2.4)
There are three important treaties in the EU that have helped or hindered businesses and individuals. These treaties (listed below) have lead to the development of the European Union, which has caused many opportunities for member countries but also threats.
The Treaty of Rome
The treaty of Rome created the EU because the belief was that the nations working together achieved more than nations working separately and against each other. Formed in 1957 and established the European Economic Community, which is now known as the EU was an agreement signed by the nations within the community.
This treaty allows the community the right to make laws that apply to all the member countries also the individuals in these communities have the right to take any other individual, firm or government to court who break the community law. The Article 2 of the treaty set out the target of a ‘common market’ for the member states, and Article 3 set out specific objectives designed to help achieve common market status.
As one may think this treaty has many advantages for the communities within:
Companies like Sony can sell goods within the EU without paying duties.
An individual can work, travel and live in any of the member nations.
The creation of a European Social Fund to improve employment opportunities and raise workers standard of living.
The creation of a European Investment Bank to support new developments in the Union and to increase stability.
However, some of the laws passed in the nations have affected the performance of some businesses adversely.
By raising workers standards of living, companies like Sony would have to raise workers wages.
They monitor and control competition to make it fairer so a company like Microsoft who has 66% of there market share cannot operate in the EU because it has a large percent of its operating market.
Laws passed have slowed down businesses profits.
The Single European Market
As time went passed changes had to be made especially since three more nations had joined so this act was an amendment to the treaty of Rome. It restated the aim of working towards a free single market across the EU, so trading within member countries would have no artificial barriers. Even though this was passed as an act in 1986 it came into affect on 1 January 1993.
Three categories of barriers that still existed in the EU one is prevention of entry into markets. Due to differing technical standards were required of products by different member states. This made it difficult for firms to enter certain markets in the EU. There was another barrier that caused firms’ costs to rise. Often complex documents were needed in order to move goods from one country to another, which was really expensive to maintain. Another barrier was different rates of VAT in EU countries and subsides given to domestic industries. This has often lead to the market being distorted; this then prevents firms from competing on equal terms. The Single Market has not affected many firms to the same degree. But where trade barriers where high, the Single European Market has resulted in major changes for those firms operating within them. Many firms had to alter many of their products to fit the new product standards for the new EU regulations. Also the harmonisation of VAT and Excise duties, which may mean firms have to increase or decrease selling price to level of VAT rate changes so different taxes create problems when trading with other countries. This Act also works towards the protection of the general and working environment also to protect EU individual freedom and human rights.
The Treaty on European Union
Also known as the Maastricht Treaty or the Social Chapter and passed as an Act in 1992. The aim of this treaty was to give power to the community and union citizenship to individuals also the commitment to an economic single currency known as the EURO by 1 January 1999.
At the same time it attempted to protect right of individual nations to decide on matters that did not need a centralised Community decision, this is known as subsidiarity.
This has many affects on Companies like Sony due this Act protecting individuals right including working conditions, participation, and gender equality. For instances,
Pregnant worker protection: all pregnant women entitled to 14 weeks maternity leave in EU. This then means that the company has to pay for individual whilst on leave and also find a replacement, which is extra cost paid.
Hour restriction: workers in Japan work as long as they like whilst in the EU the maximum is 48 hours per week. Exceptions are made to hospital doctors and managers also in the UK they can work more but no discrimination should be made to those who do not wish to.
Due to these treaties that have established the EU it has caused many threats and opportunities to individuals, businesses and countries.
Opportunities
This has arisen due to the removal of barriers to trade, which allows individuals who has a right to a EU passport to travel around the member states without the need of a visa. Whilst individuals move around freely they can gain the best of all countries of all countries, cultures and talents. Another barrier was fiscal; this is in the form of tariffs paid by businesses and individuals. So the abolition of tariffs was favourable for Sony and many big companies because it allows them to save money and this saved cost could now be used as an opportunity cost for them. But all taxes have not been abolished, for instance VAT and excise duties on cigarettes and alcohol still have to be paid by each country member (each community has their own rate of VAT). This is to enable the government to gain some sort of revenue, which is then placed back into the economy. If this seen by other large firms then they will invest into the countries. When the Single European Act was passed, it aided to bring about the minimum quality and standard of products traded across the member states, this was good for businesses because if good quality products are made it enables to gain good reputation. Also customers get their money’s worth and those who don’t produce top quality goods are likely to lose their market due to no consumers are purchasing their goods. Also, companies who provide top quality products can afford to charge more, which will increase profits. However, small businesses can’t afford to spend too much attention on quality due to the expense. Being part of the EU enables the member countries to be treated as one domestic market, so trade and people find it easier to move around due to less paper work needed. As the EU has a population of 400 million people it permits companies to aim their products at a larger audience also competing on quality and saves cost. Due to this, it permits them to make use of economies of scales, which helps generate profitability for firms. Using economies of scales within the EU is an opportunity for big firms because they have bigger reputation and revenue to support them. For instance, bulk-buying economies is better utilise because firms have a bigger population so buying in bulk is not only cheaper but also reduces variable cost. As there are many large firms in the EU which are profitable their can afford to invest in more and new technology. By doing this it ensures product are made with higher standards of quality so costs are reduced and profit can increase but small businesses can’t do this because they don’t have enough revenue to become technically advanced. Also by using managerial economies in the EU, companies can find different European managers who specialise in different skills to employ. By having different products in different markets in different communities it helps spreads companies risk because if there is decline in one country it wont be so dependent on that particular product or market and then less money placed in that country. Also big firms have more capital to base plants anywhere in the world but small firms can’t. It helps big firms because if there is a decline in one country’s economy e.g. France, of a particular product of Sony’s, then they could easily concentrate and place more cost on another economy that their plant is based (UK) so sales are not particularly affected.
Threats
As the EU is treated as one market; it will then mean an increase in competition within the UK market from other EU businesses because the other 14 countries may have better priced and quality products than those of the UK. This happens a lot because many people would rather go to other European countries to purchase their car than buy it in the UK market. Even to illustrate the extent of this competition I found a source comparing Sony’s TV market share inside Europe and it showed that Sony have more than 25 other rivals. This could be very threatening if you are a small company because it would be difficult to generate much income and become an established business which may lead to you losing your market share. Also not only small business will lose their market position but weaker firms or the really old reputable companies which are rather still to traditional for the modernised EU because as they are not competitive they will not be able to contend with the new EU rivals. Also Sony may feel that as they have a great population to target their goods they can produce much products, this may lead to over capacity of the market because they is too much businesses and not enough customers. Sony have over 25 competitors in its TV market alone, this proves there are too many firms producing similar goods and not enough customers purchasing these products (too much supply and not enough demand). This could lead to diseconomies of scales because many companies are not selling enough goods. Businesses still have to sell theses goods but it has to be sold for less, which then eats away into the company’s profits. Many old and established firms also those that are small that don’t have much reputation are likely not to succeed because of new EU rivals. For a smaller firm to do well they need to have a good product, an excellent reputation and a good location. Businesses like Aristona with their TV market share of 0.3% and TV sales of 70.6 million can’t compete with their rivals like Panasonic with market share of 6.0% and sales of 1238.1 million TV. Panasonic are more recognised than Aristona, therefore will sell more products and develop a better reputation.
