Video #19 - Japan: Sony Reinvents Itself
Tuesday, January 10, 2006BACKGROUND INFORMATION
On March 9, 1999, Sony Corporation announced a reorganization into three units, "each emphasizing the importance that data networks will play in Sony's future as a seller of digital hardware, software, and content ..." Sony Music Entertainment (Japan) was slated as one of the three Sony-related companies to be created, along with Sony Computer Entertainment and Sony Music, at a cost of about $3 billion. At that point Sony also announced plans to reduce its workforce by 10 percent through attrition and to close 15 factories worldwide over four years, eliminating 17,000 jobs. According to Nobuyuki Idei, Sony's president, the changes were to strengthen Sony's core electronics business and enhance "the value of our company for shareholders."
Sony President Idei took over in 1995 with long term plans to merge the company's traditional consumer economics with computer and networking technologies. Sony's electronics units, which were autonomous "divisional companies," were to be absorbed by three larger sub-companies: the Home Network Company, the IT Network Company and the Core Technology and Network Company. The objective was to focus on developing new network-related businesses around Sony's products. Mr. Idei said, "Sony will invest aggressively in research and development, capital equipment and facilities so that our electronics business, which is our core business, can evolve to best meet the needs of a 'network-centric world."
The realignment around networking formalized an ongoing push by Sony into technologies that can connect the company's content businesses at one end - including its movie and music operations - and its consumer electronics business at the other end. Nobuyki Idei was promoted to chairman/CE in June of 2000. He appointed Norio Ohga, a longtime friend and colleague of founder Akio Morita, as chairman of the board, a position created for him. Since Sony's largest market is the United States, Sony Electronics was reorganized so that all of its consumer electronics businesses would be under one unit: Sony Consumer Electronics Group (CEG). All this was viewed by industry analysts as part of Sony's effort to face the major challenge of the digital communication age: the Internet and the effect it is having on the relationship of the industry with retailers and consumers. The other stated reason for further reorganization was the yen/dollar exchange rate, which made it important to determine how quickly new digital products would be accepted.
In January of 2003 Sony revised its net income for the year ending March 31, 2003 to show a 28% drop, which it blamed on price competition and Japan's lingering recession. Also in January, U.S. based Sony Electronics announced that Fujio Nishida would move to the Tokyo parent company as chief marketing officer and corporate senior vice president. Nishida has been with the company for 31 years, would report directly to its chief operating officer, Kunitake Ando. Nishida was charged with the responsibility of developing strategies to improve global marketing throughout the corporation and to lead the Memory Stick business. The moves are reported to be an attempt to restructure its Sony's management in order to develop a decentralized model to facilitate quicker decisions as the divisions react to the changing market. The decentralization process has been implemented by assigning regional representatives in the Americas, Europe and East Asia.
Sony was also working in conjunction with nine other Japanese companies to develop technical specifications for digital television to allow connections to the Internet. The purpose of the new specifications would be to encourage the creation of digital televisions that would allow for TV broadcasts along with Internet browsing capabilities.
However, Sony's problems on the software end of its business have been tougher to solve. Sony Music's $142 million losses in 2003 are said to have caused the resignation of former executive Thomas Mottola. The industry had been losing money due to falling sales and online music piracy out of control, and as the world's number three music company, Sony Music was not immune. As a result, in March, 2003, Sony Music announced plans to streamline management, cutting costs and eliminate 1,000 jobs. A reduction on CD sales was given as the cause, but CEO Andrew Lack termed it "streamlining for future growth..."The restructuring move should save the company $100 million per year.
Sony is the world's second producer of consumer electronic products. In October of 2003 it announced that it would cut the 840,000 parts used in consumer electronics to 100,000 to cut costs. It stated that the company's policy of allowing engineers to design unique parts while developing products had resulted in significant redundancy. The 90 percent cut in duplicate parts should be in place by 2005.
SOURCES
"Business: The Company File/Sony Cuts Back to Move Forward." BBC NEWS, March 9, 1999
"Sony Announces New Group Architecture for Network-Centric Era to size further growth opportunities in the 21st century and enhance shareholder value." Sony Corporation Corporate News Release, March 9, 1999. Sony.com
"Sony Music cuts 1,000 jobs." CNNMONEY, March 28, 2003, http:/money.cnn.com/2003/03/28/news/companies/sony
"World Business Quick Take." Taipei Times, October 6, 2003
Guth, Rob, "Sweeping Sony reorganization emphasizes networks." InfoWorld Electric, March 9, 1999. infoworld.com
Shim, Richard, "Sony Electronics makes changes at top." CNET News.com, January 4, 2003. http://asia.cnet.com/newstech/personaltech/0,39001147,39123328,00.htm
Smith, Steve, "Critical Boardroom Changes." TWICE, June 12, 2000. twice.com/esec/Article/CA40275.htm
Williams, Martyn, "Sony to launch 23GB optical data disc in November." InfoWorld, October, 2003. infoworld.com
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Describe the history of Sony Corporation.
- Compare Sony to similar providers in Japan and the U.S..
- List changes brought about by Sony's reorganization efforts.
- Report on the results of the most recent reorganization efforts.
- Forecast the future of Sony in various aspects of the music and electronics industries.
MATERIALS:
- Background information provided.
- Background information available through Internet "search engines".
- www.sony.com
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Use charts and graphs to illustrate the organization of Sony Corporation and its subsidiaries.
- Use charts and graphs to relate the economic history of Sony Corporation and its subsidiaries.
- Gather information on the results of Sony's reorganization.
- Create a prospectus for Sony Corporation encouraging investors to buy Sony stock by citing improvements created by reorganization and the expected rise in profits.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
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