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SEMINARY PAPER

THEME : Sony Corporation

Profesor Kristina Varcakovic

Student

Contents1. Introduction. The history of Sony Corporation2. Structure3. Products4. Statistical and financial data5. Conclusion6. Bibliography

Introduction. The history of Sony CorporationSony Corporation is one of the most successful company operating in many countries of the world but it was not always such a huge and influential international corporation. Initially, it was founded in 1946 by Akio Morita, Masaru Ibuka, and Tamon Maeda. They established Tokyo Telecommunication Engineering with funding from Morira’s father’s sake business. It is quite noteworthy at the moment of establishment only about 20 employees worked in the company and the first consumer product that company sold in late 1940s in the market was a rice boiler. But soon, in 1950, being determined to innovate and create new markets, the company produced the first Japanese tape recorder.Actually 1950s were the years of the rapid progress and the growth of the company. In 1953 Morito paid Western Electric 25.000 dollars for transistor licenses that marked the start of the great progress for in 1955 the company launched one of the first transistor radio, followed by a pocket-sized radio in 1957, and a year later the company changed its name to Sony.By the way the history of the brand change is quite interesting. Since the company was interested in the entering of new market, including European and American, it needed a romanized name that would be more recognizable and easy to remember. Initially TTK was suggested as a brand name but it was rejected basically because the railway company Tokyo Kyuko was known as TKK. At the same time, the name ‘Sony’ that was eventually chosen was much better decision because it was a mix of the Latin word sonus, which meant sonic and sound, the English word ‘sunny’, and from the word Sonny-boys which is Japanese slang for ‘whiz kids’. The word ‘Sonny’ was not accepted as the name of the brand because it sounded like a Japanese word soh-nee, which means ‘business goes bad’. As a result ‘Sony’ was chosen and it was a unique word despite certain opposition because in that time it was quite unusual for a Japanese company to use Latin letters.After this change the products of the company was known as the products of Sony. In 1959 the company introduced the first transistor TV and two years later the first solid-state tape recorder. In such a way introducing new products that were absolutely innovative Sony pre-empted the competition becoming the leader in the new markets because its competitors had to catch Sony up.In 1960s the oversee expansion of the company started with the US market. In 1964 Sony launched the first home video recorder, in 1965 solid-state condenser microphone, and in 1966 integrated circuit-based radio (Schiffer 1991). 1968 marked a new step in the development of Sony Corporation when the company introduced the Trinitron color TV tube. The 1970s was marked by successful introduction of Betamax VCR in 1976 and the Walkman in 1979 (Robertson 2003).1980s were particularly difficult for the company because of a significant growth of competition, especially from the part of fast developing Far Eastern countries. Nonetheless, Sony amply used its technology to diversify outside consumer electronics, and, what was very important, the company began to move its production to other countries aiming at reduction of the effects of the currency fluctuations. At the same time 1980s, being difficult, was also marked by “a significant success of the company, namely it introduced Japan’s first 32-bit workstation and became the major producer of computer chips and floppy disc drives”

(Robertson 2003:429) that was very perspective in that time. Moreover, the company also developed compact disk technology in partnership with Phillips.In 1988 Sony acquired CBS and in 1989 Columbia Pictures that made the company “the major force in the rapidly growing entertainment industry and gave it a source of software material to sell with new hardware products” (Collins 1994:372).At the beginning of the 1990s the company manufactured Apple’s PowerBook and Data Discman, a portable CD player that displayed text and audio from reference book. In 1992 Sony allied with Sega to develop CD video games and with Microsoft to make electronic audio/video textbooks. The same year the company launched a high-end CD player, which minimized distortion. In 1993 Sony challenged the industry standard Dolby Digital 5.1 surround sound format with its newer and more advanced proprietary motion picture digital audio format called SDDS (Sony Dynamic Digital Sound) (Collins 1994). The late 1990s were marked by introduction of Memory Stick, Super Audio CD, and the continuing expansion in the market of CD video games with Play Station and Play Station 2.

