Read the given case study and answer all the four problems.
Sony is very famous the world over for its Walkman music player, PlayStation game console, TVs, and other electronic gadgets. Unluckily, success rarely lasts forever: From 2000 to 2003, Sony’s hot-under-the collar shareholders watched the value of their shares drop from $150 to $25. This was adequate to force some main changes at the company.
In the year 2005, Howard Stringer became the first non-Japanese head of the company in its history and one of the few to ever lead any main Japanese company. Stringer was born in Wales (UK) in 1942 however moved to the United States in the year 1965. He joined Sony in the year 1997 as the head of Sony America, turning around the performance in that unit through establishing higher levels of integration and cooperation across its electronics, game and entertainment units.
Though, after taking over as CEO of the global enterprise, Stringer determined that Sony’s problems were both wide and deep. This was facing mounting financial losses and increasing pressure from relatively new products, like Samsung’s LCD and plasma televisions and Apple’s category killer- iPod. To compete, Stringer decided Sony had to streamline its business into five groups focusing more on electronics, televisions, digital imaging, DVD recorders and portable audio. That would entail closing 11 plants and lying off 10,000 employees.
The cost of the restructuring? The estimated $1.8 billion. As of the changes, Sony reported that it expected to acquire a financial loss of about $90 million on sales of around $65.1 billion in 2005. Formerly it had been expected to post a profit of $90million. Some people within and outside Sony was sceptical of the change as past efforts to transform the company had failed. “We have made promises before, but we failed to implement them” Stringer said.
Stringer was determined to make change a success. The key part of the initiative included giving Sony’s Electronics division central decision making authority over key regions. Formerly each unit had its own planning, human resources, finance and sales functions and operated with considerable autonomy. Stringer believed the latest structure would streamline and speed up decision making across Sony’s product lines. This would as well permit uniform software development across the lines so Sony’s products would operate seamlessly with one other. This would, of course, as well eliminate design and product redundancies and optimize the firm’s Research and Development spending.
Stringer as well hoped the change in structure would help change Sony’s corporate culture. Sony had a tradition of engineering the best products. This approach had worked wonders for years. Though, the development of Apple’s iPod highlighted the fact that consumers were not just fascinated in technical superiority however the simple use of products. And some of Sony’s products had become too complicated for customers to operate.
The change plan as well affected specific technologies. For illustration, Sony executives declared that television was of the utmost significance to the company. The firm would scrap the production of cathode ray tube (or CRT) television sets and focus on LCD and rear-projection TVs and technology. In addition, Sony would focus on self-luminous flat –panel organic light-emitting diode (OLED) displays, on high-definition technology, Blu-ray and mobile technologies.
“Our target is for the Sony Group to accomplish consolidated sales of over 8 trillion yen and operating profit margin of 5 percent (Electronics 4%) by the end of fiscal year 2007” said Mr. Stringer. (Sony, 2006)
Answer the given problems:
problem 1: Change is the only constant.
Assess the various types of change which have occurred in Sony?
problem 2: Analyze the internal and external forces which have created the need for change in Sony.
problem 3: You have been appointed by Sony as a consultant on change management. Recommend Sony on how they could implement the change by using the different theories of change you have learnt.
problem 4: Assess the likely sources of resistance that could take place in Sony and how you would deal with it as the manager.