Supply Chain.

Running head: ASSIGNMENT TWO 1

SUPPLY CHAIN 9

Assignment two

Executive Summary / Abstract

The performance of a company in both national and international market is dependent on various factors. These factors are both internal and external. To further analyze the factors that affect the performance of a company in the market, we interrogate the performance of Sony Corporation a Japanese Multi National Company which majors in the production of electronic equipment. The analysis is based on the competitiveness of Sony and its performance against that of its competitors. The ability of the management at Sony to comply with both the national and the international regulations is also analyzed. Key to the viability of the strategies that are applied by a company in its marketing is the competitive advantage that is held by the company. For this reason, the competitive advantage that Sony holds forms the basis of analysis of the paper. The market of products that are produced by Sony can be classified into different categories (Michael, & Mark, 2013). Each of these categories is analyzed to gauge the performance of each of the market segments and even answer the popular question; could the management have done better to improve its markets. This is done so as to value the optimization of the ready market. The paper adopts the LASA analysis model to come to its conclusion and recommendations.

Introduction to Company

Sony Corporation is a multinational Company that is based in Tokyo Japan. As noted earlier in this paper, the Company which is owed fully by Sony Group operates in Electronic products. The Company also operates in entertainment products as well as financial services. By the fall of 2012, Sony Corporation was ranked 87th among the 500 Fortune Global. The company has grown from the eight employees and its initial worth of $530 since its incorporation in 1946. The word Sony is an acronym for sound in the Japanese language. The entrepreneurs who came up with Sony needed to be sound in their investment and were ready to take the market head on. To start with, they took advantage of the wreckage that was left after the war and came up with a refurbished store house (University of Portsmouth, 2013). After its first product Type-G which was a tape recorder, the proprietors were convinced on the future of their business (Michael, & Mark, 2013). Acquisition of the license of Bell Lab’s transistor gave them a boom in the radio market in America and from there the success story never stopped a bit. The acquisition of the license was also a step that helped the management of Sony to believe in the new technologies. The company has thus been in the frontline both in the research on new technology and in the usage of the technology. As note earlier most of its products are information based.

Value proposition

The value of Sony speaks a lot of the fortunes of the company. At the end of 2012, Forbes an international company that is recognized for near accurate valuing of companies rated Sony at $83 billion. This was relatively far higher than Forbes rating of Nintendo at just below $19 Billion. The value of a company is attained from the total shares that the company is floating at the market multiplied by the fair market value of its shares at that time. This means that if all shareholders are willing to sell their shares, a single seller could buy it at that amount.

The value proposition is important factor in the market. It shows how liquid the company is and is indeed a factor of consideration for the financiers of the company. The ability to maintain high share value is also a relative advantage to the company as the customers as well as the investors are lured into trusting the company all the more. According to the published financial report of the company, Sony Corporation had total assets of over 161 billion by the end of 2012. 75% of the total assets were fixed assets. This just showed that the company was firm on its investment tradition. The only worry is the low proportion of the owners’ equity in the financing of the assets which fall below the fifteen percent mark. However, the trust of the company by the financiers makes the assets of the company safe though they are collateral for the financing.

Market position

The production of smart phones has been the hot cake in the market in the 2012 2013 financial period. After the closure of the deal with Ericson for a joint venture, Sony has been planning on ways to regain its trust on the customers who were dissatisfied from the deal. However, the company has been able to deal with that efficiently currently being rated third in the sale of smart phones worldwide. On the other hand, the company has been able to beat its main competitor in entertainment Nintendo by clinching the first position in play stations and online games (Sony Group, 2012).

The demand for other electronic gadgets is however low. While Sony does not major with the production of computers, it loses out to the market that is dominated by Compaq and Dell. The electronics market is however a favorite for Sony Corporation which is rated fourth in electronics sales.

Competitive advantage

Competitive advantage refers to the advantage that a company holds that other companies do not have. It is a quality that puts the company on the winning end should all the factors that determine the market be kept constant. Sony has a variety of competitive advantages as analyzed below.

1. The closeness with the people. As noted above, Sony stared when Japan was restructuring itself from the effects of war. This placed Sony at a strategic position in the History of both Japan and the whole of Asia (Michael, & Mark, 2013). The people can be able to relate to it as part of country position. This gave Sony a good relationship with the Home government and thus an advantage over its competitors (Satya, 2009).

2. Involvement in financial products. Most of the information based companies only offer products that are related to their trade. However, the acquisition of a life insurance Charter has been an advantage for the company. The customers can be able to relate with the company beyond the office orientation of the information based services. In fact, the life insurance trade has seen the company gain more trust among its customers than before it started offering the product (University of Portsmouth, 2013).

External Environmental Scan/Five Forces Analysis Current environment

Threat of new entrants

Currently, the financial position and the market position of Sony as previously discussed in this paper make the company not wary of the new entrant in the market. The cost structure of information based product in most cases favor the large scale producers. Indeed, research has shown that information based products market is mainly dominated by few but large companies. Thus, for a company to enter into the market and get a share of the market it needs to invest a lot and have massive advertisement. For this to be attained the company would have already exposed itself for the companies in the market to have any market lost (Michael, & Mark, 2013).