StructureObviously such a company as Sony Corporation is a god example of a company that has started with 20 employees and achieved really impressive results for nowadays it is widely presented in different countries all over the world. It is quite a remarkable fact that the company is characterized by a high degree if diversification, it means that the company is not focused on one industry only that would make it very narrowly specialized but it operates in different markets and industries. What is probably more important is the fact that the company has always emphasized the importance and necessity of innovation that made company historically number one in certain spheres since they first introduced many products while their competitors either did not enter the market or just planned to introduce similar products. In such a way nowadays Sony Corporation is quite a successful company but it is quite interesting to understand the reasons and the factors that provided the company with such a tremendous success.Obviously one of the main reasons of the company’s success is high effectiveness of its management and structure. In fact from the beginning of its existence Sony readily accepted unusual solutions that is obvious from the choice of the name f the brand when an unusual name was chosen that was absolutely untypical for Japanese companies. This fact indicates at the international orientation of the company. It means that practically from the first years of its existence the company was ready to develop its structure and expand in other countries.However, the obvious international orientation of the company is significantly dictated by the products it produced and keeps producing for the implementation of new technologies, especially in electronics and computing, implies that the potential market of the company would go beyond national borders.By the way it should be underlined that its international character is supported by the fact that recently, namely on March 7, 2005, Sony Corporation announced that Nobuyuki Idei will step down as Chairman and Group CEO and will be replaced by British Sir Howard Stringer, Chairman and CEO of Sony Corporation of America. This is quite remarkable because this decision to replace Idei with Wales native Howard Stringer will be the fist time when a foreigner will run the major Japanese electronics company. In fact it means that the internalisation of the company now involves even the highest level of the company management.Naturally, on realizing that Sony Corporation success was basically predetermined by its effective structure and management, it is necessary to dwell upon these elements of the company and analyse them in details. At this respect it is necessary to point out that Sony

Corporation is the parent company of the Sony Group and is engaged in business through its six main operating segments, namely Electronics, Music, Games, Pictures, Financial services and others (Wilson 2004). Such a structure results in the wide range and “diversity of industry where Sony Corporation may operate” (Wilson 2004:247) and at the same time it can successfully experiment because even if some products fails in one of the segments than others will neutralize the loss caused by such a failure. On the other hand, close cooperation between different operational segments may lead to improvement of products of the corporation at large.Furthermore, the current number of company’s employees is quite contrasting to the initial number. As it has been mentioned above the company started with about 20 employees and in the mid 1990s there worked 152700 employees throughout the world (Robertson 2003).Returning to the company’s management, it should be said that not only the head of the company has been recently changed but the whole management structure as well in order to expand its core strengths as a global electronics, technology and entertainment company and the change has been started by Nobuyuki Idei who has implemented an effective reallocation of group-wide resources and promotion of cross-border alliances within the Sony Group and, in such a context, the new non-Japanese head of the company is a symbol of such a policy. The step, undertaken by Idei, has resulted in the significant strengthening of the entertainment content businesses, the solidifying of the mobile phone businesses, the development of the next generation semiconductor chip, and the integration and expansion of the financial services business. Quite naturally that now Sony Corporation is poised to move forward with its global electronics, entertainment and technology strategy.Furthermore, it is supposed that the new structure will enable the company to streamline its operation and provide a more cohesive focus operating its businesses around the world in a proactive and strategic manner that is particularly important in the current situation when the economic globalisation influences economies and businesses of practically all countries and companies, especially large ones such as Sony Corporation.It is noteworthy that the company strategy and suggested changes have been applied in a short term and in June 2005 Sony has a new management team centring on Sir Howard Stringer and Dr Ryoji Chubachi. In fact both men have a deep understanding of Sony’s great tradition and through their open management style they focus on energizing the entire company. It is very important that Sir Howard Stringer is respected within the corporation as well as in business community. The fact that he is a foreigner is, to a certain extent, positive because it permits him to have a global vision of the company and in such a way the better integration of Sony’s electronics, entertainment and other groups will probably be more effective.At the same time, Dr Chubachi has a deep experience in electronics and profound understanding of technology issues that creates the conditions for proper integration of technological and electronic segments in the general structure of Sony Corporation. In such a way the management structure tends to mobilize the company’s segments and integrate them closely in order to increase their effectiveness and in actuality the company shows its trend to open policy and trend to globalisation of its businesses and policies that is particularly important in the conditions of economic globalisation when international integration of a company is of paramount importance.At the same time electronics is not the only segment where Sony Corporation operates successfully. Its entertainment segment is also quite productive and is very perspective making the company more powerful and competitive. Moreover, in such a way the company tends to produce products which refer to the intellectual and to a certain extent immaterial sphere. This is very important in the period of transition from industrial to post-industrial society and way of production that provides the company to keep leading positions in different segments of the market and have good perspectives in the future.

