SONY How to repeat its Walkman success Technology and strategy SBS-EM 2010-2011

1. SONYHow to repeatits Walkman successTechnology and strategySBS-EM 2010-2011 Franquien Anaïs Jehin Maxime Xhauflair Gilles

2. Table of content • Introduction • Fit external position and internal capabilities • Industry profitability • What makes industry leaders • What capabilities do these KSF imply? • Appraise resources and competences • Strategy implications • Strategic intent for the future • PESTEL analysis • Key drivers • Scenario analysis • Key success factors • Vision • Acquire, develop internally or incubate? • Conclusion

3. Fit external position and internal capabilities • Industryprofitability • Positive impact • network externalities • Innovation potentials still high • Strong brands (premium price) • Cheap labour cost • Negative impact • Increasinglymature market • market saturation • lessproductdifferenciation • intense competition (Korea, China)  lower margins

4. Whatmakesindustry leaders • attractive design • more innovative • star products • genuinely new products • creating new market segments • low cost production • Taiwan, Korea, China

5. Whatcapabilities do these KSF imply? • Visionary leadership • New product development and R&D • Components manufacturing and assembling • Brand strength and marketing • Bargaining power with dealers (Apple selective dealer strategy)

6. Appraiseresources and competences

7. Appraiseresources and competences

8. Strategy implications • Strengths: • Good at what they do engineering excellence • Good R&D • Quality of equipment • Weaknesses: • High manufacturing cost • Divisional structure: lack of communication and cooperation between the business units

9. No trend-setting new gadget • Lot of competences and resources • Invests billions of dollars/year • Since 2000, no trend-setting new gadget • In the past, mix of visionary leadership and strategic planning • Now, systemised procedures in Japan • Missed some opportunities…

10. PESTEL analysis • Political • Regulations towards eco-friendly factories and producing recyclable products • Pressure for a company that pays decent salaries throughout the whole value chain and even to suppliers • Regulations on international trade: Chinese issues, closed markets • Compulsory warranties to counter programmed obsolescence

11. PESTEL analysis • Economical • Appreciation of local currency (yen) • Global economic downturn and saturation in mature market • BRICs opportunities • Austerity measures in Europe • Alliances between electronic companies • Pressure for low cost manufacturing

12. PESTEL analysis • Social • Ageing population (demand for commodity devices – robots) • People always looking for more innovative products • Technology increasingly widespread and affordable • People looking for easier and more convenient access to entertainment • Children using technological product very early

13. PESTEL analysis • Technological • Technology evolves faster than customer requirements • Dematerialisation of technology • Link with medical innovations embodied in technology • Bioelectronics • Connectivity possibilities increased • All-in-one products • Flexible electronics that can be bent • Technological obsolescence • 3D dominance

14. PESTEL analysis • Environmental • Emphasis on sustainability by customers • Natural catastrophes questioning the whole supply chain model • Increased use of recyclable materials in electronics • Global warming – solar panel integration in products

15. PESTEL analysis • Legal • Employment laws: Increasing the minimum wage • Competition laws against monopolies • Health and safety: more employee protection

16. Key drivers • Ageing population • BRIC demand for consumer electronics depending on disposable income • Competition from Chinese giant climbing the learning curve • 3D emergence for all devices • Strategic alliances to build a supergiant in electronics

17. Scenario analysis • ‘My Best Friend'sWedding’ • ‘Jackpot coming from the grave’ • ‘Chinese war’ • ‘3D everywhere’

18. My best friend’s wedding • People getting older and older, still not used to using technology • BRIC increasingly wealthy, demand for consumer electronics increases • Tough competition but for basic electronics • 3D received a cold welcome form customers • Strong mergers between competitors to counter Sony supremacy

19. Jackpot coming from the grave • People getting older and older, asking for devices that make their daily life easier (robotics and domotics). Accelerates collaboration between medical devices and electronics firms • BRIC domestic’s customers still don’t need electronics devices with advanced features that don’t matter to them. • Tough competition but for basic electronics • 3D well-accepted but Sony faced hard competition on this market as well • No significant M&A in the industry

20. Chinesewar • Ageing population doesn’t have a strong impact on consumer electronics • BRIC increasingly wealthy, demand for consumer electronics increases • Chinese companies have improved very fast and have a huge market share thanks to their cost efficiency • 3D received a cold welcome form customers • IntranationalM&A to counter Chinese competition

21. The future in 3D • Ageing population doesn’t have a strong impact on consumer electronics • BRIC economies stagnate, don’t change the rules of the game • Increased competition from China • 3D is now the standard in all devices • No significant M&A in the industry

22. Strategic customers Decision-making power is shifting • From: • Private Customer • To: • movie and television industry (3D becoming a huge market) • Government(robotics replacing nurses for the old subsidized by governments)

23. Key success factors • Past ksf? • strong R&D capabilities coming up with new products and technologies • ability to make its own technology the standard worldwide • Respond to customers’ needs • Past market leaders? • Brands coming up with new products and winning standard wars • New technologies for the consumer through innovation and miniaturization

24. Key success factors • Future ksf? • ability to come up with easy-to-use products connected with all the other products of the brand, maximizing the platform externalities • connectivity of products to the internet • low-cost manufacturing but importance of design • Future market leaders • most user-friendly brands • brands able to connect their customers through all their devices • importance of brand image able to convince trendy customers

25. Vision • Our vision for the future, focus on: • High quality but user-friendlyproducts • Connectivitybetweendifferentproducts • Robotics • 3D (video and gaming) • Strengthen communication between the differentdepartments

26. Vision • Sony’sstrategicintent (Sir Howard Stringer): "To be the leading global provider of networked consumer electronics and entertainment” • Develop the nextgeneration of TV display • Commence the era of 3D gaming • Become the undisputed leader in 3D • Developnetworked mobile products to utilize network services • Increase speed to market • Deliver new entertainmentexperiences  Increase value and desirability of Sony products

27. Strategy for the future • Externalenvironmentsubject to rapidgrowth • Internalresources and competences • Provide a more secure basis for strategy • Going solo becausesufficient and diversifiedassets and competences internalgrowth • Alliance: need of open platforms and softwares

28. Improvestrategicagility • Strategicsensitivity: • Missed the trend to all-in-one products, connectivity • Leadership unity: • Alreadyimprovedwith new CEO Howard Stringer • Resource fluidity: • Lack of coordination between the different business unitscompeting for resources

29. Thank you for your attention