Case study

Instructions: Assessment 1: Case Study (individual) - weight 20% Read Case Study: Sony: Battling the Marketing Environment's "Perfect Storm". And answer the following questions: Q1 What Microenvironmental factors have affected Sony's performance since 2000? Q2 what macroenvironmental factors have affected Sony's performance during that period? Q3 What stands in the way of Sony's success today? Q4 Given Sony's current situation, what recommendations would you make to Hirai for the future of the company? I Company Case Sony: Battling the Marketing Environment's "Perfect Storm" With all the hype these days about companies like Apple. Google. Amazon, and Samsung, it's hard to remember that companies like Sony once ruled. In fact, not all that long ago, Sony was a high-tech rock star, a veritable merchant of cool. Not only was it the world's largest consumer electronics company, its history of innovative products-such as Trinitron TVs, Walkman portable music players, Handycam video recorders, and PlayStation video game consoles-had revolutionized entire industries. Sony's in- novations drove pop culture, earned the adoration of the masses, and made money for the company. The Sony brand was revered as a symbol of Innovation, style, and high quality Today, however, Sony is more a relic than a rock star, lost in the shadows of today's high-flors. While Sony is still an enor mous company with extensive global reach, Samsung overtook the former market leader as the world's largest consumer elec tronics company a decade ago and has been pulling away over since. Likewise, Apple has pounded Sony with one new product alter another. When I was young. I had to have a Sony product, summarizes one analyst, "but for the younger generation today It's Apple." All of this has turned Sony's current Make. Believe." brand promise into one that is more "make-believe." Sony's declining popularity among consumers is reflected in its financial situation. For the most recent year, Samsung and Apple each talled revenues exceeding $170 billion--more than double Sony's top line. Samsung's profits have surged in re- cent years while Sony's losses reached catastrophic levels. And whereas stock prices and brand values have skyrocketed for competitors, Sony's have reached new lows. Adding insult to injury, Moody's Investors Service recently cut Sony's credit rat- ing to "junk status. How did Sony fall so hard so fast? The answer is a com plex one. Sony never lost the capabilities that made it great. In fact, throughout the past decade, Sony was poised to sweep the markets for MP3 players, smartphones, online digital stores. Office Update To keep up-to-date with security updates, foxes, and improvements, choose Check 10 CHAPTER 3 Analyzing the Marketing Environment 123 and many other hit products that other companies have mar keted successfully. But Sony was caught in the middle of a per- fect storm of environmental forces that inhibited its growth and success. Some factors were beyond Sony's control. However, at the core of it al, Sony took its eye off the market. Tosing sight of the future by failing to adapt to important changes occurring all around it Hit on all Sides For starters, Sony foil behind in technology Sony built its once mighty empire based on the innovative engineering and design of standalone electronics -TV, CD players, and video game con Sokis. However, as internet and digital technologies surged, cro ating a more connected and mobile world, standalone hardware was rapidly replaced by now connecting technologies, moda, and content. As the world of consumer Entertainment gave way to digital downloads and shared content consed through PC Podnomartphones, tablets, and Internet ready TV, Sony was late to adopt. Bohaving as though to market leadership could never bechal Jonged, an arrogant Sony clung to conful old technologies rather than embracing new ones. For example, prior to the launch of Apple's first iPod in 2001, Sony had for three years boon soling devices that would download and play digital music files. Sony had everything it needed to create an iPod/iTunes type world, including its own recording company. But it passed up that idea in favor of continued emphasis on its then highly successful CD business. "Apple's Steve Jobs figured it out, we figured it out, we didn't cute," said Sir Howard Stringer, former Sony CEO The music guys didn't want to see the CD go away Similarly, as the world's largest TV producer, Sony clung to its cherished Trinitron cathodo-ray tube technology Meanwhile, Samsung, LG, and