SONY' S TURNAROUND IN 2005

Sony Corp. announced that it will eliminate 10,000 jobs after forecasting its first loss in more than a decade. In addition to the jobs cut, constituting about 6 percent of its global work force, the company said it plans to close 11 plants and shrink or terminate 15 unprofitable operations. Sony's Chief Executive Officer, Howard Stringer, said at a press conference in Tokyo that he predicted a 10 billion yen ($90 million) annual loss, thereby reversing a July profit forecast.

Despite the turnaround plan announced by Mr. Stringer, the first foreigner to head Sony, the prospects remain uncertain for the company which has lost money in its electronics sector for two straight fiscal years. The company's financial difficulties follow its inability to establish a strong presence in the digital home appliance market, particularly in the business of flat TVs. Sony was late in adopting LCD TV technology and bringing out flat-panel models. Facing stiff competition from Sharp and Matsushita Electric Industrial Co. it has seen its market share steadily erode in the television industry. Sony has also lost market share to Apple whose iPod player has proven far more popular than Sony's Walkman products, which to many appear old and tired.

The job cuts announced by Stringer's job-cut is half the size of his predecessor Nobuyuki Idei's three-year plan announced in 2003. That plan failed to prevent the company's electronics business from enduring two years of losses. Still, some investors doubt that the latest plan will lead to the desperately needed reversal of the company's financial woes. "Cost cuts are one thing, having good products is another," said Masse, who helps manage $12 billion of Asian equities at Aberdeen Management Asia Ltd. in Singapore. "If there are no killer products to come out of the pipeline, this won't make much of a difference."

Likewise, John Yang, analyst with Standard & Poor's in Tokyo, wasn't impressed, noting that cost cuts are merely a continuation of a plan laid out by Stringer's predecessor. Also disturbing, according to John Yang, was Sony's unchanged mentality of wanting to be an all-around king, instead of focusing on key areas. "If I had to give a grade to Howard Stringer, I'd give him a C-plus," Yang said. "He talks a lot about restructuring in cost reduction. He doesn't really talk about stirring growth."

Under Stringer's plan, Sony will cut costs by 200 billion yen ($1.8 billion) by the end of March 2008. The company will reduce 4,000 workers in Japan and 6,000 outside the country, while the number of factories will be cut from the current 65 to 54. Sony also intends to cut the number of products it offers by 20 percent, and will consider selling, downsizing or forming alliances with other firms in 15 non-strategic business categories. Under the new turnaround plan, the group also plans to list shares of Sony Financial in the year to March 2008, as well as shares of Sony Communication, in the current fiscal year. The company intends to incur a total of 210 billion yen in restructuring charges through to March 2008, and says it now believes it will incur a net loss of 10 billion yen and operating loss of 20 billion yen in the current fiscal year to March 2006.

In the meantime, in order to grow its business, Sony said it will be spending some 340 billion yen over the next two years, predominantly on semiconductor chips and electronics devices. Sony also pledged to turn around its limping television business, aiming to make it profitability by the second half of fiscal year 2006.

Read the following question and answer them in a brief manner

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The case study (SONY' S TURNAROUND IN 2005)

Questions

1. The case says "Prospects remain uncertain for Sony Corporation." Do you agree or disagree? Give proofs to substantiate your answer.

2. Do a SWOT analysis for the company and identify the major issues/problems, if any, facing the company.

3. What were the corporate/business/functional -level strategies undertaken by Sony Corporation? How successful or unsuccessful have these strategies been? Give reasons to prove your point.

4. What are the corporate/business/functional -level strategies visualized by Stringer to improve Sony's future performance? Will these strategies be successful?

5. Do you have any recommendations, of your own, to help the company survive better in future?

6. Finally, write down a "MISSION STATEMENT" for Sony, taking into account the future business scenario of the company.