Issues in Global Business and Strategic Concepts
Currently, the need for business survival in the global business has seen many international companies seeking expansion in new areas as well as within their existing markets. However, strategic planning and marketing is of essence in order to realize any success or even stay within competition. There is no longer a company with a definite edge.
Sony is among the leading companies in the digital entertainment, communication and information technology in the whole world. Although the company has a strong brand name, in the last four years it has incurred huge losses. Thus, there is a need for urgent resolution to avoid sinking further. Sony can expand in the emerging market of India that has a huge customer base considering its population. In order to achieve success, Sony can use the segmentation of markets, introduce new products and push for more sales.
Company Background. 3
The Indian Emerging Market 4
Serving the Indian market 4
Expansion Methods and Strategies. 5
Implications of Sony’s Supply Chain. 6
Appendix A.. 10
Appendix B.. 10
The need to not only survive, but also thrive in the global market has propelled many companies to venture into existing and emerging markets. However, both markets require that companies apply strategic concepts in order to handle or overcome some issues as pertained to the market in question. Cavusgil et al. (2008) states that, companies are eager to venture into new and emerging markets. However, they are not keen in differentiating the ideal from the reality. It is relevant to understand that there is no such thing as global strategies. A strategy that was of great effect in the United States may fail tremendously in the Asian Market. Companies must critically observe marketing, political/economic, infrastructure and culture issues, amongst others (Hill 2010). Observing these issues at a global perspective will enable firms to handle branding, marketing, sales, procurement, and human resource strategies, as will be of significance to the target market.
Sony has taken a number of steps in employing strategic concepts in order to thrive in some strong emerging markets. One of the markets it has ventured into is the Indian markets. It has applied strategies that array from marketing to corporate social responsibility strategies in order to thrive in this market. Although it has shown relevant progress over the years, more can be done towards its establishment and success in this market. India population estimates to 1.2 billion people. From a business perspective, the company has a potential market share of 1 billion customers. Although the market accounts for five percent of the company’s total annual revenues, it aims at increasing this percentage to ten percent in the next half a decade. The company therefore needs to undertake a number of strategies in order to reach this goal. This includes dealing with the competition, skepticism from the consumers about the products/brand and cultural issues, amongst other issues in as far as their supply chain is in question.
Sony is among the leading global manufacturers of audio, visual, communications and information technology products for both consumers and corporate markets. With a vast of products in its business such as the music, online business as well as games, the company is well situated as a world’s leading company in digital entertainment. Its brand is known worldwide and is well positioned in consumer’s minds as one of the best electronics companies. Some of its trademark products include Bravia, Vaio, Handy cam, Cyber-shot, Sony hi-fi, Xplod, memory stick and PlaySation. These products have created a unique position for the Sony Company worldwide (reuters.com 2012).
However, the current global market trends do not guarantee that a big company of brand name like Sony has a definite edge to competition. With the current increase in global competition, no company however strongly branded is guaranteed of success. Thus, continuous innovation and development of winning strategies is necessary to keep afloat the rising tide in competition (reuters.com 2012). Despite Sony having a good brand, it has incurred losses in several areas that resulted to a downsizing and closing down of 10 manufacturing bases worldwide. This was in a bid to reduce its costs that contributed to its losses in the last four years. Additionally, the last four years have seen the company’s share price drop by 10%, representing the biggest loss in many years. In the 2011 financial year final quarter, the company incurred a total loss of 50.9 billion yen, which is a 75% fall from the previous nine months. The financial year incurred a total loss of 557 billion yen. This is one of the biggest losses ever. It is surprising that despite its brand name and prize winning products the company is still incurring losses.
Some of the issues within the new global markets are increased consumer awareness on rights. For instance, the company was fined ?250,000 after a breach of data protective act. With such issues, it becomes hard for businesses to conduct business without taking into consideration the regulations available in a country. With its mission statement, ‘to bring new technologies, content and services together in unprecedented ways that enable people to re-shape their perception of the world and enhance their lives,’ Sony has to ensure that all the new technologies abide to the set regulations in order to avoid such incidents that not only contribute to the loss, but also spoil the company image and reputation (reuters.com 2012).
