony, 2012e). However, Sony faces increasing competition from devices like smart phones or tablets, which are seen as a threat (Bloomberg, 2012d). Furthermore, Sony generally manages its in- and out-bound logistics well. They select suppliers that obey laws, are financially solid, are innovative, offer competitive prices and protect the environment. To respond on environmental customer needs, Sony introduced a green procurement (Sony, 2012e). To lower production costs, the company is producing in low income countries like Thailand, China and Indonesia. Thailand was recently affected by floods which led to a shutdown of production plants and caused delay problems for the PlayStation 3 (Bloomberg, 2012f). In addition, Sony possesses automated out-bound logistic activities and well managed distribution networks in every continent (Sony, 2012c). Finally, over the years the company positioned itself as an innovator and a maker of high quality products with good designs. Sony is recognized as one of the best known and most valuable companies in the world with an annual advertising budget of roughly five billion US-Dollars (Financial Times, 2009). It is ranked on the 17th place among the top 100 brands in the world by a survey from Sync Force in 2012. The great marketing campaigns (e.g. $50 million for PlayStation 3), the brand centres and the established service activities (service centres, warranty, installation, etc.) help to further improve the brand image (Sony 2012e).
5 SWOT Analysis
The following SWOT analysis examines the internal strengths and weaknesses in light of external opportunities and threats. It is mainly based on the outcomes of the PESTEL, Five Forces and Value Chain Analysis and the starting point for the following strategic recommendations.
I N T E R N A L E X T E R N A L
Strengths
Good supplier system
Weaknesses
Financial situation
Large sales network

