Looking ahead the company raised its net profit outlook for the full fiscal year, the period to the end of March this year, from ¥50 billion to ¥55 billion. Sony's sales and operating profit forecasts remain unchanged at ¥7.4 trillion and ¥100 billion.
3.1) Growth Strategy for Electronics and Game---
Four key area of strategy
In four key areas detailed below, the business base will be strengthened and a growth strategy promoted.
3.1.1) Solidifying No. 1 Position in Audio-Visual Categories
Audio-Visual is a core business category, and here we will create a vertically integrated structure through the application of mechatronics and Sony key devices which will result in high added value and product differentiation. This will in turn realize high and sustained profitability. The shift of resources to growth areas like Flat Panel Displays, Optical Disk/HDD Recorders and digital imaging equipment will be accelerated. At the same time added value will be promoted through the application of broadband capability and key devices will increasingly be produced within Sony.
3.1.2) Creating New Product Categories through Integration of Game and Electronics Technology
PSX and PSP (due to debut at the end of Calendar 2004) will mark the beginning of a new series of products that will unite the most advanced Electronics devices with the leading-edge semiconductor technology associated with the Game sector. These products will create a new market based on a massive integrated platform where customers can enjoy the latest content (game, pictures, music etc.)
3.1.3) Eliciting the Growth Potential in IT/Telecommunications Sectors
In its role as a home network gateway, VAIO's functions will be strengthened and its links to peripherals and network services promoted in order to create a total business model that increases profit. Sony Ericsson Mobile Communications will strengthen product development in the mobile phone business, while reconfiguring their USA and China operations and focusing resources in strategic areas.
3.1.4) Enhancing Semiconductor Business
Semiconductors are key devices for adding value in order to differentiate products. Sony will continue to apply its unique and leading-edge technologies in this field to enhance the competitiveness of its products. R&D for system LSIs and imaging devices key to electronics products will be energetically promoted. Advanced semiconductor process technology and DRAM-embedding technology will be pursued and the development and investment in processors will continue. In CCDs, where Sony maintains a high market share, efforts will be made to balance external and internal sales, thus reinforcing competitiveness and securing profitability.
3.2) supporting growth strategy
To support a growth strategy for electronics, R&D efforts will focus on the following:
3.2.1) Development of competitive key devices to maximize added value in products
* Imaging devices and peripheral devices
* Devices for next-generation Flat Panel Displays (OEL and FED) and projectors
3.2.2) Developments of next-generation processors, centering on CELL. Potential applications include:
* Home Server
* Broadband-capable Television
3.2.3) Core technology and components (architecture, OS, middleware, chipsets) to be standardized to create a strengthened, speedier development and engineering environment.
3.2.4) Develop IT technology related to content distribution
3.3) Group Strategy
3.3.1) Entertainment
Music
Under the new management structure, Sony Music Entertainment (SME) implemented a series of organizational changes designed to further intensify its focus on artist development, streamline operations, and position the organization for future growth. The company continues to focus its energy and resources on identifying and developing talent, as well as on developing new A&R sources in virtually every territory across the globe. As part of these changes, SME has created Sony Urban Music, a new division that is dedicated to identifying and developing the best urban talent.
Pictures
Sony Pictures Entertainment (SPE) will energetically promote new releases and develop its franchise strategy to reinforce its market position. Core programming for television will be strengthened and the rich library of assets leveraged to pursue new programming and business opportunities. At the same time, digital initiatives will help advance the broadband distribution of SPE content directly to consumers. Initiatives to promote maximum efficiencies and ensure sustained profitability will continue.
3.3.2) long term strategy plan of Personal Solutions Business Group (PSBG) and Network Application and Content Service Sector (NACS)
PSBG: PSBG will focus on the development of new services centered on individual customers. Cross-marketing opportunities with other Sony divisions will be explored with the aim of creating new customer-bases and business chances. In the longer-term, alliances may be created both within and outside the Sony group, based on proximity to the customer base, to provide integrated services to customers.
NACS: NACS is responsible for leading the Sony Group to the early realization of its business model to integrate hardware and content. Through this Sony will be able to provide network services which offer customers new value for the broadband era. At the same time NACS provides horizontal support to NCs and Business Groups through its linkage with the Platform Technology Center.
4. HRM Summary
To be successful a Comprehensive IHR Management must have an IHR strategy that is clearly articulated, committed to paper and continuously refocuses to match the IHR goals and objectives with the business. Unless, the entire organization views the same picture, conjecture and opinion will rekindle fires. To remain competitive in the global marketplace and to optimize the international human resources to be most productive, multinational companies must maintain a "global view" and keeping the pieces of the IHR puzzle fitting snuggly together into the picture defined by their IHR strategy.
Globalization means adopting a global outlook for the business and business strategies aimed at enhancing global competitiveness. Companies, which have adopted a global outlook, stop thinking of themselves as national marketers. A truly global corporation views the entire world as a single market; in other words, there is nothing like a home market and international market- there is only one market, i.e., the global market.
