Brittany Wilson's Portfolio



Situation AnalysisSony’s Inability to Spin-off its entertainment division Brittany WilsonBrendan AhrnsbrakEmmeline HoangRobert MwakaAlyson KingreeSony’s Company & Industry AnalysisSony has been exploring the feasibility of spinning off its entertainment division into its own publicly traded company. In order to make a comparison we have evaluated Sony's position relative to the industry. Sony's financials, products, company size, core competencies and trends are used to determine its position for this opportunity. In analyzing these criteria we have concluded Sony should not spin off its entertainment division as its electronics division would not be able to financially stand on its own. Sony Corporation Product Portfolio (a diverse market strategy): No other company has a market presence in all five of Sony Corporation's business segments. However, each of Sony's businesses faces intense competition in their respective market. Sony Corporation is engaged in business through its five segments: Consumer Electronics; Professional, Device and Solutions; Entertainment; Financial Services; Mobile Communications and All Others. Having such a diverse line of businesses, and resultantly diverse product portfolio, makes Sony one of the most comprehensive entertainment companies in the world. This core philosophy of diversification embodies the company's slogan: Sony. Like no other.Consumer Electronics was 47% of Sony’s 2012 Revenue. Sony is still a leading brand and has a reputation for quality with consumers, and its products cover a wide spectrum of the consumer electronics markets. Even with its high revenue contribution, brand recognition and overall reputation for quality, during FY2012 the electronics division operated at a loss (Sony Corporation, 2012). Audio – In the 1980's and 90's Sony's Walkman dominated the market but Sony failed to develop a successor to its Walkman and Discman players and has lost its competitive edge (Wikiinvest, 2009). iPods, iPhones, and other various Smart Phone/Audio devices now dominate the portable audio market (Silver, 2009), making Sony a second-rate player, unable to gain market share.Video – Sony makes digital cameras and Blu-ray players in its video business. Both Sony’s Cyber-Shot line of digital cameras and Blu-ray players has enjoyed strong market performance since 2009 (SAR Corp., 2013). Television – Even with declining market share, Sony’s television manufacturing constitutes the majority of Sony's electronics division (Sony Corporation, 2012). Sony’s Bravia line of LCDs was once the dominant brand in the US market and is currently the third best-selling LCD TV brand in the U.S. with roughly 10% market share (Yasu, 2012). Information & Communication – The information and communications division includes a broad range of products, which includes laptops, printers and professional broadcast equipment, such as the XDCAM and CineAlta line of cameras. Sony’s VIAO Z Series notebook currently holds approximately 20% market share (PTI, 2011). Year over year, sales of the company's VAIO brand of laptops and PCs have outpaced market growth. Gaming – Sony is preparing to replace its PlayStation 3 with the company's next-generation gaming platform— the PlayStation 4. Sony faces fierce opposition in this market, as Microsoft has also announced the release of its latest generation gaming console, the Xbox One. Unlike its predecessor, critics are predicting that the PlayStation 4 will outpace Microsoft's new gaming console of overall unit sales, due to its lower price and a more consumer friendly Digital Media Rights policy (Long, 2013).Sony Corporation – Industry Trends and Core CompetenciesSony is most notably known in the United States for its consumer electronics and mobile devices, music, games, films and television, digital services and other businesses (Sony, 2013). Unfortunately for Sony, it has not been on the forefront in keeping with industry and consumer trends in recent years; contributing to the poor performance of its electronics segments. In comparison, its entertainment segments have performed well in recent years. Resulting in positive trends for Sony overall.Sony is now faced with a difficult challenge as presented by Daniel S. Loeb, hedge fund manager for Third Point investment fund. “Mr. Loeb proposed breathtaking changes at the company, including a spin-off of up to 20 percent of its studio and other entertainment holdings” (Barnes, 2013, p. 1). In assessing its options, Sony needs to evaluate industry trends as well as its core competencies and consider their values as relates to each segment of its business.Sony’s Businesses Vary Significantly. As Mr. Loeb suggests, Sony’s businesses vary significantly, and focusing on all aspects may be a downfall for Sony (Sony, 2013). In separating two major aspects, the electronics and its entertainment segments, one is able to focus on the industry trends and Sony’s core competencies in each. Unfortunately it is difficult to compare Sony’s entertainment segment to that of its competition in that some competitors may only make movies, while others, like Sony, are also in the television business (Sony, 2013).Sony’s Entertainment Segment is not as Profitable as Others. A significant trend for studios and the entertainment business in recent years has been in aggressively consolidating to a more narrow focus on specific types of movies. Disney, Paramount and Warner Brothers now concentrate on superhero and fantasy block-busters. Sony, on the other hand, continues to pursue a wider range of films and productions. On occasion this has been to Sony’s advantage. However, notable is that while Sony entertainment is creating profits for Sony overall; it is not as profitable as others in the entertainment business (Sony, 2013).Sony’s Entertainment Segment’s Core Values are Stability and Industry Relationships. While changes are beginning to be made within Sony’s entertainment business, they continue to look to their core competencies in this industry. Most notably is that “stability became a core value at the studio in the late 1990s, after a long period of dislocation” (Sony, 2013, para. 3). At the base of this core value is the long standing relationships they have built within this industry, including such stars as Adam Sandler and Will