2.5)
Strategies to Maximise Opportunities
There are many solutions relating to Sony to maximise opportunities and minimise threats. A recommendation that could be suggested for Sony is for them to enter into one or two niche markets or two remain small. The latter one seems unlikely in Sony’s position since it is a known firm world wide for it’s electrical goods and it has a large amount of market share so it can’t stay small unless it would sell its share to another companies, which will unlikely happen. But developing into a niche market could probably a better way for Sony to maximise opportunities even though diversifying increases risks. Then again this could be seen as a good thing for the company because cost has been saved because as you are operating in a market, which specialise in a particular product and you know there is a need for this product so money will be made. For instance when Sony brought out the DVD player it enabled them to gain first to the market advantage and facilitate them to become more competitive because no other of Sony’s competitors had this innovative idea and this increased Sony’s market share in electronic goods. But as it was a rather technical good it had to be priced high also as they where the first electronic producers of the DVD they didn’t know if it would appeal to the populace because if it didn’t then Sony would have loss a great deal of money. They can’t stay small because they have too much money on the electronic goods, which are on the market.
Merging or takeover with EU firm allows Sony to capitalise on opportunities. However, it will not be recommended for Sony to takeover one of their rivals like Panasonic not only because it is expensive due to legal and administration fees but you will not want to bring down a highly recognised rival but functioning with Panasonic to gain the best is healthier for Sony. Also Panasonic have 18% of electronic market share whereas Sony has 20% and if Sony takeover Panasonic they will be breaching one of the acts stated in the Competition Act and then 10% of Sony’s turnover will be used as compensation. So a merger with Panasonic is more operative because Sony then benefit by market domination due to a lesser competition also it is cheaper because they function in the same industry as Sony. As two of the most prevailing electronic producers have joined together they can price product lower because the can afford to due to having greater market power, which then gives them larger market share. But if this will affect the consumers in any way it may be inoperative because the law may interfere and not give permission for this sort of merger to take place. So Sony are better of merging with businesses who have low market share, this then means that Sony are eliminating competition which then gives them a greater chance to expand and increase market share. Also as they are market leaders many of their rivals will try and follow their footsteps. Staff rationalisation allows Sony to abstract the worst staff and retain the best of employees during a merger, which then saves cost because there is a fall in labour cost this can then used as an opportunity cost. But as you have the best staff then Sony knows the output will be of the best standard and quality because if it is not reputation is easily lost. Merging also increases Sony’s source of capital because as they have joined with another company they gain more money and machinery globally. Sony also procures economies of scales because once you have merged the larger you become, so consequently firms who can place large orders have significant market power. Sony can also gain financial aid quicker with a lower rate of interest because banks feel it is less risky. Also as Sony grow they have better access to managers who are specialised at their jobs which then enables them to have better quality decision making also fewer mistakes are made which is a cost advantage. Lastly, merging creates technical economies because there is less desire to use labour than machineries also capital investment becomes more viable as a firm grows because capital cost per unit falls as usage rises. Nevertheless, there are some consequences from merging, like when it comes to rationalising your staff because you have to make some redundant. This does decrease morale within the organisation and if staffs are not happy that they have lost colleagues it does lowers quality. Customers may not see this as ethical because Sony want to increase their profits but it is costing many employees their jobs. These then losses them loyal consumers and potential investors because they see this as ethically wrong, which then influences their sales and profit. Mergers can cause conflicts between both of each Directors objectives and strategies of the merged company because they are both coming from different backgrounds and both feel that what they have to input is valid which then becomes a barrier to communication because they also implement different managerial and culture styles within their old company. Research by Hofsteade said that UK employees tend to be assertive, materialistic and prefer personnel freedom, whereas employees in France are more caring and concerning. This then shows a clash of national culture because different countries have dissimilar cultures, which they put into practise, which then causes more problems for the Sony UK then the one in France.
Sony can increase competitiveness by cutting cost by using economies of scales and other ways so more profit is made for Sony PLC. As cost have been cut you can then afford to lower prices, which then enables you to stay competitive. Also Sony can set up factories where labour is cheaper and this can be known by what GDP the country is earning. So Greece with the lowest of all EU countries GDP of $11,530 is best suited. But to Sony this may still be a bit high but they want to locate where they have education because training cost would be lower and much easier because if staff are bright training is then straightforward. So Sony have plants in Hungary and Slovakia where staffs are educated and labour is cheap this the aids Sony to gain a higher profit margins. Investment in Research and Development and hi-tech machinery increases competition because it benefits Sony in the long run. Also money is saved because Sony can’t afford to produce products that consumers don’t want and as continuous research is done Sony know that products that are made are what consumers want so revenue is also continuous.
Export agents are needed by Sony to break into new markets. They reduce the risk of trading abroad because as they know the ins and outs of that countries market because they specialise in what they do. They look for sites and ensure Sony about trading practises and legal requirements of that market. This saves money for Sony instead of them just placing themselves in a market, which they think, is suitable because their competitors are there but another market may not have been touched and so an agent is used to expose this market for Sony.
Establishing subsidiaries in different countries enables Sony to come closer to customers and potential consumers. This is because as the EU is made up of different countries and building subsidiaries throughout the EU would then give Sony local knowledge and expertise about what consumes want. Also stable exchange rates due to the EURO will let Sony use one currency within the EU, which will be easier than operating in 15 different currencies and different exchange rates. As your based in different countries it saves money on transport and less travel time too because Sony’s products then gets to the consumers faster because it is not being shipped from Japan to the EU. Nonetheless, if Sony wants to sets up subsidiaries abroad, a number of things should be taken in to account like the taxing matters, the number of strikes that takes place within the country and what disposable income they have. This may affect Sony’s staff in case transfer or relocation to another EU country is needed. On average in all industries within Greece, 625 working days are lost between the years 1992-96 and Germany with a greater population lost only 17 working days. Sony wouldn’t develop a factory in Finland because in all industries in 1996, they did not work 333.8 days per 1,000 employees and they would gain adversely in profits. All of the European Union countries have marginal rates of personal income taxes. In Sweden the taxman takes 61% of your earnings from the top rates and from the bottom rates 25% in1997. So if Sony would set up subsidiaries would have to be in United Kingdom, which they have already done because on the average we seem take less time out of work, also have more disposable income and the taxman does not deduct much tax from our income.
With all the facts and figures that I have used, I noticed that Germany and Belgium is the best country that Sony should target. This is because Germany has a great population of 82,163.5 million and has $21,212 of disposable income in PPP. Also they have a comparative growth, which exceeds ten other EU countries with 4.3%. This is good for Sony because if goods are targeted here they know that at least 45% will be sold because the populace can afford to purchase Sony’s products. Belgium even though with its small population of 10, 239.1 has a considerable amount of spending power per head of $23,864. This is beneficial for Sony because the more consumers earn the more they can increase prices which then give Sony more profit due to an increase in revenue. A country, which I do not recommend for Sony, is Greece. This is not because they have a diminutive population but due to the spending power per head. They have the lowest disposable income in the EU with $12,476 this means they will not have much money to spend on Sony electronically products that are priced high. But if Sony lowers prices of their goods in Greece then people in the EU would prefer to travel to Greece to buy Sony’s product, which will not benefit their sales and profit. So Greece only should be used if a plant was really needed in another EU country but should not really targeted by Sony because it is a waste of money.
Strategies to Minimise Threats
To minimise threats, Sony would have to stay competitive but also have to meet their marginal profit. If this is done then there will be an increase in productivity within Sony because as costs are cut then profit margin will increase due less money wasted.
