Sony Corporation: History and Structure

1. Introduction

This report is organized for the senior management team at Sony. This report provides a strategic approach of how Sony manages its innovation, knowledge transfer and risks. This report begins by analyzing a brief overview of Sony, its business segments, and geographical coverage. Furthermore, this report will also examine Sony's mission and vision and shows how innovation is rooted in its mission and vision. This report then follows the global strategy and structure adopted by Sony which is a transnational strategy and matrix structure.

2. Company Overwiev

I. Sony

Sony Corporation is a Japanese multinational conglomerate corporation established by Akio Morita and Masaru Ibuka on May 7, 1946. Sony Corporation is a global manufacturer of electronic devices, software, and games consoles for consumers, and industrial and professional markets. It operates in three main sectors which include electronics, entertainment, and financial service. Sony's operations are further carried out through diverse business segments as displayed in Appendix 1. With its pictures, music, game, and online businesses, the company has successfully placed to be one of the world’s leading digital entertainment brands, providing an exceptional portfolio of inspiring multimedia content. Sony operates across America, Europe, Africa, the Middle East, and the Asia Pacific and employed about 117,300 people as of March 31, 2018.

II. Mission and Vision

Sony's mission is to deliver “Kando” through its superior products, content, and services which inspire and fulfils the curiosity of the customers. 'Kando' is a Japanese term which refers to moving people emotionally and it is deeply rooted in Sony's core philosophy to deliver a moving experience to its customers by their innovative products. For instance, the PlayStation attracts and engages consumers through an emotional bond based on the gaming experience. Sony Corporation's vision also focuses on the concept of Kando. The engineers of Sony use their infinite passion for technology to create and produce new innovative products to fulfil the customer's curiosity. In aspiring to achieve this, Sony aims to create social value by providing consumers with a sense of enrichment through the creation of a community of interest by connecting producers and customers together. Thus, Sony's mission and vision complement one another and maintain its strong influence on the business.

3. Corporate Strategy and Structure

Firms choose a suitable strategy for their businesses among the four main strategic postures while competing globally. They are international, multinational, global, and transnational strategies. The appropriateness of each strategy differs with the extent of pressures for local responsiveness and cost reductions.

I. Transnational Strategy

Sony utilizes a transnational strategy on their business. A transnational strategy is where firms produce and sell a certain degree of standardized as well as modified products in various markets according to the local preferences Ireland, et. al. With this strategy, Sony aims to consolidate the advantages of global scale efficiencies with the benefits of being locally responsive either in a geographic region or a country and the authority remains both centralized and decentralized. Sony depends on the standardization of products with global production and distribution; however, it also has a system called “Sony Pledge of Quality” through which new designs for local markets are developed and introduced. Sony's Pledge of Quality helps Sony to create products that satisfy the needs of local preferences of consumers.

Bartlett and Ghoshal have stated that transnational strategy is superior in contrast to other strategies and is the ideal way for firms to reach success by reducing cost and achieving local responsiveness. For instance, Sony PlayStation reduces its cost by locating most of its production facilities to low-cost countries such as China. Sony PlayStation understands its customer needs in different markets with different cultures of both home and host countries. Thus, with the effective formulation and implementation of the transnational strategy, Sony PlayStation is able to dominate the global video game market in opposition to Nintendo and Microsoft’s Xbox.

II. Matrix Structure

Sony Corporation has a diverse product portfolio and large global operations and sales in international markets. Following the Stopford and Wells structure model, a high level of product diversification and global operations and sales has led Sony to adopt a global matrix structure. Sony has implemented a matrix structure to combine well with the transnational strategy as it helps Sony to coordinate the activities effectively between a parent company i.e. Sony Corporation and its subsidiaries or even within subsidiaries to subsidiaries.

Following a global matrix structure, Sony is more flexible in all of its activities such as manufacturing products and responding actively to customer needs from different geographical areas. Due to the complexity of the matrix structure, the headquarter of Sony, however, has to be in constant contact with product groups and countries. Sony Corporation’s matrix structure shows that the subsidiaries have a certain level of autonomy depending on the business units. Therefore, the parent company of Sony do not possess complete control over its subsidiaries. As Sony follows a transnational strategy and a global matrix structure, knowledge and ideas sharing exist between Sony Corporation and its subsidiaries.

