Unit 7 Sony Ericsson Business Strategy Assignment

Unit 7 Sony Ericsson Business Strategy Assignment

Introduction

Sony Ericson is amongst the world’s largest providers of mobile phones, PC cards and accessories for phones as well as radios. It is a joint business venture between Sony which is a Japanese firm and Ericson which is a Swedish company. Sony is a leading supplier of electronics while Ericson is a leading provider of network infrastructure and telecoms. After the merger, London remained the global headquarters of Sony Erickson but with other major offices in Netherlands, China, the US and France. There are many possible business level strategies for the firm.

(LO 3.1, 3.2) Evaluate possible strategies that can be implemented in Sony Ericsson

In terms of Business level strategy, Sony Ericson can develop an upstream integration. This is whereby the company will have to strive to ensure ownership and control of mobile phone accessories as well as spare parts needed to make or repair their cell phone brand. This will prevent the accessories and spare parts landing onto the competitor’s hands. There are several business level strategies that Sony Ericson can employ such as:

Differentiation

Sony Ericson may adopt differentiation form of business level strategy (Steiner 2010). This may be based on the assignment excerpt where the main competitors of Sony Ericsson such as Motorola, Inc., Nokia and Samsung make almost similar products with Sony Ericson. The differentiation business level strategy will generally encourage innovation and leverage trustworthiness. Sony Ericson may improve its innovativeness by launching new cell phone designs with more features and longer battery life unlike the previous models. In addition, in terms of trustworthiness the firm can resolve to engage security based initiatives. This may give them an upper advantage since there is generally lack of accountability among the open source competitors. Further differentiation for the firm may involve leverage of tight integration especially between its phones applications and operating system to reduce cases of imitations and counterfeit of the firm’s products.

Low price

According to the excerpt report, Sony Ericsson’s sale in the third quarter in 2008 was €2,808m. This was observed as a decline by 10% when compared to the third quarter of the year 2007 with an overall turnover of €3,108m. As a result, their gross profit dropped by 35% from 2007 to 2008 (Sony Ericsson Press Release 17/10/2008). The company can improve this by charging slightly lower price on their products as compared to their competitors. This will ultimately increase the sale volumes that will consequently increase the profit margin. Low price as component of business level strategy can be seen even in the firm’s mission and vision. The mission of Sony Ericson is to be the most innovative and attractive brand worldwide in the cell phone industry. This is very important since potential customers will be aware of the firm’s existence particularly when their prices are slightly lower than their competitors. Moreover, from their vision statement, the company is striving to be the prime driver or set-pacer in the world’s communication industry. Therefore, the firm’s vision may be consistent with low price business level strategy since it will enable most people to afford its product. Therefore, success of the firm in providing low price and user friendly mobile phones may result in a massive sales turnover within a very short period around the globe. Moreover, the firm will be able to establish a huge customer base that will earn it the economy of scales and even improve the future prospects of the company in the communication industry (Lennon 2011). This huge customer base may require modern technological necessities which the firm is lacking at the moment. For example, based on SWOT analysis, the weakness of the company in terms of technological advancement is the production of cell phone designs with large switches and battery with low life.  This has seen their competitors gaining more market share as customer opt for their competitors’ phone and radio designs. Low price as Business Level Strategy comes in handy when combined with technological improvement in solving Sony Ericson’s problems.

Corporate level strategy

Corporate level strategy is another form of business level strategies that Sony Ericson can adopt. In this strategy, a firm’s operation primarily a single unit that uses several segments that adds value by presenting a variety of solutions. These solutions may be offered either singularly or in combination with other technologies, systems, services, products, software and financing. It is advisable that Sony Ericson adopt a corporate level strategy that may have combination of both concentrations on vertical integration strategy together with a single business strategy. The single business unit will enable the Company to compete successfully within the framework of a single business unit. The advantage of this kind of operation is that it will allow Sony Ericson to focus its entire collective resources to attain market dominance thereby becoming a success in communication sector which is in line with the firms’ vision statement.  The other alternative to corporate level strategy would be diversification. However, this has its own disadvantages since the firm may end up spreading their resources out too thereby limiting or preventing the firm from taking advantage of potential opportunities in foreseeable future as a result of lack of resources and capital availability. For example, in PESTEL analysis, Sony Ericson is already trailing its competitors in terms of technology due to low capital. The competitors use smaller switches and chips as compared to Sony’s. Therefore, to avert future decline in capital, the company should avoid diversification as business level strategy and embrace corporate level strategy. 