Smith, as well as the elite filmmakers in Hollywood. Sony is looking to minimize the risk of any changes in their management and style affecting those relationships (Sony, 2013).Sony does not keep up with Trends in the Electronics Industry. It is Mr. Loeb’s suggestion that by selling off its entertainment business, necessary capital would be provided for Sony to focus on reviving its electronics business. Here too, Sony is seen as not keeping up with the changing trends in this industry. One such recent trend was the TV industries change to delivering signal digitally. “But Sony was tied to old technology and rapidly outdated manufacturing systems. It lived on its success, failed to see the future and was slow to react” (POLLOCK, R., 2013). Another industry trend Sony was slow to react to was the change from VHS to DVD and DVR (POLLOCK, R., 2013).More recent personal electronics industry trends include the portability of music and access to information. Quickly emerging is the “second-screen revolution, in which mobile devices and TV’s finally talk to each other” (TARR, G., 2012). The second-screen revolution was one of five trends identified in the study by Quixel Research. Others include: TVs getting larger, the smart home, digital entertainment and the returning importance of sound (TARR, G., 2012). Sony will want to keep each of these trends in mind when considering their market and any changes to their business segments and/or products.Sony’s Core Competencies. Sony is most known in the US for its core competencies from its electronics business line. A core competency is something a company does better than its competition, something for which it is known, and something which provides a competitive advantage over its competition or others attempting to enter its market. In recent years there has been a difference noted between core competencies and core capabilities. “The core competencies were described as the things an organization competes on (the ‘what do we do better than anyone else?’) and the example given was Sony’s miniaturization of components” (Stanford, N., 2013).Most easily notable of Sony’s core competencies in addition to its technological excellence is in its brand, having been “tagged in a 2011 survey as the most valued brand” (FATAKIA, K., 2012). Sony Corporation’s Company Profile states its core values to include: serving a wide geographic area with a diversified product and service offering, in addition to its focus on sustainability and research and development (2012).Although Sony is determined to retain ownership and remain in each of its current industries, changes have been occurring since Harai took over as CEO on April 1, 2012. While its electronics segment continues to struggle, its entertainment and financial segments are profitable. Among those changes was the billions of dollars booked as one-time income events from the selling off of certain major assets. The sale of those assets generated strong returns, and were mostly viewed as favorable for Sony (ALABASTER, J., 2013).Perhaps more challenging for Sony will be to regain any footholds lost in its core competencies within each industry that it operates. To do so it will need to work to keep ahead, or regain any losses, in both its capabilities and competence (Stanford, N., 2013).Sony Financial Position Compared to the Electronic Industry. After conducting a financial comparison between Sony and the electronic industry, I found out that Sony is not in a stable financial position compared to the electronic industry. The growth rates of sales show that Sony does not have a strong foundation to produce economic growth in the future. Since Sony does not have a strong financial growth, it cannot stand alone without the entertainment sector. Sony’s Growth in Sales Falls behind the Electronic Industry Analyzing sales growth will determine if a company will be able to sustain the growth of a company over a period of time. Sony sales cannot compete with the Electronic Industry. Figure 2 shows a comparison between Sony and the electronic industry. The comparison is weighting the growth in sales for 2013. Figure 2. 2013 Growth in Sales for Sony vs. Electronic Industry In Figure 2, 2013 growth in sales are displayed for Sony vs. Electronic Industry. Sony sales growth is -7.80% and the electronic industry is 3.54%. Sony should not be in the negative for sales growth. Rather, Sony should have a positive growth in order to stand alone without the entertainment industry. The electronic industry is steady growing due to technology advancement. This means that Sony is not keeping up with or following in the trends of the electronic industry. Now, Sony has to focus on increasing the growth rate in the future and getting above the electronic industry curve. Sony must become strong enough to stand without the entertainment sector. Next we will discuss Sony’s position competitively. Competitive AnalysisSony’s weak financial position is shown by its inability to effectively retain revenues as operating profit, heightened financial risk, and lack of profitability, compared to Disney and Panasonic. By performing a competitive analysis of the electronics and entertainment industries, as well as the companies as a whole, we are able to analyze Sony’s position to compete given the proposal of the entertainment division spinoff. In this competitive analysis, Sony’s financial position will be compared to that of Disney and Panasonic through three comparisons: Sony as a conglomerate will be compared to Disney and Panasonic, Sony’s entertainment division will be compared to Disney’s, and Sony’s electronics division will be compared to Panasonic’s. This section of the situational analysis will detail Sony’s weak financial position through analysis of its inability to efficiently retain earnings as operating profit, heightened financial risk, and lack of profitability.Disney and Panasonic Retain More of Their Revenues as Profit Compared to Sony. Sony’s ability to retain revenues as profit in its entertainment and electronics divisions is weak compared to Disney and Panasonic. A comparison of entertainment operating profit with Disney gauges Sony’s position within the entertainment industry while a comparison of electronics operating profit with Panasonic is an indicator of Sony’s position