As Kenichi Ohmae, a world renowned management expert and author, observes, 'a global corporation develops a genuine equidistant of perspective'. Embellished by promises of limitless and effortless affluence, the vision of a global economy has an entrancing appeal. Akio Morita, the founder and the chairman of Sony Corporation remarked, “Overtime we should seek to create an environment in which the movement of goods, services, capital, technology and people throughout are truly free and unfettered."
4.1) International HRM of Sony
One of the most critical determinants of Sony's success in global ventures is the effective management of its human resources.
International human resources are a complex paradigm -- like a puzzle where all the pieces are intertwined and all placement of the piece in hand decisions impact the total picture. However, in many organizations international human resources managers are forced to spend most of their time "fighting fires” kindled by the magnitude of issues arising from international growth and expansion, rather than being given the time to concentrate on the greater, and far more important strategic management issues, which could well avert future fires from breaking out at all. Furthermore, the "solution" that puts out one fire can easily become the fuel for the next fire to be ignited, leaving few resources and little energy to take the considered global view necessary for IHR to be a strategic partner to the business as a whole.
After many years of assisting organizations large and small to deal with this paradox, and from that experience, we have developed a concept which to date has been able to provide the means for companies to establish an IHR strategy that clearly aligns IHR with the business values, philosophy and goals. When the IHR strategy "twins" the business strategy, it steers IHR decisions and the fires go out. If Corporate and local management alike are willing accept it as the benchmark for all IHR design and delivery systems, it can change the HR Directors life from "managing to manage" to "managing by design". The IHR strategy will provide management with a consistent methodology to evaluate each situation and make decisions in keeping with the company’s values and demographics as well as guide all expenditure choices. Most importantly, a distinctive strategy enables IHR to be a true strategic business partner contributing to organizational growth and profitability.
4.2) the "Four C's" of IHR
An IHR strategy addresses the "four C’s": how the company will compete for employees, how employees will be compensated, how corporate culture will be defined and broadcast and of course, the cost side of the equation of managing expenses and liabilities and harnessing global synergies for cost savings. An IHR strategy recognizes the interrelationships between the "four C's" and becomes the management tool which defines IHR processes and sets standards for productivity and success
The process that we have been able to develop supports growth and expansion by ensuring start-up activities at new international locations aligns with the IHR strategy for the implementation of company-wide policies and culture and the development of country-specific HR policies. All new compensation and benefits programs are designed to align with the IHR strategy thus avoiding inconsistencies that fuel other fires. On-going IHR operations also become more effective because programs are redesigned to contain cost and maintain competitive pressure. IHR operations are managed according to the IHR strategy and global view.
Here, we will address the major issues that managers face everyday as they attempt to manage human resources across national boundaries. It incorporates an overview of current international human resource management (IHRM) theory and research. Specific topic areas will include the traditional human resource management (HRM) functions as well as issues which evolve from the internationalizing of these processes.
The primary emphasis will be placed on managerial level employees; however, technical and professional employee issues will be included as appropriate due to the increasing requirements of the transfer of technology.
Human resource management has escalated to the forefront of Sony’s attention due to the enormous transformations taking place in the social, political, economic and educational environments.
4.3) Corporate Strategy and Human Resource Management
Large, worldwide businesses tend to evolve from international to multinational to global structures (Zeien, 1991).
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An international company transports its business outside of its own country although, in general, each of its operations is a replication of the company's domestic experience. Typically, an international company is structured geographically and involves subsidiary general managers.
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A multinational company, in contrast, grows and defines its business on a worldwide basis, but continues to allocate its resources among national or regional areas so as to maximize the total. Companies with multiple product lines often find it difficult to remain geographically organized for a variety of reasons, such as the need to have a common accounting system, common financial and management controls, and interrelated marketing programs. As a result, such companies tend to evolve into multinational structures, with combinations of product-line and solid-line responsibilities (Zeien, 1991).
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Global organizations treat the entire world as though it were one large country. The global organization may be the entire company or one or more of its product lines. Some firms operate with a mixture of two or even three of these models of organizational structure simultaneously. Changes in organizational structure have important implications for the management of people within those structures.
As an example, considering the business system of Sony, it is comprised of five interlocking parts.
1. Boarder-less structure and bottom-up decision-making processes that encourage communication and information flow among all components of the company and extend the network to its key suppliers, distributors, and other business partners.
2. Custodial leadership that emphasizes values and vision and is skillfully unassertive, while energizing and challenging middle managers with demanding targets.
3. Human resource management, including socialization, training, and promotion via a hierarchy of ranks, job rotation, and appraisal systems that promote hard work, commitment, and competition among peers.
4. Incremental planning and control that help a company expand little by little, focusing on new products and the relentless pursuit of operating improvements, rather than "grand designs" for competitive advantage.