Investing in Research and Development reduces threats because you are making products that consumers want and because it saves Sony any additional losses, which could happen if they produce electronics that consumers don’t see as necessary and then it results them not purchasing those products. Also Sony can diminish threats by investing in training and technical machinery, which are needed in the long run of their company. This is because putting money into advance technology aids you in
staying competitive and puts you ahead of your rivals because you then get your money’s worth in the long run with technical economies because high tech products have short life cycle and need updating quickly this then increases Sony’s profit margin in the long run because much investment is spent on improving technology to increase productivity.. Also training employees gives them more knowledge and experience of the world of work that then enables them to make the right decisions for Sony in achieving their objectives. Sony could also buy cheaper raw materials or re-use materials because it then reduces the amount of waste and this does helps the environment. This then gives them a good ethical reputation because many consumers are becoming aware of unethical practises of businesses from the media and this probably will not keep profits high for Sony if they are caught in this position. For Sony to be price competitive they may have to merge but this will cause a few predicaments. For instance, when merging, staff have to be rationalised this would then mean loss of some employees through redundancies. So Sony would have to offer employees not only financial support but over incentives so they maintain their good name. This thus strikes a vibe through the organisation because redundancies those cause job insecurity between remaining staff. So Sony would have social gatherings to increase motivation of employees so they do not leave Sony Plc to a rival company because increase in staff turnover means more money spent on recruit and selection.
To reduce threats, Sony would have to increase advertising and promotion spending to keep consumers aware of existing or new products. This enables Sony to lessen competition because if Sony continuously advertise and place promotion on their products it makes consumers want to purchase these products because they are kept on thought about in the subliminal conscience of the consumers. Also for Sony, as they sell the same products in the EU, they can advertise and publish brochures of the same design in EU countries but just the language is different. This ensures quality but does not take into account of different countries culture taste and also needs. Germany for example may have the highest television sales for Sony but Spain does not, so Sony would have to spend money to see the need of each fifteen country separately. But Sony does benefit from marketing economies of scales because marketing cost are shared across the fifteen countries and have less wasteful duplicity.
Sony would have to concentrate on customer service and customer needs to reduce threats. Consumers are needed to keep Sony alive and growing. So products should be made from their recommendations and needs. If this were not done then Sony would have a loss in profits because if Sony don’t see it as crucial and don’t offer it to consumers then a rival firm will. This means market research has to be continuous because highly technical products are short lived so new innovative products needed to be mad e quickly by Sony. Sony has to build a good customer relations with consumers to increase their reputation because they are seen as customer friendly then they will gain more sales and reputation will then wide spread. Also they then gain consumers who repeatedly buy Sony’s goods and then become loyal customers. This should keep customers happy because they know that Sony always thinks of their needs.To conclude, personally I believe Sony should merge with a smaller company like LG. This is due to they have only about 2.3% of the electronic market and not doing well as other rivals because others have diversified into other markets and LG haven’t. This would reduce the amount of competitors in the electronic market and it still enables Sony to remain highly competitive because they are now bigger and can enjoy many economies of scales to reduce cost and still have a high output. Also as LG operate in Sony’s market it enables Sony to save costs on producing plants around other European countries where they have not got a plant. All Sony would have to change is the way LG produce and manufacture the goods and since it has Sony’s name associated with LG it should increase sales because Sony have a good established name in the electronic market. But it would cause much hassle for Sony because they already make a turnover of a certain million which one company cannot have because it infringes the Fair Trade Act. Which means Sony would still have to employ Lawyers to keep the Commissioners out of Sony’s business.
2.6)
When the individual nations join/ed the European Union they have to comply with all the rules and regulations. This includes businesses as well. There are policies that big and small businesses have to obey while trading in the EU, which has great impact on the way they operate.
Impact of Single Currency on Sony
Whereas before many of the nations within the EU had their own domestic currency, now it will be replaced by the European Currency Unit (the Euro). This is known as the single currency because all the fifteen nations are now using one currency instead their own domestic currency. There are many benefits of this for Sony and also hindrance that this policy causes. As there is one currency for all fifteen countries then this will remove any fluctuating exchange rates and currency exchange cost for Sony because they would not have to pay any admin fees to trade with other nations. Also with the knowledge of this Sony can plan how much output, demand, prices, costs of production, number of workers and investments, which are needed in the future in case there is a downtown in the economy. This then helps Sony to cut costs to maintain profit or to raise prices in line with the value of the pound. As England, Wales and Scotland have not joined the Euro yet it makes trading life rather hard work for Sony because they have two plants in Wales. So when the pound is stable it enables Sony to plan, and sell, more easily and work out costs but when it fluctuates this prohibits this because this aided them to loss 20% 400 million total exports to the EU. Being part of the EU for Sony brings the prospect of low inflation and decent economic growth of the small EU countries that are inoperative e.g. Greece that suffer from high inflation. This is because there is tight control from the European Central Bank and they set an interest rate that is about right level whereas in England the Bank of England frequently changes it. This benefits Sony because they pay no export tariffs when trading across nations, they are able to move around and relocate with less admin fees. But they are problems for Sony due to UK still have not joined the Euro. The pound is still very strong and finding the right level to unite at is hard because it then makes Sony’s exports uncompetitive and there is another problem that the ECB may currently set the interest and exchange rates lower compared to the UK this then would cause a demand pull inflation for Sony because they may never get the right rate. Then Sony would have to pull out from the UK and then lose inward investments. Sony believes having price transparency enables them to competitive because consumers can then compare prices (without the need of a calculator) and then sees which EU country offers the product cheaper and go abroad and purchase that good. However this may lead too loss in sales for Sony in perhaps Portugal because there product are priced expensively then the Portuguese’s can’t buy it due to their low spending power and they may not have the need for so many electrical goods. Also with price transparency Sony can look at the countries and employ people with higher wages because they are highly skilled at what they do but then this could dissatisfy Sony’s employees because they can see they are gaining the lowest wage around each EU country.
Impact on Competition Policy
The competition policy is there to protect competitors from anti- competitive behaviour and strengthen laws governing cartels. The Competition policy was produced in 1980. It is the concept of an anti-competitive practise and is based on four Parliament Acts.
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Fair trading Act 1973 this deals with monopolies and mergers. If the Secretary of State believes there is a monopoly situation that exists or proposed merger because the company has 25% or more of the market she would refer the case to the MMC.
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Restrictive Trade Practises Act 1976 this is concerned with agreements between firms that might limit their freedom to operate independently. In another word is that companies cannot fix prices to benefit themselves and not the public interest.
- Resale Prices Act 1976 this act says it is illegal for firms to set minimum prices at which there dealers or retailers can sell goods. Also to withhold supplies or to offer less favourable terms to a dealer who supplier believes to be price-cutting.
- Competition Act 1980 this prohibit businesses to restrict, distort or prevent competition.
Sony is apprehensive about this policy due to them having a turnover of more than 10million but not 25% of their market share in EU (Sony have about 20% of the EU market share) because they know that they will be fined 10% of turnover, which is a gross amount of money loss for Sony. So for this not to happen Sony employ Lawyers that are based in Berlin at their Headquarters and make sure they comply with all these rules. The competition policy has had huge effects on Sony that is why many of Sony’s policies had to be changed to collaborate with the competition policy. For instance, Sony can encourage shops to do what Sony want by offering goods at cheaper costs but Sony can’t control prices or refuse to supply a shop that discounts Sony’s goods. Sony can’t phone Panasonic to agree that all TV’s will be sold at £1,000 because Cartels are banned, full stop! Sony doesn’t mind because they believe there are too many rivals in the electronic market in the EU for this anyway. Sony does believe it is unfair. Sony believe the competition policy is abrasive to some extent because they realise if they in company shoes that low market share this policy would be in favour of them. But Sony find it hard not to control the prices shops charge, that they can’t set a recommended retail price (RRP) and can’t stop supermarkets to discount prices too much because other shops will follow and it then puts pressure onto Sony for them to cut prices they charge to shops. Sony also know that much negotiation goes on when selling their products to retailers so they train their staff a lot on what they can and cannot say to shops concerning the publicizing of Sony’s goods.
