Sony Corporation's Strategic Performance

This case study analyzes Sony Corporation's strategic changes implemented in 2012, focusing on their effectiveness in improving financial growth. It examines profitability ratios, competitor analysis, and the company's ability to adapt to a rapidly evolving electronics market. The analysis highlights the challenges faced by Sony due to its late adoption of new technologies and the need for innovative long-term strategies to succeed in the competitive global marketplace.

Quantitative Business Methods

Introduction
The present report is developed for providing an analysis of the organizational changes in
the Sony Corporation responsible for its preset growth and success. This has been carried out
through analyzing the case study of ‘Sony Corporation’ that has highlighted the strategies
adopted by the Sony for overcoming its declining profitability. The case study has provided an
analysis of the performance of the company since the few past years in order to provide an
evaluation of its decisions. The report has provided an evaluation of the decisions that the
company has taken for improving its growth and profitability.
Analysis of Performance of Sony Corporation as per the Case Study
Sony Corporation, a leading Japanese multinational electronics company, has diversified
business including electronics, entertainment and financial services since its establishment. The
company since its establishment has undergone various structural changes for improving its
financial performance. The company attained an international recognition for its electronic
products soon after its establishment in the year 1971 (Farrell, 2008). However, its financial
performance suffered a setback in the consecutive years due to the impact of foreign exchange
rates and increasing competition in the global marketplace. The company’s financial
performance has been declining over the past few years. The company has recorded an operating
loss from the period 2010-2012 due to degrading performance of its business segments such as
consumer products and services and professional devices and solutions. The increasing
competition from the global competitors such as Samsung, Canon and LG further impacted
negatively its sales in the international market. The company recorded an operating loss of about
¥456.7 billion in the year 2012 with a significant increase in the capital expenditure to about
¥295.1 billion (Sony Corporation, 2012).
The main reason for the declining sales of the company was attributed to its existing
organizational structure. The company was operating is several business segments and thus lost
focus on its major segments. The company operates in various divisions that are entertainment,
insurance and chip manufacturing. The major operations of the company are focused on the
electronic products such as audio and video equipments, radio, television and many others. As
such, the company is presently focusing on transforming its organizational structure for

overcoming its present business challenges. The CEO of the company has introduced a new
management structure ‘One Sony’ in the year 2012 for reinforcing and integrating its overall
business structure. This is done mainly to succeed in the global competitive marketplace by
focusing on the company’s core competencies and strengths. The company is estimated to record
an increase in the revenue by 5.2% on an annual basis with the transformation of its
organizational structure (Sony Corporation, 2012).
Evaluation of the Success Attained by the Decisions of Sony through Demonstration of the
Reasons
The company was believed to have a downfall in its financial performance due to its
diversified organizational structure with several business segments having their own mission and
vision statement. Also, the negative impact of foreign exchange rates after the downturn
experienced by the economy of Japan due to Earthquake and floods in the year 2011 has also
impacted its performance to a large extent. The company with its existing organizational
structure is not able to focus on a major business segment. The increasing competition in the
external marketplace also had resulted in reducing the sales and income generation of the
company. The CEO of Sony Corporation in order to overcome from the existing challenges has
implemented new structural changes in its business segments for improving its competitive
position and overcoming from the operating losses. The new organizational structure introduced
by the management ‘One Sony’ focuses on reinforcing its diverse business segments so that it
can devise strategies for improving the performance of its major business units
(SonyCorporation, 2012).
The strategic shift of the company is intended to integrate its operational activities so that
it can focus on its core capabilities and competencies. The reorganization of the company
structure is believed to achieve the satisfaction of the customers through emphasising on
electronic products market and thus securing its competitive image (George, Frynas and Mellahi,
2015). The company has also announced a strategic plan in the year 2012 for overcoming its
present business challenges as follows:
 To strengthen its core business in the area of electronics products
 To undertake expansion in the emerging markets