in the electronics industry. We will first examine Sony’s entertainment operating profit compared to Disney’s followed by Sony’s electronics operating profit compared to Panasonic’s.Disney’s entertainment division is more effective in retaining operating profit than Sony’s. Sony’s entertainment operating profit in 2011 and 2012, as a percentage of its entertainment sales and operating revenue, signals its inability to effectively retain its revenues as profit compared to Disney (Sony Corporation [Sony], 2013; The Walt Disney Company [Disney], 2013a). In 2011, Disney’s entertainment operating profit was 9.73% compared to Sony’s 7.25% (Disney, 2013a; Sony, 2013). In 2012, Disney’s operating profit improved to 12.39% while Sony’s dropped to 6.46%, barely half of Disney’s percentage (Disney, 2013a; Sony, 2013). To add some perspective to the disparity in 2012, Disney earned nearly the same operating profit yet generated about half of the sales and operating revenue compared to Sony (Disney, 2013a; Sony, 2013). From these statistics we can imply that Sony’s expenses are roughly twice as high in comparison to Disney and that Sony is struggling to limit its operating expenses. This could hinder Sony’s ability to compete with Disney, an entertainment industry leader, if the proposed spinoff takes effect. Although Sony actually generated an operating profit in its entertainment division, its electronics division is a different story. Panasonic’s electronics division is more effective in retaining operating profit than Sony’s. Sony’s electronics operating profit in 2012 and 2013, as a percentage of its electronics sales and operating revenue, shows its inability to retain any profit (Sony, 2013). Sony incurred operating losses in both years while Panasonic incurred an operating loss in 2012, but recovered with a small operating profit in 2012 (Panasonic Corporation [Panasonic], 2013; Sony, 2013). In 2012, Sony’s electronics operating loss was (3.78%) compared to Panasonic’s loss of (3.96%) (Panasonic, 2013; Sony, 2013). Though this gave a slight victory to Sony, the triumph didn’t last long. In 2013, Panasonic recovered by generating an operating profit of 1.45% while Sony incurred another operating loss of (2.96%) (Panasonic, 2013; Sony, 2013). These figures imply that 2012 was a struggle for both organizations, but show that Panasonic made the necessary adjustments to turn a profit in 2013 while Sony did not (Panasonic, 2013; Sony, 2013). If Sony’s trend of operating profit loss in the electronics industry continues, it negatively affect chances for success if the proposed spinoff comes to fruition. We have shown that Sony’s weak financial position is mirrored by its inability to effectively retain revenues as profit in both the entertainment and electronics industries. These characteristics also represent major problems that negatively affect Sony’s ability to compete given the potential spinoff. The next section of this competitive analysis will examine the financial risk of Sony, Disney, and Panasonic.Sony is at Greater Financial Risk than Disney and Panasonic Sony’s financial stability is frailer than Disney’s and Panasonic’s. The evaluation of financial risk compared to Disney and Panasonic shows where Sony, as a conglomerate, stands in relation to two main competitors, as conglomerates. We will examine the debt ratios (total liabilities divided by total assets) of Sony, Disney, and Panasonic to determine financial risk.Sony’s debt ratio is a major cause for concern. The percentage of Sony’s assets that are financed by its debt is dangerously high. This percentage should be as low as possible to limit the amount of financial risk as debt financing leaves less room for financial flexibility. However, more than 81% of Sony’s assets in 2013 are financed by its debt (Sony, 2013). That percentage is slightly worse than Panasonic’s 2013 debt ratio of nearly 76%, but drastically pales in comparison to Disney’s stellar debt ratio of less than 46% for the same year (Disney, 2013b; Panasonic, 2013). These statistics show that Sony’s financial risk is hazardous to the health of the organization and that presents a major problem if the proposed spinoff takes effect.We have detailed that Sony’s weak financial position is partially attributed to its high financial risk stemming from a dangerous debt ratio. This high debt ratio is a critical cause for concern and will adversely affect Sony’s ability to compete given the prospects of an entertainment division spinoff. The next section of this competitive analysis will observe the profitability of Sony, Disney, and Panasonic.Disney’s Profitability Trumps Sony and PanasonicSony’s profitability, measured by earnings per share, doesn’t come close to competing with Disney (Standard & Poors [S&P], 2013a; S&P, 2013c). Earnings per share measures the profitability of an entire company, thus, comparing the earnings per share figures gives us an idea of how profitable Sony is in comparison to Disney and Panasonic. We will observe and compare the earnings per share figures to determine the profitability of Sony, Disney, and Panasonic.Sony edges Panasonic in earnings per share, yet lags far behind Disney. Sony’s earnings per share, in 2012, show that they were not profitable at all, losing $5.77 per share (S&P, 2013c). In 2013, Sony rebounded nicely by earning $0.49 per share to get out of the negative and is expected to slightly improve to $0.53 per share in 2014 (S&P, 2013c). With the exception of 2012, Sony’s earnings per share bested Panasonic’s (-$3.94) in 2013 and is expected to edge Panasonic’s 2014 ($0.00) earnings per share (S&P, 2013b; S&P, 2013c). However, this triumph is not enough to proclaim a victory for Sony in this category as Disney’s earnings per share numbers in 2012, 2013, and 2014 (expected) all dominate Sony’s, as noted in Figure 1 (S&P, 2013a; S&P, 2013c).Figure 1. Based on information from “Disney (Walt) Co: Company Profile,” 2013, by S&P and “Sony Corp ADS: Company Profile,” 2013, by S&P. By looking at Figure 1, we can determine that Disney has been extremely profitable, regarding earnings per share, and has steadily increased its profitability from 2012 to 2014, assuming the 2014 estimate is correct. Also from Figure 1, we can conclude that the disparity between Disney and Sony over these years is