Mid term report topic sony

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM MID-TERM REPORT TOPIC: SONY Subject: International Business Class: Advanced Finance 62C Group: 03 Supervisor: Dr Bui Huy Nhuong Students: Ha Thuy Hang 11201298 Nguyen Vu Thuy Linh 11205851 Nguyen Nguyet Minh 11206121 Nguyen Phuong Thao 11206947 Hoang Le Anh Tho 11201298 Hanoi, 11/2022 TABLE OF CONTENT PART I: Overview of the company Error! Bookmark not defined About Sony Corporation About Sony - Ericsson (its member partner) Vision .2 Objectives PART II: Reasons why they decided to choose joint venture as entry mode at that time of entry National environments 1.1 Japan 1.2 Sweden Business situation PART III: Factors affecting joint venture partners Culture .7 Strategy 2.1 Absorptive Capability 2.2 Market power 2.3 Product Relatedness 2.4 Market Experience Company structure 10 3.1 Firm Size 10 3.2 International Business Experience 10 3.3 Previous Cooperative Experience 11 3.4 Organizational Structure 12 Finance 12 4.1 Investment Assessment and Capital Budgeting 12 4.2 Risk Management 12 4.3 Exposure Hedging 13 4.4 Financial Ability 13 Part V: Criteria 14 Goal compatibility 14 Resources complementary .14 Commitment 15 Capability .16 REFERENCES 20 TABLE OF FIGURES Figure 1: Sony Ericsson joint venture Figure 2: Japan's Economic Situation in the Lost Decade Figure 3: Real Income Growth (GDP) in Sweden, 1986-2000 (in %) Figure 4: Sony Ericsson product Figure 5: A journey to become successful joint ventures 14 PART I: OVERVIEW OF THE COMPANY Sony is one of the most well-known electronics businesses in the world Sony has several collaborative ventures, including one with Union Carbide to produce Eveready batteries in Japan In addition, the corporation manages a life insurance company in collaboration with the Prudential Life Insurance Company and a company that imports and promotes Wilson sports equipment in collaboration with PepsiCo Sony has also formed a partnership with Ericsson, a renowned provider of Information and Communication Technology (ICT) to service providers In this report, the alliance between Sony and Ericsson is chosen to analyze About Sony Corporation Sony is one of the most well-known electronics businesses in the world The corporation, which was founded in Japan, has evolved from humble beginnings to become an international behemoth Sony's record of the invention has kept the firm prosperous for more than 60 years, from the tape player to the Walkman to the OLED TV Kazuo Hirai, who joined the business in 1984 and rose through its media and consumer electronics divisions, was named president and CEO in 2012 It is a Japanese multinational corporation that ranks among the top producers of electronics goods for both the consumer and business markets In essence, it is a top producer of communications, information technology, video games, audio, and video goods for both the consumer and professional industries Sony is in a great position to become a global leader in personal broadband entertainment About Sony - Ericsson (its member partner) A joint venture between Sony and Ericsson called Sony-Ericsson was established on October 1st, 2001 They begin cooperating because they aim to establish themselves as a communication entertainment brand by encouraging people to engage in activities more than simple communication and providing tools for everyone to design and take part in entertainment experiences experiences when communication and entertainment are muddled The primary headquarters of Sony Ericsson is in London Figure 1: Sony Ericsson joint-venture Vision “To become the communication entertainment brand, by inspiring people to more than just communicate, and enabling everyone to create and participate in entertainment experiences Experiences that blur the lines between communication and entertainment.” Document continues below Discover more from: Working Capital Management FIN370 39 documents Go to course 2020a Version of Final exam year 2020 Working Capital Management 100% (2) CHAP market efficiency Working Capital Management None Bai tap Ktnnl - thay Bao - ktlđ Working Capital Management None WCM-literature review for Final Exam 16 Working Capital Management None 2023 Fin360 Group Assignment and guidelines Working Capital Management None Working capital management assignment Working Capital Management None Objectives The main objective of this joint venture is “to develop an alliance that would allow Ericsson to reduce spending on the costly development of nextgeneration mobile phones at a time when many European telecom companies see their inventories piling up as the world’s cell phone market is growing much more slowly.” PART II: REASONS WHY THEY DECIDED TO CHOOSE JOINT VENTURE AS ENTRY MODE AT THAT TIME OF ENTRY National environments 1.1 Japan Japan's economy started to take shape in the late 1980s and carried out major economic conduct at