ProductsNaturally, Sony Corporation could hardly achieve such astonishing results without its productive achievements. Before speaking about its products, it is necessary to point out that the company always tended to introduce innovative products and technologies that is obvious from a brief historical review of the company development. In fact, every time the company was the ‘first’ in introduction of some products, such as pocket-radio, solid-state videotape recorder, etc., the company made a significant progress and increased the gap between itself and its competitors because the latter should either use experience or invent their own products that would be similar to those of Sony while Sony Corporation improved and perfected what the company had already introduced.As for the company products, it has been already mentioned that since the establishment of the company it has introduced a lot of innovative and successful products. Nowadays the company continues to play a particularly important role in the world market in different spheres, especially in electronics, where the company’s recent achievements are particularly significant. But it is also noteworthy that the company entered entertainment businesses that are very perspective, especially in well-developed countries because entertainment industry can be not less profitable than any other technologically advanced industry.Nonetheless, the recent achievements of the company in electronics are particularly notable. In fact Sony has always been notable for creating its own in-house standards for new recording and storage technologies instead of adopting those of other manufacturers and standards bodies. Among the most remarkable examples of such products may be named MiniDisc that was created by Sony for use in portable music players. They were designed to share the market of Walkman products. However, “low consumer adoption has seen the product fail outside the Japanese market” (Robertson 2003:483).Furthermore, among the products developed in last decade may be named Sony’s Memory Stick flash memory cards for digital cameras and other portable devices, though other manufacturers are also make use of this technology that obviously deteriorates the position of Sony in this segment of the market but still the company is quite competitive and is able to remain among the leaders of the industry. However, it should be pointed out that Memory Stick have less market share than Compact Flash and SD devices.One of the successful attempts of Sony was the introduction of the 90mm micro floppy diskettes (better known as 3.5 mm floppy discs), which Sony had developed at a time where there were 4” floppy discs and a lot of variations from different companies to replace the then on-going 5.25” floppy discs. In such a situation Sony achieved the great success with its product and the format became dominant. However, the development of technologies has never stopped and gradually 3.5” floppy discs faced a more advanced substitute, USB flash memory ‘drives’ and memory cards, as well as cheaper CD-R and CD-RW drives and media.Furthermore, the DVD format, currently being used in households world wide, were jointly developed by Philips and Sony to replace CD. This format is more preferable due to the use of a shorter wavelength laser beam that sees the higher storage capacity of 4.7-17+ GB as opposed to conventional 640-700 MB on to a single disc (Robertson 2003).Another invention of Sony, SDDS is more preferable than traditional Dolby Digital 5.1 for this format employs eight channels of audio opposed to just six used in Dolby Digital 5.1. Unlike Dolby Digital, SDDS utilizes a method of backup by having mirrored arrays of bits on both sides of the film which acts as a measure of reliability in case the film is partially damaged. However, even this progressive achievement of early 1990s has been “overshadowed by DTS (Digital Theatre System) and Dolby digital standards in both the motion picture industry and home audio formats” (Robertson 2003:532).It is noteworthy that since the introduction of MiniDIsc format, Sony has attempted to promote its own audio compression technologies under the ATRAC brand, against most

