Sony France Best in France Case Study September - December 2004

1. Gabriela Gaut Philippe de Montenon Marguerite Lassalle Stanley Chan Yoshitomo Shinji Sony France Best in France Case Study September - December 2004

2. SONY’S CORPORATE INFORMATION Foundation: May 7, 1946 Headquarters: Shinagawa-ku, Tokyo, Japan Major Products: Electronics Game Music Pictures Financial services Others Employees (Consolidated): 162,000 persons (as of March 31,2004) Consolidated Sales and Operating revenue (2003): 7,496,400 million yen (aprox. 55,000 million euros)

3. WORLWIDE MANUFACTURING ACTIVITIES

4. SONY – EUROPEAN PRESENCE • Armenia • Austria • Belgium • Bulgaria • Croatia • Czech Republic • Denmark • Estonia • Finland • France • Georgia • Germany • Greece • Hungary • Ireland • Italy • Kazakhstan • Kyrgyzstan • Latvia • Lithuania • Macedonia • Moldova • Netherlands • Norway • Poland • Portugal • Romania • Russia • Serbia and Montenegro • Slovak Republic • Slovenia • Spain • Sweden • Switzerland • Tajikistan • Turkey • Turkmenistan • Ukraine • United Kingdom • Uzbekistan Sony has presence in 40 European countries

5. SONY EUROPE STRUCTURE Source: Sony France

6. SONY FRANCE STRUCTURE Source: Sony France

7. SONY FRANCE – SALES

8. WHY FRANCE? • Since he founded Sony, Mr. Morita has been advocating the Global Localization policy which states that business should be deeply rooted in the local society • Therefore, sales companies within Sony have to be established near the customers There is no other specific reason apart from the Global Localization Policy that explains why Sony started a business in France

9. PLANT LOCATION As Sony France S.A. was established in 1973 Sony received from the French government –both at a country and at a local level– some economic incentives such as reductions in “taxe professionelle”, custom duty deductions, etc. Such incentives had an important impact on the location selection.

10. PDG Operation Director Sales Director Marketing Director Business Director MANAGEMENT AND CORPORATE CULTURE In the RME business unit, the hierarchical positions are filled in both by French and Japanese managers, being the management style predominantly European. French Japanese

11. PERSONNEL COMPOSITION BY ORIGIN • Sony France employs 2,600 people in its different offices and plants • Since Sony established its activities in France, the number of Japanese people at the Sales Division was always lower than 10 • Japanese employees are regularly rotated (2-5 years) based on their career development, their position and their performance • Most French employees are transferred within Europe.

12. RELATIONS WITH WORLD HEADQUARTERS • Strong dependence in terms of product development (all R&D function are located in Japan) • Except OEM products, Sony Europe is not able to develop European customer oriented products but merely to sell products that Sony Japan prepares

13. CLIENTS IN FRANCE – RME division • Main RME products • Memory Sticks • USB storage media • DVD tapes • VHS tapes • CD-Roms • Batteries • Main Clients • Supermarkets (Carrefour, Auchan, Monoprix, etc.) • Department Stores (Printemps) • Specialists (Darty, FNAC, etc) Clients expect that Sony will keep providing products that they can easily sell and that consumers demand

14. INTERNAL CLIENTS The presence in France is undoubtedly indispensable to satisfy clients’ demands. From an internal point of view, the form of the organization might be a possible drawback. Generally speaking, once a company is established, it has to trade with other Sony’s business units. Such trade could sometimes require considerable efforts and be inefficient. For instance, to carry out the business in France Sony could have only a representative office in France instead of the current sales company.

15. COMPANY VALUES Sony contributes to the local society by making it richer both in material and spiritual terms through its products, which clients expect at an appropriate price. • In France, Sony contributes to the local society by adapting to the French culture and generating job opportunities.   • Internally, Sony considers that values should not be installed, but created. In this aspect, Sony is completely different from other Japanese firms such as Toyota.

16. CONSTRAINTS IN FRANCE • While establishing itself in a foreign country Sony always considers cross-cultural communication such as language, sense of values, habits, religion etc. to be constraints. • In France, the pride of local people for their country and national products is considerably high compared to other European countries and it could be consider as a constraint.

17. KEY CONSTRAINT COSTS The key costs of operating in France are higher than operating in other European countries, specifically in the following areas: - Tax: Corporate tax is relatively high (35.4% in France vs. 19% in USA) - Labor cost: As annual working hours are relatively low, the unit labor cost (salary/working hours) is consequently high. Labor-intensive industries could not ensure competitiveness in France. Social Security costs are also significantly high (45% vs. 18.7% in NY, USA) - Dismissal: Dismissal requires long processes in France compared with countries such as the UK. In France, it is impossible to dismiss employees without economic reasons or breach of duty. - Infrastructure: Information infrastructure was weak when Sony France was established, but has been improved after significant investment

18. HR PRACTICES IN FRANCE • Recruitment/Selection: When Sony France started business, a French HR manager might have had a major role to recruit French employees • Management Development: Job rotation is carried out in Europe, but the HR of the original country that recruited an employee has stronger authority over his personnel issues. • Promotion: In France, promotion is mainly requested by employees themselves. • Performance Appraisal: Sony France uses yearly contract system for all employees; at the beginning of a year, all employees determine their target mainly based on the result of the previous year consisting of five-grade evaluation after careful discussion with their superior.

19. HR PRACTICES IN FRANCE • - Compensation: Salary range is fixed, based on job grade (e.g. marketing: junior manager, junior product manager, product manager, senior product manager, general manager). In each range, salary consists of fixed part and performance-based part. • Motivation: As an incentive scheme, once a year director gives an award to the employees that achieve remarkable results. Each director nominates candidates and then the assessments of all candidates are discussed and adjusted in the board meeting. • Communication Policies: There are no special communication policies. As for meetings, the Board and managements meet on a regular basis. Other meetings are scheduled on a project basis. • Training: Training is mainly carried out as on the job training (OJT) in Sony. • -       etc.

20. “When establishing itself in another country every firm should try to understand the local culture and at the same time make the most use of local talents” Mr. Yamaguchi RME Sony Europe

21. Sources of information: • Mr. Masayoshi Yamaguchi • Director – Recording Media and Energy • Sony Europe • Sony Europe Financial Statements – Fiscal year 2003 • Sony Corporation – Annual Report 2004