Importance of Product Innovation at Sony

Searching for Sony’s Salvation: The Turnaround Strategy of an Industrial Giant

There is no doubt that Sony, one of the greatest companies of the twentieth century, accredited with being the creators of products such as the portable radio, Walkman, and PlayStation, to name but a few, is no longer the force of old. No longer does it rule the roost in the consumer electronics industry to the extent that it did in decades gone by. No longer does it feature among the world’s most valuable brands as it did at the peak of its powers. Founded by Masaru Ibuka and Akito Morita in post-war Tokyo, Sony, or Tokyo Tsuchin Kogyo KK (Tokyo Telecommunications Engineering Corporation), the predecessor of Sony, started as a small company with capital of just 190,000 yen and less than a couple of dozen employees (Sony, n.d.). Yet, therein laid the foundations of what was to become one of, if not, the most iconic consumer electronics company in the world, worth an estimated $7.6 billion as at 2016 (Forbes, 2016) with more than 125,000 employees on its payroll (Sony, n.d.). However, it is fair to say that in recent years, Sony’s performance has fallen short of expectations. According to the case study, the company has “failed to tap into new opportunities, and been criticised for being complacent and over-reliant on past successes.” The aim of this assignment, therefore, is to: firstly, discuss the importance of product innovation to the future success of Sony, in regard to the changing marketing environment; secondly, conduct a SWOT analysis of Sony; and thirdly, recommend a course of action for Sony based on an exploration of the strategic options available, in an attempt to turnaround the industrial giant’s ailing fortunes. In so doing, this assignment explores the key concepts at the heart of each discussion and applies them within the context of the case study, around which the questions are based.

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Discuss the importance of product innovation to the future success of Sony, in regard to the changing marketing environment.

In order to fully appreciate the importance of product innovation to the future success of Sony, there are several issues which must be examined. For example, the concept of the marketing environment should first be defined and broken down, likewise the process of environmental scanning that will lead on from this, and only then can such a discussion begin to take place.

The marketing environment can be defined as “the actors and forces that affect a company’s capability to operate effectively in providing products and services to its customers” (Jobber and Ellis-Chadwick, 2016). In other words, the marketing environment includes all the factors that have an impact upon the decisions, policies, and strategies of an organisation. On the face of it, therefore, the marketing environment is a one-dimensional concept that is easy-to-understand. However, that is by no means correct. Indeed, there are multiple facets of the marketing environment; hence it is vital to break it down into its component parts.

The marketing environment is composed of the macro environment and micro environment. Whereas the former consists of a number of “broad forces that affect not only the company but also the other actors in the microenvironment,” (Jobber and Ellis-Chadwick, 2016: 38) the latter consists of “the actors in the firm’s immediate environment that affect its capabilities to operate effectively in its chosen markets.” (Jobber and Ellis-Chadwick, 2016: 55) To put it more simply, the macro environment revolves around external factors, in contrast to the micro environment, the focus of which is on internal factors. For example, the macro environment includes political, economic, social, technological, legal, and ecological factors that affect an organisation, all of which will be expanded upon later in the discussion. The micro environment, meanwhile, includes competitors, customers, distributors, and suppliers. These shape the character of the opportunities and threats facing a company and yet are largely uncontrollable.

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In order to combat the uncontrollability of the marketing environment, it is essential that organisations adopt a strategy for dealing with such a problem. This leads us to the concept of environmental scanning. According to Huczynski and Buchanan (2016), environment scanning refers to processes through which the impact of external trends and developments on the internal functioning of an organisation can be determined and forecasted. Diffenbach (1983) finds that organisations can reap the rewards from carrying out the process of environmental scanning. Chief amongst the multitudinous advantages it can deliver are enhanced general cognisance of, and responsiveness to, changes in the marketing environment; improved strategic planning and decision-making; better industry and market analysis; and more efficient energy planning.

As far as the macro environment is concerned, one of the widely used approaches to environmental scanning is a PESTLE analysis. This is an environmental scanning tool identifying political, economic, social, technological, legal, and ecological factors that have an effect on an organisation. Political factors influencing organisations emerge from decisions made and actions taken by the government. For example, taxation rates may change which will affect the profitability of an organisation. Economic factors arise from the state of the country’s wealth. If there is a recession, for example, it slows down the economy as people are less likely to spend unnecessarily which, in turn, impacts upon sales and profits. Social factors refer to the ways in which society changes and the requirement for organisations to acclimatise in the same way. For example, changing demographic forces such as an ageing population may mean appetite for particular products either peters out or grows. Technological factors relate to the rapidly evolving technological advancements that marketers have to keep abreast with and invest in to remain competitive. Legal factors include the implementation of specific laws, which, for example, may necessitate the payment of a statutory minimum wage by organisations to their workforces. Ecological factors, meanwhile, revolves around environmental concerns and reducing toxic emissions, pollution, and spills. These factors cannot be controlled but can prepare the organisation for changes that may take place in the marketing environment (Morrison and Daniels, 2010).

Now that we have explored the concepts at the heart of the question, namely innovation, and the marketing environment, tying in with environmental scanning and PESTLE analysis, it is possible to apply these within the context of Sony.

Beginning with the micro environment, Sony has faced increasing numbers of competitors in recent years. Indeed, the case study alludes to the fact that “aggressive competitors are stealing market share in key markets where once it dominated.” For example, within the mobile phone sector, multination corporations such as Apple and, to a greater extent, Samsung are now seen as the dominant forces. Together, Samsung and Apple, the top two global smartphone brands, accounted for more than 42% of the worldwide market share in the first quarter of 2016. (TrendForce, 2016) By stark contrast, Sony did not even feature among the top five, lagging behind in the ‘others’ category. Hopes had initially been high that Sony’s range of phones, complete with top-of-the-range camera capabilities and Walkman-branded capabilities enabling them to be transformed into portable digital music gadgets, would see them retake the lead in the market. However, Sony’s strategy to market Walkman-branded products against the likes of Apple’s highly innovative and successful iPhone range has yet to yield success and is unlikely to do so in light of how outdated the Walkman is in comparison to their opposite number’s latest device. Just as technology is evolving, so too is it the responsibility of marketers to keep up-to-date with such changes in an attempt to remain competitive in the marketplace.   Thus, the importance of product innovation should be underplayed from a micro marketing environment perspective.

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That said, it can be argued that it is of equal importance in a macro environment sense too.

Conduct a SWOT analysis on Sony.

What are the strategic options available to Sony? Furthermore, recommend a course of action for Sony, giving reasons for your answer.

Bibliography

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Diffenbach, John (1983) ‘Corporate Environmental Analysis’ in Large US Corporations, Long-Range Planning Vol. 16 No. 3 pp107-16

Forbes Website (2016) ‘The World’s Most Valuable Brands’ https://www.forbes.com/powerful-brands/list/#tab:rank [accessed 3^rd March 2017]

Huczynski, Andrzej; and Buchanan, David (2013) Organizational Behaviour 8^th Edition, Pearson

Jobber, David; and Ellis-Chadwick, Fiona (2016) Principles and Practice of Marketing 8^th Edition, London: McGraw-Hill Education

Morrison, Mike; and Daniels, Kathy (2010) Pestle Analysis Factsheet, London: Chartered Institute for Personnel and Development

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Sony Website (no date)

TrendForce Website