|About SONY –|
|Company Name||SONY Corporation|
|Industries served||Consumer Electronics, Imaging and Sensing. Movies, Music.|
|Headquarters||Minato City, Tokyo, Japan.|
|Employees (March, 2020)||111,700|
|Net Revenue (2019)||8,259.9 Billion Yen.|
|Net Income (2019)||622.3 Billion Yen.|
SONY is a leading brand of consumer electronics, gaming products, music, movies, and imaging solutions. The company is renowned worldwide for its high-quality products and focus on customer satisfaction. Its growth worldwide has been driven by its continuous dedication to innovation. Apart from the other things, the company has focused on creating an ethical and customer-friendly image. However, the company is also facing intense competition from many brands, including industry-leading brands like Apple and Samsung and LG Electronics, and other consumer electronics brands. SONY makes, markets, and sells a large portfolio of products. It has divided its business into five main segments.
The company is headquartered in Japan, which is also its leading market. However, the company also generates a large portion of its revenue from the United States market. In fiscal 2019, the company experienced a decline in net sales and revenue due to reduced demand and sales of Play Stations, televisions, and digital cameras. The pandemic has also hurt its business worldwide. The impact was severe on SONY’s supply chain like many other brands worldwide.
However, the company is steadily growing its focus on innovation to capture a larger market share and open new vistas of growth. The company also experienced a sharp rise in net sales and operating income from its imaging and sensing solutions. SONY’s growth in the coming years depends on its ability to innovate since a large number of competing brands have introduced products at lower prices, causing the profit margins of SONY to reduce.
STRENGTHS of SONY CORPORATION
SONY has achieved the image of a quality-focused, customer-friendly and ethical brand. Its brand image is a key driver of sales and revenue growth for the company worldwide. Millions of customers around the globe trust SONY for its great quality products.
While SONY is not counted among the industry’s best marketers, its brand image is still strong support for the company driving faster revenue growth and market expansion. While SONY products are generally priced higher than the competitors, its distinguished quality still drives higher sales. The company has achieved a distinguished position in the global markets and the industries in which it operates.
SONY’s focus is not just on quality and innovation but also on sustainability and business ethics. All these factors are important for businesses that want to achieve a strong social image. Particularly, CSR and sustainability have been recognized as among factors that help build a strong social image. SONY’s brand image helps it achieve higher customer loyalty and easy brand recall.
Diverse product portfolio:
SONY makes and sells a large and diverse product portfolio that includes products and services like consumer electronics, music, movies, imaging, and sensing solutions, and more.
The company has divided its business operations into five major segments: Game & Network Services, Music, Pictures, Electronics Products, and solutions, as well as imaging and sensing solutions. The company has continued to diversify its product portfolio for market expansion and to grow its profitability.
In recent years while the market for SONY televisions and digital cameras has shrunk, its imaging and sensing solutions have experienced faster growth in sales. The demand for its imaging and sensing solutions has grown among smartphone makers, leading to growth in this business segment’s profitability. In 2019, while its gaming and network services and electronics products and solutions segments experienced a decline in sales and revenue, the music and pictures segments and the imaging and sensing solutions segment experienced growth. The reason was that apart from a reduction in sales of televisions and digital cameras, the company also experienced reduced sales of PlayStation 4 hardware. However, due to its diversified product portfolio, the company was able to substantially reduce the negative impact of the pandemic and the reduced demand for its gaming and electronics products.
The company is also investing in other latest technologies to gain inroads into new business areas.
SONY has remained a leading name in the consumer electronics industry mainly because of its focus on quality. The company is known to make and sell premium quality televisions, music players, speakers, and other products. Its products are also differentiated from its competitors on the basis of quality. Its continued focus on quality has also resulted in higher customer loyalty as well as strong sales worldwide.
Despite the growing competition from several players including Samsung and other consumer electronics brands like LG and Panasonic, the company has not let its focus on quality dwindle. Moreover, its focus on quality is not limited to just a few leading products but to almost all business areas in which SONY operates. From digital cameras to televisions and music players as well as movies, the company is famous for its exceptional focus on quality. However, the growing price competition has also led to reduced profit margins for the brand. Despite that SONY has managed to retain its quality level and that has helped it manage its strong market share in key industry sectors.