laughable. Although Sony is in a slightly better position to compete than Panasonic, in regards to earnings per share, it will have a difficult time generating profitability numbers that can compete with Disney if this proposed spinoff takes effect. We have identified that Sony’s financial position is adversely affected by its lack of profitability, especially compared to Disney. The near absence of solid earnings per share numbers for Sony identifies another financial problem if it is looking to have the spinoff engage. The next section of this competitive analysis will evaluate the size of Sony, Disney, and Panasonic.Sony edges Panasonic in Size, but gets Trounced by DisneySony’s size, measured by market capitalization, is slightly greater then Panasonic’s, but isn’t close to its colossal competitor in Disney (S&P, 2013a; S&P, 2013b; S&P, 2013c). According to Investopedia, market capitalization measures a company’s size by multiplying its current stock price by the total number of shares outstanding (“Market capitalization defined,” 2013). Analysis of market capitalization will indicate Sony’s size relative to Panasonic and Disney. We will explore the market capitalization of Sony, Disney, and Panasonic to determine the size of each company. Disney’s size overwhelms both Sony and Panasonic. As seen below in Figure 2, Disney’s current market capitalization value of nearly $118 billion is more than five times the market capitalization values of both Sony and Panasonic (S&P, 2013a; S&P, 2013b; S&P, 2013c). Figure 2. Based on information from “Disney (Walt) Co: Company Profile,” 2013, by S&P, “Panasonic Corp ADS: Company Profile,” 2013, by S&P, and “Sony Corp ADS: Company Profile,” 2013, by S&P.Sony’s value of $22.2 billion is slightly higher than Panasonic’s value of $21.5 billion, as shown above in Figure 2 (S&P, 2013b; S&P, 2013c). These statistics imply just how large Disney, as a conglomerate, is compared to Sony and Panasonic. If Sony proceeds with the proposed spinoff, another publicly traded company will be formed. Its current market capitalization of 22.2 billion will be split into two pieces making both companies smaller than Panasonic, thus, increasing the already massive gap with Disney.Through our research, we have shown that Sony’s market capitalization negatively influences its financial position. The impact of a split, given the looming potential for a spinoff, will only decrease the size of both newly formed companies. This is a massive cause for concern in regards to Sony’s ability to compete, especially against Disney. The next section of this competitive analysis will evaluate the financial health of Sony, Disney, and Panasonic.Sony Generates Superior Sales and Operating Revenue FiguresSony outperforms Disney in entertainment sales and operating revenue as well as Panasonic in electronics sales and operating revenue (Disney, 2013a; Panasonic, 2013; Sony, 2013). Comparing the sales and operating revenue of Sony’s entertainment division to Disney’s serves as an indicator of financial health compared to an industry leader. Evaluating the sales and operating revenue of Sony’s electronics division to Panasonic’s shows their financial health in compared to a main competitor in the electronics industry. We will first compare the entertainment sales and operating of revenues of Sony and Disney, then the electronics sales and operating revenues of Sony and Panasonic to determine financial health.Sony’s entertainment sales and operating revenues nearly double Disney’s. In 2011, Sony generated nearly $10.8 billion in entertainment sales and operating revenue while Disney generated roughly $6.4 billion (Disney, 2013a; Sony, 2013). In 2012, Sony’s $11 billion revenue nearly doubled Disney’s $5.8 billion (Disney, 2013a; Sony, 2013). These statistics imply that Sony has a competitive advantage over Disney in the entertainment division by its ability to generate a greater amount sales and operating revenue. This is a rare positive for Sony in this entire competitive analysis. However, when comparing these numbers, keep in mind the statistics from our first criteria that show Disney’s ability to effectively retain a much higher percentage of their entertainment revenues as profit.Sony’s electronic sales and operating revenues more than double Panasonic’s. For 2011, Sony amassed over $54 billion electronics sales and operating revenue, which more than doubled Panasonic’s $21.7 billion (Panasonic, 2013; Sony, 2013). In 2012, Sony increased that margin as its $45.3 billion was roughly 2.6 times greater than Panasonic’s total of $17.2 billion (Panasonic, 2013; Sony, 2013). These numbers indicate Sony’s competitive advantage over Panasonic in the electronics division by its ability to bring in higher amounts of sales and operating revenue. Once again, however, it is important to remember the statistics from our first criteria that show Panasonic’s ability to retain its electronic revenues as profit more efficiently than Sony.We have displayed that Sony does a better job in generating sales and operating revenues than Disney in the entertainment industry, and Panasonic in the electronics industry. Given the potential for a proposed spinoff, this is the lone positive opportunity identified in this competitive analysis. However, that opportunity doesn’t seem so positive when we reiterate Sony’s lack of ability to effectively retain these sales and operating revenues as profit compared to its competitors. In order to increase its financial health and strengthen its ability to compete, Sony must cut back on its operating expenses. In this competitive analysis, we have displayed the weakness of Sony’s financial position through analysis of its inability to effectively retain revenues as profit, heightened financial risk, and lack of profitability compared to Disney and Panasonic. This evaluation indicates that Sony will have difficulties competing if the proposed spinoff takes effect, thus, we recommend Sony to not engage in the spinoff. The next section of this situational analysis will analyze Sony’s strengths and weaknesses, as well as potential opportunities and threats.SWOT Analysis: Sony’s market position relative to its internal and external environments.In this section we evaluate Sony by doing a SWOT analysis. This analysis put into consideration, our