4. Innovation Creation

I. Strategy Innovation

Innovation has always been the core philosophy and spirit of Sony Corporation. The ground-breaking spirit of continuous innovation has always encouraged Sony to create innovative products from its establishment to date. Sony was the first firm to produce portable music players in 1979 such as Classic Walkman as given in Appendix 3 before any other companies could actually conceptualize them. It completely transformed the way to listen to music. Furthermore, Sony built PlayStation in 1994 which is one of the most profitable and successful products of the company and manage to dominate the gaming industry. Recently, Sony also introduced “Aibo” the AI-driven entertainment robot pet for various use in environments in addition to the home and to bond actively with humans.

Due to the size of the conglomerate and the nature of its diversification strategy, Sony’s electronic business segment is used as a unit of analysis. Appendix 3 displays a generic illustration of Sony’s electronics supply chain. It is found that Sony’s configuration of their downstream value chain activities is organized according to how high-tech the product is.

For example, Sony product items are classified as commodities and require little technical expertise which are often manufactured abroad. The reasons for this decision are supply chain cost-related, as the low manufacturing costs of “commodity” products outweigh the higher costs of transport and longer lead times. China, in particular, has proven to be an excellent location for the outsourcing of many of Sony’s less innovative products, where competition is based on efficient, fast production. Alternatively, for leading-edge products, Sony found that China’s manufacturing base, among their many others, lacks the critical “market mediation” capabilities – i.e. the technological expertise, benefits of proximity, and the supply chain flexibility to cope with the demands of high-margin, high-risk new product introductions. As such, products that fall into this category are often produced in Japan.

Sony has several manufacturing facilities dispersed all over the world and the configuration of value chain activities varies according to the product and its manufacturing needs. It will now focus on the configuration and coordination of the manufacturing of Sony PlayStation.

One factor that remains consistent across all value chains is how the subsidiaries are controlled. In 2016, Sony made drastic changes to the management of the manufacturing operations of its electronics division. Effective April 2016, Sony created the Sony Global Manufacturing & Operations Corporation (SGMOS). This was created through the merging of Sony EMCS previously in charge of domestic engineering, manufacturing, and repair services of electronics, and Sony Corporation, which is in charge of supervising operations globally. As a result, Sony Global Manufacturing & Operations Corporation assumed the responsibilities of Sony EMCS in managing domestic manufacturing operations in Japan and administering manufacturing facilities overseas. In addition, it is also responsible for global shared services functions that oversee procurement, logistics, quality, and environment-related initiatives in manufacturers all around the world. Through this realignment, Sony has brought together the extensive knowledge and expertise in operations that its various organizations have accumulated, in order to streamline and continue evolving its operations that transcend national/regional boundaries and product categories.

Here is Sony PlayStation’s value chain. On the following slide, Tabina will look at how some of these activities are configured and coordinated across the globe.

Appendix 4 shows Sony’s manufacturing downstream activities are primarily performed in Japan, with parts outsourced to China and some others imported from the U.S. hence the decentralized configuration is pretty clear. The reason Sony implements this strategy is because the PlayStation is relatively low-tech and is classified as a commodity. Other products classified as innovative, such as the Aibo, are manufactured solely in Japan because Sony has found that China’s manufacturing base, in amongst their many others, lacks the critical “market mediation” capabilities i.e. the technological expertise, benefits of proximity, and the supply chain flexibility to cope with the demands of high-margin, high-risk new product introductions. As such, it uses mass production, which China does both efficiently and cost-effectively which is a location advantage. The products are then distributed for sale and all upstream activities are outsourced to retailers across the globe. The idea is developed in Japan and sold everywhere in the world to fulfill the global mindset of the corporate strategy of Sony.

These activities are linked through the Sony Global Manufacturing and Operations Corporation which leads to high degrees of coordination for the communication and operations between domestic and foreign manufacturers. Sony’s approach is defined as “global localization”. SGMO sets out the global strategy whereas the various locations across the world have the autonomy to adapt it to local needs, still referring back to the core strategy. The compatibility across the operations back to the core will be further explained in the R&D section.