Another major strength of the company is its focus on product innovation. SONY is known for having introduced several groundbreaking products and technologies. Its products are known to be of superior quality and differentiated from competing products and brands. Its focus on innovation has helped the company introduce several innovative products to the market that offer a superior customer experience. Whether, it is about SONY televisions or digital cameras, or its other products and solutions, its focus on technological innovation has helped it introduce products that are exceptional in terms of performance and quality.
SONY is a leading name globally in various industry sectors including consumer electronics, music, movies and other sectors. However, the company has acquired alagre and loyal base of customers through its relentless pursuit of quality. Throughout the world it has a very large and loyal base of Play Station customers. Apart from that, SONY is a highly trusted brand globally. The company, apart from remaining dedicated to quality and innovation has also remained dedicated to ethics. These factors have helped it build a superior brand image and achieve strong customer loyalty.
Falling PS4 Sales:
The company is experiencing a reduction in PS4 sales which had remained a key driver of revenue for the company. Due to the heavy reduction in sales of PS4 hardware during fiscal 2019 as well as reduced sales of televisions and digital cameras, the company experienced a fall in its overall operating revenue. PS4 is facing heavy competition from other players including online gaming channels and makers of gaming devices like Xbox and Nintendo.
In fiscal 2019, the company sold only 13.6 million units of PS4 hardware compared to 17.8 million units in fiscal 2018. Apart from the negative impact of the pandemic and supply chain disruption, the competitive factors were also responsib le for the decline in sales of PS4 hardware in fiscal 2019 (ending March 31, 2020)
Not just the PS4 hardware, but SONY also experienced a decline in sales of its televisions and digital cameras during fiscal 2019, which also caused its operating revenue for the fiscal to decline.
SONY sold only 9.3 million units of televisions in fiscal 2019 compared to 11.3 million units in fiscal 2018. Sales of digital cameras declined to 2.9 million units in 2019 compared to 3.6 million units in fiscal 2018. The sales of SONY smartphones also dropped to less than half of the previous fiscal in 2019. SONY sold only 3.2 million smartphones in fiscal 2019 compared to 6.5 million units in fiscal 2018.
Lack of focus on marketing:
While SONY is known as a highly innovative brand and exceptional in terms of quality, the company has not been as exceptional in terms of marketing as the brands it is pitted against in the market. The decline in sales of consumer electronics products made by SONY can also be attributed partially to the lack of a focussed marketing strategy.
SONY is facing intense competition in the global market. Several brands have introduced a large number of products that even if not as great in terms of quality, come loaded with the latest features and appeal to a large group of customers looking for quality products available at affordable prices. From televisions to smartphones and digital cameras, the company is known for its exceptional quality but has been losing market share to rivals because of poor marketing as well as premium pricing.
The company needs to develop a focussed global marketing strategy to retain its market share in key industry sectors and for retaining its large and loyal customer base from around the world.
The company is facing heavy price pressure. The continued loss of market share and a decline in sales and profitability during fiscal 2019 can be attributed mainly to the company’s premium pricing strategy.
Many companies have entered the fray, including companies based in South Korea, Japan and several more based in China. The Chinese companies, especially those with access to cheaper resources, including cheaper labor, have introduced products at much lower prices. The result is that while profit margins have shrunk for SONY, the company also has to spend more on marketing and research, and development to maintain its market position and market share.
The company experienced a sharp decline in sales of key products in 2019 that have remained the leading source of revenue for it for years. Some of the decline in sales was caused mainly due to the premium pricing of SONY products. The problem is that if SONY wants to maintain its products’ quality, it cannot price them lower since it has to invest a lot in raw materials, marketing and R&D. Pricing them lower can also lead to a perception of lower quality products among the customers worldwide. Overall, while price competition is ruining SONY’s sales in various corners of the world and particularly, in the emerging economies where increasingly the Chinese brands are gaining market share, the company does not have a great option before itself apart from rethinking its marketing and business strategies.