Impact of Social Policy on Sony
The social policy is attempted to protect the rights of individuals and EU nations through directives. This policy mainly concerns the social environment of all businesses in the EU that they have to comply or else the European Commission prosecutes them. In this policy includes the social chapter, which is also known as the Maastricht Treaty. Sony offers appropriate protection in the work place (H & S) because they see this to attract employment and it motivates the work force because the environment they work in is clean and hazard free. When Sony are recruiting and selecting they have to keep in mind the rights of disabled because that act is a big part in the social policy. If it were found out they where discriminating against disabled people it would cause much adverse in sale and reputation for Sony. Sony offers quality circles where information, consultation and participation in the work place are concerned. As they are originally a Japanese firm they believe in good consultation with workers through quality circles. Sony has set up EICC (European Information Consultation Council) where staff can discuss issues with management relating to changes they would like to be seen concerning Sony. This does motivate employees because they feel part of Sony due to their grievances are being dealt with and they work in teams so no one is left out which causes satisfaction in when working in Sony. If Sony did not do this and the complaints of workers leaked into the media it would make Sony may seem rather unethical because employees are Sony’s stakeholders and give them a bad name and then no one would like to work for them. Sony and all businesses in the EU have to conform to the minimum wage and fair pay for both men and women. Sony believe that the minimum wage does not affect them because it is too low but could impact them depending on how high it gets also as they don’t see pay as a way to motivate staff the minimum wage and fair pay act is not a major problem. As Sony has given employees minimum wage it does improve their living conditions because now they have money to spend on themselves and domestic goods. Employees can move anywhere in any of the EU nations freely. This makes admin for Sony more bearable because in case transfers need to occur from one plant to another, less money and paper work would be needed. Also Sony can employ the best workers from anywhere in the EU with not having to pay any extra cost. Equal treatment for part time workers are part of the social policy. This has to be obeyed not to make part workers feel inadequate to full time workers. If Sony does not accomplish this it would mean they would be fined, which then gives bad working reputation (no one would feel job satisfaction working there) so they would just take the skills learnt by Sony to Philips or Panasonic. Vocational training enables workers to be experiencing working and training at the same time. This is beneficial for Sony because it helps them stay competitive because there work force is motivated to produce more units and gives workers more skilled so what they do produce is of high quality. Sticking to the maximum working hours a week aids Sony to have a work force that are consistently at work and alert which does help Sony stay ahead of other rivals because Sony’s employees have rest between and not constantly absent from work or striking due to being overworked and not getting paid. Sony will implement this social policy not because they will be prosecuted but because if Sony offers it, it then makes them highly competitive because many of the people would want to work with Sony because of their good reputation because they fairly treat and involve workers. Therefore productivity rises and less conflict.
2.7)
Many EU policies affect Sony because they are a large company whether they join or don’t join the EURO. These policies will impact how Sony competes within Europe but they have to respond without losing competitiveness.
Competition Policy
Sony is a leading electronic company with 20% of their market share. So hiring specialists in different areas that need to aid them in not infringing this policy would be in their agenda because they don’t want to be prosecuted 10% their annual turnover. One specialists needed are Lawyers so they help Sony comply with this competition policy because they know what has to be done and what legislation has to be meant and can advice Sony in what options are open to them. If Sony don’t hire Lawyers and they break these laws set then they will be fined 10% of their turnover. This then leads to bad reputation by Sony, which gives Sony more expenses to be paid in the short run to bring up sales. The expenses, which have to be paid to increase the amount of sales, are advertising costs because as they have loss the reputation they had, then Sony would have to advertise and promote their goods to get back their position as a leading electronic producer. Another specialists whom I recommend Sony to employ are Accountants. This is because they can keep a tally on the turnover which Sony have also monitor how much money coming in and out of the company so there are no scandals operating within Sony because this may cause bankruptcy in the future. Also Accountants can find any cartels operations taking place or any other doggy businesses to assistance and advice Sony.
Sony can increase competition to cut costs. This can be used for investments in technology and research also for short and long time planning, so Sony can think of competition strategies. Also raising productivity can cut Sony’s cost and it still enables them to be competitive and then Sony can now spend more money on advertising. Sony could also add more value to Sony’s goods, which no other rival has done to increase competition. Sony could use technical, financial, bulk buying and marketing economies to cut and increase competition because technical economies enable Sony, as they are a large firm, to invest in more technology for cheaper due to buying in bulk from suppliers. Also, Sony can obtain a lower rate of interest by banks because they have much capital and as they have much money marketing helps Sony to advert and promote their goods. Or Sony could just set up subsidiaries in cheaper countries to increase competition and save cost because they don’t have much legislation to follow e.g. minimum wage, which does cut cost.
Sony would have to train employees about the competition policy because if they don’t they may break this policy and then leave Sony with extra costs to pay like fines. Also it needs to be done so they don’t sell Sony’s goods to retailers too cheaply and lose profit for Sony and that employees can’t pick and choose whom to sell Sony’s product to because that is against the competition policy. Especially to supermarkets because they price goods too low for Sony and they then except Sony to sell them more goods for a cheaper price which will decrease the amount of revenue Sony take in. Sony would have to be diplomatic on training employees so it does not de-motivate or restrain them so they are inoperative to work effectively.
Sony would have to compete on prices but they have to do it to work with the competition policy, which means they cannot set prices to low or high to affect other rivals because this does affect competition and at the end of the day Sony will be fined if they compete on price. But for Sony to stay competitive they would have to promote their goods to consumers, which enables them to continue to buy Sony’s product and this can be done by giving the retailers a bulk of PS2 games when they buy more PS2 consoles. Sony will still have to be careful when in selling products to supermarkets because they slash prices whereas retailers don’t so they have to continue to monitor the prices that supermarket set so they don’t demand more products from Sony for a lesser price.
Single Currency
Sony is half in and out of the Euro. This is because UK have not joined this single currency yet that is why price transparency still occurs because Sony and consumers in Europe still compare prices with the pounds and Euro. If the pound is high this eventually leads to become a problem for Sony because less consumers would be hesitant to buy in the UK but would prefer to go another European countries like Germany because the Euro is cheaper. But Sony do get more for the pound from suppliers abroad because the pound is very strong but prices don’t have to increase in Europe become more people are buying Sony’s goods so prices are lower. But Sony can continue to keep their price low because gain more Euro when trading with countries which have join the single currency. Also as Sony has added value to their products they can be sold for more money that then enables them to keep other prices low because it didn’t cost them much to make it in the first place. Sony have cut their costs by employing cheap labour in non-EU countries but Sony could then set a plant in a EU country like Greece because they have the lowest spending power within the EU so they will not need much income this then aids them to still produce goods, so productivity is still high but products can be sold for cheaper because not much money has been wasted on fixed costs (employees wages). With this opportunity cost that Sony now have they can invest in Research and Development so they produce products which will sell in their markets also increase their reputation and image so they can gain more loyal customers and also as demand increases then Sony can set low prices on product. Sony goods are of excellent quality, as this is so they can price it at a high price but as there is continuous demand for their goods from retailers and their outlets throughout Europe from consumers they have no choice to put the prices lesser.
Sony’s products are price elastic that means they are responsive to change in price mainly because they are electronic products that are priced highly.
Price
Quantity
So the cheaper the price in which Sony set their products at will enable to gain more consumers. Another words this does affect Sony and I have some strategies which Sony should implement or maybe already do. Firstly, Sony should offer discounts to their consumers in their outlets and retailers who they sell products to because will allow consumers to still purchase Sony’s product because they are offered with other Sony’s product which will entice them not to go to Sony’s competitors. Secondly Sony could just set the same price of their goods as their rivals because then consumers will not go for the cheaper products because they are the same price level. Thirdly, Sony could just advertise to keep consumers thinking about Sony’s product also to remind them of what high quality and low price Sony products are. This then enables Sony to have a greater relationship with consumers because they are constantly reminded of the Sony’s good reputation.