other competitors were moving rapidly ahead with flat screens. Sony eventually responded. But today, both Samsung and LG sel more TVs than Sony Sony's TV busi- ness, once its main profit center, has lost nearly $8 billion over the last 10 years. Recently, in an effort to get back on its foot Page 2 of 3 O Words English (US) lagged in the burgeoning business of connecting people to digital entertainment There are plenty of other examples of Sony's failure to capital ize on market trends despite the fact that it had the products to do so. Consider the Sony MYLO (or My Life Onine), a clever de vice released a year before the first IPhone that had the essence of everything that would eventually define the smartphone-a touch screen, Skype, a built-in carnero, even apps. Or how about the long Ine of Sony Header devices, the first of which was re- leased a year before Amazon took the world by storm with its first Kindle The Turnaround As Sony awoke to the reality of flattering revenues and plummet- ing profits efforts were made to turn things around. In 2005, then CEO Stringer moved in to put Sony back on track. To his credit, Stringer made a credible effort to rolgnito the company, develop ing a turnaround plan med at changing the Sony mind-set and moving the company into the new connected and mobile digital ngo. Stringor offorts were slow to tako root, mooting rosistance by Sony's hardware worshipping culture. Whenever i mentioned content, he wys, "people would roll their eyes bocaune. This is an electronics company, and content io socondary. But even with its rigid structure and inflexible culture working against it, Sony's strengths kept it in the game. In fact, just a few years into Stringer's tonure, the once great consumer electronics giant be- gan to show signs of it, as Sony's profits jumped 200 percent to $3.3 billion on rising revenue. But if Sony didn't have enough challenges, this uptick 00- curred just as the Great Rocession hit. A year later, Sony was right back whore torted with a billion dolarlo. Stringer was Quick to point out at If not for the global inancial colapse and the ven trading near a post-war high, it would have been comfort ably profitable After a few more years of negative profits, 2011 was to be Sony's comeback year, its best batch of new products in over a decade wa bandia to the + 147% Check for Updates Wii Security potes, Toxos, and improvements, choose Check for Updates competitors were moving rapidly ahead with flat screens. Sony eventually responded. But today, the yon trading near a post-war high, it would have been comfort ably profitable. both Samsung and LG sell more TVs than Sony Sony's TV busi After a few more years of negative profits, 2011 was to be noss, once its main profit center, has lost nearly $8 billion over Sony's comeback year. its best batch of new products in over the last 10 years. Recently, in an effort to get back on its feet, a decade was heading for store shelves, including a portable Sony spun off its TV division into a standalone unit. But it faces PlayStation player, a compact 24-megapixel Camera, one of the a daunting uphill battle in a competitive landscape that is far dif most advanced smartphones on the market, a personal three ferent from the one in Sony's heyday. Not only does Sony con- dimensional Video viewer, and the company's first tablets. Por tinue to lose market share to Samsung and LG, but Chinese TV haps more important, the company was ready to launch the makers such as Haier, Hisenno, and TCL are producing cutting Sony Entertainment Network -an iTunes-like global network edge flat panel offerings with a cost advantage that significantly that would finally combine Sony's strengths in movies, music, undercuts Sony and video games to all its televisions, POs, phones and tablets It was a similar story for Sony's PlayStation consolos, once Analysts forecasted a profit of $2 bilion the undisputed market leader and accounting for one-third of But on March 11, 2011, Stringer recalved a text message Sony's profits. Sony yawned when Nintendo introduced its in- at 4:30 a.m. after having just arrived in New York City. Eastem novative motion-sensing Nintendo Wii, dismissing it as a niche Japan had boon devastated by on corthquake and tsuram game device. Instead, Sony engineers loaded up the PS3 with Nobody at Sony was hurt. In fact, Sony's employees dove into pricey technology that produced a loss of $300 per unit sold. W rescue efforts, fashioning rescue boats from foam shipping con become a smash hit and the best-seling game