widely used formats such as MP3 and Windows Media Audio. Until late 2004, Sony’s Network Walkman line of digital portable music players did not support MP3 de facto standard natively, although the software provided with them would convert MP3 files into the ATRAC or ATRAC3 formats. Sony is currently pushing its Blue-Ray optical digital versatile disc format, which is likely to compete with Toshiba’s HD-DVD. However both formats have significant industry backing and it is unclear whether this will prove to be a mistake for Sony, or whether their formats will win out that will be a great breakthrough in the market for the company’s product.Probably one of the most successful developed by Sony in 1990s and recent years is the PSP (Play Station Portable). This is a handheld gaming system, which uses the proprietary Universal Media Disc (UMD) format on which games are distributed. Other Play Station media also make use of non-standard features to prevent use of pirated copies. It is particularly important because this segment of the market is quite perspective and develops fast and the share of pirate products constantly grows especially in developing countries and countries with transition economies.Statistical and financial dataSpeaking about the financial data and progress of Sony Corporation, it is necessary to say a few words about the basis of the company power. It is obvious that Sony, being presented in different segments, could not be such competitive as it currently is without its acquisition, which were particularly significant in late 1980s-90s and in recent years.First of all, it should be pointed out that Sony Corporation acquired CBS (Columbia) Record Group from CBS for 2 billion dollars and it was renamed “Sony Music Entertainment”. A year later, Sony acquired Columbia Pictures Entertainment from Coca-Cola for 3.4 billion dollars and since 1991 it is named “Sony Pictures Entertainment”. In 2000, Sony had sales of US 63 billion dollars and 189.700 employees.However, the US was not the only country where Sony made its acquisition. For instance, the company acquired Aiwa corporation in 2002. Sony also owns television channels in India and channels aimed at Indian community in Europe. In Latin America it owns Sony Entertainment Television, a TV channel that broadcasts popular series from other networks in the US with subtitles in Spanish and Portuguese (in Brazil only).Moreover, on July 20, 2004, the EU approved a 50-50 merger between Sony Music Entertainment and BMG. The new company is called Sony BMG and, together with RIAA partner Universal, control 60% of the worldwide music market. The same year, on October 13, a Sony-led consortium finalised the deal to purchase the famous film studio Metro-Goldwyn-Meyer for about 5 billion dollars, including 2 billion dollars in debts.Speaking about the companies sales and its main markets it should be pointed out that Sony, being presented worldwide, has it’s the largest market in the US market where the company had 31% of sells and constituted 11,208 million dollars in 1994, in Japan 27% and 9,939 million dollars, in Europe 22% and 8,085 million dollars, and in other countries 20% and 7,018 million dollars respectively.As for the products sold by the company in the mid1990s, namely in 1994, they were as follows: audio equipment constituted 22% or 8,162 million dollars of total sales, video equipment 18% and 6,491 million dollars, televisions 17% and 5,999 million dollars, music 12% 4,483 million dollars, pictures 9% and 3,182 million dollars, and other products 22% and 7,933 million dollars respectively. Also it is quite interesting to trace the dynamics of sales, net income, earnings per share and the number of employees of Sony Corporations since early 1990s to late 1990s. At this respect, sales of Sony constituted 26,249 million dollars in 1991, in 1994, it was 36,250 million dollars and in 1995 - 45,670 million dollars; net income respectively constituted 832 million dollars in 1991, 149 million dollars in 1994, and 1,124 million dollars in 1998; earnings per share in 1991 constituted 1,85, in 1994 it was 0,41, and

in 1998 the figure achieved 2,49 (Robertson 2003).Judging by this statistics, it is possible to say that the mid-1990s were quite difficult years for the company but in fact the main problem of Sony Corporation at a time was the health problems of Morita, who suffered a brain haemorrhage and, though he recovered after surgery he resigned in 1994 and as a result earnings dropped dramatically because of these problems with the head of the company who obviously was the key figure in Sony Corporation. Nonetheless, the company successfully overcome the problems and in the late 1990s the earnings increased significantly.ConclusionThus, taking into consideration all above mentioned, it is possible to conclude that Sony Corporation is one of the largest companies currently operating in the international market. It is important to underline that Sony operates in different segment of the market but its basic principles remain practically the same. At any rate throughout its history the company always tended to apply new, innovative technologies and products that provided the company with leading positions in different spheres, especially in electronics. Obviously the same trends are typical for the company now despite significant changes that take place in its management structure. But the company has already proved that it is ready to take untraditional decisions, it was demonstrated when the name Sony, strange for Japanese, had been chosen, and so strangely for a Japanese company is the choice of Sir Howard Stringer as the Chairman that does not make such a choice less effective, as it used to be with the choice of the company’s name.Anyway, the experience of Sony Corporation in its transformation from a small company with 20 employees into international a gigantic corporation is worthy attention and research. Personally I think that the company is extremely successful and the basis of its success is its readiness for innovation on all levels from introduction of absolutely new products to experiments in management structure.

Bibliography:1. Collins, H. Made in Japan by Akio Morita and Sony, LA: McGraw Hill, 1994.2. Schiffer M.B. The Portable Radio in American Life The University of Arizona Press, 1991.3. Robertson, H.W. Sony Corporation: Past, Present, and Future. New York: Routledge, 2003.4. Wilson, G. Management of Japanese Corporations. New York: Touchsto