The Indian Emerging Market
Currently, India is among the fastest growing markets in the whole world, mainly driven by its large population and provides cheap labor as well as a market for goods. India has a population of over one billion, which provides a lucrative market as long as one avails the right products and services. Its population not only provides a market for goods and services, but also a ready labor force for any company planning of entering this market. It is not surprising that India is among the leading countries where multinational companies outsource their work.
Its GDP is currently growing at a rate of 7%, making it one of the highest growing and emerging market. It is the tenth world largest economy in terms of GDP, which makes it quite promising for business especially considering that, India might overtake some of the countries as long as it continues with its current growth. Further, it is ranked the third in terms of power purchasing parity. Despite the economic crisis that recently hit the whole world, India continued to grow. Much of its growth is coming from its manufacturing ability as well as a huge population (mapsofindia.com 2010).
The economic environment and other factors affecting business are favorable in India due to the recognition by government that a favorable economic climate is crucial for business. For instance, the Indian tax system is considered favorable. Additionally, the country is considered the largest democracy country, which makes business environment attractive to foreign businesses. The growth of the economy has seen the improvement of livelihood in India where families have a better income as well as exposure to a digital technology (mapsofindia.com 2010). This has made the Indian electronic consumer grow rapidly with many going for the emerging technology. Some of the goods that are currently doing well include Smartphone and computers or gadget with internet access capability. India is one of the best emerging markets to invest in, as well as one of the easiest in which to invest considering the high availability of skilled labor. The electronics market in India is expected to grow by 17% between 2012 and 2015, thereby providing an attractive opportunity for companies willing to enter this market (mapsofindia.com 2010).
Serving the Indian market
Entering an emerging market requires having the right strategies in order to succeed. With the current growth rate of Indian market, many companies are entering the market in order to capture it. Therefore, a winning strategy is necessary if Sony is to succeed in gaining a market share in India. Entering new markets is faced by many factors especially foreign markets irrespective of the company size or influence. It requires a plan for the whole supply chain starting from production to how the products reach the consumer in the new market. Entering any new market requires a thorough analysis of the competitors within the market and potential customers as well as other factors affecting the business environment in order to develop a strategy (mapsofindia.com 2010).
The Indian market in particular is a market that requires careful planning considering there are many foreign investors eying the opportunities. All factors within this market play a huge role in the success of any firm. It is important to find out the real value or worth of the market before entering. Some of the factors to look at in order to evaluate the market attractiveness include finding a good partner with good knowledge of the local market as well as issues of procedures needed. The other factors include planning well, identification of the target market considering the market is quite huge and diversified, conducting of promotion of the products and services and contacting adept agents and distributors. After consideration of these factors, a foreign investor needs to look at the various opportunities within the market available for exploitation. Some of these options can include subsidiaries and ventures with an Indian-based company.
Although the market is quite lucrative, many international companies have failed to realize their full potential in this market. Largely because most of them have entered the Indian market with strategies that worked elsewhere thinking, they would do the same in India. As aforementioned in the introduction, there is nothing like a global strategy. Each market has its own influencing factors that require different strategies from other markets. Therefore, any company in this emerging market needs to develop a strategy that suits it or a strategy specifically designed for this market as opposed to fitting a strategy into it.
Expansion Methods and Strategies
Several methods and strategies are available for Sony to expand in the Indian market. Considering it has been in this market for some time, it will be easier to expand considering it has established a market share as well as customer loyalty. Additionally, the Sony has a lot of knowledge about this market for the time it has served in India. Expansion as well as growth strategies available for exploiting include increasing sales within the current market or region served, introduction of new products and services, developing of new market segments, franchising or licensing and creating strategic alliances in order to serve areas within the market that are not served (Cherunilam 2010).