the extreme point of 1997–1998 The 1990 Japanese economic crisis with the creation of the Japanese bubble economy concept However, the 1990s' effects on Japan's economy and financial performance were limited to that nation The economic crisis of 1990 had a significant impact on the growth of the Japanese economy from 2000 to the present; it helped Japan to recognize its limitations in terms of economic development while also highlighting the reasons for failure in the most apparent way Since then, the Japanese government has had a foundation upon which to decide and implement more suitable policies, in order to restore the flagging economy and advance it in the direction of the development it is now Japan has gone through a terrible decade since 2000, entering a new decade and the start of a new millennium, even though the Japanese economy is currently still experiencing a protracted slump This time in Japanese economic history was characterized by bad loans and a crisis in the country's development paradigm Japanese Prime Minister Koizumi started settling these bad debts by some means in 2001 Japan has implemented policies in particular to encourage foreign investment and joint ventures Figure 2: Japan's Economic Situation in the Lost Decade 1.2 Sweden Sweden experienced its worst post-World War II economic crisis in the 1980s and early 1990s, which led to Swedish enterprises losing out to their rivals on a global scale and the state becoming overburdened Between 1991 and 1994, the GDP and unemployment rates both experienced considerable declines The Swedish economy experienced a significant slowdown after the early 1990s economic crisis, which was largely caused by the country's increasingly interventionist business policies These policies reflected a shift in which private enterprise and economic incentives that were unrelated to large corporations were viewed with suspicion Sweden implemented a significant structural reform program in response to the crises of the early 1990s Up until now, the main emphasis has been on the macroeconomic components of Sweden's reforms, which have included the establishment of a flexible exchange rate with an independent central bank, the pursuit of price stability, and the development of governmental budgetary discipline It is clear that these macroeconomic reforms helped the economy recover, but it is less generally recognized that a significant element of the Swedish reform plan was geared at improving market microeconomic functioning, which sparked a significant industrial restructuring process in the business sector Governments also didn't reverse the reforms after they were implemented, which was essential to their success Between 1995 and 2011, Sweden already had the highest worker productivity and competitiveness of any Organization for Economic Cooperation and Development (OECD) nation, tied with Ireland and the United States (OECD 2013) The major causes of Sweden's productivity development have likewise been those that have made its corporate sector more efficient Figure 3: Real Income Growth (GDP) in Sweden, 1986-2000 (in %) Business situation The first step taken by Sony is to seek a partner to investigate Global System for Mobile Communications and Code Division Multiple Access technologies In the 1990s, Sony formed an informal alliance with Siemens and Strategy 2.1 Absorptive Capability Through their partnership, Sony and Ericsson learned different things about product design And the Japanese company gave the business the ability to comprehend the trends in the market for smart mobile devices Furthermore, the Japanese business helped Ericsson in developing its managerial skills However, based on Sony's performance, Ericsson's market share was unable to overtake Nokia and Samsung In the primary market, they faced intense competition from Motorola and LG Sony also obtained access to the market share, infrastructure network, and handset technologies of Ericsson Sony's expertise in consumer electronics, stylish designs, and manufacturing techniques could benefit Ericsson 2.2 Market power Sony excelled at consumer multimedia electronics in 2001 The Walkman portfolio was the initial product line Sony gave Sony-Ericsson access to their multimedia technology while Ericsson played the major role in that deal, SonyEricsson contributed the core handset technology and telecom infrastructure that allowed Sony-Ericsson to release a series of mobile phones based on collaboration with telecom operators 2.3 Product Relatedness While Ericsson sold infrastructure, software, and services in information and communications technology for telecommunications service providers and enterprises, including, among others, 3G, 4G, and 5G equipment as well as Internet Protocol (I.P ), Sony's product line had focused on the fields of consumer electronics such as color televisions, audio & video products, video games, and