Great brand image Technology
Product portfolio
Organizational structure
Opportunities
New CEO Strategic alliances and acquisitions 3D technology Technical know-how
Threats
Exchange rates Political dispute with China Hacker attacks Greater competition
Figure 3: SWOT Analysis of Sony's consumer electronics division4
Strengths: According to Sonys CSR report the company established a well managed supplier system with suppliers acting conform to law, protect the environment and deliver quality at a competitive price. Furthermore the company possesses a wide sales network with sales offices in over 120 countries around the globe (Sony, 2012e). Sonys after-sales service is a strength, too. Almost all products carry a warranty and customer information centres are maintained in main markets (Sony, 2012f). One of the most outstanding strengths of Sony is its great brand image. This is highlighted by the fact that the company was tagged by Asian consumers as the most valued brand in 2011, despite the losses and the network security breach (Edge, 2011). Sonys consumer products are best known throughout the world and considered to have high quality and good designs. A great product portfolio and the know-how behind is another advantage. The product variety minimizes the risk of failure and makes Sony simply less dependent on a particular product or service. As a result to this, the capability
4
Own illustration based on Cowe et al. (2011)
to cross-sell or rather cross-market products is another benefit (e.g. movies, DVDs, games, etc.). Weaknesses: The current financial situation is considered to be unfavourable for the company. Decreasing sales, slow recovering profitability and underperforming stocks are deterring investors. In addition Sonys diversified empire might operate in too many parts of the entertainment value chain. The various product lines and the organizational structure behind those lines not only caused the companys innovation and flexibility slowdown, but also impaired specialization. Another weakness of Sony might be the lack of cooperation between business units, a result of the poor organizational culture. The lack of collaboration can be seen in the products, which cannot be networked. Opportunities: The new CEO, Kazuo Hirai, might turn around the declining sales and bring more focus to the companys product lines (Sony-PlayStation, 2012). The harsh competition from competitors like Apple, LG or Samsung could result in more integration within the electronics and software industry. Sony may take this opportunity to acquire competitors and build strategic alliances in order to gain synergy effects or rather new competitive advantages. Sony already bought off its entire Sony Ericson joint venture to act independently in the booming smart phone and table market (Sony, 2012g). Further, the company can take advantage of its excellent technological knowhow within the business units and create new products by combining the knowledge of the different segments (e.g. 3D technology). Threats: As Sony operates across the world it is more sensitive to exchange rates which are out of Sonys control (Sony, 2012c).
The political island spat between China and Japan might also have further affects on Sonys supply chain. They already had had to close factories based in China (Bloomberg, 2012b).
In addition Sonys excellent reputation is threatened because of a security breach in the PlayStation network and the Sony Online Entertainment properties (Bloomberg, 2011).
Finally, the company has to face an even more intense competition from firms that may be more specialized (e.g. Canon) or have greater resources (e.g. Samsung).
6 Conclusion
Based on the SWOT Analysis, the most important challenges for Sonys consumer electronics division are the harsh competition within the industry, the fast product lifecycles, the slowdown in innovation and the macro-risks like exchange rates. The following brief strategic recommendations aim to cope with these challenges. Facing highly specialized competitors within each business unit, Sony need to concentrate on certain businesses (e.g. smart phones, cameras/camcorders and games), restructure the electronics division around the focused segments and get rid of less profitable segments like TV. By allocating the resources from other divisions (e.g. R&D, marketing, logistics, etc.) to the focused businesses, Sony will achieve a competitive advantage over its rivals. This is simply because no other firm has a comparable mix of know-how in the variety of segments in which Sony operates. To keep up with the highly innovative and go-getting competition and the movement towards convergent devices (all-in-one solutions e.g. IPhones), Sony should focus on innovation and user-centred design to generate a Unique Selling Propositions (USP). The upcoming 3D-trend and the so called eco-prestige of customers could be an opportunity in this case. Green products represent added value to customers. Thus Sony should focus on a strong sustainability strategy and create green products. Once Sony has focused on certain markets, they should also start to build strategic alliances, joint ventures or acquire within the segments. This helps Sony to have access to new technology, enhance economies of scale and get market share.
9
Finally, Sony might be able to utilize their Financial Services to reduce risks of exchange rates and overcome this external factor by financial instruments like currency swaps.
10
List of references