5. An extended family model that encourages and rewards commitment.
Sony has taken several steps to enhance the quality of human relations and at the same time maximize the effectiveness of their human resources. The above practices generate broad working networks and an appreciation for total business needs horizontally and vertically throughout the organization. Effective human resources management does not exist in a vacuum but must be related to the overall strategy of the organization. The human resources policies of the company and the personnel function itself must relate to the goals of the organization.
Effective strategic human resource management requires a simultaneous match between the external and internal environments. The external match is the integration between HR functions and the organization at each stage of change within the total environment context. The degree of effort expended to understand the country culture(s) and socioeconomic environment is a critical element of the external match. The internal match is the integration between the HR functions throughout the organization. However, within Sony the desired degree of match or integration varies based on the organization strategy, products, structure, and philosophy
A number of researchers have identified flexibility as critical too successful strategic management. Flexibility being defined as ability to cope with change and continual adaptation to the changing internal and external organizational environments. Flexibility and internal and external integration can be viewed as two separate. As HR functions change over the life-cycle (development of the organization) of the organization internal and external integration as well as flexibility is critical to successful strategic HR decisions.
4.4) Staffing for Global Success
The difference between failure and success depends on how well organizations select, train, and manage their employees. One of the distinguishing characteristics between international and domestic HRM is the complexity of the work force mix. The type of organization structure will directly impact the complexity of the mix of employees. A wholly owned subsidiary operation may employ only expatriate and host country personnel while a strategic alliance may have a far more complex work force. Research to date has basically categorized human resources into three or four of the following groups of employees; (1) foreign parent(s) expatriates; (2) host parent(s) transferees; (3) host country nationals; and (4) third country employees.
The above classifications can be further expanded by utilizing the following categories in various combinations. Employees can be classified using three criteria: (1) country of origin; (2) recruiting entity; and (3) country of employment (Zeira & Shenkar, 1986). There are many possible combinations which result in various categories of employees. Shenkar & Zeira (1987) identified eight categories of employees; however, the six categories of employees described below require specialized attention
(1) Foreign parent expatriates are employees from the foreign parent(s) headquarters assigned to the venture. These employees are nationals of the foreign parent(s) home country and are usually assigned to upper management positions.
(2) Host parent transferees are employees of the host parent(s) company and are transferred to the venture but may have been previously employed overseas before being transferred.
(3) Host country nationals are employees directly recruited and employed by the venture and are national of the host country. They may occupy all levels in the organization, however, initially they are usually not found in the upper management levels.
(4) Third country expatriates of the foreign parent(s) are employees in the foreign parent(s) organization who are nationals of neither the foreign parent(s) country nor the host parent(s) country.
(5) Third country expatriates of the host parent(s) are employees in the host parent(s) organization who are nationals of neither the foreign parent(s) country nor the host parent(s) country.
(6) Third country expatriates of the new venture are employees recruited directly by the venture who are nationals of neither the foreign parent(s) country nor the host parent(s) country.
These six categories of employees require specialized attention in each functional area of HR to maximize their effectiveness in the complex global venture (Bailey & Shenkar, 1993)
The failure rates of expatriate personnel are well documented. The majority of research has focused on pre-departure and post-arrival training and orientation for the employee and other family members (Black & Mendenhall, 1991; Black, 1989; Mendenhall & Oddou, 1988). However, recruitment and selection criteria have as much impact on employee success in organization as orientation and training. Employee selection criteria based on technical competence alone will not lead to success in Sony. Personality characteristics such as adaptability and flexibility as well as interpersonal skills are better prediction criteria
4.5) Global Human Resource Development:
International HRD practitioners must be able not only to operate on a global scale but also to work effectively in the myriad of distinct local cultures they encounter. They need to learn from the best of each nation's HRD programs as well as from the best of the global HRD technologies, ideas, and visions.
4.5.1) Human resource training and development
Technology
Managers find that technology plays a critical role in industrial competition as well as ability to provide quality service. The Nissan car and truck plant in Smyrna, Tennessee incorporates widespread use of industrial robots with painting being done by West German technology, using robots from Norway. Fiber-optic communications, developed by U.S. aerospace firms, monitor 3000 points in the paint process. However, many firms are experiencing a 50 - 75% failure rate when attempting to implement information management technology, due mainly to neglect of the critical interface between technology and human resources in the work place (Saraph & Sabastian, 1992).
Many non technical managers are averse to technological concepts and some suffer the same stress, fear and frustration as others when technology is introduced. Managers are finding their jobs being redefined or eliminated as technology assumes more functions and fewer personnel are required to perform tasks Bailey & Cotlar, 1993). The level of technical competence of the work force requires a different style of managing, along with technical competence on the part of managers (Brod, 1984).
Sony Corporation’s performance can be greatly enhanced by employee training at all levels but management development is critical. All stakeholders input are of value to the organization.