specialized electronics such as broadcasting equipment Figure 4: Sony Ericsson product Following the merger, Sony Ericsson focused mostly on the following segments: photography, music, business (email and web), all-arounder, design, price-conscious, and environmentally friendly phones The business named its phone products in three different ways Depending on when they were introduced to the market, mobile items have names of three, four, or five characters 2.4 Market Experience Before the partnership, Sony's situation in Japan was largely favorable They also discovered that the mobile industry is expanding Although Sony was very good at product design, it was not a significant player in the worldwide GSM industry It wouldn't be difficult for Sony to increase its current market share by 2% However, Sony needed more than just product design and multimedia know-how if it wanted to be a major player Sony believed a joint venture would be the best option to cooperate with a partner in this industry based on previous experience with soft alliances The advantage of working with Ericsson was that it made it easier to enter the European market Ericsson ranked third in the mobile phone market in 2000, allowing Sony to easily enter the European market with this partner while also building the brand name for Sony's other businesses such as television Company structure 3.1 Firm Size Sony was one of the world's leading manufacturers of consumer electrical goods such as compact disc players, mobile and cordless phones, computer peripherals, and television systems in 2001 Ericsson, on the other hand, had been operating its mobile business in the market for years prior to the collaboration Ericsson was the world's thirdlargest producer of mobile handsets at the time, trailing only Nokia and Motorola 3.2 International Business Experience  Sony In 1960, Sony established a trade office in New York City and another in Switzerland called Sony Overseas, following a business dispute with Delmonico International, the company Morita had appointed to handle international sales In 1970, Sony Overseas established a subsidiary in West Germany to handle sales there In 1973, The Trinitron series received another Emmy, the year Sony Overseas established a French subsidiary On November 29, 1985, Sony Corporation of America, which operated several assembly plants in the United States, paid $2 billion for CBS Records 10 In 1989, Sony made headlines around the world when it paid $3.4 billion for Columbia Pictures Entertainment, Inc from Coca-Cola  Ericson In the late 1890s, Ericsson expanded into foreign markets through a network of agents The United Kingdom (Ericsson Telephones Ltd.) and Russia were early markets where factories were later established to improve the chances of obtaining local contracts and supplement the output of the Swedish factory By the late 1890s, other countries and colonies had been exposed to Ericsson products through their parent countries' influence Australia and New Zealand were among them, as they were Ericsson's largest non-European markets Despite their success elsewhere, Ericsson did not achieve significant sales in the United States in 1901 Ericsson eventually sold its assets in the United States Sales in Mexico paved the way for expansion into South American countries Significant sales were also generated in South Africa and China Lars Ericsson stepped down as CEO of his now multinational company 3.3 Previous Cooperative Experience  Ericsson In December 1999, Microsoft and Ericsson formed a strategic alliance to merge the web browser and server software of the former with the mobile internet technology of the latter In 2000, The largest producer of semiconductor chips in the world, Intel, agreed to a three-year, $1.5 billion contract with Ericsson to provide flash memory  Sony 11 In 1968, in order to create phonograph records, Sony and CBS Inc formed a joint venture, opening a trading office in England In the 1980s, together with Philips, a Dutch electronics company, Sony created the CD, in part to promote widespread format standardization Sony, which was a leader in the pulse-code technology that enabled digital sound reproduction, was the perfect partner for Philips, which had created the most advanced laser technology 3.4 Organizational Structure Sony has a matrix organizational structure that was mostly composed of divisions of products and businesses and groups based on functions Additionally, the organization includes various geographic divisions Ericsson, on the other hand, had a Go-to-Market strategy that was solutionsbased and was focused on strong collaboration between Business Areas and Market Areas Five established Market Areas are currently selling and delivering customer solutions with a focus on winning client experiences, and five business areas are in charge of establishing and sustaining product and service offers as well