Low share in the smartphone market
SONY’s market share in the global smartphone market has kept shrinking over time. Apart from its premium pricing, lack of innovation is also an important factor that has caused sales to fall. The company sells premium Xperia phones that are priced higher than most smartphones available in the market. As a result, these smartphones are positioned against premium phones like the iPhone or the upper range models in Samsung’s Galaxy range.
India has grown into the second-largest smartphone market surpassing the US in 2019. However, in the same year, dwindling sales forced SONY to exit this highly lucrative market. The reason was that apart from Apple and Samsung, the best selling brands in the Indian market are from China. These brands have brought a large range of products that are priced competitively and as a result, acquiring sales is much easier for them.
Apart from that, SONY also lacks in terms of marketing. Where other smartphone brands have been marketing their products quite aggressively in India and other smartphone markets like China and the US, SONY’s marketing approach has not changed a lot over the years. The company does not have any entry-level or mid-range phones either to offer that can drive sales higher. However, while SONY is currently among the bottom players in the global smartphone industry, it has not totally exited it. The company might introduce new models that are priced competitively to spur sales again.
SONY’s opportunities lie in the latest technologies. The company has already entered the automobile sector with its Vision-S. According to Wikipedia, SONY Vision-S is an all electric concept sedan, that was first unveiled at the 202 consumer electronics show. The company has developed this Sedan in collaboration with many automobile companies including Magna International, Continental AG, Elektrobit, Benteler and Bosch.
The car features SONY’s latest technologies related to the automobile sector including autonomous driving technology, sensory devices, as well as, always-on connectivity. The car also comes loaded with immerskive entertainment features.
In 2020, the car included a drive assistance system like Tesla’s called the Safety Coccoon. It had 33 sensors onboard including CMOS, solid state Lidar, and time of flight cameras. SONY has grown its focus on research and development so it can expand its business into new areas including AI, Cloud technology and other latest technologies like machine learning.
If SONY’s automobile project (Vision-S) is successful, it could prove to be a driver of revenue for the brand. Due to its shrinking share in consumer electronics industry, the company needs to focus more aggressively on latest technologies to sustain its market position and growth momentum.
While SONY is recognized globally as a great consumer electronics brand, it has kept lagging behind its American and South Korean counterparts with regards to marketing. Its Xperia phones compete with Apple’s iPhone and other high-end smartphones made by brands like Samsung and One Plus. However, when it comes to marketing, SONY has mainly relied on its loyal customer base for word of mouth and to maintain sales.
Without developing a new marketing strategy or adopting improved customer retention methods, the company cannot expect to grow the sales of its key products including televisions, cameras, and smartphones.
In the 21st century, CRM has become a key area of focus for businesses. Technology and consumer electronics businesses have to particularly focus heavily on customer relationships if they want to avoid losing market share. The focus has shifted from great quality products to great quality customer experience and from marketing to sales and after-sales service, the focus is always on customer satisfaction.
While SONY is still a highly trusted consumer electronics brand worldwide, if it is losing market to its South Korean and Chinese rivals, the reason is that the company did not focus enough on marketing.
Compared to SONY, Apple and Samsung have done a much better job. However, it does not mean that SONY has totally lost the game. It must focus on reaching out to customers using digital marketing methods. Social media marketing could also help the company grow its reach and penetration in the emerging markets. SONY moved rater lousily in this area, and the result was that the market for SONY products, despite their quality, kept shrinking. If the situation persists, SONY risks losing its most loyal customers. The company must use digital channels like Facebook and Youtube for digital marketing and video marketing and engage its customers. While in the short term, it can help the company drive sales higher, in the longer term, it will help the company acquire its lost market share in key market regions. The company can combine its digital marketing capabilities with its existing strengths to expand its global customer base.
The emerging economies present the most significant opportunities before the consumer electronics brands like SONY. A large number of Chinese and South Korean brands have been focussing aggressively on growing their penetration of emerging economies like India, Malaysia, Brazil, Indonesia, and others.
Currently, the two largest markets for SONY products are Japan and the United States. However, while the company has been building great products and has a great product strategy, it does not seem to be focusing on creating strategies tailored for specific market regions.