Achieving the Desired Results
All effective, efficient and economically founded management processes begin by ensuring there is a clear picture of the objectives before the individual pieces of the puzzle are addressed. Defining the picture is accomplished through the Assessment and Development phases.
During Assessment the goal must be to sketch the current picture of business operations and IHR. The assessment therefore looks at:
- Company's objectives and goals,
- Current policies, practices, processes and structures,
- Benefit plans and compensation programs, and
- Cost elements.
This information is then summarized and reported to management to gain consensus on the issues and the current status. After everyone has an appreciation of the environment the organization presently enjoys, the next phase, Development, can begin.
During Development the desire picture is delineated through a distinctive IHR strategy perfected specifically for the company's needs, plans and objectives.
From the IHR strategy that is established by the organizations management, a blueprint can be developed for building the desired picture by designing global programs and harmonizing and aligning current policies, plans, and programs in each country to the IHR strategy. Prior to moving to the next phase, Implementation, the proposed IHR strategy and blueprint are presented to all levels of management for their approval and commitment to action.
The Implementation phase involves the revamping of IHR policies, programs and plans to fit into the desired picture. The supporting blueprint is followed closely to ensure all the pieces fit into the puzzle and paint the desired picture. Of course, the first step of the Implementation phase must be communicating the IHR strategy and supporting processes to employees and all levels of management on a global basis. Next, the global synergy goals of the IHR strategy are promoted through establishment of the global policies and programs. These programs include but are not limited to multinational pooling, international retirement programs, global medical plans and universal pension funding.
Finally, the important but arduous task of aligning policies, benefits and compensation programs within each country to the IHR strategy is undertaken.
Ensuring the Pieces Continue to Fit
To maintain a clear picture of the completed IHR puzzle, the strategy must be continuously adjusted and refocused. Therefore, the final phase, Maintenance, never ends. There are ongoing, periodic and annual IHR processes that must be continuously managed according to the IHR strategy. As well, policies, plans and processes must be revised as necessary for legal compliance, competitiveness and changes in business plans or goals.
Management must be kept informed through updates and status reports on any information key to the success of the IHR strategy. In addition, a worldwide audit of IHR programs and plans should be conducted at least every three years as a matter of course. While guidelines and an approval process help management navigate through obvious change, subtle changes within the company, local market practice, legislation, and employee demographics can erode programs’ effectiveness over time. Multinational pools are particularly subject to degrading without continuous corporate sponsorship and should also be re-evaluated periodically.
Companies using this system that is developed will budget time and expense each year for auditing and re-aligning their IHR programs as an integral part of the plan itself. This has proved to be the most cost effective approach to continuous acceptance of IHR as a true strategic business partner.
5. Financial Issues
In the 1990s, Japanese banks were forced to undergo cataclysmic changes due to the enormous amount of bad loans remaining when the economic bubble burst in 1991. During this period, banks including some large banks failed, large amounts of public funds were injected into bank capital, bank management was drastically streamlined including shedding some lines of businesses, mergers and consolidations, and red ink was posted for year-end financial results. All of these trials were new to Japanese banks as they seldom occurred in the preceding post-war growth era.
These predicaments contributed to a transformation of the Japanese banking industry landscape. It is also evident that liberalization and globalization, which characterized Japanese banking in 1980s and culminated in the Financial System Reform Law of 1992 and the unveiling of a Japanese version of the Big Bang in 1996, played a role in paving the way for the present reshuffling of the industry.
In tandem with changes in the supervised entities, the supervisor (the former Ministry of Finance) has also undergone a complete change in terms of organization and the way it supervises.
With the advent of Prime Minister Koizumi, the review of government financial institutions, particularly privatization of the Postal Savings, has appeared on the national agenda. The final shape of the Japanese financial industry is yet to be seen.
5.1) Changes in Financial Supervision
The reform of central government ministries and agencies that took place in January 2001 abolished the Financial Reconstruction Commission and reorganized the Financial Services Agency (FSA) as a subsidiary organization of the Cabinet Office. The FSA took over responsibility for resolving failed financial institutions from the Financial Reconstruction Commission. The Cabinet Office also established a "Financial Crisis Management Committee" which serves as a consultative body to the Prime Minister for discussing policies for dealing with financial crises such as large-scale and systemic failures of financial institutions and other important matters. Also, the post "Minister for Financial Services," who deals with general banking matters to build an environment for smooth financing, was also created.