If UK joins the Euro then companies like Sony benefit from a stable exchange rate and Sony can now plan ahead for demand in the short and long term and how much Sony would need to produce because they are dealing with a steady exchange rate. As Sony now know what the exchange rate will be they can plan for long term finance like how much is needed for workers, if they can afford to produce more products and what sort of investment can be made or needed for Sony. Sony can now fix a rate with their suppliers when purchasing raw materials because before as Sony was exchanging sometimes with Euros and then pounds it confused the suppliers because they lost in some cases when trading with Sony because the pound was always stronger that is why they preferred trading in Euros because their was a set exchange. Now Sony are dealing with Euros, they maximise profits and grow by building more subsidiaries around the EU because all there pounds have now turned to Euro so they still are better off than other companies because they gained more Euros from the pound. As Sony deal with much technical products they know they have a short life cycle. This because electronic goods can always be updated and improved and there is always something new that is electrical coming out on to the market. So a great deal of money has to be spent on Research and Development by Sony. Sony need to
continue to find the needs and wants of consumers so they can produce new innovative products that enable Sony to have a high turnover because they sell more products and gain much money from this. Sony would have to do this quickly
Price
Development Introduction Growth Maturity Saturation Decline
Stages
not only to gain first to the market advantage but once your leader many will follow and Sony’s competitors will copy this product but as Sony where first there they can gain the greater percentage profit from this product for instance like the DVD player.
But is easy said that there are many benefits given when UK and Sony join the single currency that I have mentioned above for instances gaining stability of exchange rates this does appeal greatly to any business because Sony can virtually plan what investment is needed, what can be paid to suppliers and many more advantages. Also there is no price transparency so life is made easier because there is on currency and there is no pound to dominate this currency. But as UK have not joined it is causing much hindrance
If UK does not join Euro
They still have this matter of having a fluctuating exchange rate with other European members and this does put pressure on Sony because it would mean they moving out of UK to other European countries or a non-EU country that means investment will be taken out of the UK economy. So Sony have to get their Lawyers to lobby the European Central Bank because as they control interest rates in the EU. Sony want the ECB to lower the interest rates so it then depreciates the valve of the pound and then raise the Euro which means exporting to the EU is less for Sony because lower admin cost is paid also more consumers can buy Sony’s goods because they are now the same price as rivals because before Sony’s prices where higher because they where in pounds and non of the Europeans wanted to buy it because it was too expensive in pounds but now in Euro it then increase Sony’s competition. Then again this not likely to happen for Sony because the ECB is a huge bank and Sony can’t lobby them to benefit themselves, so Sony could put pressure on the Confederation of British Industry. As they are closer to the government who controls the Bank of England so they can lower interests rate to enable the value of the pound to fall and appreciates the Euro. Or Sony can convince the Speculators not to buy the pounds especially if interest rate is low because then they will sell their pounds because it is not strong. This then leaves the government with too much pounds hanging around, so they are then forced to decrease the price of goods. Due to the pound being weak it then appreciates the euro so then more retailers and consumers are buying from Sony because their products are cheap. Sony has a limit in compete with this fluctuating exchange rate because if we don’t join the Euro businesses like Sony can’t predict their future. If the pound is high then Sony have less customers because they would prefer to go to other member countries because it is cheaper and free for them to travel there but if it is low then consumers would want to buy goods in the UK instead. This then cause more problems because you can see the differences in wages and prices of goods so price transparency then occur because you can then compare which country is the cheapest for a particular product so you can go their and buy it and then leaves Sony with a loss of sales.
Possibly Sony could just change markets. The USA could be a possible market because have one currency which is the dollars in all 52 states. Also the dollar is becoming stronger than the pound so Sony could sell to the USA instead for more but then trying to find a supplier that paid the same rate in Britain would be hard so Sony have to pay more. Advertising is more expensive because you don’t know the needs of the USA populace, which means extra costs incurred by Sony. But the fact that the EU population is greater than that of the USA by over 100 million is major factor because there will less demand for Sony’s products because there are lesser people.
Social Policy
Sony doesn’t consider the minimum wage set by the European Union is a problem because they believe it is low anyway but could become a problem if it increases because this would then increase costs which Sony don’t need. I do know Sony believe that setting a minimum wage enables Sony to stay competitive and it recommends them to employ people who have certain skills. This means that Sony can employ people from anywhere in the EU for the same amount of money because they all need training at the end of the day so they know has to be done within Sony Corporation. Sony need to employ specialists staff to deal with the EU Directives like Lawyers because they know how to handle and take care with situations dealing with legislations and directives set by the EU also they can lobby the EU when they are deciding on directives so it does not adversely affect Sony. Sony already has done this because they have Lawyers based in Brussels who inform Sony on what is going on also advice Sony in what can be done to find loopholes around these directives so it benefits Sony. Sony has to find ways in which to motivate employees. As they are a Japanese firm they believe in consultation and believe money doesn’t motivate workers. Here are two-motivator theorists that I will compare Sony with. The first one is Abraham Maslow and he came up with the idea of the Hierarchy of needs. Maslow argued that the needs at the bottom are basic needs and are concerned with survival. A person needs to satisfy those needs before moving on to the next level.
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Physiological needs/basic needs- e.g. wages being high enough to meet weekly bills (first need).
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Safety needs- job security, the importance of routine and familiarity (second need).
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Social needs/love and belonging- receiving and giving trust and acceptance also being part of a group (third need).
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Esteem needs- gaining the esteem and respect from others also feeling competent (fourth need).
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Self-actualisation- realising your full potential (fifth need).
Sony provides a minimum wage for their employees so they are able to say that the first step of the hierarchy has been met. Sony set the same targets which has to be met by the whole organisation, so the work Sony give employees are familiar to them also Sony follow the Health and Safety Act so no danger is imposed on workers so they should feel safe. As I said before, Sony believe in team working because it gets more done for the company and keeps the workers happy because they feel a since belonging to Sony and accepted with one another. Also staff can be part of the EIC council it gives them a esteem because their views can come across also it is listened to by senior managers at Sony, so it enables to gain self-confidence and respect within Sony because they are allowed to express there concerns in this councils. I do believe Sony enable workers to realise their full potential, this can be seen through promotion of workers from being a production supervisor to production manager. Another motivation theorist was Frederick Herzberg. He came up with the two-factor theory of motivators and hygiene factors. He said motivators gives the workers job satisfaction and hygiene factors caused the worker to become dissatisfied because they didn’t motivate the individual.
Motivators Hygiene Factors
- Responsibility Company policies
- Promotion Relationships
- Advancement Work conditions
This could be true because in some cases but within Sony they believe relationship with workers and managers through consultation through quality circles because it enables them to gain greater productivity and does motivate staff in Sony because they have received great response from the EICC. Sony train workers so they can gain more responsibility because if they know more about a particular aspect in the production department then they will use their instinct and knowledge in solving the problem instead of involving a manager. But they relate to saying pay is a de-motivator and so can working conditions that’s is why Sony also makes working areas safe for all staff and don’t use a pay as a motivator because they believe it may cause discontent on behalf of some employers when other workers are receiving more income than them.