Apart from local economic and political developments, the pandemic has also affected SONY’s business in several markets. The rivals were able to exploit the opportunities in the emerging markets successfully where SONY failed and in some cases was forced to exit.
SONY must focus again on markets like India, China, Brazil, Malaysia and Indonesia where its most significant opportunities lie. While these economies have enjoyed higher economic activity in recent years, the growing middle class in these economies also presents a significant opportunity for the consumer electronics companies.
Acquisitions and diversification:
SONY’s revenue fell in fiscal 2019 compared to the previous fiscal. The company need to focus on methods of creating new channels of growth and achieving market expansion. Acquisitions can help the company diversify into new business areas. They can also help the company strengthen its position in the existing areas. For example, in fiscal 2019, the company acquired AT&T Inc.’s minority stake in Game Show Network, LLC and acquired Silvergate Media Group through which Sony aism to cement its position as a leader in the U.S. TV game show business (SONY form 20f, fiscal 2019).
The company can acquire smaller businesses to enter into new areas in emerging fields like AI, machine learning, etc. Its recent acquisitions like the Game Show Network, Bilibili and Epic Games (SONY holds a small stake in both Bilibili and Epic games) were mainly related to entertainment and video games. The company skhoudl shift its focus towards latest technologies to make its business more future ready compared to its rivals.
Customer focused innovation:
While SONY is known as an innovative company, it has missed one key area that is understanding the evolving customer needs and preferences. It is why SONY must be focused on innovation that customers love or making products that suit their customer needs better.
The key thing is to understand how customers’ needs are evolving with time and create products accordingly. Until now, the company has been making innovative products, but it cannot rely solely on the quality of these products to sell them. The company must understand customers’ needs and design products accordingly to drive sales higher. The secret to achieving higher sales and winning more customer loyalty is to focus on innovation that suits the customers’ needs.
SONY’s rivals seem to have mastered this art but SONY itself seems to be missing the more important side of the coin. The question is not just to innovate but to innovate for customer’s satisfaction. This could also help SONY add more life to its existing products and grow their appeal for the customers. Differentiation has already become difficult for consumer electronics companies because of the heavy competition in the market. The rival brands are also investing heavily in research and innovation but the winner is the one that understands customers’ needs adn caters to them better.
Let’s take Apple’s example. The company does not just create products but multidimensional experiences. Apart from that, it offers regular updates and also engages customers using various marketing channels. It is why customers love Apple. This is how companies like Apple achieve higher customer engagement. They know their customers’ needs and how to fulfill them.
Samsung also followed the same route to win customers’ hearts. However, while SONY kept making great products, it seems the company missed the track long back and since then was also forced to discontinue some of its most attractive products like SONY VAIO laptops. It also applies to SONY’s smartphones and televisions. Understanding customer needs will allow SONY to differentiate its products further from the rival brands that are continuously expanding their market share. The company missed important innovations by a thin margin.
One of the biggest threats before SONY’s market position is the heavy competition, the company faces from brands based in the US, China, and South Korea. In the smartphone market, while it is pitted against Apple, Samsung, Xiaomi, and One Plus, in the consumer electronics market too, the company is facing strong competition from Samsung, LG, Panasonic, and other brands.
Its market share of consumer electronics products has kept shrinking. While the company has grown its focus on research and development, in the coming years, its operating expenses could grow faster due to the growing competitive pressure. Apart from its production-related costs and R&D expenses, the company’s marketing expenses are also expected to grow faster in the future. Competition has hit SONY hard mostly in its core business areas. Its rivals like Samsung, Apple, Xiaomi, One Plus, LG, and others are also focusing aggressively on innovation which has become key to success. Many of these brands have adopted highly competitive pricing strategies to gain market share faster. They have adopted aggressive moves including adopting thin profit margins in many cases to win market share.
Its result is that they easily grew their market shares in important economies like India and China and SONY was forced to quit or remain satisfied with a much smaller market share. SONY could have easily ruled the market if it could early realize how competition could ruin its market share and growth rate. Customers have switched to other brands because it proved profitable for them.
