Sony Corporation, the world's leading consumer electronics company is hit by problems on various fronts - both financial and competitive. In the first round of addressing these problems, Sony has resorted to internal cost-cutting.
Since the late 1990s, Sony Corporation,
the world leader in
consumer electronics, has been
facing problems in its core business.
Besides consumer electronics, Sony’s
other product lines like the entertainment
division and video games was
also witnessing tough times due to a
weak Japanese economy and stiff
competition from players like
Matsushita, Philips Electronics (consumer
electronics), Nintendo (video
game console maker) and Samsung.
Further, Sony seemed to be losing out
on two of its traditional competencies—
technological innovation and
product quality. To pull the company
out of such circumstances, Nobuyuki
Idei, CEO of Sony, embarked on a
massive restructuring plan, the first
phase of which started in 1999. To cut
costs further and to boost its revenue
growth, Sony announced a second restructuring
phase called ‘Transformation
60’ in 2003. The restructuring
plan is to be completed by 2006, when
Sony celebrates its 60th anniversary.
The plan would enable Sony to generate
an operating margin of 10% from
2007 onwards.
Besides consumer electronics, Sony
entered into other business segments
in the 1980s. It entered the life insurance
business in 1981 and in January
1988, it forayed into the entertainment
segment by acquiring ‘CBS
Record Inc.’ It also purchased ‘Columbia
Pictures Entertainment Inc.’ in
November 1989 for $3.4 bn. In 1993,
‘Sony Computer Entertainment Inc.’
was established to develop and market
video game consoles and game
titles. In 1994, Sony’s ‘PlayStation’
was launched in Japan. It became a
tremendous success and sold more
than 1 million units within six months.
Following its success in Japan,
‘PlayStation’ was introduced in the
US and Europe in 1995 and by 1996,
Sony had sold 5 million units worldwide.
By 1998, the company was having
sales of ¥6.761 tn with a net income
of ¥222 bn (operating profit of ¥514 bn).
|