as securing delivery capabilities Finance 4.1 Investment Assessment and Capital Budgeting In 2000, while Sony could only supply 7.5 million handsets, Ericsson was able to ship over 41 million Sony would contribute its expertise in consumer electronics items along with $500 million, and Ericson would contribute to employees and their telecommunications skills 12 4.2 Risk Management Two risk management to overcome will be talked about below The first significant strategic error made by Sony Ericsson was to focus primarily on a small number of high-end markets Sony Ericsson has focused on the high-end, low-volume market from its inception Sales of mobile phones initially exceeded all forecasts, and Sony Ericsson's strategy was deemed successful However, over time, Sony Ericsson Mobile Communications saw a sharp decline in sales and was unable to maintain or grow its market position in the high-end, low-volume sector Additionally, each handset's shelf life as well as its selling price were both declining annually Sony Ericsson only controlled 5.4% of the global market in September 2003, while Nokia controlled 34.5% 4.3 Exposure Hedging In this case, Sony's hedging strategy when forming the joint venture was to easily enter a new market without having to pay initial advertising or image acquisition costs as well as avoid encountering negative consequences to lose investment when it had already gained recognition in a new market thanks to Sony Ericsson Not only that, when the joint venture was first established, Sony did not invest too much money in it, so that when it lost capital, it would still preserve a certain amount of money On the other hand, Ericsson was looking to invest in handset production, which was one of the most expensive areas in its operation while its business was not favorable, so it chose a joint venture with Sony to reduce the risk of investing in a new product 4.4 Financial Ability While the deal was being worked out, Ericsson actually saw a sharp decline in its annual profits, suffering a $1.39 billion loss in the second quarter 13 of 2001 At that time, the corporation also planned to reduce its employees by roughly 20% While Sony is expanding and enjoying stable financial conditions, little has changed in the overseas client market PART V: CRITERIA Besides the factors affecting the choice of partners of joint venture enterprises, there are also certain criteria so that Sony and Ericsson can be sure of their cooperation decisions Figure 5: A journey to become successful joint ventures Goal compatibility Sony, headquartered in Japan, is a worldwide manufacturer of consumer electronics The corporation focuses on the entertainment, technological, financial services, and gaming industries The organization has a strong connection and value with the corporate and national cultures, which increases 14 the chances of success in the target markets Sony's vision is to explore the potential created by its distinctive business methods Ericsson is a Swedish corporation that is the global leader in the mobile phone industry, providing services and solutions to major mobile phone standards as well as manufacturing telecommunications equipment The company's vision is to develop a culture of value by relying on tenacity, respect, and professionalism The two firms' orientations are somewhat different, but they both have the same objective of evolving to become the world's top information technology corporation and building a fresh and creative brand while maintaining basic principles that are in accordance with current tastes Resources complementary Sony and Ericsson are both leading firms in the domains of technology gadgets and telecommunications and networking equipment, therefore both sides' resources are enormous and have the potential for mutual growth Both firms discontinued developing their own mobile phones after combining forces in 2001 Initially, the two firms were compatible joint venture partners Sony was a big electronics brand with technical expertise, while Ericsson was a communications industry leader Sony could join the mobile phone market on the coattails of a prominent firm, and Ericsson could stay on innovating with Sony's newest technology (particularly in the mobile handset industry, which was a crucial area at the time) Ericsson's long-standing reputation in telecommunications and terminal manufacturing combined with Sony's innovative and advanced technology at the time gave hope that this joint venture would succeed, creating a new line of Mobile products that are versatile, have a fresh design, and can transmit information well This would raise the brand level compared to fierce competitors at that time such as Nokia, and Samsung, etc 15 Commitment Both companies would benefit from each other’s established markets, making them the fifth largest mobile phone producers in the world Also, before joining, Ericsson