Sony Corp. has announced a new management plan including about 10,000 job cuts and reinforcement of its strengths in the electronic sector with TVs, games and cell phones, but there is no assurance it can bounce back from the company’s worst deficit ever. The new focus is a major shift from Sony’s past strategy, with the TV sector as the main profit-earning pillar. The company aims to rejuvenate the TV business by drastically reducing its number of models.
Sony is expected to report a 520 billion yen net loss for the fiscal year ending in March 2012.
Time for change
President Kazuo Hirai proclaimed loudly, “Now is the time for Sony to change” at the beginning of his explanation of the new management strategy Thursday.
“Rebuilding our electronics sector is our top priority and greatest duty,” he said, emphasizing the company’s mission to reestablish itself as a leader in the category.
Once known for its innovative technology, Sony started to focus on the “soft” technology sector, such as movies, after Nobuyuki Idei, who formerly worked in sales, assumed the presidency in 1995. The firm then tended to turn away from its prior emphasis on manufacturing activities, an analyst said.
In the TV field, Sony was a late adopter in moving from cathode-ray tube TVs to liquid crystal display TVs. In the field of mobile music players, Sony products are far behind Apple Inc.’s iPod series.
Previous President Howard Stringer, who hailed from the entertainment industry, reduced funding for research and development. Sources say many engineers left the company during the Stringer presidency.
Hirai emphasized Sony would review the company’s R&D arrangement thoroughly.
The sales goal for the entire Sony Group is 8.5 trillion yen for the year ending in March 2015, up 33 percent from the expected sales for the business year ending in March this year.
However, Hirai failed to present a clear vision for how to bolster the R&D field.
Sony has long been unable to introduce hit products like the Walkman series and the Trinitrom TV lineup.
“We will develop and market innovative products that symbolize Sony’s revival,” Hirai stressed Thursday, but was unable to communicate what kind of products the company is planning.
Selection, concentration
To rehabilitate the company, Sony has set a target of increasing sales in the electronic field for the year ending in March 2015 to 6 trillion yen and the operating profit to 300 billion yen.
It will appropriate 70 percent of the total development budget to three core business fields: digital imaging, games and mobile technology.
Sony still has a competitive edge in game consoles and image sensors used for digital cameras, but Apple and Samsung Electronics Co. have major shares in the mobile field such as cell phones and tablet devices. Sony plans to regain lost ground in the mobile field.
Meanwhile, Sony will lay off about 10,000 employees, 30 to 40 percent of them in Japan. It will sell or withdraw sections and subsidiary companies’ sections that have less synergy with core businesses or have proved unprofitable.
However, with decisive products for its revival still unknown, the company may fall into a spiral of “diminishing equilibrium,” an analyst said.
In the ailing TV business, Sony revealed it will seek business alliances with other companies with organic electro luminescence TVs and other next-generation TVs.
Hirai said the turnaround for the TV business is in sight. However, price and technology wars have been intensifying in the TV business, with heavy competition from foreign companies, including those in South Korea.
Given the situation, Sharp Corp. had no choice but to form an alliance with a Taiwan maker.
If Sony sticks to maintaining its brand image and cannot steer completely away from the TV business, the new management strategy of “selection and concentration” will likely prove insufficient.
(The Yomiuri Shimbun)