client’s competitors and, Sony Corporation’s market position in relation to its internal and external environments.Sony’s overall strengthsSony as a corporation has a lot of strengths in the market. The company’s top two strengths are their strong corporate brand and a diversified product and service offering. Having a good history and company name show people how far your company has come. Having a diversified product and service offering let you keep up with other similar companies and let you reach more and more markets.Sony’s has been around since the 1940’s. Sony’s name and brand carriers a higher end name in the electronic business. If you buy a Sony product it will more likely last. On all their products Sony puts their name. Putting your name on a product shows that you trust the product and know it’s going to work. Sony also does something called umbrella branding. Apple also uses a similar strategy. The strategy is to make people want to have products by the same company. You can buy every product you need from one company (Data Monitor, 2011).Sony offers a wide array of products and services to the public. All these products help Sony make plenty of money in the market place. Sony makes appliances, electronics, finance, and is even in the entertainment business. In the electronic industry Sony makes TVs, phones, tablets, computers, mp3 players, and game systems. All these different products help their electronic industry be a top company. Sony is also in the entertainment industry. Sony was the big force behind the push for Blu-ray disc. Sony owns 11 record labels in the United States like Columbia Records, Roc Nation Records and Epic Records. Finally in Japan Sony owns a financial company that does life insurance and some other financial companies. With the huge diversified products and services that Sony owns and produces; it wouldn’t be unbelievable that this company will be around for a long time and making plenty of money (Market Line, 2012).Sony’s eroded brand is its major weaknessToday, Sony corporation faces stiffer competition in nearly every product sector it participates, compared to a decade ago. Among the many factors that explain this new reality for Sony Corporation is its eroded brand. Also a major weakness factored into the SWOT analysis. According to authors Si Hyung boo and Keun Lee, who wrote an article that described Samsung electronics catch up to Sony corporation, ‘’Numerous reasons for the successful catch-up of Samsung Electronics have been suggested by the media (e.g. Wall Street Journal, Fortune and BusinessWeek). However, the most extensive and scholarly explanation of the issue has recently been provided by Chang (2008). His quest for the answer to the successful catch-up started from the detailed analysis on the difference of strategies for digitalization, marketing and globalization, which have been undertaken by Sony and Samsung Electronics over the last decade, but finally ended with an intensive study of the difference of the two firms in terms of internal organizational processes and the leadership of the top management’’(Hyung boo and Lee 2010).“He reached the conclusion that the destinies of two firms cannot be fully explained by the mere difference in the revealed strategies, but the ultimate success of Samsung Electronics should be attributed more to its internal organizational processes and the leadership of its top management, which shaped the difference in the revealed strategies’’(Hyung boo and Lee 2010). Once known for its high quality and ground breaking innovation capacities with products such as the Walkman and the Sony PlayStation, Sony’s brand has gradually moved from supreme to mediocrity in sectors such as televisions, computers and smartphones. Brand strength is something that can both be strength and a weakness and in this case, for Sony Corporation, its eroded brand is a weakness.Product variety and lack of specializationOften an overlooked aspect of a company in good times, the wide spectrums of products and services produced by one particular company can also be a weakness. In this case Sony Corporation’s involvement in several products and industries could be a weakness contributing to the lack of focus which in term allows greater competition. Hence a lower bottom line.The lack of focus and lack of specialization in Sony Corporations case means that, the company allocates minimum budgets for product development and marketing for many of its new products. This becomes a grave weakness when the competition such as Samsung and Apple Inc. outspend you on both product development and marketing leading to significant drops in market share and ultimately the bottom line and brand value.Sony’s Opportunities Sony has opportunities stemming from strategic alliances and acquisitions as well as focusing on expansion into foreign markets that allow for future growth of their company. Sony has made some made alliances with several companies over the past few years that have helped to promote growth in their development and technology. Sony has also seen plateauing growth in their major markets in the recent years. Therefore, expansion into new markets that include Brazil, Russia, India, and China will help to encourage economic growth in emerging markets. With these alliances and expansion into growing market places, Sony can look for a positive future that will produce new beneficial opportunities if it remains one entity.Sony’s Strategic AlliancesSony has made some strategic alliances with several companies that will help to provide growth in new technological markets. In 2010, Sony made deals with Discovery Communication and IMAX in trying to develop a 3D television network in the United States (Data monitor, 2011). This was the first attempt to create a 3D network of this capability. Also, in the same year Sony bought Convergent Media Systems a leading provider of video integration solutions to the enterprise market. These acquisitions helped to broaden Sony’s involvement in the entertainment industry. A major alliance formed was with Google in 2010. The two companies joined forces to develop Android based hardware products for home and mobile uses (Data monitor, 2011). Sony has looked to improve their compact digital camera market by joining forces with Olympus in September 