- Emergence of the Big Four Financial Groups
In September 2000, the Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan established the bank holding company, "Mizuho Holdings, Inc." They also announced a plan to reorganize the three banks under the holding company in 2002 into the Mizuho Bank and Mizuho Corporate Bank in accordance with the customer segment. In April 2001, the Bank of Tokyo-Mitsubishi, Mitsubishi Trust and Banking, Nippon Trust Bank and Tokyo Trust Bank established the bank holding company, "Mitsubishi Tokyo Financial Group, Inc." Subsequently, three trust banks that came to belong to the holding company merged in October 2001. Another bank holding company, "UFJ (United Financial of Japan) Group" was established in April 2001 by the Sanwa Bank, Tokai Bank and Toyo Trust and Banking. The two commercial banks, Sanwa and Tokai, merged into UFJ Bank and Toyo Trust and Banking changed its name to UFJ Trust Bank in January 2002. These financial groups, along with "Sumitomo Mitsui Banking Corp. (SMBC)," established by a merger between the Sakura Bank and Sumitomo Bank in April 2001, form the so-called Japanese Big Four financial groups.
- Entries of New Types of Banks
As utilization of the Internet becomes common among the general public and customer needs diversify, new types of banks have emerged. In May 2001, IY Bank, which specializes in payment and settlement services for individual customers and was established by the largest Japanese supermarket chain, Ito-Yokado, started operations by fully making use of ATMs installed in their convenience stores. Sony Corp. established Sony Bank in cooperation with SMBC and JP Morgan and started operations in June 2001. The bank provides services through the Internet to individual customers. In addition, eBANK, which specializes in small-amount payments using the Internet and portable phones, was established by trading companies, insurance companies, information service companies, etc. and started operations in July 2001. Prior to these, Japan Net Bank, an Internet bank, began operation in October 2000 with investments from SMBC, Fujitsu and Nippon Life Insurance.
The Financial Reconstruction Commission and the FSA responded to the establishment of these new forms of banks by formulating "Measures for Licensing for and Supervision of New Types of Banks include Entry into Banking Business by Non-financial Entities (Operational Guidelines)" in August 2000. Also, the "Law Partially Amending the Banking Law, etc." that is being submitted to the Diet further adapts to the entry of non-financial entities into the banking business by regulating major shareholders of banks.
5.4) Public Finance Issues
The Japanese financial system is notable for the significant position assumed by public financial institutions. The main entity, the Postal Savings, holds deposits in excess of 255 trillion yen (Dec. 2000), making it the largest financial institution in the world.
The Postal Savings was originally established to promote small-volume personal savings. It is only allowed to accept deposit from individuals and there is a limitation on the amount of deposits an individual can make with it (10 million yen at present). Private financial institutions criticize that the Postal Savings has expanded too much on account of its merits including favorable interest rates, and maintains that public sector businesses should be supplemental to those run by the private sector.
Before April 2001, all funds collected by the Postal Savings were entrusted to the Trust Fund Bureau of the Ministry of Finance and invested in government financial institutions such as the Development Bank of Japan, Japan Bank for International Cooperation and other public corporations. The Trust Fund Bureau was abolished in April 2001. And now the Postal Services Agency, which belongs to the Ministry of Public Management, Home Affairs, Posts and Telecommunications as a result of the ministerial reform in January 2001, independently invests in the market and governmental financial institutions raise funds on their own by issuing debentures.
The Postal Services Agency is slated to transform itself into a government-run public corporation in 2003. The government of Prime Minister Junichiro Koizumi, a long-time advocate for privatizing the Postal Savings, has set up a panel consisting of leaders in various industries and academics and started discussing how to run the mammoth institution including privatization. In the meantime, the interim report published in June 2001 by the Secretariat to Promote Administrative Reforms states that governmental corporations that have lost their raison d'être due to socioeconomic changes, or that can be substituted with private institutions, should be reviewed and may be abolished.
