A company business strategy involves coming up with the overall direction of the company, its goals and performance metrics, and arranging for the resources with which to achieve that strategy. Business strategy includes marketing elements involving the products and services specification and the positioning of those in the market place. Business strategy also has resource specific aspects such as the degree to which in sourcing versus outsourcing will be undertaken within the value creating processes of the organization (Samson D, 2005).
There is also, as a part of Business strategy, the structural and ownership elements of the firm, as well as the financial strategies, such as whether to hedge currencies or not, setting debt to equity ratios and a variety of other financial variables. It is clear that a Business strategy must successfully integrate these various aspects such that they are aligned and synergistically take the organization towards its desired goals (Samson D, 2005).
A sound Business strategy also positions the organization well in terms of its external environment, namely the set of external pressures and opportunities facing the firm including market forces, government regulation, and all other significant stakeholder relationships. Indeed Business strategy can be seen as fitting the functional policy settings together as well as fitting them collectively to the environment and its pressures such as to develop and maximize the leverage that is possible from the organization’s capabilities (Samson D, 2005).
Business strategy and Innovation
Innovation need not be a major or dominant part of all firms’ business strategy. For some firms, for example in pure commodity industries, innovation in some form of differentiated offering or activity may not be important. The only important strategy may be the achievement of the lowest cost of production of such commodities (Samson D, 2005).
However, for most organizations, innovation is indeed important, especially if it is defined as broadly as containing the aspects of products, processes, paradigms (Business models) and positioning. Innovation strategy, which can be considered as the plan of how the organization will create value through new activities in any of the four domains above, can be considered as a subset of Business strategy. However, a firms’ innovation strategy is far from all of its Business strategy. Innovation strategy, as a subset of Business strategy, therefore must be guided by the firms overall Business strategy. In return, an innovation strategy can give real power to the Business strategy.
Intellectual Property and Innovation
An organization’s intellectual property can be considered as its specifically owned knowledge assets that are not owned by any other firm or organization. For firms that make investments in developing new products and services, processes, paradigms, or specific market positions that are unique, a return on these investments is a reasonable expectation. There is risk in making these investments and shareholders and other stakeholders will expect a return that is at least commensurate with this risk.
There are many tactics that an organization can employ to attempt to increase the return that it gets from investments in innovation, such as keeping the innovative process technologies that it has developed a secret. An example is the chemical process associated with making a pharmaceutical, or perhaps the core code of a software package that is sold in a marketplace. Keeping these secret provides exclusivity, reduces total supply and hence provides higher market share and higher prices than if the information was openly published.
Another intellectual property protection strategy is to disclose in part the nature of the knowledge asset through patenting. This is quite the opposite of keeping it secret in the sense that one publishes enough of the information such as to describe it comprehensively and publicly claim the ownership of that knowledge. The return can then come from restricting the supply of goods and services that require that knowledge to be produced and/or licensing out that knowledge or technologies or products to others that make use of it.
Sony Corporate Strategy
Sony Corporation is one of the world largest Multinational operating in a number of countries operating in media production. Masaru an engineer and Morita a physicist incorporated in 1946 for purposes of repairs of equipments. Since then they have carried a number of innovations, acquired many companies introduced ground breaking electronic equipments including television, video cassette, radios, plasma TV, DVD recording and many other products.
The US sub prime crisis has already had a global impact on global financial markets and could affect consumer spending worldwide. At first sight, this would seem a disproportionate reaction but banks all over the world are exposed to US debt. Sub-prime lending was lending at higher interest rates as a means of helping American consumers of lower incomes and poorer credit records obtain mortgages. These loans were then sold on, in complex ways, to other institutions including hedge (higher risk higher return) funds. The treatment of sub prime loans by the banks is likely to have far-reaching effects including, possibly, a slowdown in the US economy and a confidence linked decline in US consumer spending.
The effect is being felt in the large market segments of Sony corporate. There is fall in profits of Blu-ra probably because of this crisis. The economic downturn has made many people not buy video products. The profit losses experienced by this company are also experience by competitors like Electronic Arts of USA operating in the substitute products.
Nearly quarter of the words population, have broadband Internet connections in their homes. Most consumers are now relying on adverts made thorough internet. Research carried out indicate 69% urban residents said they used the Internet or they go online to locate items before going to the store to make a purchase. Only 13% said the Internet had not improved their in-store shopping experience. The conclusion is that, instead of replacing brick and mortar stores, the Internet is an extension of consumers’ in-store shopping experience, providing a resource to research product and price. When asked what the most powerful influencer was concerning purchasing decisions, 60% said word of mouth, followed by advertising (47%) and online information (43%). In view of the technological trend of consumers being reliant on the Internet for information, it is recommended that Sony Corporate should consider setting up an online shop, which will give them an hedge against their competitors.
Five Forces Analysis
Porter, the Father of Competitive strategies identified five forces that drive competition within an industry (Porter M, 1986),. He listed them and explained how they are applied in the industry. These strategies include
- the threat of entry by new competitors into the industry: this is main problem of the competition. A new competitors comes in there chances that he will go with some of the buyers. Another related problem is entering new market either through geographical or vertical expansion.
- The intensity of rivalry among existing competitors that the change of strategies: the current competitors and the task of staying competitive in current market was identified by Porter as another problem that needed strategies.
- Pressure from substitute products.
- The bargaining power of buyers.
- The bargaining power of suppliers.