2012. The companies are collaborating with each other’s strengths to help merge the best of both companies into a productive camera. According to industry estimates, the digital camera market is expected to grow at a CAGR, or Compound Annual Growth Rate, of 10% through 2015 (Market line, 2012). This alliance with Olympus will help to establish Sony’s presence in a growing market for digital cameras. Through the several alliances, Sony has made with Olympus and other companies; they have begun the process to expand into emerging markets that will potentially provide growth and new ways to earn profits.Sony’s Expansion into BRIC economiesWith economic growth becoming stagnant in Sony’s current market places, Sony is looking toward Brazil, Russia, India, and China to provide new market opportunities. These four nations make up over 40% of the world’s population, and all four are growing economies that are providing new market possibilities for Sony (Data monitor, 2011). Sony can look to these markets for potential because they have already success in the Indian market with its electronic business and film, television, and music content (Data monitor, 2011). If Sony can model the same approach in Brazil, Russia, and China as they did in India, than there is potential for repeated success. Expansion in these countries will provide a global presence, and add new revenue growth. Success in these countries is very important, as it will provide a new spike in economic growth as many of their current markets are leveling off in revenue production (Data monitor, 2011).Threats: Sony Corporation faces fierce competition in all of its business segmentsSony Corporation is a multinational conglomerate with subdivisions in many electronic, entertainment and service areas. These various subdivisions include consumer products and devices, networked products and services, b2b and disc manufacturing, development and production of television programming, music entertainment, and financial services (Reuters, 2013). Like with any corporation Sony faces the threat of competition from industry rivals. Further, Sony faces opposition from many different types of competitors since it operates in so many business areas. In the consumer products and devices industry Sony faces competition from companies such as Apple, Samsung and LG; two of which Apple and Samsung currently dominate the market. In the networked products and services segment that includes “Sony Computer Entertainment Inc. (SCEI) that develops, produces, markets and distributes PlayStation 3 (PS3), PSP (PlayStation Portable) (PSP) and PlayStation 2 (PS2) hardware and related software” (Reuters, 2013), Sony competes with companies like Dell, Microsoft, and Apple. Sony’s music division faces competition from Universal Music Group and Warner Music Group. In the motion picture industry, SPE (Sony Pictures Entertainment) faces competition from Universal studios, Warner Bros. Studios and Walt Disney Studios. Sony Corporation subject to massive security breachesIn 2011 Sony’s online gaming and entertainment networks were hacked by a third party using stolen consumer identifications and passwords (Olsen, P. 2011). As a result of the massive hack attempt Sony had to shut down approximately 9300 online gaming and entertainment accounts. Much of the shutdown was a precautionary measure, however some users did have to reset their passwords due to a “high level of activity prior to being locked” (Olsen, P. 2013).The above security breach is not the first time that Sony was forced to suspend operations of its online entertainment division. In April of 2011 24.5 million SOE user accounts were the subject of online hackers which left the accounts compromised (Schwartz, J., 2011). In this attack hackers got their hands on more user information including credit card information; luckily for Sony the credit card information was from an “outdated 2007 database” (Schwartz, J., 2011). Repetitive security breaches, especially back to back breaches in short periods, could be a red flag for many Sony online entertainment account holders. Further, this leaves a blemish on Sony Co. as a whole.Sony’s External Environment Provides a Bright FutureSony’s internal strengths and weaknesses do not put them in a weak position, allowing Sony to take advantage of the few opportunities they have available which will lead to economic growth and expansion. The strengths and weaknesses of Sony at this time are evenly matched at this time. Their brand name and variety of products they offer can benefit or hurt them. With this information being provided Sony can take the right steps to strengthen their brand name as well as their products. The external environment brings opportunities to expand into Brazil, Russia, India, and China, which are all growing economies that Sony can look to lean on in the future. They have also joined many partnerships and alliances with major companies that will help with technological advancements. The weaknesses that Sony has are easily fixable by strengthening their gaming network. The competition that Sony faces has always been an issue, and by taking advantage of these opportunities they can look to surpass their competition. With the great opportunities Sony has they will be able to succeed in their future endeavors without splitting off the entertainment division. We now will take a look at the position of Sony in the market from a market analysis. Marketing Analysis shows Good Position for SonyA marketing analysis was prepared on Sony to determine the position of its electronics and entertainment segment in the market. Based on research and analysis, Sony’s electronics segment is not in a good position in its market, while its entertainment segment is doing well in the market. Sony is attempting to market outside their current market base of men to include women that could increase their revenue and competiveness in the market. Sony’s market share is growing for its entertainment segment, while its consumer-electronics segment declines. Customers are buying movies and music, and this is where Sony is making its profits. Sony is using the profitability of their entertainment division to market its electronics, so that the company can increase its competiveness in its established markets, gaming consoles and televisions, and