Even though focusing on a single business unit strategy may not be very effective, the Sony Ericson may improve her market share by pushing forth its core competencies strategy. By definition, core competency is a specific attribute that an organization identifies as the best way to work with the employees (Smith 2012). The firm’s core competence strategy is the sustainability concept which envisages better working relationship with employees by taking into account their welfare in addition to making highly advanced and competitive.  The achievement of core competency strategy will see the company sailing to greater heights in terms of business and market share in the future.
The other corporate level strategy Sony Ericson can use is already envisaged in the firm’s goals. By description, a goal of a company is can be based on improvement of market share, improvement in quality of the product or improvement in technology. For example the firm’s goal in the sustainability report of 2011 was to reduce the greenhouse gas emissions from the full life cycle of our products by 15% by 2015, based on greenhouse gas emissions levels of 2008.  

Operation

Sony Ericson was established in 2001 as a joint venture between Japanese company, Sony and Swedish company, Ericsson. It has it’s headquarter in London. The operation of Sony Ericson covers more than 140 nations globally and the firm derives more than three quarters of its income from sales in the developing nations of Africa, Asia and Latin America. To improve on its operation, the company needs to adopt an international strategy that focuses on how it plans to operate and compete globally. This can only be achieved by creating “value” in their products. An avenue of doing this would be transferring their valuable mobile phones products with new features and skills to foreign markets especially where their main competitors lack such products and skills.

Notably, even though Sony Ericson’s revenues comes from overseas sales, the firm tends to centralize major decision making as well as other firm’s core functions in London. The implication is that market decision making have to be made at the Company’s headquarters without putting more emphasis on the happenings in other countries with unique markets. In addition, the products are rarely custom made to suit the different market preferences. This calls for adaptation and modifications of the newly launched products which is seldom done. Therefore, for the firm to improve on her operations overseas, it needs to decentralize some of its decision making process and be ready to do modifications on their product so as to adapt in the various local markets.

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(LO 4.1, 4.2, 4.3) Plan to implement the strategy

There are several plans that Sony Ericson can adopt so as to implement the strategies discussed above. The company can for example engage Synoptic Planning. This will require the firm to look at the major problems from a system’s point of view and analyze it by means of both mathematical and conceptual models in an objective way by relying on the sales volume (Larsen, 2003). It is much applicable in implementing the business strategy of “low price”. Here the firm will need to set the goal to be achieved in a fiscal calendar year. For example, a goal can be attaining an increased profit margin of 20% in the year 2014 through cut on products prices. At the same time the firm will need to identify an alternative policy if the main goal is deemed to fail. The alternative policy would be on how to cover up for the losses and raise the capital for the next financial year (Gershon, 2008). In this Synoptic Planning, there will be essence of evaluating the means of in terms of cost in implementing the low price policy against the expected result. Ultimately, a decision has to be made by the firm’s management if it is possible to implement the business level strategy or not. The implementation of Synoptic Planning may require sourcing for capital from banks, development partners and other financial institutions since it is an expensive venture. It can be achieved within 2 years.