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dispute-over-islands-risks-340-billion-trade.html. Accessed: 10.11.2012 Bloomberg (2012c). Sony Posts 7th Straight Loss as TV Sales Slump on Economy. Available from: http://www.bloomberg.com/news/2012-11-01/sonyposts-7th-straight-loss-as-tv-sales-slump-on-economy.html. 10.11.2012 Bloomberg (2012d). Nintendo Cuts Forecast as Smartphone Games Hurt Console Demand. Available from: http://www.bloomberg.com/news/2012-1024/nintendo-cuts-forecast-on-lower-demand-for-3ds-stronger-yen.html. Accessed: 10.11.2012 Bloomberg (2012e). Sonys Rating Cut by S&P on Earnings Recovery Concerns. Available from: http://www.bloomberg.com/news/2012-09-25/sony-s-credit-ratingcut-by-s-p-on-earnings-recovery-concerns.html. Accessed: 10.11.2012 Bloomberg (2012f). Thai Flood Zone Fortified to Lure Manufacturers: Southeast Asia. Available from: http://www.bloomberg.com/news/2012-10-25/thai-floodzone-fortified-to-lure-manufacturers-southeast-asia.html. Accessed: 10.11.2012 Boddy D. (2011). Management an Introduction. 5th Ed.. Harlow, Person Education Limited Accessed:
II
Central Intelligence Agency (2011). The World Factbook. Available from: https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html, Accessed: 08.11.2012 Cowe A., Mackerron, G., Moffat, A. and Douglas, T. (2011). Sources of competitive advantage 3rd Edition. Harlow. Pearson Education Limited Edge (2011). Sony still Asias most valued brand survey. Available from: http://www.edge-online.com/news/sony-still-asias-most-valued-brand-survey/. Accessed: 19.11.2012 Financial Times (2009). Sony retunes $5bn ad budget. Available from: http://www.ft.com/cms/s/2/0315c95c-d3a9-11de-8caf00144feabdc0.html#axzz2CbsKkgaM. Accessed: 18.11.2012 Financial Times (2012). Sony to cut global workforce by 10,000. Available from: http://www.ft.com/cms/s/0/d9fccb94-8240-11e1-924200144feab49a.html#axzz2BeQOo0Ne. Accessed: 08.11.2012 Greenpeace (2011). Eliminating Hazardous Substances and Industry Taking Responsibly for E-waste. Available from:
http://www.greenpeace.org/international/Global/international/publications/toxics/2 011/Achievements%202-%20Hazardous%20Substances%20and%20Ewaste.pdf. Accessed: 09.11.2012 Manager Magazine (2012). Fitch stuft Japan herab. Available from:
http://www.manager-magazin.de/finanzen/artikel/0,2828,834466,00.html. Accessed: 09.11.2012 New York Times (2012a). Sony Corporation. Available from:
http://topics.nytimes.com/top/news/business/companies/sony_corporation/index. html. Accessed: 08.11.2012 New York Times (2012b). Japan. Available from:
http://topics.nytimes.com/top/news/international/countriesandterritories/japan/ind ex.html. Accessed: 09.11.2012 PEGI (2012). European regulatory body. Available from:
http://www.pegi.info/de/index/. Accessed: 09.11.2012 Porter, M. (1985) Competitive advantage. Creating and Sustaining Superior Performance. New York, Free Press
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PWC (2012). The Future of IT Outsourcing and Cloud Computing. Available from: http://www.pwc.ru/en_GX/gx/technology/cloud-computing/methodology.jhtml. Accessed: 09.11.2012 Sony (2009). Annual Report. Available from:
http://www.sony.net/SonyInfo/IR/financial/ar/8ido180000023g2o-att/SonyAR09E.pdf. Accessed: 08.11.2012 Sony (2010). Annual Report. Available from:
http://www.sony.net/SonyInfo/IR/financial/ar/8ido18000003dkyyatt/8ido18000003dl0u.pdf. Accessed: 08.11.2012 Sony (2011). Annual Report. Available from:
http://www.sony.net/SonyInfo/IR/financial/ar/report2011/SonyAR11-E.pdf. Accessed: 08.11.2012 Sony (2012a). Business Highlights Proportion of Sales. Available from: http://www.sony.net/SonyInfo/IR/financial/ar/2012/financial/. 08.11.2012 Sony (2012b). Business Highlights Sales by Segment. Available from: http://www.sony.net/SonyInfo/IR/financial/ar/2012/financial/page02.html. Accessed: 08.11.2012 Sony (2012c). Annual Report. Available from: Accessed:
http://www.sony.net/SonyInfo/IR/financial/ar/2012/common/docs/EAR.pdf. Accessed: 08.11.2012 Sony (2012d). CSR Report. Available from:
http://www.sony.net/SonyInfo/csr_report/issues/pdf/CSR2012E_highlight.pdf. Accessed: 08.11.2012 Sony Sony Sony (2012e). Corporate Information. Available from:
http://www.sony.net/SonyInfo/CorporateInfo. Accessed: 08.11.2012 (2012f). Support. Available from: http://www.sony.co.uk/support/en.
Accessed: 08.11.2012 (2012g). Recent News Releases. Available from:
http://www.sony.net/SonyInfo/News/Press/201202/12-025E/index.html. Accessed: 19.11.2012 Sony-PlayStation (2012). Chairman of Sony Computer Entertainment. Available from: http://us.playstation.com/corporate/about/management/kazuohirai/.
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Accessed: 19.11.2012
SyncForce
(2012).
Ranking
the
Brands
top
100.
Available
from:
http://www.rankingthebrands.com/The-Brand-Rankings.aspx?rankingID=30. Accessed: 11.11.2012 Teulade F. (2010). PWC 3D Here and Now?. Available from:
http://www.pwc.com/en_GX/gx/entertainment-media/pdf/3d-technology-here-andnow-v2.pdf. Accessed: 09.11.2012 The Verge (2012), Sony to lay off more than 2,800 employees. Available from: http://www.theverge.com/2012/10/20/3530236/sony-layoffs-retirementminokamo-headquarters. Accessed: 10.11.2012 USK (2012). German regulatory body. Available from: http://www.usk.de/en/theusk/about-us/. Accessed: 09.11.2012 Wickramashinghe, N. and von Lubitz, D. (2007). Knowledge-Based Enterprise: Theories and Fundamentals. London. IGI Publishing Yahoo Finance. Sony Corporation (SNE). Available from:
http://finance.yahoo.com/q?s=SNE. Accessed: 09.11.2012
Appendix
Appendix 1: Proportion of sales by business
Source:
Sony
(2012a),
Business
Highlights
Proportion
of
Sales,
Available
at:
http://www.sony.net/SonyInfo/IR/financial/ar/2012/financial/, Accessed: 08.11.2012
Appendix 2: Sales and Operating Income by Segment
Source:
Sony
(2012b),
Business
Highlights
Sales
by
Segment,
Available
at:
http://www.sony.net/SonyInfo/IR/financial/ar/2012/financial/page02.html, Accessed: 08.11.2012
VI
Appendix 3: PESTEL analysis of Sonys electronics division

