Sony’s CEO Kazuo Hirai predicts the company won’t turn a profit until 2015. With a net loss of 136 billion yen in the past 3 months, the firm now forecasts a 230 billion yen full-year loss; a figure 4x greater than it forecast in September.
Since 2008, the giant Japanese electronics company has been unable to turn around profits, even after undergoing several changes in operations and marketing and after Kazuo Hirai became CEO in 2012, with a proposal to focus on game consoles, cameras, and mobile devices.
So what exactly is the reason for Sony’s unprofitability?
Vlad Savov from The Verge believes that Sony’s current strength is with is Android and PlayStation devices and speculates that Sony will not be able to compete on a focus differentiation model emphasising design or picture quality. Likewise BBC attributes Sony’s unprofitability to its strong competition; from apple and samsung for high value proposition phones from other firms like Huawei and Xiaomi for low-cost phones, and from Asian rivals for its TV unit. In China, Sony decided to reduce phone sales as it couldn’t compete with a Low Cost strategy in the face of competition, yet Sony is also not able to compete with Apple and Samsung on the higher end of smartphones and tablets.
Hiroko Tabuchi from The New York Times, on the other hand, believes it’s due to ineffective operations at Sony and the failure to take appropriate advantage of recent technological innovation. Since the breakthrough with the Walkman, Trinitron TV, and the acquisition of Columbia Pictures, Sony failed to innovate new products and keep up with its transient advantage; leading to a fading brand compared to companies which continued to innovate- like Apple, which came out with the iPod.
As I’m only a couple weeks into business school myself, I can’t say for sure what’s preventing Sony from making profit; but from my readings and knowledge thus far I think a potential weakness is Sony’s diversified products and inability to efficiently focus its resources on all of them, which leads to its domination in neither field. Not only does Sony produce several different types of products, like TV sets, game consoles, and mobile phones, they also produce multiple variations, neither of which are substantially different from the other and results in an over-saturation of products in the market and a confused value proposition and product offering. Hence I think Sony’s decision to restructure its firm by quitting businesses— they sold their Vaio brand and exited the PC business earlier this year, and are planning to use another 135 billion yen on restructuring ventures this year- is a step in the right direction. Not only should Sony select and change its focus in terms of products and focus on innovating great products in its strong field, it should also continue to work on the efficiency of its internal operations and ensure the corporate environment is healthy.
References:
“Japan’s Sony forecasts losses until 2015 after PC exit”. BBC News. 14 May 2014. http://www.bbc.com/news/business-27403887
“Sony reports a quarterly loss of $1.2bn”. BBC News. October 31 2014.
http://www.bbc.com/news/business-29844746
Alpeyev, P., Huang, G. and Amano, T. “Sony’s Loss Widens as Xperia Struggles Against IPhone”. Bloomberg News. October 31 2014
” http://www.bloomberg.com/news/2014-10-31/sony-posts-narrower-than-expected-loss-on-playstation-sensors.html
Huang, Grace and Nakamura, Yuji. “Sony Tumbles as $2.1 Billion Loss Limits Hirai’s Options”. Bloomberg News. Sept 17 2014. http://www.bloomberg.com/news/2014-09-17/sony-forecasts-wider-full-year-loss-on-smartphone-competition.html
Savov, Vlad. “Sony wants to Overhaul Unprofitable TV Division”. The Verge. August 2 2011.
http://www.theverge.com/2011/08/02/sony-wants-to-overhaul-unprofitable-tv-division
Tabuchi, Hiroko. “How the Tech Parade Passed Sony By”. The New York Times. April 14, 2012
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