Introduction
Sony Ericsson mobile communication was formed as a joint venture in 2001. This was an international collaboration between Sony Corporation and Ericsson. The joint venture has been in operation for almost ten years. However its performance has been a major cause of concern bearing in mind that the venture has been making losses. The two sides have pledged to increase the funding for the venture. According to them probably the company needs more capital engineering. However the whole joint venture is subject to a lot of debates ad discussions. The aim of this paper is to take a deeper analysis at the whole path travelled by the joint venture. In order to succeed in this endeavour the paper will begin by analyzing the origin and formation f the joint venture. At this level the paper look explore the alternative available apart from forming a joint venture. Problems encountered by the company will also be analyzed. Strategies used by the company to address the problems will also be explored. The significance of the strategies on the long-term prospects of the company will be given prime focus.
Motivation for the Alliance
The Sony Ericsson joint venture was formed by two giants; Sony Corporation of Japan and Ericsson of Sweden (Luo & Yan 2001). One of the major reasons behind the formation of the collaboration was the expertise and experiences of the two companies’ n their respective areas (Netzer & Campbell 2009). Sony Corporation was considered efficient in the manufacture of electronics whereas Ericsson was a major telecommunication player in Sweden. The collaboration was a way of consolidating the two companies experience and prowess. The synergy was meant to propel the joint venture to greater heights of success (Pirnes et al 2009). Bearing in mind that the two companies complemented each other it was predicted that a joint venture was the best way to pool the resources for greater performance (Hook & Kuglin 2002).
Better Alternatives
During the formation of the joint venture more focus was put on the expertise of the two companies. Little attention was given to the viability pf the venture. As a result the venture ended being unfruitful by all means (Polishuk 2004). There were several alternatives to the joint ventures; the protagonist of the collaboration could have explored other alternatives before settling on the joint venture. This could have been of much significance bearing in mind that the joint venture has turned out o be unprofitable. Probably the two companies could have cooperated in other forms to make a successful business (Hitt et al 2005). There was a lot of misunderstanding of the dynamics pf international business during the formation of the venture (Afsarmanesh et al 2004). Therefore the problems of the joint venture are as a result of the miscalculations made in the beginning. During the formation of the joint venture there existed many other alternatives that would have been more appropriate for the two companies. A joint venture was not appropriate for the two companies since the odds were many as compared to the opportunity of the same. As a result the company has continually performed poorly due to the fact that the joint venture was poorly planned. There are so many avenues for collaboration as far as the two companies are concerned. They could have cooperated in other aspects apart from making a joint venture. Joint ventures involve a lot of factors. They require so many considerations for them to be successful. There was a huge miscalculation as far as the joint venture formation was concerned. The two companies did not consider certain factors before forming the joint venture. The consideration that motivated the formation of the joint venture was the poling of resources and expertise of the two companies. Sony was considered a powerhouse as far as the electronic business is concerned. It was therefore considered that the experience and expertise of the company could be instrumental in the production and manufacture of high technology phones. The joint ventures plan was to manufacture digital technology enabled mobile phones. The expertise of Sony was perceived as of great advantage for the Venture. However this did not succeed, since the company began making loses in the year 20092. As much as the Sony Ericsson mobile phones were of great quality and could support quite a number of programs the venture failed to realise high profits and performance. Ericsson on the other hand was considered giant in the telecommunications sector. It was therefore considered that the collaboration will be highly successful since Sony would bring in electronic expertise while Ericsson was to bring experience from the telecommunications sector. The combination was seen as the best way to mange the market and make great success.
Problems Encountered By the Joint Venture
The joint venture started with very high expectations from the many quarters. It was predicted that since the two companies were key players in their own areas, the joint venture will be of great success (Polishuk 2007). However, this turned out to be a huge disappointment to the investors. The joint venture’s market share dwindled during the first year of operation. Ericsson was considering outing an end to the partnership.
This was due to the losses and dismal performance registered by the venture (Campell 2008). As a result both companies expressed their willingness to increase their investments in the venture (Xing & Gutterman 2009). The company encountered quite a number of problems since its inception. The company’s performance continually failed to rise. At the same time the market level of the company continued to go low with time. The two companies have always endeavoured to pump more money into the venture. However it has always remained elusive goal for the company to rise in its performance. The ventures high end digital phones failed to bring any good to its fortunes since the phones never performed well. As a result the company did not succeed in its initial plan of becoming the market leader in the mobile sector. As much as the company had the best phones at the time, the market response was not in favour of the venture. The company has suffered very many problems from losses to poor performance and poor market receptivity.
