28 Jun SAVING SONY
Read the following case study and answer all the four questions.
Saving Sony
Sony is famous the world over for its Walkman music player, PlayStation game console, TVs, and other electronic gadgets. Unfortunately, success rarely lasts forever:
From 2000 to 2003, Sonys hot-under-the collar shareholders watched the value of their shares drop from $150 to $25. It was enough to force some major changes at the
company.
In 2005, Howard Stringer became the first non-Japanese head of the company in its history and one of the few to ever lead any major Japanese company. Stringer was born
in Wales (UK) in 1942 but moved to the United States in 1965. He joined Sony in 1997 as the head of Sony America, turning around the performance in that unit by
establishing higher levels of integration and cooperation across its electronics, game, and entertainment units.
However, after taking over as CEO of the global enterprise, Stringer determined that Sonys problems were both broad and deep. It was facing mounting financial losses
and increasing pressure from relatively new products, such as Samsungs LCD and plasma televisions and Apples category killer- iPod. To compete, Stringer decided Sony
had to streamline its business into five groups focusing more on electronics, televisions, digital imaging, DVD recorders, and portable audio. That would entail
closing 11 plants and laying off 10,000 employees.
The cost of the restructuring? An estimated $1.8 billion. Because of the changes, Sony reported that it expected to incur a financial loss of about $90 million on
sales of about $65.1 billion in 2005. Previously it had been expected to post a profit of $90million. Some people inside and outside Sony were sceptical of the change
because past efforts to transform the company had failed. “We have made promises before, but we failed to execute them” Stringer said.
Stringer was determined to make change a success. A key part of the initiative involved giving Sonys Electronics division central decision making authority over key
areas. Previously each unit had its own planning, human resources, finance, and sales functions and operated with considerable autonomy. Stringer believed the new
structure would streamline and speed up decision making across Sonys product lines. It would also permit uniform software development across the lines so Sonys
products would operate seamlessly with one another. This would, of course, also eliminate design and product redundancies and optimize the firms Research and
Development spending.
Stringer also hoped the change in structure would help change Sonys corporate culture. Sony had a tradition of engineering the best products. This approach had worked
wonders for years. However, the development of Apples iPod highlighted the fact that consumers were not just interested in technical superiority but the easy use of
products. And some of Sonys products had become too complicated for customers to operate.
The change plan also affected specific technologies. For example, Sony executives declared that television was of the utmost importance to the company. The firm would
scrap the production of cathode ray tube (CRT) television sets and focus on LCD and rear-projection TVs and technology. Furthermore, Sony would focus on self-luminous
flat panel organic light-emitting diode (OLED) displays, on high-definition technology, Blu-ray, and mobile technologies.
“Our target is for the Sony Group to achieve consolidated sales of over 8 trillion yen and operating profit margin of 5 percent (Electronics 4%) by the end of fiscal
year 2007” said Mr. Stringer. (Sony, 2006)
Answer the following questions:
1. “Change is the only constant “
Evaluate the different types of change that have occurred in Sony?
(25 marks)
2. Analyse the internal and external forces that have created the need for change in Sony.
(25 marks)
3. You have been appointed by Sony as a consultant on change management. Advise Sony on how they could implement the change by using the various theories of change you
have learnt.
(25 marks)
4. Evaluate the likely sources of resistance that could occur in Sony and how you would deal with it as a manager.
(25 marks)
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