console, the PS3 tainers to assist in saving victime and ferrying supplies. But in the lost billions for Sony, dropping it from first place to third. aftermath of the destruction, Sony shuttered 10 plants, disrupting Even as a money loser the PlayStation system, with its the flow of Blu-ray discs, batteries, and many other Sony tome elegant blending of hardware and software, had all the right In the wake of the extreme natural disasters, Sony's miseries Ingredients to make Sony a leader in the new world of digi- had only just begun. A month later, a hacking attack invaded the tal entertainment distribution and social networking Execu- company's Internet entertainment services. In what was door tives Inside Sony even recognized the PlayStation platform mined to be the second-largest online data broach in U.S. history, as the 'opitome of convergence," with the potential to create Sony was forced to shut down the PlayStation Network. A short "a fusion of computers and entertainment. In other words, four months later, free not by rioters in London dentroyed a Sony Sony could have had a strong competitive response to Ap- Warehouse and an estimated 25 million CDs and DVDs, Outting ple's iTunes. But that vision never materialized, and Sony has the nventory of 150 Independent laboh And to round out the 124 PART 2 Understanding the Marketplace and Customer Value state-of-the-art products and the unitying umbrella of the Sony Entertainment Network show promise. Now, if Sony can just get the economy and Mother Nature to cooperate Questions for Discussion 3-18 What microenvironmental factors have attected Sony's performance since 2000? 3-19 What macroenvironmental factors have affected Sony's performance during that period? 3-20 What stands in the way of Sony's success today? 3-21 Given Sony's current situation, what recommendations would you make to Hiral for the future of the company? year, foods in Thailand shut down component plants, disrupting production and distribution of Sony cameras. Sony's 2011 comeback year turned out to be big all right, but for all the wrong reasons. The projected $2 bilion profit ended up as a $3.1 billion loss, marking a three-year losing streak. As Stringer prepared to fade away into retirement, Kazuo Hirai Sony's emerging CEO, began speaking publicly of Sony's 'sense of crisis. Indeed, Sony entered the record books the following your with a not loss in excess of $6 billion -- its biggest ever Assessing the Damage So in the end, just what is it that has caused Sony's fall from grace? Was it an addiction to hardware, an uncompetitive cost structure, the global financial crisis, natural disasters, computer hacking, or riots? In retrospect, all these elements of the mar keting environment combined to deliver blow after blow. Sony's encounter with a perfect storm of environmental forces us trates the havoc such forces can wreak-Whether unforesee able natural and economic events or more predictable turns in technology Throughout Sony's turbulent existence over the past decade, a few things remain clear. Sony is a company with a long history and strong legacy that refuses to give up. Even now, Hirai and others at Sony tre firmly resolved to save the company. And with engineering and design at the core, they still have all the ingredi- onts needed to become a total entertainment provider in today market. Sony is a gaming console maker, a TV producer, a mobile company, a home device company, a movie studio, and a ma jor recorded-music label. With renewed offorts toward cost-cut- ting and breaking down division walls, Sony portfolio of new Sources Jones Movey Sony Should Have Been a Digo Contender Forbes, February 6, 2014, www.forbes.com/site/forrester/2014/02/06 sony should have been-a-digital-contended Kara Inagak. Sony Slashes Forecast to $1.1 Bilion Annual Loss." Wall Street Journal, February 6, 2014, www.online, covnews/article/S81000142405270 2303490004679305013296595026, Dk Wakab, "Sony Posts Loss, Curbing Stocks Raily, February 7, 2013, http://online.com nows/articles/S810001424127887324500004578289103990907408 Cif Edwards and Marko Yasu, Sony's Search for Cool. The Old Fashioned Way." Bloomberg Businessweek, February 24, 2013, pp. 20-21: Kananaga, "Moodys Cuts Sony Bond Rating to Junk. Wal Street Journal, January 27, 2014, www.online woninows/articles/ SB1000124052709304007504579346001281765972: A Lewis, a Sony So What? Wil Street JournalFebruary 2014 www.online.com news/ticles/ 1424052702304680904570367212204873836 and information www.sony / Sonynto/IR/, nodune 2014 ROM