5.5) Quarterly Financial and Stock Information
Sony Corporation and Consolidated Subsidiaries - Year ended March 31
Yen in billions except per share amounts
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2001 2002 Sales and operating revenue. . ¥1,565.1 ¥1,633.5 ¥1,690.9 ¥1,780.9 ¥2,129.6 ¥2,279.3 ¥1,929.2 ¥1,884.6
Operating income (loss) . . . . . . 30.6 3.0 53.1 (3.4) 144.8 158.6 (3.2) (23.6)
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . 36.9 (14.3) 76.9 0.6 136.2 119.3 16.0 (12.8)
Income taxes . . . . . . . . . . . . . . . 17.2 20.3 38.0 14.8 53.0 39.0 7.3 (8.9)
Income (loss) before cumulative effect of accounting changes . . . 12.0 (36.1) 18.7 (13.2) 74.8 64.0 15.8 (5.5)
Net income (loss) . . . . . . . . . . . . (92.4) (30.1) 18.7 (13.2) 74.8 64.0 15.8 (5.5)
Per share data
Income (loss) before cumulative effect of accounting changes
-Basic . . . . . . . . . . . . . . . . ¥ 13.21 ¥ (39.26) ¥ 20.43 ¥ (14.34) ¥ 81.72 ¥ 69.72 ¥ 17.20 ¥ (5.91)
-Diluted . . . . . . . . . . . . . . . 12.71 (39.26) 19.38 (14.34) 75.82 64.87 16.46 (5.91)
Net income (loss)
-Basic . . . . . . . . . . . . . . . . (101.48) (32.75) 20.43 (14.34) 81.72 69.72 17.20 (5.91)
-Diluted . . . . . . . . . . . . . . . (92.34) (32.75) 19.38 (14.34) 75.82 64.87 16.46 (5.91)
Depreciation and amortization*. ¥ 79.8 ¥ 80.0 ¥ 83.0 ¥ 87.5 ¥ 87.2 ¥ 94.6 ¥ 98.2 ¥ 92.0
Capital expenditures (additions to fixed assets) . . . . 81.6 86.1 88.2 93.3 90.5 75.2 205.0 72.1
R&D expenses . . . . . . . . . . . . . . 90.3 103.2 108.1 123.2 100.0 98.9 118.3 107.9
Tokyo Stock Exchange price per share of Common Stock**:
High . . . . . . . . . . . . . . . . . . . . ¥ 15,000 ¥ 10,200 ¥ 12,480 ¥ 8,150 ¥ 10,800 ¥ 6,200 ¥ 9,370 ¥ 7,200
Low . . . . . . . . . . . . . . . . . . . . . 9,490 8,100 9,900 4,210 7,560 3,980 8,040 5,540
New York Stock Exchange price per American Depositary
Share**:
High . . . . . . . . . . . . . . . . . . . . $ 137.56 $ 85.50 $ 116.25 $ 65.75 $ 98.69 $ 49.86 $ 76.90 $ 56.59
Low . . . . . . . . . . . . . . . . . . . . . 90.25 65.80 90.44 33.20 69.38 33.72 65.95 41.00
* Including amortization expenses for intangible assets and for deferred insurance acquisition costs. *
** Stock price data are based on daily closing prices.
Notes: 1. In July 2001, the Financial Accounting Standard Board (“FASB”) issued Statement of Financial Accounting Standards (“FAS”) No.142 “Goodwill and Other Intangible Assets”. Sony adopted FAS No. 142 retroactive to April 1, 2001. As a result, Sony’s operating income and income before income taxes for the year ended March 31, 2002 increased by ¥20.1 billion ($151 million) and income before cumulative effect of accounting changes as well as net income for the year ended March 31, 2002 increased by ¥18.9 billion ($142 million).
2. On April 1, 2001, Sony adopted FAS No.133,
“Accounting for Derivative Instruments and Hedging Activities” as amended by FAS No.138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB statement No.133”.
As a result, Sony’s operating income, income before income taxes and net income for the year ended March 31, 2002 decreased by ¥3.0 billion ($23 million), ¥3.4 billion ($26 million) and ¥2.2 billion ($16 million), respectively. Additionally, Sony recorded one-time non-cash after-tax unrealized gain of ¥1.1 billion ($8 million) in accumulated other comprehensive income in the consolidated balance sheet, as well as an after-tax gain of ¥6.0 billion ($45 million) in the cumulative effect of accounting changes in the consolidated statement of income.
3. in the fourth quarter of the year ended March 31, 2002, Sony adopted Emerging Issues Task Force (“EITF”) Issue No. 00-25,
“Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products”, which was later codified along with other similar issues into EITF Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products” (“EITF No. 01-09”), retroactive to April 1, 2001. As a result, Sony has restated sales and operating revenue for the first three quarters of the year ended March 31, 2002.
4. In June 2000, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (“SOP”) 00-2, “Accounting by Producers or Distributors of Films”. Sony adopted SOP 00-2 retroactive to April 1, 2000. As a result, Sony’s net income for the year ended March 31, 2001 included a one-time, non-cash charge with no tax effect of ¥101.7 billion, primarily to reduce the carrying value of its film inventory.
5. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”. Sony adopted SAB No. 101 in the fourth quarter ended March 31, 2001 retroactive to April 1, 2000. As a result, a one-time no-cash cumulative effect adjustment of ¥2.8 billion was recorded in the income statement directly above the caption of “Net income” for a change in accounting principle. Sony has restated its financial results for the first three quarters of the year ended March 31, 2001.
- conclusion
Success and survival depend upon the ability of Sony to compete globally. The human potential is the most essential. Thus HRD forms the integral part of the persona development of the individual who will form the future asset of the company.
Observation, research and analysis uncover the common needs of Sony's customer groups. Once individual needs are known, automated business rules determine the appropriate treatment, and each customer is treated according to his needs.
Ultimately, Sony Corporation can increase its profitability and enhance the experience it provides its customers by ensuring that the treatment customers receive across different touch points matches their individual needs. The increased profitability is derived from increased efficiency.
Demographic information often correlates with customers' needs and can be an effective tool to begin analysis for targeting customer needs, but it is not the end goal.