Japan: transition from single to double party system may have consequences for Japan-based multinational corporations, in terms of future legislation, government & trade policies (New York Times, 2012b). Sony had to close factories in China as the island spat between China and Japan escalated (Bloomberg, 2012b) influence on Supply Chain.
Political Factors
The recession has had a negative effect on consumer electronics sales worldwide increasing price competition. As a result of overwhelming public debt of 225.8% (Central Intelligence agency, 2011) along with deflation and weak public demand, Japan faces global pressure to cut public debt over recent
Economic Factors
months. Ratings agencies (Fitch, S&P, etc.) deducted Japan in credit rating (Manager Magazine, 2012). The effect of changes in currency exchange rates has been unfavorable for Sony from 2007 onwards (Sony, 2012c). Billions of yen run off. Such an unfavorable currency exchange rate is deterring investors.
Social Factors
Sonys largest market is Japan which accounts for 43% of sales (Sony, 2010). However, it is an ageing population, with an average age of 45.4 years (Central Intelligence Agency, 2011). Loss of trust from customers due to security attack & failure to notify immediately has caused a negative brand image.
Consumers behavior is moving toward multi-functional devices meaning the demand for dedicated devices is reducing (Bloomberg,
2012d). Technological Factors

The market for 3D related technologies is growing rapidly (Teulade, 2010). Industry-wide movement toward networked products & services and cloud computing (PWC, 2012).
Legal Factors
Age and content restrictions from regulatory bodies (USK & PEGI). VII
EU warnings because of privacy issues following security breach on PSN network & Sony Online Entertainment properties. (Bloomberg, 2011)
Some of Sonys manufacturing activities were closed after recent tsunami, resulting in share price drop of 9% (Yahoo Finance)
Environmental Factors
Regulations on the impact of electronic trash by restriction of hazardous substances and electronic waste (Greenpeace, 2011). Additional procedures and certification are consequences of these regulations increasing costs and affect on supply chains.
__________________________________________________________
Source: Own illustration based on Cowe et al. (2011)
Appendix 4: Five Forces analysis of Sonys electronics division

Market Entrants
Large economies of scale
Low
Very high capital requirement

Expected price and production retaliation Strong brand loyalty Barriers through patents
Bargaining Power of customers

Low switching costs High price sensitivity
High
Bargaining Power of suppliers Degree of rivalry

Oligopolistic markets Declining market sales growth Price competition
Low
High Low supplier concentration Various Joint Ventures In-house production of high valuable components Low possibility of suppliers buying forward
Increasing prices through Yen
No forward integration Large number of customers Small number of sellers
High innovation in the industry High exit barriers
Substitutes
Short product life-cycle High R&D costs Lack of Differentiation
Medium / High
All-in-one devices (e.g. smart phones like Iphone)
Source: Owen illustration based on Porter (1985).
VIII
Additional outcome explanation:

Threats of new entrants LOW o economies of scale incumbent firms are producing at the lowest-cost; hard for new entrants to compete on price o Extremely high capital requirement Existing firms are highly experienced and the industry is driven by knowledge and innovative capacity; extensive investment robotics (tools, equipment, machines, etc.) -> e.g. Sony has an extremely advanced quality assurance, where no dust is allowed to touch the production line of its lenses and mirror-house Bargaining power of buyers -> HIGH o Switching costs are low - Information easily available with online reviews -> buyer can switch brands without high switching or transaction costs for example in the compact camera sector. o Price sensitivity is high buyers can choose a better-priced substitute. Sony tries to separate their products with better technology. Also the en causes prices to increase for Sony -> reduced profits (Bloomberg, 2012b). Bargaining power of suppliers LOW o Low supplier concentration low value component (plastic, chassis, etc.) manufactures -> high competition -> low price. Sony can force suppliers to cut prices > best deals for Sony o Various Joint Ventures for high value components e.g. Panasonic (3D), Olympus (cameras) ->keep input costs to a minimum -> bundle know how/ experience -> new core competence (Bloomberg, 2012c) Threat of substitutes HIGH o Short product life-cycle - e.g. cameras, gaming hard- & software. o Smart phones - Smartphones with integrated high definition cameras, games to download, video, music, etc. (Bloomberg, 2012d).
Appendix 5: Sonys financial business highlights
________________________________________________________________________
Source: Sony Annual Report 2012 (Sony, 2012c)
IX
Appendix 6: 5 years trend of Sony Corporation Common Stock
___________________________________________________________________
Source: Yahoo Finance, Sony Corporation (SNE)
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