There are several management styles that Sony can adopt. One is known as a contingency management style this manager plans ahead and always has an alternative plan if the first one does not work. Secondly, you have a task-based manager who works on a specific tasks or projects. Thirdly, a situational manager who deals with situations, problems or tasks. Fourthly, a proactive manager who does the task before they even arise because they like efficiency and are very systematic. Lastly we have the reactive manager who does task when they arise. Sony should use the proactive style because that type of manager is always one step ahead and has more time to deal with other issues that may pop up at the last minute. This style should be applied to Sony because it is not good leaving issues to the last minute due to the fact there could be a multiple of them whereas achieving ahead what needs to be done so more time is given and things are done better.
Sony have to oblige to the equal opportunity act because if they don’t it could lead to them having a bad reputation and known to be unethical because they where not offering equal opportunities to all. This could then lead to loss of sales because it would leak to the media also many people would want to leave Sony because of their bad name and go to another firm who does not discriminate people. Also they would break the social chapter, which means they can now be prosecuted. So Sony should just obey the act because it will save them many extra expenses in the long run.
Personally, I believe that Sony should just horizontally merge with a retailer like Dixions so they can solve the problem of any supermarkets lowering prices than those in the retailers can. If this is done by Sony then they can set prices that compete with those supermarkets so they would have to set prices at the same level as Dixions. This does allow high competition with supermarkets and Sony but as Sony has now merge with Dixions they are better off because they have now more power and money to dominate the price of products and still allows competition. Sony should consider in persuading more of the UK Economists to join the single currency and forget about the pound because it will benefit not only Sony but also other UK businesses in the future all they have to lose is British sovereignty which matters the most to us because we are the only European country left with an constitutional monarchy but if this not done then Sony can no more stay competitive would eventually have to leave the UK market which may lead to other multinationals leaving too. Also Sony has to comply with the Social Chapter because there are where all principles are on how to treat your employees but is good to follow because it keeps your workers happy and Sony will have less expenses to pay on fines. It will also give them good reputation if they follow the social charter because many people would want to work for them. Sony motivating their staff will lead to high productivity because workers are working together with much ease and this will keep staff retention high because staffs feels satisfied within Sony Corporation. Also Sony does allow promotion within their organisation, so employees may realise the full potential and are progressing through Maslow’s Hierarchy of Needs.
2.8)
Cultural Attributes of the EU
Sony has to find similarities within the EU market to make targeting their products easier to them. If this is done then Sony will become highly competitive because goods they are producing are of the needs of these countries and it will save Sony expenses. There are many ways in which Sony can find out how to group the EU countries together and this can be done with their similarities because the closer you are to another country the similar you become.
One way that Sony could look at the countries and group them together is through their culture because culture is the way people behave. It can be a set of values, beliefs and norms. Culture can be seen in there tastes perspectives and motivation of individuals of that particular country. Also subgroups exist in a particular country that is known as subculture. This includes family values, attitudes towards authority, role of women in society and degree of quality expected in advertisement. Due to a convergence in cultures, 15 nations have similar cultures.
Sony could separate the countries by religion because it provides a foundation for attitudes, beliefs and values. For instance, Catholicism is predominantly the strongest religion in the EU because countries like Italy, Spain, Portugal and Ireland are traditionally Catholics. Catholics was use to be seen as people who supported an acquisitive society as it has been associated with greed and material wealth. This would be really good for Sony because it shows that they can target expensive products at them because they can afford. As Catholics continue to prohibit birth control which tends to result in large families, which more kids. So these kids would want Sony’s products like the PS2 because it is fashion. This benefits Sony because they know that their goods will be sold in these countries because many have the spending power. Maybe soon the Turkish will join the EU so Sony would have to target their products to the men in the Muslim society because they mostly go out and do the shopping. Women are at home because Muslim believes that the women’s place is to look after the kids and house and to keep out of society. Protestants on the other hand, work hard for their money and save consistently to provide their children and themselves with technical goods.
Countries that have high GDP in the EU can be grouped together because they are likely to want to buy more goods and are more concerned with having the latest gadgets. Countries like UK, Luxembourg, Germany, France and Brussels would buy anything in fashion because they are materialistic whereas southern European countries and Netherlands are more traditionalist and settle for less and simple products because they believe that is not what life is based on. This enables Sony to know where expensive products can be sold and when they have new products that have been introduce to the market who would likely buy it because they have money to waste whereas those that don’t have money will not spend money on it because they believe that they don’t have use for it.
Countries that have great wealth due to a high GDP will be targeted by Sony because these are countries individuals will have great spending power to purchase Sony’s new technological and high priced goods. Countries like Germany, England, Luxembourg and Belgium are very greedy nations with a great desire to have anything that is in fashion or a great deal worth of money just to show of this wealth.
Language is the way people communicate to each other. This can be seen as a boundary because they are 15 countries with different languages but luckily English is a wide spread language which is spoken by many European countries because they have been thought at school. The reason for this is because England colonised many countries also tourism by the English is very common and lastly due to the USA and UK culture has influenced many other countries through media. But there where problems that languages caused for Sony at one point but now all they do is keep the product the same all that has changed is the packaging which has been translated in the 15 different languages and instructions in the booklet has been kept short because it is very expensive for Sony if it any longer than that.
Those countries with high GDP have great preferences in items that are in vogue or fashion. All the EU countries know many pop ideals like Westlife and Spice Girls through media and this known as MTV especially the youngsters and advertising when they go on tours and do concerts in different EU countries especially in Germany. The Spanish and the Portuguese can be seen to listen to Latin songs from Latino singers like Ricky Martins. Even though we can be seen as different to the other EU countries from outsiders but we have considerable similarities not only in music but also in clothes. This is because those in Western Europe are exposed to magazines, cat shows and exhibitions whereas those in the Southern areas don’t bother because they don’t see it as necessary to be in fashion with the latest car, house or electrical good because they are not so materialistic.
Countries like Greece, Portugal, Southern Italy and Spain are more loyal to certain brands because they have fewer choices in what brands are sold in their country. Also when they are smaller amount of choices it means product are priced high because there are less demand for the latest products. However, Western Europe are becoming less loyal to national brands because they have more choice which are considerable cheap to them also they have much exposure to other international goods due to the power of media and advertising. More advertising has to be done by Sony to enable the consumers to become loyal to their products because it can be easier to sway as there are many variations of televisions, DVD players and many more in different brands. Also other brands may offer consumers something that Sony hasn’t, so Sony will have to do more research in consumers needs.
As we all know that those that don’t work hard can’t spend hard. Germany, France, Sweden and Luxembourg are countries that work very hard and don’t get many holidays and take time of work. This facilitates in having a high GDP per capita because they are highly productive countries. Nevertheless, southern European countries including south Italy have siestas for about two hours and during that time much work time has been lost so productivity has to decrease also. That is why many individuals don’t have enough money in these countries to purchase expensive goods. UK and Ireland are comparable in work attitudes because works are very similar and also they share the same government and rules on holidays.
Theory on similarities in culture in EU
Vandermerwe identified six European clusters using the geodemographics of purchasing and buying patterns of consumers. Vandermerwe believed that customers geographically close, but not necessarily living in the same country. They will have the same or similar economic, demographics and/or lifestyle characteristics, which cut across cultural and national boundaries
Vandermerwe went on to suggest that Europe would continue to be a complex set of independent operating areas, not necessarily determined by regional differences but by a market system dominated by certain similarities that are,
- Mass clusters with common consumer needs;
- Niche clusters wherein consumers have similar but not identical needs;
- Local and specialised clusters
Cluster 1:UK & Ireland
Cluster 2:France, Belgium
& Luxembourg
Cluster 3:Spain & Portugal
Cluster 4:N.Italy, S.Germany &
Autsria
Cluster 5:S.Italy& Greece,
Cluster 6:Finland, Denmark,
Sweden, Netherlands &
N.Germany.