Demographic information should be viewed as a building block and not as the end of the information required to understand customer and market needs
For the Sony Corporation, Sony could start with the implementation of a new mission statement, with profit and benefits of the company tied more closely to everyday operations. Internally, the four forces, the management, the designers, the production and the marketing should achieve better communication and cooperation.
Alliance and cooperation between competitors should also be actively sort after in order to create standards in new fields. Sony should aim at being the leader instead of being the maverick.
As for cost cutting, Sony should seriously consider setting up operations in other Asian countries in order to take advantage of the cheap labor and the budding markets. Finally, diversification, instead of pursuing the fast changing and easily imitated consumer goods market, Sony should use its technological expertise for high-end business and office equipment.
With SWOT analysis and Porter's competitive forces model, we can view that the market is much more competitive with less profit margins and lead-time for product innovation.
However, even with strategirial and structure change, the Sony spirit of innovation should remain intact because that is what made Sony grow and would make it stay strong.
Appendix 1
Finance issues
Kodak Hopes to Set Trend With Sony Suit
Mr. Eastman Kodak filed a complaint against Sony alleging that the consumer electronics giant is infringing upon ten Kodak patents for digital still and video photography.
Patent disputes are common in emerging technology markets like digital photography, but this battle has the potential to get quite interesting, disrupting the industry's current balance of power. Kodak (NYSE: - - ) says it invented "the first working digital camera prototype in 1976," although it famously got a very late start getting into digital camera production. Sony (nose: - - ), however, is now the world's leading maker of these cameras. For the month of January, Sony had 18.7 % share in the market for digital camera and PC web cameras, followed by Canon (nose: - - ) at 16.5%, Kodak at 12%, Olympus with a 9.4% share and Logitech (NASDAQ: - - ) which at a 7.3% market share, according to The NPD Group.
Should a court find in favor of Kodak or, in the more likely scenario, if Sony and Kodak settle the suit and Sony agrees to pay licensing fees for the technology in dispute, it would be a tremendous boon to Kodak's oft-criticized efforts in the digital camera marketplace. At the very least Kodak could come away with a hefty chunk of new licensing revenue. It could also provide a huge boost to Kodak's image in the digital realm. Kodak says that it currently licenses digital photography technology to ten companies, including Olympus and Sanyo (NASDAQ: - - ), but does not break out those numbers in its financial statements. Kodak also sued Sanyo in 2001 before the two companies settled on a cross-licensing agreement for their technologies.
"To me the only surprise is that it's taken so long for [Kodak] to file this suit," says Paul Worthington, an analyst at the digital imaging research outfit Future Image. "For years, when critics were wondering what was taking Kodak so long to get into the digital camera market, the company always said, 'We have lots of patents on a lot of the basic technology, and however digital photography plays out we'll make money on this.'" Worthington adds: "It sounded wishy-washy, but that doesn't mean it's not true."
A Kodak spokesman says Kodak and Sony have been negotiating the issues at hand for three years, and in the technology industry lawsuits are often a means of forcing a conclusion to such licensing negotiations. "This is just part of conducting business in the high-tech arena," says Morningstar analyst Rod Bare.
The patents at issue in the complaint include "inventions in an electronic camera utilizing image compression and digital storage" and "inventions in an electronic camera providing multi-format storage of full and reduced resolution images," among others.
Those patents sound like they would apply to any and every digital camera, but the U.S. patent process is complex and notoriously flawed. Just because a particular technology can perform a certain task, doesn't preclude the existence of different technology that can serve the same function using a different technologic process.
"An ongoing criticism of the U.S. Patent Department has been that the patent examiners aren't familiar enough with the technology [that they review]," says Future Image's Worthington. "As a result, they will issue a patent for technologies that aren't necessarily new or innovative and may already be patented by someone else."
That may be, but this isn't the first time that Sony has been accused of digital imaging patent infringement. In March 2003 a court ordered Sony to pay $25 million to St. Clair Intellectual Property Consultants for infringing upon four digital imaging patents. "Sony didn't pay much, but by going to Sony first, St. Clair set a precedent," says Worthington. "If you can get the industry's biggest player to back up your patent claims then you can get everyone else to do so also."
No doubt that's just what Kodak is thinking.
Appendix 2
New Sony Walkman Can't Break I Pod’s Stride
IN NEW YORK - If there's one thing that makes Sony's Network Walkman seem superior to Apple Computer's , at least at first glance, it's the issue of size versus storage capacity.
Sony's (nyse: - - ) reinvented Walkman is actually comparable to an iPod Mini, in terms of physical size, but its ability to store 13,000 songs on only 20 gigabytes rivals Apple's (NASDAQ: - - ) ability to cram 10,000 tunes onto 40 GB.
If Sony's product had come out two years ago, we all would have been blown away. It would have been hailed as a huge leap forward in personal audio because it is tiny, can store a ton of music and provides excellent audio quality. Plus, it's relatively easy to use (once you get used to it) and has a long battery life. The iPod might have been an also-ran in the category it has come to define. On the whole, the Network Walkman would have been seen as nothing less than a revolutionary piece of listening equipment.