Another plan to implement business level strategy involves incremental planning. This will be based on instrumental assumptions and rationality. It will acknowledge the cognitive levels of the top decision makers and endeavors to meet the choices of the successive approximation. However, it does not examine the current institutional performance. The planner’s duty would be to identify the current problem that needs immediate solution.  The planner will then mediate between the different perceptions and interests among implementers and ultimately reach to a consensus that is of the best interest to the organization and its members. Incremental planning would be good in addressing corporate strategy of Sony Ericson Inc. Implementation of Incremental planning may require political good will from the particular nation Sony Ericson operates in as well as financial incentives from development partners especially in areas of corporate responsibilities like reduction of greenhouse gas emissions. This may take a very long time. It will be monitored by the growth of the company within a particular nation.

Targets and Achievements:

This company is said to have the initial focus of developing the basic color phones on which the mid-level management are been enabled. Annual productions for these are been reaching millions by 2009. Thus they have a local manufacturing in the basic developments of the attractive products and have even competitive price points in it.The mobile phone firm, a venture between Japan's Sony and Sweden's Ericsson, plans to offer customized features for the Indian market, such as local content and customized keypads, in addition to competitive pricing.

With a GSM subscriber base of 105.4 million, India is one of the fastest growing mobile markets in the world. The move follows the steps of other manufacturers who aim to capitalize on the same market.The world's second largest cell phone maker by unit-shipment, Motorola (NASDAQ: MOT) introduced its own low-cost phone to the India market in November, 2006. Its Motophone features an innovative, low-power display, using technology from E Ink Corp.

Sony Ericsson had a fourth-quarter global market share of 8.7 percent, behind Nokia's 35.2 percent, Motorola's 21.9 percent and Samsung's 10.7 percent. In 2006, the company shipped nearly 75 million handsets worldwide.

Time Scale Techniques:

Using balanced scorecards as tools for translating any strategic objectives into a set of performance indicators for its operational units. These focus primarily on:

• Market and customer performance
• Competitive position
• Internal efficiency
• Financial performance
• Employee satisfaction and empowerment.

Based on the annual strategy work, these scorecards are updated with targets for each unit for the next year and communicated throughout the organization. The balanced scorecard is also used as a management tool to align operating unit and individual goals to Company goals, follow up progress and monitor identified risks.

In addition, Transitive Planning can also be considered as a plan to implement business level strategy.  The planning focuses on specific target group and setting the steps of planning. Transactive Planning is based on the personal knowledge of the involved rather than the processed knowledge and endeavors to ensure social reconstruction through mutual learning (Friedmann 2003). Unlike incremental planning, it focuses on personal and organizational development but not on specific functional objective. This planning would be suitable for the operations of Sony Ericson. The financial resources incentives required would basically be channeled to training of the decision makers and therefore the source may be the company itself. The time required to implement it may vary from months to years. The mechanism for monitoring would be how effective are the decisions made by the top managers.
Lastly, Radical Planning can also be considered as a plan to implement business level strategy. Radical Planning will assess two aspects of thinking especially in decision making that comes together. It is based on freedom, personal growth and corporation in an organization when planning. It would be appropriate for corporate level strategy. The time frame to implement Radical Planning can be approximately 5 years. The source of finances may be from banks and other financial institutions. This will be evaluated by comparing the previous performance of the firm with its performance after 5 years.

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Conclusion

In Unit 7 Sony Ericsson Business Strategy Assignment we discussed there are many possible business level strategies for the firm. These include differentiation, low price, corporate level strategy and operation strategy. The business level strategies for Sony Ericson have several plans for implementation. The plans include Synoptic, Transactive, Incremental and Radical.

Reference

Friedmann, John. "Why do planning theory?" Planning Theory 2.1 (2003): 7-10.
Gershon, Richard A. Telecommunications and business strategy. Routledge, 2008.
arsen, K. T. "ICT in urban planning." Aalborg University, June (2003).
Lennon, Mark M. "East Asian supply chains: designer mobile phones." International Journal of Management and Decision Making 11.3 (2011): 284-297.
Smith, Leigh, and Peter Ball. "Steps towards sustainable manufacturing through modeling material, energy and waste flows." International Journal of Production Economics 140.1 (2012): 227-238.
Steiner, George A. Strategic planning. Simon and Schuster. com , 2010.

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