Strategies Used To Address the Problems
Sony Ericsson employed digitalization as its strategy (Sherr et al 2002). The company manufactured technology enabled phones which were diverse in their use. The phones were made to accommodate various technological operations. The phones could be used for photography, media and other operations (Taliashvili 2009). The aim of the company was to make quality diverse products which will attract customers and increase the earnings of the company. The company continued in the production of high end mobile phones with many capabilities. This was the main market strategy since by that time there were few technology enabled phones (Henry 2008). In spite of the companies efforts to overcome its misfortunes its performance remained dismal. Losses became common and its dream continued to be a failure (McAfee 2009). The company applied a number of strategies so as to mitigate the effects the failure of the joint venture to make success in the market. As a result a lot of focus was put on various approaches that were meant to bring about a certain kind of success in the market. The performance of the company was greatly affected by the initial decision taken by the protagonists of the joint venture. At the end of the day the venture ended up being a total failure as far as its goals are concerned. The company started failing in its first year of inception pointing towards great miscalculations on the part of the authors of the whole collaborations. The most common strategy throughout the life of the venture has been the cash infusion. The two companies have been pumping more money into the venture witan aim of making it more vibrant. However the more they infuse cash into the business the more the company’s fortunes dwindle. As a result many analysts have pointed to the whole venture as being a failure. In other words probably the venture was not meant to be in the first place. Then various strategies have continually been a failure in the market they have achieved virtually no progress at all.
Conclusion
The venture between the above discussed companies was formalised in the year two thousand and one. The venture was predicted to be lucrative bearing in mind that the individual companies had been successful in their areas of operation. The key motivation of the formation of the venture was the expertise of both companies. Sony was versatile in the electronic industry whereas Ericsson had been successful in the communications sector, but the Ericsson was not doing well. In fact the whole period of almost ten years has been full of loses for the company. The company has tried several strategies in order to overcome its misfortunes. However the strategies have been of little success since the company is continually making losses. The paper has taken an analytical look at the whole life of the joint venture. First was the origin and background of the venture. The paper has endeavoured to go deep into the whole life and events f the joint venture. At the depth of the matter was the formation of the joint venture. Thorough analysis has been given to the origin of the whole venture in relation to its performance. Whether the company was formed in the right manner and where the company has been successful in its endeavours all along has been the essence of the paper. It was found out that in spite of the many strategies used by the company, the venture has continued to make loses. This can be traced from the origins of the venture. The paper has endeavoured to find out if the formation motivation of the joint venture has any thing to do with the performance and endeavour of the company. For instance the paper has analysed the factors that liked to the formation of the joint venture. At this point the paper sought to unearth the reasons that might be affecting the company’s performance. The performance of the joint venture has also been given much focus.
References
- Afsarmanesh, E. et al, 2004, Collaborative networked organizations: a research agenda for emerging business models. New York: Springer.
- Campell, D. 2008, The Comparative Law Yearbook of International Business, Volume 30. London: Kluwer Law International.
- Henry, A. 2008, Understanding Strategic Management. Oxford: Oxford University Press.
- Hitt, D. et al, 2005, Understanding business strategy: concepts and cases. New York: Cengage Learning.
- Hook, J. & Kuglin, F. 2002, Building, leading, and managing strategic alliances: how to work effectively and profitably with partner companies. Washington: AMACOM Div American Association.
- Luo, Y. & Yan, A. 2001, International joint ventures: theory and practice. Houston: M. E. Sharpe.
- McAfee, A. 2009, Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges. Harvard: Harvard Business Press.
- Netzer, A. & Campbell, D. 2009, International joint ventures. Washington; Kluwer Law International.
- Pirnes, S. et al, 2009, From Innovation to Cash Flows: Value Creation by Structuring High Technology Alliances. New York: John Wiley and sons.
- Polishuk, P. 2004, China Telecom Monthly Newsletter. Washington: Information Gatekeepers.
- Polishuk, P. 2007, Asia Pacific Telecom Newsletter. Washington: Asia Pacific.
- Sherr, F. et al 2002, International joint ventures: Soviet and Western perspectives. London: Quorum Books.
- Taliashvili, G. 2009, Joint Venture Company – JVC under German and UK Jurisdictions. New York: GRIN Verlag.
- Xing, Y. & Gutterman, B. 2009, International joint ventures: how to negotiate, establish and manage an international joint venture. New York: Business Press.