new innovative markets, such as mobile devices. Sony Seeks to Broaden Customer Base to Women and Children Sony Corporation’s customer demographic has been to be males ages thirteen to thirty four, but recently it has been strategizing to change this. The highest percentage of profits has been coming from Sony’s 90 million subscribers, whom consist mostly of males ages thirteen to thirty four (Dave, 2013, p.1). Recently after unveiling many new games the Sony Corporation has taken steps to broaden its customer demographic to females as well as children.To be profitable and have growth within the company, Sony has decided to take many steps to increase its customer demographic to women. Sony wants to diversify its current customers that are 85% male and 32 years old to women, who have become big consumers in the casual games area (Warman, 2007, p. 39). Sony has created many games that are veered toward women to help increase sales and to increase customer attraction to not only males. The company is striving to lower the age range to the 20’s age group and attract men and women at even proportions (Schiesel, 2007, p. 3). Sony has to change its customer demographics in order to remain a big competitor in the market. Another customer demographic Sony Corporation has been reaching out to has been children. It is producing games, such as Free Realms, aimed at attracting children, especially girls that is a drastic change from its traditional fantasy and science-fiction games that were aimed towards male players (Schiesel, 2007, p. 3). By increasing the age range of their customers Sony has realized a much larger profit and a higher potential for profit as well.Sony Corporation has been known to have the teenage to adult aged men customers as their highest amount of customers but as companies evolve and grow Sony has started to as well. It has created products and games veered specifically toward women and also to children. This gets Sony more recognition and more popularity among a larger population and hence creating more profitability and room for growth.Declining Consumer-Electronics Market Due to Lack of Competitiveness Sony is known for being one of the biggest consumer-electronics companies in the world with a broad array of products. It was named #3 on the list of world’s largest consumer electronics companies overall in 2011 by Forbes (Forbes, 2012). But, based on its market share it is not in a good position because of its failure to remain competitive in this market. Televisions, for example, are the largest division and generate the most sales of it consumer-products segment (Hoovers, 2013). Figure 1 shows Sony’s market share for televisions Figure 1. The market share of televisions in North America for 2010Note. Adapted from “Vizio tops Q4 North American TV market share reports” by Greg Tarr, 2011, TWICE, 26 (6), 14. Adapted with permission. But the market share for its product line of televisions has declined. In 2010, its market share in North America was 10.4% which decreased 8% from the year before while the competitor, Vizio, increased by 17 % (Tarr, 2011, p. 14). This loss in market share would indicate that the profitability of its televisions has decreased. This is troublesome for the company because televisions are the biggest portion of the consumer products segment and the consumer products segment generates 45% of its sales in 2012 (Hoovers, 2013).This shows that Sony is not in a good position because it is not able to remain competitive in the consumer-electronics market and this is affecting its profitability. Market Growth of Entertainment Segment Gives Sony Good Position In contrast to its consumer-electronics division, Sony’s entertainment business is in a good position in both music and motion picture segments. Figure 2 shows the change in Sony’s market share in movies and music from 2010 to 2011.Figure 2. Market share change for the music and motion picture division from 2010 to 2011Note. Adapted from “Top Movie Studios by Market Share, 2010”, 2011, Advertising Age, 22 and “Top Music Firms, 2010-2011”, 2012, Business Wire. Adapted with permission. From 2010 to 2011, Sony increased its market share 1.34% to 29.29% while Universal Music Group, the leader of this market, decreased its market share to 29.85% (Market Share Reporter, 2012, p. 882). This indicates that Sony’s music division was performing well because it is closing the gap in market share with the top competitor and could overtake the music market. It was able to grow within this market and take away part of the market from its competitor. This growth may have been due to Sony’s investment in music publishing that acquired 1.3 million copyrights of EMI Music Publishing and the rights from the Estate of Michael Jackson (Hoovers, 2013). This has helped Sony increase its market share and therefore in a better position within the entertainment industry. In addition to the music segment, Sony has seen growth within the movie-entertainment segment and this puts Sony in a good position in the entertainment industry. Sony’s market share of the motion picture industry has increased .7% from 12.7% in 2010 to 13.5% in 2011 (Business Rankings Annual, 2011, p. 22). It has increased its market share which means it was able to compete in this industry and remain profitable. Sony is focusing on big picture films, such as the Spiderman movies and the latest James Bond movie, Skyfall, that will bring in a lot of revenue for the company. Because Sony has seen growth in its entertainment segment, it is in a good position as compared to its consumer-electronics segment of company. Trends Show that Sony makes its Profits off of Movies and MusicMusic and movies make up a majority of Sony’s profits. In the last decade, Sony’s entertainment division brought in $7 billions to the company’s net earnings (Tabuchi, 2013). With this amount of revenue from its entertainment division, it is being offset by how much the electronics division loses. The products cannot sell because they are overpriced. The PlayStation gaming console is the most popular product in Sony’s electronics. The PlayStation gaming console, released in 2010, was sold to about 3.5 million customers. (PlayStation 3) Even with the large amounts of revenue brought in by the gaming consoles, Sony’s electronics section