The coronavirus pandemic has hit large and global businesses very hard. Apart from shutting down their supply chains and stifling the movement of goods across borders, it has also hit economies very hard including some of the biggest economies like the US and the UK. It led to lower purchasing by consumers in various economies as well as heightened pressure on hardware brands like SONY that experienced lower sales of PS4 and televisions.
The company had started gathering momentum before the pandemic but several of its plans received an unexpected blow as the pandemic forced supply chains to shut down and the release of new music and movies got stalled. The impact of the pandemic is expected to last long. The use of digital channels for shopping and entertainment has grown which also reflected in SONY’s sales in the Pictures and music segment but the impact has clearly been harsh on the consumer electronics and gaming products.
After the pandemic, SONY may be able to realize several of its important goals but for now the pandemic seems to have forced the company to hit the pause button.
In a March, 2020 press release, SONY quoted that its music releases were going to be delayed due to the disrutpioncs caused by the novel coronavirus. Its press release stated,
“Especially outside of Japan, the business has started to be affected by delays in new music releases, interruptions in supply chains for CDs and other physical music media, and a decrease in music licensing resulting from both lower advertising activity and delays in production for motion pictures and television productions. Concerts and other live events around the world are being cancelled or postponed, including all Sony-sponsored performances and events in Japan.”SONY press release. March 2020.
Economic fluctuations :-
SONY is a premium brand, and the fluctuations in the global economy directly impact its business. Economic factors directly impact SONY’s business since the company’s sales depend on the purchasing power of the consumers worldwide. Japan and the US are the two most important markets for SONY products, followed by China and Europe. However, the pandemic has affected the US economy bringing sales of nonessential products down in the market. Similarly, fluctuations in currency exchange rates also harm SONY’s profits, which was again clearly felt at the end of fiscal 2019 (ending March 31, 2020) of SONY Corporation.
When the level of economic activity in key markets across the globe is high, brands like SONY enjoy higher sales and profits as people spend more on entertainment and consumer electronics. Before the pandemic, the company enjoyed strong sales and had made plans for the future related to market expansion. However, the pandemic and the resulting decline in economic activities worldwide applied brakes on SONY’s growth by stalling production and bringing sales down sharply.
Millions of people worldwide were rendered jobless after the pandemic and spending across various economies went down sharply. While in some economies like the US, China, and UK, economic stimulus provided by the government may work to stimulate economic activity, SONY’s plans in other markets may need to wait.
A few last words:
In this swot analysis we have analysed the key strengths and weaknesses of SONY apart from the opportunities and threats before the brand. The company is a leading manufacturer of consumer electronics apart from a leading name in the world of music and movies. However, the company’s imaging and sensing business has also expanded fast and has become a leading source of revenue for the company.
The industry dynamics and consumer needs and preferences have changed fast in recent years. Sony is facing intense competition in several areas including consumer electronics and gaming. The company’s Xperia smartphones have been experiencing a steady decline in sales caused due to competition among other factors. Sony makes only premium products and the growing competition in the industry has caused sales of key products to decline and SONY’s profit margins to shrink. The price pressure has kept growing and since the company cannot risk its image if it trie to compromise on the quality of its products, it cannot price them lower as its Chinese rivals do.
However, the company has gathered strong growth momentum, and if not for the negative impact of the pandemic, the company is otherwise doing well. Its business is in strong shape, and the company is investing in new areas, including AI and autonomous driving, to create new growth channels. The company is also investing in research and development to grow the appeal of its product portfolio. In 2019, SONY invested 499.3 billion Yen or more than 4.75 billion USD in Research & development compared to 481.2 billion Yen or around 4.6 billion USD in fiscal 2018 (Sony form 20f, 2019).
One key area where SONY will need to focus more is marketing. Digital marketing can help the company grow its influence in the industry and help bring life back to some of the SONY products that are otherwise losing their appeal faster. Compared to its American and South Korean rivals, SONY has maintained a less aggressive marketing approach. Its previous marketing approach is insufficient in the current hypercompetitive market scenario. The company must also focus on maintaining stronger customer relationships to reduce the competitive pressure and the growing risk of market share loss.