No matter which competitive force is to use the most important thing to keep in mind is the relationship between profit margins or returns and the intensity of competition. The higher the intensity of competition, the low is profits (Varadarajan p and Cunningham H, 1995),
Porter Model Analysis for the Media industry
Using Porter’s model of analysis (Rugman A and Verbeke A, 2004),, when analyzing the model you start with (1) Intra-Industry Rivalry: this are companies that operate in the industry and they compete for the same market. The companies operating in this industry include LG, Panasonic, Mitsubishi, Philips, Pioneer, Samsung ,Sharp, Sony and other small companies in various countries where Sony is operating. From the case study, we are told that industry was very competitive with Sony engaging in Format wars in various products. They have were more capital constrained, had less predictable revenues and cash flows, innovative product diversity, and were forced to spread fixed costs over a smaller revenue base—factors that were prompting the industry to consolidate. This can be seen from acquisitions made by Sony that is Aiwa and Wega.
Another force in Porter’s model is buyers. Most of the customers for these products include homes, offices and other producers. The companies in this industry spend a lot of money to advertise targeting the at large world market and innovation. Most adverts have target world at periods of festivities like the world cup and end year festivities. Sony incorporated company should target to sponsor the world cup and capture wide market. This will increase the market share of the company and open up an exploited market. They should enter strategic relationship with other companies operating in other products like internet broadband to diversify. The purchasing power of the population has been affect by the economic performance of countries in the world.
For any production to be successive there must be suppliers. Porter recognized that fact in his model. Suppliers of this company include cooper-mining companies, labor force, case manufacturers, and electric products producers.
Substitutes have been identified as another force that affects the market of goods and services. Porter recognized that fact and he enlisted it as one of forces. The media are facing substitute products like personal computers, laptops, mobile phones and internet video games, which are currently being manufactured by many companies.
The other force in the market entry of into the industry new competitors this is evident from the way Far East countries are industrializing and how they are taking innovations Africa and Latin America should not be undermined. Sony should aggressively enter geographically into Africa, Latin America and North America markets and acquire through mergers and acquisitions or takeovers companies that are seen to cause a threat in the future.
The company main objective is to be a market leader and produce the best products.
- Strengths: Unique Products that has been in the market for years with the same brand name. Continual innovations and being in a zone where cheap labor. They have also located their plants in various parts of the worlds. From Russia, South Korea, India, China Indonesia, various parts of Europe and parts of Africa.
- Weaknesses: there are emerging companies like LG, Panasonic, Mitsubishi, Philips, Pioneer, Samsung ,Sharp, Sony and other small companies in various countries where Sony is operating and other small companies that in Latin America, Africa, North America, Asia and Europe.
- Opportunities: there is enlarging target Market especially un exploited desert areas of the world. There is an increase of awareness of people about Healthy Living thus are drinking nonalcoholic drinks. The opportunity is potentials of informing more customers about product Offers through internet.
- Threats: economic downturn brought by sub prime crisis and other problems of the economic. Price wars with other competitors and format wars.
In our case, since Sony Inc. largest media company and the larger they become the more challenges they face. With regards to threats, we cannot control some threats that might hinder business operations. However, these threats will serve as challenges and will focus on the strengths in order to attain success in achieving goals and missions.
- Positioning – Sony Enterprises would like to create a niche in offering a wider array of electronic in the world market. As most competitors are offering a variety. Sony inc. will go a mile higher by offering all electronic, electric, home appliances and related products to the world specifically desert countries. In achieving this, they will need to enter strategic with companies like electronic arts, Amazon, Apple incorporated and social groups in various markets. Sony needs to be known as a company with a difference in producing their products.
- Promotion – use of internet, television adverts, promoting social activities, fliers, sponsoring sports and many other promotional activity. Since we are involved in providing wider electronic choices, Sony is inclined for product differentiation, which is essential in positioning. The products should be positioned so it can stand apart from competitive products. Sony electronics unique combinations that differentiate their products from other competitive offerings will enable customers to define the important attributes of the business.
- Place – Sony is situated in various parts of the world with head office in Japan.
- Pricing – Sony incorporated will make all the prices of their goods to match the prices of their competitors but will have a hedge because they are unique.
Sony will focus on customers who living in various parts of the world.It is expected that people in Africa t will be the largest consumers and the current market should be kept intact as the expand to other markets. China has ¼ of the population thus offering a huge market.
Sony products are a health and of a wide array of electronic products to the growing market of the world. It should also plan to venture in producing other products. Since there is large market, the success will definitely rely on quality and standards.
The goals and objectives of Sony are as follows:
- To be a market leader in the industry.
- To provide affordable and high quality electronics to the residents of the world;
- To constantly guide and inform consumers about their products they offer;
- To continuously strive to make service fast, accommodating and excellent towards all wellness consumers in all parts of the world.
The mission statement of SONY would be:
- The modern society with modern electronic equipments. This means they produce worldwide respected products.
There are many established competitors seen like LG, Panasonic, Mitsubishi, Philips, Pioneer, Samsung, Sharp, Sony and other small companies in various countries where Sony is operating. Most of them are offering similar products also with international presence like Sony. Almost all of them know Sony’s strengths and weakness, Sony company should make themselves an inspiration to strive harder in satisfying the customers needs.
In order to achieve better future results, better or higher to industrial average, the sonyneeds to cut down its operating expenses, enter to new markets through vertical integration, geographical expansion and product differentiation. This would considerably improve the profitability, which is declining recently. They also have to review their policy on capital management and keep optimal levels of various items of current assets. This would improve the firm’s liquidity position. In order to improve the return on owner’s equity ratio, the management should invest in viable projects that would yield positive NPV’s.This has the effect of maximizing their wealth.
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