This will help Sony in understanding buying habits because it has been placed in set groups of countries, which are very similar in socio-economic terms. So Sony can visibly see which countries they can target with the same product because they are likely to buy because they are very comparable to their neighbour due to the same trends and have been placed in the same cluster that Vandermerwe produce. This will save much cost for Sony because many of these groups of countries that are in clusters have the same ethics and traits so packaging and advertising can be easier than producing it for 15 different countries know it is only six.
Another theory that I will be using is the Ronan and Shenkar clusters. This theory also focuses on the buying habit of the 15 countries saying that they can be influenced by characteristics related to the economy and demographic/lifestyle attributes also but the only difference is that Ronan and Shenkar looked at the countries history to find similarities.
This information can aid Sony draw up a better strategic plan in targeting the EU countries because as now the cluster has now reduce to five so Sony can just have five production line instead of fifteen. Less money spent on marketing these products because majority of the countries are in a cluster with the same need as many other individuals. Also Sony will benefit from just five different marketing strategies now because the individuals are group into a similar historical background that should have the same beliefs and values of certain issues. However, this cluster those not take into consideration the subcultures that exist within society within these countries just their traditions, which may have changed due to many external circumstances. But this will not affect Sony as such because many of these clusters have high population so there are many individuals with the same need, which should enable Sony to benefit from economies of scales and it shows which clusters are highly productive like European. Sony can use this and then increase prices of a certain amount on these clusters because they will have more spending power than the others.
2.9)
It is not easy especially if you are large company like Sony in making decisions concerning the issue of standardising your product for a pan-European market or to differentiate it on a market-by-market basis because each strategy offers a range of benefits and drawbacks.
Standardisation
Standardisation is where a company such as Sony offers the same product to all countries. The reason why many companies do standardisation is because it saves much cost due to its cheapness and it is easy to operate. For instance, if standardisation is done it eliminates Sony spending vast amount on Research and Development because you are just catering one product to the needs of all fifteen countries you don’t have to research what each EU country want. But as Sony has global success with they products through global brand recognition, which shows that, they very reliant on advertising and they are lucky that their products require minimum product knowledge and information. So Sony can spend less on advertising cost once it’s goods are standardise because they are now only producing one set of TV’s to all the countries so one set of advert can be used also, but all that has changed in the adverts is the language. This is also done to Sony’s catalogues and leaflets which means advertising is pan European and not achieved by the local sales forces. As advertisement is of very good standard this ensues quality around the EU because it is an identical advertising used in everywhere. But the problem with this is that Sony ignores cultural differences when using the same advert in each country. Sony can now realise they are gaining economies of scales through buying in bulk due to Sony producing TV’s. Standardisation means for Sony that they don’t have to employ many workers because machines can now take their place once Sony has a set production system for this. Nevertheless major cost will go down once Sony standardise because they are producing on set of products for pan-Europe. However they are also disadvantages in producing one set of products for all the member countries. Cheapness is not everything for Sony because standardisation doesn’t take into consideration of individual cultural needs and differences for each country. There can be seen that there is cultural difference in the EU with Vandermrwe model of clusters and it’s important that Sony does not forget this. Some countries for example Portugal may not be able to afford Sony’s standardised TV because they have very low spending power. So this automatically excludes them in Sony’s pan-Europe strategy because the Portuguese needs and culture have been ignored. All this would lead is that they will buy from Sony’s rival like Panasonic because they may notice this weakness in Sony and cater for the Portuguese instead. Sony knows that not all countries are same because they realise that the Germans love big screen TVs, whereas UK like the smaller ones. So Sony can’t standardise TV’s especially because of this reason due to Germany and UK being the largest population the EU and ignoring there demands would lead to an adverse in sells for Sony. Also not only Germany and UK have different cultures but also different plug system because the UK use three pin plugs whereas those in the rest of the EU countries use the two pin plugs. If Sony standardise have to enclose adaptors for the UK population or will have to decrease the amount of volts usage for the UK population because we use more volts in our electrical appliances. If Sony does take this strategy then consumers will not be happy because at the end of the day you can’t make money if you don’t give consumers there wants. So Sony should standardise some products, which don’t have that much impact on the different cultures like Laptops, Camcorders, Walkmans and Mini Disc’s because these products are very similar to other rivals. Whereas, the PS2, DVD players and TV’s shouldn’t be standardise because adaptation can be done to these products interiorly and also the outside colour could also be changed to suit the culture of any EU country.
Adaptation
This is where production is made to suit the needs of individuals and consumers requirements. This strategy satisfies consumers because you are making goods, which appeal to there needs and culture and if this done then they will buy Sony’s product. It has to be said that Sony do make an effort to satisfy their customers especially countries like Germany where they have the largest population in the EU but this is not good enough because other countries don’t have the same needs and spending power as Germany and it wont be good if Sony neglects them because they will go to other competitors and this may lead to Sony having a smaller market share in the EU. Adaptation allows Sony’s turnover to increase because as they are producing products that are particularly wanted by the fifteen countries in EU then they will buy from Sony because they are meeting their needs. This then could lead to brand loyalty and consumers in the EU will only buy from Sony, which attributes to an increase in sales. If Sony adapt to each country it will mean there is a greater range of products throughout the EU. This then means greater amount of choices for consumers and enables Sony to stay very competitive because they are producing goods for different cultures whereas some of their rivals cannot do this. But this could become an hindrance to Sony for instance, if products are suited for each country especially economically then consumers from the UK could easily come to Spain to buy their TV’s because both nations like small TV’s but in Spain it’s cheaper due to them having lower spending power so electronic goods are much cheaper over there than in UK. This then means prices are being compared from all over the EU member states and Sony would have to promote products in the UK to stop them going abroad to purchase their goods. There are many down falls for Sony if they do apply this strategy because it is very expensive. Considering every cultures means more Research and Development has to be utilised by Sony because Sony need to find out what products are best suited for what country. At least they know that when introducing a new product into a market they can’t sell it in Netherlands because they wont make money due to Netherlands being a traditionalist. They are very resistances because they prefer products, which have been around for along time, and everyone is using it. Also costs of producing TV’s that have different exteriors and other products as well is very high even though Sony know that some countries prefer black goods this are likely to be countries that don’t have high spending power because they know if it has colour it will be more expensive. Whereas other countries with higher GDP per capita can afford to have different coloured goods for instance Germany.
Standardisation causes internal conflicts for Sony between departments as well. The marketing departments aim is to meet consumers needs but they feel this can’t be done if there is only one design copied 3.4 million times because they know what consumers like and it should be expressed through the designs. But the production department want the same product to be made for all the EU countries, because they want Sony to benefit from economies of scale and to use more machinery but not having to buy more, because they don’t want to train people in producing the different designs that the marketing department want to impose on them through differentiation of products. Sony’s pan European approach is quite impossible as some aspects concerning issues like culture. Cultural differences are obviously an important element contributing to this diversity and make various kinds of adaptation necessary for Sony. But to Sony this does not enable them to save from costs because they want low cost but for a high volume of products and this can’t be done if there is adaptation. I do believe that Sony shouldn’t strategically ignore those countries, which don’t have a big enough population because a country like Luxembourg which has least populace in the EU but have the highest GDP and spending power per head. So they can buy Sony’s most new and expensive products because they have high spending power and if Sony ignore their needs this could lead to Sony having adverse in sales. Sony ignoring cultural difference only leads to many countries not interested in Sony’s products because advertisement is used to convince people that there product is the best and to always have their product in mind when shopping. Nevertheless, Standardisation can occur for Sony using the Vandermerwe’s clusters because each cluster has countries with similar economic, language, demographic and lifestyle. So Sony can use R&D to see what each clusters preferences are and then standardised that product to each cluster. This still enables standardisation, so Sony benefit from saved cost but also they are meeting the needs of the different cultures in each cluster by producing products they want and will buy. But adopting to each countries culture through the sales team when using advertisement has to be done by Sony because they will not make money other wise. So Sony should make a marketing force in each of Vandermerwe’s cluster and let them relate to the sales force team because they know the market condition and what appeals to each country. This then allows them to adapt to each culture and know what each cluster prefers in terms of the goods being sold in each country.