had a problem manufacturing their goods cheaply, which Sony’s affiliates and manufacturers solved for them and Sony was expertise in mobile handset technology, which was a key sector Ericsson was hoping to break into at the time All of the above capabilities show that the joint venture between Sony and Ericsson to create phones at that time was a decision to exploit the strengths as well as overcome the weaknesses of their own businesses to be able to create new products that lead the trend of the times and elevate brands of both sides in the market Sony Ericsson then had become a strong brand with a variety of market opportunities for desirable fun user products and mobile operators The company had undertaken major investments in product development, sales, marketing, research, customer services, and distribution The company had operated from London whereas the R&D is in France, Sweden, India, Netherlands, China, Japan, the United Kingdom, and the United States Capability According to research, we can see that Sony and Ericsson have the following strengths and weaknesses: SONY STRENGTHS ERICSSON - One of the world's - Flexibility in largest consumer providing and electronics companies, conducting business with a global presence solutions through multi-brand - Mobile systems shops and ecommerce 16 platforms technology - Known as a pioneer in - Has been operating on its industry, with economies of scale offerings spanning from - Flexible and electronics to music to responsive organization computing, gaming, and semiconductors, among other things - Has a strong brand image and is well- - Global presence in over 180 countries - Strong R&D department known across numerous - Has over 100,000 continents employees in the - Contributes to the organization development of new technologies and the establishment of new market segments - Has enhanced its market position via various significant investments and acquisitions across the world - Focused on complete marketing and spends millions on advertising via TV commercials, 17 online ads, social media, digital marketing, event sponsorships, and much more WEAKNESSES - In many of its markets, - Variability in it is expensive operating results is a - Because of the concern competition, Sony is no - Credit and other risks longer a market leader in regarding customers the majority of the areas in which it competes - In comparison to its success and image in the appliances sector, has not been able to establish itself significantly in the mobile market Through this, we can see that Sony and Ericsson hope to support each other to strengthen each other's strengths and limit each other's weaknesses through a joint venture as follows:  Sony could help Ericsson diversify its product lines to suit everyone's tastes while bringing fresh designs and useful features to mobile phones that could stand out compared to its competitors 18  With a long-standing and influential reputation in the telecommunications sector, Ericsson would bring Sony's attention to customers worldwide, giving Sony products a better image and reputation  The two corporations can rely on their resources and reputation to widely promote their products to customers around the world by advertising, sponsoring events, online ads, social media, digital marketing, etc 19 REFERENCES Carter, J (2018) The Joint Venture of Sony Ericsson - Case Study Example Retrieved from https://studentshare.org/management/2080624-the-riseand-fall-of-sony-ericsson-jv Companieshistory (2015) Sony Retrieved from https://www.companieshistory.com/sony/ Ericsson company Three important decisions Retrieved from https://www.ericsson.com/en/about-us/history/changing-the-world/bigbang/three-important-decisions Fredrik Heyman, P.-J N (2019) The Turnaround of the Swedish Economy: Lessons from Large Business Sector Reforms The World Bank Research Observer, 274–308 Hitipeuw, J (2011, October) Ericsson Sells Stake in Sony Ericsson to Sony Retrieved from https://web.archive.org/web/20111028115632/http://english.kompas.com/ read/2011/10/27/13520476/Ericsson.Sells.Stake.in.Sony.Ericsson.to.Sony Miller, K (2016) Case Study: The Collaboration Between Sony and Ericsson Retrieved from https://www.mbaknol.com/management-casestudies/case-study-the-collaboration-between-sony-andericsson/?fbclid=IwAR0SY59kFlihzz_RxX63Vmr2wogYGGXYmMtzFh VHGxCEAP6j_w0rgHBsxsQ Trustedreviews (2007) Sony Ericsson profits crash 48% Retrieved from https://www.trustedreviews.com/category/news UKEssays (2018) History of sony ericsson as a company Retrieved from https://www.ukessays.com/essays/business/history-of-sonyericsson.php?vref=1 20 UKEssays (2018, November) The Sony Ericsson Joint Venture Retrieved from https://www.ukessays.com/essays/marketing/the-sony-ericsson- joint-venture-marketing-essay.php?vref=1 10 wikipedia (2019) Ericsson Retrieved from https://en.wikipedia.org/wiki/Ericsson 21 GROUP TURNITIN RESULT 22