 To create new business through introducing innovative products
As per this strategic plan, the company has strategically transformed its business segments
into mainly digital imaging, game and mobile. There will be a single management team working
together with the heads of each business unit and developing the overall financial, corporate and
business strategies. These strategic initiatives of the company were aimed to strengthen its brand
image in the international market through driving its growth and profitability. As analyzed from
the consolidated financial statements of the Sony Corporation given in the case study, the
strategic initiatives have not helped in improving its financial performance. The company had
succeeded in reducing its operational cost and expenditure from the year 2010-2012 as depicted
in its consolidated statement of income. The cost and expenses has reduced from ¥7,151,991
million to ¥6,438,790 from the year 2010-2012. However, there is no significant increase in the
sales and operating revenue in the year 2012 with the adoption of the strategic changes as
depicted from its income statement. The sales and operating revenue has decreased from
¥7,213,998 million to ¥ 6,493,212 from the period 2010-2012. This is mainly due to the increase
in the income taxes levied on the company in the year 2016 and also due to reduction its
operating income realized from other business activities (Sony Corporation, 2012).
The strategic change in the financial performance of the company over the year 2010-
2012 can be evaluated through the use of ratio analysis. The ratio analysis will help in analyzing
the profitability and liquidity realized by the company after the adoption of the strategic changes
in the year 2012 as follows:
 Profitability Analysis: The profitability analysis of the company can be done through the
evaluation of the net profit ratio. The net profit ratio examines the profitability realized
by the company after meeting all its operating expenses such as taxes. The formula for
calculating the net profit ratio can be stated as follows:
Net Profit Ratio=Profit after tax/Sales
Net Profit Ratio= -¥456,660.00/ ¥6,493,212.00
Net Profit Ratio= -7.03%
 Liquidity Analysis: The liquidity analysis of the company predicts its ability to meet its
financial obligations through maintaining appropriate cash balance. It can be analyzed

through the calculation of the current ratio. The current ratio measures the ability of a
company to meet its short and long term obligations by providing an assessment of its
current assets with that of its current liabilities. The current ratio of the company for the
year 2012 can be calculated as:
Current Ratio=Current Assets/Current Liabilities
Current Ratio=3,754,962/4,529,981
Current Ratio=0.82
The ratio for the year 2011 can be calculated as follows:
Current Ratio=3,844,046/4,135,299
Current Ratio=0.92
Therefore, it can be said from the ratio analysis of the company that its profitability and
liquidity position has not improved even after the implementation of the strategic initiatives of
organization restructure. On the contrary, the financial performance has further declined and
therefore it can be said that the strategic actions taken by the management of the company has
not proved to be successful (Sony Corporation, 2012). The competitor analysis of the
company undertaken can also be depicted as follows:
Profitability ratios of year 2012
Particulars Sony Apple Microsoft
Revenue
¥6,493,212.0
0
$
156,508.00
$
73,723.00
Net Profit -¥456,660.00
$
41,733.00
$
16,978.00
Net Profit
Ratio -7.03% 26.67% 23.03%
It has been illustrated from the competitor analysis that the profitability of Sony
Corporation has still not increased even after its restructuring in comparison to its competitor’s
such as Apple and Microsoft. The company has still reported an operating loss while its

competitors are achieving increasing profits in the electronic markets on a global level. The main
reason for the failure of the strategic actions of the company can be its late implementation of the
latest technologies for the manufacturing of the electronics products. The competitors have
strengthened their brand image in the marketplace by providing innovative features in their
electronics products. The Sony Corporation still lacks on technological platform from its
competitors due to its poor performance in the past years as a result of economic downturn. The
electronics market has reached an oversaturated position and therefore the company need to
implement some long-term growth strategies in addition to restructuring so that it can attain
success in the future context (Sony Corporation, 2012).
Conclusion
Thus, it can be said from the overall analysis of the case study that strategic changes
adopted by the Sony Corporation in the year 2012 has not proved to be successful in improving
its financial growth. Therefore, it should develop some innovative growth strategies to survive in
the highly competitive global electronics marketplace.

References
Farrell, R. 2008. Japanese Investment in the World Economy: A Study of Strategic Themes in the
Internationalisation of Japanese Industry. Edward Elgar Publishing.
George, J., Frynas and Mellahi, F. 2015. Global Strategic Management. Oxford University Press.
Sony Corporation. 2012. Reinventing Itself to Rediscover the Technological Edge.