 By Sam Richardson
Sony has posted record losses of £4bn in its last fiscal year. It also reported that it would eradicate around 6 percent of its workforce worldwide, which represents a figure of around 10,000 jobs. New CEO Kazuo Hirai announced on the same day that the company’s strategic and financial targets for the next 3 years would be vastly different from expected.
Sony were one of the organisations hit most drastically by the two natural disasters in 2011. Firstly the earthquake in Japan impacted on some of the firms factories; before the Thailand floods affected storage supplies for computer products. There is also the issue of the Japanese Yen, which has been at such a high point that it has adversely affected any business that relies heavily on export.
So how will Sony turn this around?
During his press conference Mr Hirai announced that the company will reorganize to focus on three core areas- digital imaging, games consoles and mobile devices. It hopes that these changes will help to generate sales of $10.5bn by the end of the 2015 fiscal year; representing a profit margin of 5%.
The reduction in staff includes from companies being sold, such as its chemicals division. More will be from the TV division that is facing cost cutting of 60% by March 2014. The reorganization will cost Sony a potential $926m during the current financial year.
Digital Imaging
Sony and other manufacturers including Panasonic and Olympus have struggled to squeeze profits out of simple point and shoot cameras, largely due to the relative ease in manufacturing and due to the ever-increasing improvement in camera phone technology. This has led these manufacturers to wage war on the higher end market against the likes of Nikon and Canon- which sell about 75% of the single-lens-reflex (SLR) cameras, which is the model of choice for most professional and serious amateur photographers.
They are hoping to gain a market share with an emerging type of camera that packs high quality features into a more compact design. Like SLR’s, these cameras come with large sensors and interchangeable lenses that produce high quality images. The cameras do not have a conventional mirror based viewfinder;the image is instead digitized which allows for a more compact body. These products can be up to £150 cheaper.
Mobile Devices
Sony recently bought out Ericsson’s half of their smartphone venture for £940m to increase its position in an ever increasingly crowded market in which Apple are dominating while Samsung are constantly growing and getting stronger. Since this buyout it has launched its Xperia series. The real key to success in this market is choosing the right operating system and by teaming up with Google’s Android, Sony are looking like they could mount a strong challenge to the likes of HTC but Samsung and Apple look too far ahead to even think about in this 3 year plan of Sony’s.
Gaming Consoles
At the time of writing this piece, Sony have just announced the release of a new ‘Scarlet Red’ Playstation 3. This alone is nowhere near enough to bring the Playsation back above the Xbox 360 in terms of sales - which the console from Microsoft has dominated for 15 months straight. To put it simply, Sony need to ensure the next generation Playstation is not only out before the next Microsoft offering, but they must also ensure it is as innovative as the new Nintendo Wii U, offers the hardcore gamers a unique yet solid performance and that the casual consumers are not priced out of the equation. Something that must also be addressed is the huge problems Sony seem to have with their Playstation Network. The service is free, which is not the same as the Xbox Live service, but the Microsoft network is far more reliable. This time last year the service was down for several weeks following a data breach which of course left many gamers furious.
If Sony can ensure the Playstation Network is more reliable then this could be a huge opportunity to offer an online content store that could rival iTunes. Films, music, TV shows and even Games could be downloaded directly from this service and potentially eradicate the need for physical games. This would also give the opportunity to destroy the second hand game business and Sony could charge developers a higher fee as these developers would be saving such a huge amount on distribution fees. This service would also be able to link into the Xperia smartphone series and also the handheld PS Vita gaming console. Sony would have to hope that they have made products that are so innovative and up to date that consumers view them with the same fanfare as they do Apple’s products.
Without this fanfare, Sony will not be able to recover to be the giant they once were and are in danger of becoming left behind in all of their new core strategic avenue’s.
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