As Sony have to adapt to these changes in culture it would mean they would have to change the management techniques for managing staff also, because the way people in different countries carry out businesses with partners and suppliers can depend on the national culture. Problems can arise in international operations because of cultural ignorance or insensitivity. Sony should know that northern and north-western Europe are essentially issue-focused but they demonstrate this characteristics in varying degrees. The people of southern and eastern Europe, by contrast, tend to be relationship-focused, but even here there are important differences of degree. For Anglo-Saxons, Nordics and to some extent Germanics, believe ‘time is money’. Latins, on the other hand, will dedicate all the time necessary to discuss the issues and get the job done-deriving as much pleasure from the process of decision-making, because a relationship-focused experience, as from the decision itself. The transfer of northern European values to the South, for example, can be inappropriate and corporate culture and management practises may need modifying to suit local conditions. Hofstede’s work has provided a framework for understanding cultural differences. The way people record to management techniques can be affected by the amount of social difference and the existence of formal rules. Hoffstede analysed countries according to these two issues:
- Formal rules and inequality: Greece, Portugal, Belgium, France, Spain, Italy
- Formal rules and equality: Austria, Germany
- Few formal rules and equality: Denmark, Ireland, Sweden, UK, Netherlands, and Finland.
So Sony’s Human Resources Department have to understand this concept when deciding in ways to motivate this work force in each EU countries even though it is very expensive for Sony because they apply quality circles within their policies. Sony would have to keep the same policy throughout each EU country but their management style has to meet each country culture because countries like Greece, Portugal, and Belgium. France, Spain and Italy have to use an Autocratic management style due to these countries don’t believe work shouldn’t be shared. Whereas other countries in the EU believe work should be delegated because this is how their cultures respond well to management techniques.
2.11)
Looking back on all decisions I have suggested for Sony I had not mention for them to have a corporate policy at the Headquarters when deciding on different strategies to implement. This would benefit Sony greatly in acknowledging different cultures because the corporate policy will be mixture of all fifteen nations. A solution for this would be for Sony not to adapt to each country but to have a standardised company policy. If this were done it would make any future plans for Sony easier because they have this foundation to build decisions on now because this will resolve conflicts of Directors ideas, which is not needed in such a competitive market. As they make these decisions, the Human Resource Department mangers will then notify the managers of each Sony Centre and each Sony department to carry this operational change. This will be done by placing this strategy in employee’s mind through training and when recruiting new staff in the induction stage. Even though it is expensive to accomplish, it would benefit Sony greatly because as they have this in mind it will enable them to increase the quality of their productivity and stay very competitive against their rivals.
Another strategic decision for Sony, which needs to be accounted for is cultural
differences. This is because it is a major factor, which will affect Sony when producing goods for the EU market which is made up of over 300 million people. Even though these countries can be placed into clusters due to their socio-economic similarities it would help for Sony to understand that this is important because different clusters have different preferences and in order for Sony’s goods to be sold they have to cater for these tastes. So the Human Resource Department Managers will have to find managers in each cluster in order to implement this operational change. These mangers are obviously from the different countries because they have a clearer understanding of what individual nations desire to purchase. This then ensures that the market which Sony is producing to are being satisfied and turnover is increasing to create greater profits. This may conflict with the Finance department because they feel that creating these managers will increase expenses. Due to wages needing to be paid and training off or on the job has to be accounted for also market research will need to be done to know what products each culture prefers because it is their responsibility to make sure less money is spent and more is made. But if Sony stay product orientated it will make them a lesser contender for domination in the electronic market and that approach will just aid other competitors to gain Sony’s loyal customers. So I strongly advocate Sony to imply this strategic change.
All the EU countries are developed but at different stages. So a strategic solution has to be for Sony to target certain products at certain countries. This is because not all the EU countries for instance Netherlands respond well to highly technical goods due to their preferences being tradition. This solution does relate to if Sony should standardise or adapt their products and will conflict with their aim to exploit niche markets or mass market their products. This decisions has to be thought about by Sony because they can’t keep wasting money on producing products which are not selling to certain countries because it means you they are not benefiting from capacity utilisation also economies of scales. In my opinion, Sony should adapt their products to each of Ronan and Shanker’s cluster because this focuses more on consumers buying habits in the EU which is very essential in understanding what products can be sold in each cluster and give employees more creativity which motivates them. For instances in the Nordic cluster big telly’s are popular whereas in the Latin cluster small telly’s are liked. The operational change which will take this into account are the marketing managers because they will have to advertise to each cluster needs. Standardisation does lead to inflexibility of subordinates, which could result to a decrease in productivity and it will mean ignoring consumers who don’t spend vast amount on Sony’s goods but if Sony adapt by implementing Ronan and Shanker’s theory it means they can provide to all the countries their product which will enable them staying very competitive because all consumers needs are being met. So mass marketing is out of the question for Sony because adapting their products to each cluster means they are exploiting new potential markets even though it increase cost in the short run but long term it will increase turnover because the consumers are always thought of. Instead of Sony investing into mangers for each country, the operational change which I believe will best suit Sony, is for them to have a specialist managers for each cluster so expenses are still saved a bit than previously also adaptation is still incurring. This would have to include the marketing and research department because they know how to achieve customer orientation and the production department to produce these products for each niche.
Economies of scale is another strategic plan that Sony have to take in mind because this will affect how cost are saved and the quality of work produced. As Sony deal with electronic components to make their products it has to be bought in bulk to save them cost and this cost can be used to invest in technological machinery to enable Sony to produce unique products and gain first to the market advantage. Sony also can benefit from advertising economies because one advert can be used in each cluster because language is similar for each cluster. So Sony can promote their goods to each of Ronan and Shanker’s cluster and consumers are still reminded of Sony’s products to enable brand loyalty. This those enable Sony to lower cost and increase efficiency because each domestic cluster manager can check on the quality of what is produced because it is even part of the treaties that established in the EU which Sony have to comply with. Operational change will occur by the production department through the production managers because they are the ones who deal with producing the products also they know the best suppliers who enable discounts when Sony by in bulk.
As Sony build managers in each cluster I do believe different leadership styles are recommended because each cluster is based by their similarities. If this not done then they will be a barrier to communication and work will not be done efficiently, and could lose Sony their market position. This decision has to be performed because changes are being implemented for instances using clusters. So management style have to adapt also to each cluster to enable greater productivity and less conflict. Each manager has to be trained to understand this concept through the Human Resource Department managers because they have to provide training to enable this operational change to take place.
All the strategic planning has to take into account the social and competition policies. This is very important for Sony because these policies have to be complied by Sony especially because they are a big company so there will not be prosecuted, which will leave them with an adverse reputation. Sony has to offer to minimum wage to increase staff retention and also to enable staff to feel safe that are being offered this financial incentive. Sony don’t have over 25% of their market share but there are fast exceeding there turnover so the Human Resource mangers have to hire specialists like Lawyers and Accountants so Sony doesn’t lose 10% of their turnover. Also keeping to the social policy and in the EU enables you get the best employees from all fifteen countries so Sony can maximise their opportunities.
I believe all the recommendations I made are very valuable for Sony because it may seem that cost are being spent in the short run but the returns are fast exceeded.