Increasing sales within the existing market is the most obvious and easiest way of expanding. This is the first basic way of expanding any business. This requires a bigger location, which India has, different pricing strategies in order to lure more customers and improved techniques of marketing. Upon increasing sales he business will have grown. For Sony, this will be an easier way of expanding within India since it already has a wide clientele base. However, proper and careful planning as well as marketing is necessary in order to capture the extra consumers who will bring in more sales.
Introduction of new products within a market is yet another way of expanding. Although it is used as an expansion tactic, this should be a routine part of business. This will require conducting extensive analysis on the existing market and collecting feedback from consumers in order to understand their needs, which is crucial before introducing a new product. Additionally, testing the new product before launching is necessary (Cherunilam 2010). The new product must prove to add value to the consumers in order to have the right response. All marketing strategies needed for a new product have to be used such a promotion and positioning. With a new product, the company can aim to capture a new market segment such as the lower income earners or middle class. This would attract new consumers, probably those that have not been considered by other competitors. Considering India has a big number of people living in poverty, Sony should consider this by making a product that considers their earning. This could capture a big market segment. This has to be positioned, as a response to customer needs in order to minimize risks associated with new products. This will capture more customers since the company will be addressing their needs (Cherunilam 2010).
The other strategy is developing new market segments or even moving to newer locations. Although Sony entered India several years back, it has not captured the whole region or country. Where it has, it has eliminated some of the consumers considering it is a diverse market in terms of economic status. Sony products are known to be a bit expensive for the low income earners, probably due to their quality. However, Sony can segment the market in terms of economic status considering India is stratified into three classes depending on economic status, the high class, middle and the lower class. The middle class is majority but considering the population of the country, there is a substantially big market for the lower class. In order to segment the market in economic class, Sony will need to invest in making lower price products while still maintaining quality and profitability. This will also require better analysis a to the buying behavior of the different segments within the market in order to develop strategies for reaching out to the new segments since different strategies will be needed. For instance, if the Sony segmented the market depending on demographic factors such as age, a message for a teenage will have to be different for a 50 year old. Additionally, the product would be different since the two market segments have different preferences.
However, segmentation does not occur at all stages of a product lifecycle. Rather, it best adds value during the growth and maturity stage when expansion is necessary in order to make more revenue considering at these stages the competition is usually high, as many competitors will have entered the market (Cherunilam 2010). Therefore, Sony can segment its market of products that are within these stages in order to remain competitive. Segmentation will not only be necessary for differentiating the marketing strategies, but also for selecting what would be the best segments to concentrate on. After segmenting, it would be easy to know what product to provide for which segment as well as where to avail the product. Market segmentation could be on various bases as demonstrated above. However, no matter what the basis for segmentation is, companies must avoid some things or should ensure to fulfill several characteristics. These characteristics include a measurable segment, where one can estimate the size, it should be substantial where it is large enough to offer profits, differentiable where one can justify a particular marketing mix that does not apply to others and finally, it should b accessible as well as actionable where one can clearly identify and reach the consumers within this segment (Cherunilam 2010).
With these strategies, Sony is likely to capture the different market with more ease. Additionally, this will help in reaching out to those customers the company did not consider before. However, care has to be taken to ensure that each segment is profitable to avoid any more losses.
Implications of Sony’s Supply Chain
As known, Sony’s main operations are domestic distribution, international logistics, parts procurement and customer service operations (Sony, 2013). The main implication of such a structure is that it handles issues affecting the target market as they emerge at the international or local level. Daniels et al. (2008, 88) acknowledges that many organizations/companies prefer to maintain uniform supply chain structure despite the target market. This is because the management is able to maintain a synchronized mode of assessment and follow up everywhere. Although this is an advantage, it can be disadvantageous too. A supply chain structure in the Singapore market may not work effectively in the Indian market. The company should assess when to modify or come up with a structure that suits the target market.