cannot bring in enough revenue to keep it profitable. Daniel S. Loeb, a large investor in Sony, is pushing Sony to spin off the entertainment segment in order to raise enough cash to revitalize its electronics business (Tabuchi, 2013). With not much growth in electronics sales, Sony Corporation needs to decide what to do with the electronics portion of the company. Currently Sony is deciding on how to bring in more revenue from electronics departments and how to revive it. Sony’s Main Concern is its Decline in ElectronicsAfter the Sony Corporation saw a decline in its electronics sales, plans were made to increase sales. Sony is making plans to revitalize and grow the electronics division in order to increase its profits in electronics. The 2012 financial statement showed the weaknesses that Sony needed to address which included the following: Significant improvement in TV business on path to profitability*Reinforced Sony’s sales and marketing operations in emerging markets*Strategic investment and foundation-building for?new business?creation and strengthening core electronics businesses**These goals were found on the Sony’s Corporation website (Sony Corporation, 2013).Using Success of Entertainment in Producing Innovative ElectronicsSony is using its entertainment and electronics division together to leverage its competitiveness in the marketplace. Sony has established consumer electronics products such as the Playstation gaming consoles and televisions. Sony also has new products designed to facilitate its brands’ presence in the market for mobile products. Sony’s Entertainment arm, consisting of Music and Movies, is teaming with the Mobile division to release innovative products. Each of these products will be discussed below.Playstation. Sony recently released the Playstation 4 and, in competition with Microsoft’s Xbox One, priced the product $100 cheaper than its rival’s price (O’Reilly, 2013). Sony also would like customers to use the Playstation as a hub to reach Sony’s entertainment content such as streaming movies and music. Televisions. According to Sony’s FY13 Press Release, Sony is using its imaging technologies to create value in its products by enhancing the image and audio quality of its high definition televisions (Sony Corporation, 2013). Sony’s Bravia television are priced and marketed as premium products. The price of a Sony Bravia FullHD 1080p with a 55-inch screen is priced at $3,299 (Tarr, 2013). At this price, the product is priced higher than most other 55-inch screen, high-definition televisions. Mobile. Sony has expanded its presence in the market for mobile products by its Xperia Z Smartphone release. The product had been generally well received in markets around the world (Sony Corporation, 2013). The Mobile unit has teamed up with Sony Music in an attempt to integrate its core businesses while leveraging its competiveness in entertainment as well as electronics. The result is the launching of Xperia Access, a music content platform, and Sony hopes to use this to increase awareness of its smartphone product, the Xperia Z (O’Reilly, 2013). Entertainment and Electronics Work Together to Promote Sony’s Products Sony is using a promotional strategy that cross promotes their entertainment division with their electronics division in an effort to boost both parts of its company. Due to a 2.9 billion dollar operating net loss, the company is pushing for both divisions to work together (Taub, 2009, p. 13). By working together, Sony will be able to show consumers the advantages of using their entertainment products with their electronics products (Taub, 2009). This promotional strategy helps show how it music and movies are amplified on its electronics. This may help Sony’s electronic division increase their position by using the success of its entertainment to help boost its electronics. Sony Working With Retailers to Distribute Products to CustomersSony is moving from distribution channels of grouping to working with direct retailers and stores to get products to customers in a more direct way. Sony traditionally has been using distribution that looks at the group retailers and the groups’ sales volumes (Tarr & Wolf, 2005, p. 1). It is now looking at individual retailer’s performance in order to decide the distribution of its products. For Sony, this strategy is about the consumers. This way of distribution will decrease the steps to get its products directly to the customer. Sony is analyzing the customers and seeing how the products at certain retailers to match with what the customer wants. With consumer electronics, customers are more informed and are shifting to buy those products at Costco and Wal-Mart to find the best overall value (Tarr & Wolf, 2005, p. 21). This strategy of distributing to the individual rather than a group helps Sony increase their sales over all and bring in revenue.Statement of Problems and Opportunities for SonySony is currently not in the best position overall to split off its entertainment division. Sony has many issues that it needs to work on within the company before it decides to make a decision like that. Sony is mainly known for its electronic division however its electronic division is not strong enough to stand alone without its entertainment division. Sony’s inability to keep up with the trends in the industry, its inability to compete with other companies, negative sale growth, and its eroding brand are the main issues that Sony would have to consider when it comes to splitting off the entertainment division and it will have an even more negative impact on the company. Sony has opportunities through its introduction of the new PlayStation 4. The PlayStation is one of Sony’s most profitable products and the release of the newer version is highly anticipated and expected to bring much success to Sony. Sony also has the opportunity for global expansion in the Brazil, Russia, India, and China markets. Sony will benefit more from these opportunities by remaining one whole entity and not splitting off its entertainment division. ReferencesALABASTER, J. (2013). Hirai remakes Sony in first year as CEO, now must win consumers. Cio (13284045), 22.BARNES, B. (2013, May 19). Sony's Unwanted Genre: Suspense. New York Times. p. 1. Christman, E. 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