A Case study about the International Management of Sony with a focus on their diversification strategy.

2. Presentation overview
 Introduction of Sony
 Introduction of assignment question
 Diversification strategy Sony
 Sony’s Paradigm shift
 Questions
 Conclusion by Maria Kalieva

3. Introduction Sony
 Multinational Corporation (Anno 1946)
 Headquartered in Tokyo, Japan
 One of the leading manufacturing
companies for:
• Video Media Electronics,
• Information Technology
• Communication Technology for both
the consumer and professional
markets.

4. Introduction A.Q.
“Outline and evaluate Sony’s diversification strategy, in
the period 1987-2003”
&
“Do you consider the strategy changes involved to be
evolutionary or a more dramatic paradigm shift in
terms of Sony’s definition of the business it was in?”

5. The Diversification Strategy

6. What is a Diversification
Strategy?
 A corporate strategy to enter into a new market or
industry
 Creating a new product for that new market.
 This is the riskiest section of the Ansoff Matrix, as the
level of know-how is likely to be low.

8. Objectives of
Diversification Strategy ?
 Offer a wider range of products and services to the
public
 Manage Risk – No matter how diversified, risk is
never eliminated completely
 Make money in high profit businesses
 A medium between risk & return : achieve financial
goals whilst getting a good night’s sleep.

9. Diversification Strategy
 Movie Industry
 Music Industry
 Gaming Industry
 PC Industry
 Mobile Phone Industry

10. The Movie Industry
 1989: Purchase of Columbia
Pictures (movies, media)
 Abandoning projects in
development
 Lawsuits
 Contract claims
 Low Know-how in Film
Production: a service business
based on creativity.
 Sony’s poor judgment over Film
Production Management.

11. The Movie Industry
“Was the diversification from Consumer electronics to
Film Production a failure?”
1995: 3,3 billion USD NETLOSS
 Sold MCA & Universal Studios in 1995
 Columbia Pictures –> Sony Pictures Entertainment
(more successful ‘Men in Black & Spiderman’)

12. The Music Industry
 Acquisition in 1987 of CBS
 Successful recording artists: Michael
Jackson, Oasis and Will Smith.
‘All record music companies faced
difficulties’
 Artist Personal problems
 Music Piracy
 Technical change

13. Gaming Industry
 1994: The PlayStation I
 Success despite late market
Entry (Sega & Nintendo)
 Why? Superior technology,
processor power and great
marketing (name example).
 1998: 50 Million + unites
sold (55% world games
market)

14. PC Industry
1995: Partnership with
US Intel
Intel: Processors &
Pentium Boards
Sony: Monitors & Disk
drives
1997: VAIO
1998: Revenues increased by 70% - Profits highest level ever

15. Diversification Strategy
 Not only product level  Management level
“sony the most westernized country of Japanese
companies has been the most pioneering in developing
cross functional Americal and European organisations
and in integrating non-Japanese into top management
posts.”

16. Diversification Strategy
Other examples of Management Diversification (comp.
Jap)
 Decision making delegated to regional
organizations.
 Sony UK reports to Sony Europe in Germany
 Non-Japanese people in the SONY Board.

17. Organizational restructuring
1999: MAJOR restructuring – All 10 divisions
reorganized into three groups:
 Home Network Company: TV, Video, Audio
 Personal IT Network company:
telecommunications, VAIO, camcorders
 Core Technology & Network: Semi-conductors,
disc drives and storage media

18. Revolutionary ?
 Sony’s diversification was an innovatory rethinking of
traditional industry boundaries to achieve competitive
boundaries
 Vision: A multimedia future in which Sony controls the
high value software products (Music & Movies) running
on their hardware products.
 Example: Provide the Videocassete recorder & library of
films
 Transnational Structuring: Subsidiaries are doing their
own decision making.

19. Dramatic
 Enormous & risky step
 Massive Cultural difference between USA & Japan

20. Thank you for listening
Questions ?