Amidst problems like increasing competition and underperforming electronics division, will the new, non-Japanese CEO help Sony Corporation revive its past glory?
Sony Corporation has long been known as the leader in product in-novations. For an even longer period, it was a de facto standard for other companies, especially in electronics and related products. Over the years, it emerged as a giant electronics powerhouse whose foundation lay in innovation and quality. However, the company once known for cutting-edge products like Walkman and PlayStation is now facing stiff competition from rivals. The sagging stock, which lost 75% of its value during the last five years, reflects Sony's growing tale of woes.
Ten months after Nobuyuki Idei took charge as Chairman and CEO of Sony Corporation in June 1999, Sony's share prices reached a record high. However, this performance did not continue for long. Sony witnessed a huge loss of $1 bn in the year 2003, which is often referred to as the `Sony Shock'. Though Idei embarked on a big restructuring plan, the company could not revive its profit margins. Shrinking profits were attributed to the replication of Sony's products by its rivals and also to the price cuts due to stiff competition.
Sony's electronics business comprises of a wide array of products which have been facing strong competition. Though the competitive advantage of Sony has been product innovation, competitors have always been quick to emulate the new technology. They have been capturing the market share by producing similar, less expensive products. Prof. Rishikesha Krishnan, Associate Professor of Strategic Management, IIM (B), opines "With the fast pace of new product innovations and a number of players who can quickly introduce similar products, the consumer electronics industry has become very competitive. |