Instead, we're left to compare it to the omnipresent iPod, which is in itself more than just a popular piece of consumer electronics. It's also a cultural phenomenon: It even has its own magazine.
That said, in trials, the Network Walkman performed like the high-end device that it is. If you've never used an iPod before, then there certainly is a lot to like.
The differences in design and functionality are mostly a matter of personal preference. It's like comparing a Mac to a PC; they do nearly the same things, just a little bit differently. With its circular touchpad control, the iPod is so easy to use that even a moron can figure it out. One thing the Walkman doesn't have is games, though it does have more switches and buttons, such as a dedicated volume control, that the iPod lacks--unless you buy the 40-gigabyte version or the optional inline remote.
Which leads to a consumer's pet peeve: It makes obvious sense that both companies would want customers to purchase peripherals, but it is profoundly annoying that they'll ship a $400 player with cheap accessories. In Sony's case, the chief complaint lies with the included headphones. They sounded hollow and overall unworthy of the device with which they were packed.
While smaller is generally better, the iPod display screen is bigger and clearer, thus modestly easier to read. And its sleek white-and-stainless-steel exterior is more refreshing and exciting than the boring brushed-steel-and-black surfaces that dominate most of Sony's consumer electronics. The metal parts of the Walkman, however, are less likely to get dinged and scratched. (The iPod is accompanied by a rather healthy crop of protective cases meant to prevent this.)
Apple claims its sound quality is better because Sony has compressed its proprietary ATRAC files down so the device can hold more music. Yet, under normal listening conditions, it's tough to tell the difference, if there is one at all. It gets even harder to distinguish between the two when you're on the street, in a car or on the subway.
Sony's player supports only its ATRAC format, so there's the frustratingly long step of converting existing music libraries to this format for use on the Walkman. This is less of an issue with the iPod, which supports several formats, including MP3 and AAC.
True, the Network Walkman holds more tunes: 13,000. But how many do you need? Apple's lowest-priced iPod model stores 5,000 songs; you could fly across the continental U.S. and back multiple times and still not have listened to every track.
But, while taking such a trip, you would have to charge the iPod before you'd have to charge the Walkman. The battery in Sony's device easily lasted the 30 hours the company claimed, compared to the iPod's 12, though you have to use a docking station that's provided to recharge the Walkman.
And then there's the issue of the music stores. Apple's iTunes Music Store is already famous for its success. Yet it's strange that Sony, which is a record company in its own right, hasn't done a better job with its store: Its software didn't work terribly well, gave error messages and froze when burning CDs. Of course, the same issues pop up with tunes as well. It seems there are plenty of bugs to go around on both sides. With more than a million songs, Apple's download library rivals that of Sony.
The Network Walkman's $400 price tag gives the iPod the edge. Apple's 40-GB iPod goes for the same price. Sony's player should be about $100 cheaper.
Overall, despite many good points, the Walkman falls short of the iPod. Sony can do better, but has yet to get its formula right. Given a choice, go with the iPod.
Appendix 3
Sony stands up ipod--finally!
Can Sony Connect bring Sony into the digital music game?
Finally Sony has decided to pick up the ball and offer something comparable to the .
Well not quite. Sony will launch this spring. Connect appears to be Sony’s version of tunes. The online music service will have database of 500,000 tracks downloadable for .99 cents a song or $9.95 for an album.
Sony’s foothold in the music industry and ownership of music labels makes one wonder: what was the delay? That pesky problem of being able to provide music and pay the artists kept Sony diving into the digital downloading frenzy until Sony’s engineers in Tokyo and music team in the United States could resolve the technical and legal issues, according to the .
So where is the familiar white device or chic new colorful mini to place the songs in? This is where Sony believes it has struck gold. In the , Jay Summit, manager of Sony Connects Manager stated “we are in the unique position to offer consumers easy-to-use, affordable service with the broadest number of devices.”
The beauty of the Sony Connect is its ability to transfer songs into several existing Sony products such as the NET MD Walkman, the Hi-MD Walkman recorders, the Atrac CD Walkman Players, and the Network Walkman Players.
Unlike the outrageously expensive iPods that can cost as much as $499, Sony’s products range from $60 to $300 in price.
With all pluses come drawbacks- The highest capacity for Sony’s mp3 compatible merchandise is 490 hours whereas some iPods can hold over 800 hours.
In addition, hard-core downloader’s may not be excited to pay a dollar for the latest top ten hit. Sony will still have to convince Netizens to pay for what they are accustomed to getting for free.
But all chances for free tunes are not lost. You want to have your song and eat something too—if you get in line at McDonalds. This summer Sony will be giving away a free downloadable song with every Big Mac purchased. No longer do you have to take your chances on the “1 in 3 are winners” Pepsi caps.
Appendix 4
Balance sheet of Sony
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