Threat of substitute products or services

The substitute products that are offered by the other companies are indeed a worry for the management at Sony. The fact that the deal with Ericson did not materialize as expected is an enough proof of the damage that is already caused by the joint merger. Both of the companies are thus in a restructuring moment and there is vulnerability of being caught unawares by other competing companies (University of Portsmouth, 2013). The market leaders Nokia and Samsung have been producing products that have been performing better than Sony products. On the other hand, Sony is yet to be beaten in the production of play stations and online games. While the latter market is flooded by many producers, the ability to maintain the market is dependent on the creativity of the Sony team which has already proved competent in that field (Shin, 2003).

Bargaining power of customers (buyers)

Perhaps the most worrying factor in the external factors that determine the competitiveness of the company is the bargaining power of the customers. The influx of information products in both the developed countries and the developing countries has pushed the prices of the products to extreme low. Worldwide, there are yet to be laws to govern the pricing of the information products. This has been to the advantage of the customers and to the displeasure of the suppliers. The ability to sustain the profit maximization goals is thus dependent on the mass production which helps the company to cut costs through economies of scale and mass sales. Apart from the low prices, there have been many companies that have been allowing free download of the online games to the consumers. While the quality of the products that are given by these producers may be wanting, the market that is potentially lost is not negligible (University of Portsmouth, 2013). The free online games give the customer of such products to have an upper hand in bargain table.

Bargaining power of suppliers

The tradition that is adopted by Sony is to buy from the best offer. The same tradition has been adapted by most of the players in the electronic market. This reduces the bargaining power of the supplier as the power of competition among the suppliers overpowers the will to bargain. On the other hand, Sony has been able to cut deals with some of the suppliers by helping them to solve conflict battles. Most of the raw material that is used by some is extracted minerals. The company has been involved in settling mineral disputes (case in DR Congo) giving Sony an edge in the pricing of the products (Michael, & Mark, 2013).

Intensity of competitive rivalry

Due to the participation of Sony in wide range of product, the company has its rivalry been tackled differently. The products that are offered by each category of rivals define the competitive strategy that Sony takes. For example, Sony has noted that the movie industry is mainly driven by quantity ands has thus come up with a variety of series movies which makes the consumer acquainted to their products and this has really given Disney World and other competitors a run for their money (Sony Group, 2012). On the other hand, the content and individualization of the smart phones wins the consumer more, with this Sony has been focusing on smart phones that have more features and are less complex. While this has been moving the product turnover very high, the strategy has been helping in maintaining the customers (University of Portsmouth, 2013).

Assessment of external factors applying five forces

While the above analysis of the external factors is true, it is good to note that they are not aggregate due to the various markets that the company is involved in. On aggregate, the company performs well when rated amongst its competitors- this analysis has been done earlier in this paper. The fact that the company is still ranked third even after the closure of the joint venture with Ericson and the ability to consolidate both the markets in developed and developing countries gives the company competitive advantage (Michael, & Mark, 2013). The tradition of rising against the storm acquired from its initial stages has indeed helped the company to grow steadily even when there is economic crisis. The position of the company at the market was notable high even in the 2008-2010 international economic recess.

Strategic Issues

The current issues that the company has to look at are as below

a) The issue of mineral conflict is evident mostly in the third world countries where the developed countries are accused of encouraging illegal mining. This is an issue that the manufacturers using these products must be aware of so as to maintain the trust of these governments. While Sony has been involved in these conflict in the past more needs to be done (Sony Group, 2012).

b) The market is in high demand of smart phones. On the other hand there has been a high product turnover for these products. There has to be a research on the viability of any product otherwise the production of smart phones will lead to companies doing business at a loss (University of Portsmouth, 2013).

c) The red tape; one of the issues that is affecting the competitiveness of businesses is the red tape effect- rigidness and complexity in expansions. While expansions cannot be assumed where competitiveness is a factor, the management of Sony has to be aware of the challenges posed by administration during expansion.

d) Dominance of market leaders; as it has been noted earlier in the paper, information products market is favorable to the few large companies. The management should be confronting of the fact that it ranks third in overall business. There is thus a need to remain relevance and competitive as compared to Nokia and Samsung.

e) The lost confidence due to flopped merger with Ericson; in business not everything goes on well. While this is so the customers may not be at a position to understand all the propositions of the deals gone sour. In the case of Ericson, Sony lost some trust among its customers. More needs to be done so that any future business cannot be affected adversely.

f) In the rise of free online games in the market. There is a need to examine the profitability of the product in the future and the ability of the Sony Corporation to face a market that is already flooded with free products. There is thus a need for the management to engage various regulatory bodies so that it is not pushed out of business.

Summary / Key Findings and Recommendations

From the paper it is evident that Sony is still a company to beat in electronics, and information product. While there are challenges that have not been exhaustively dealt with, the company has a going concern which is dependent on the way the management deals with the five factors of external environment. It is recommendable for the management to look at the strategic issues as not above since good research will lead to productive business.

References

Michael, S., & Mark, C., (2013). How Sony strengthened its supply chain and added value. New York: Green Biz

Satya, S., (2009). Business Policy And Strategic Management . New York: CengageBrain

Shin, L., (2003). Business the Sony way . New York: SAGE

Sony Group, (2012). Environment, Labor, Human Rights and Conflicts in the Procurement of Raw Materials. Tokyo: Author

University of Portsmouth, (2013). Sony Electronics as The Leading Consumer Electronics Company in The World. Portsmouth: Author