Sony’s structure is of effect as it handles significant areas in the marketing and procurement sector. It not only serves other businesses, but it also serves individual consumers. It takes care of the local consumers through its customer service operations. However, by adjusting the structure in one way or another, the structure will be of more effect to the consumers and the market as whole. India is a large market as compared to other emerging and existing markets. If the company can subdivide the subsidiary units in order to serve as many consumers as possible with the utmost service outlet per area, then the services provided will be of more quality and of better effective. Additionally, more employment opportunities will emerge, considering that the rate of unemployment in the country is quite high.
Baranova et al. (2011, 120) emphasizes on the relevance of supply chain integration. According to this author, this type of integration allows firms to determine whether their supplier-customer relationships are based on free-will or there is some form of coercion or pressure from larger or more powerful customers or suppliers. The supply chain administered by Sony takes care of this main issue. it is easy for the large company to intimidate pressure or coerce consumers or other smaller firms into entering a supplier-consumer relationship with it. However, the organization chooses to make sure that this does not occur through its customer service operations. Additionally, it ensures that it is does not take advantage of other firms as well as be taken advantage of by other international companies through its international operations.
It is relevant for any business to determine the direction of supply chain integration occurrence and the mechanisms put in place to ensure that the processes are fully integrated. The direction may be downstream or upstream. Mechanisms include contractual relational or technological means (Mintzberg, Ahlstrand and Lampel, 2005: 65). Sony’s chain allows it to understand its mechanism and relationships. For example, there is Sony which is mainly associated with electronics and Sony Erickson which associated with mobile phones. The relationship as well as uniqueness of these two brands which are under one roof is taken care of by the company’s supply chain. However, the organization should make sure that the supply chain is improvised in order to compensate for the least productive brand. Production in this case arrays from revenues production to customer satisfaction. As mentioned earlier generating more units in order to serve a wider share of the already distinct market share is one step towards achieving such a goal. Further, the company will have to incur more costs of having to implement and over see all the marketing of all the strategies involved in differentiation.
Although Sony has been an international company for several decades while remaining amongst the industry leaders, it has been affected by the global concepts that are influencing all businesses especially international ones. Sony has been India as well for some time but has not yet managed to capture the whole market. Therefore, Sony needs to adopt a strategy that can win more market share the emerging market. The main strategy for expansion that Sony can adopt is segmenting the market and differentiating its strategies in order to address the needs of each. Additionally, Sony could expand by pushing for more sales as well as providing new products but ensuring they are well positioned to win the consumers (Johnson, Whittington and Scholes 2011).
The most important decision for Sony to make in expanding within this emerging market is how to cover the market. The strategy chosen here is of utmost importance considering it will affect the success of the company either negatively or positively. Additionally, choosing a strategy will not be enough (Johnson, Whittington and Scholes 2011). Implementing monitoring and evaluating its progress will be necessary in order to realize any shortcomings or hiccups. Just like all strategies, internal and external factor have to be considered the strategy that will be chosen.
Additionally, Sony must decide whether to concentrate on a few segments within the emerging market or go for all majority of the segments. This should be followed by establishing the best strategy for expansion. Considering that Sony has been in India for quite some time now, it should go for the second option since it has the capacity to spread over the completely Indian market (Hill 20100. After choosing this strategy, Sony has three strategies from which to approach or cover the market. The first one is using a concentrated marketing strategy that aims at realizing the maximum penetration in a few or one segment while excluding the rest. This may not be the best since it is a form of niche market where a company concentrates on one segment. The other strategy is undifferentiated marketing in which the company treats all the consumers in the same way using marketing aggregation. This is where all segments are treated as one segment irrespective of the difference. Although it is easy, it is not an ideal option for Sony within the Indian market. Finally, the company can and should adopt the differentiated strategy that treats each segment as different from others. This is bound to capture more market considering Sony can approach all the segments at the same time Hill. Considering Sony aims at expanding its market within India, a differentiated strategy is the best, one that uses different marketing strategies for each segment in order to capture the whole market. This offers a better solution to expansion (Johnson, Whittington and Scholes 2011).
After selection to approach a majority of segments, Sony should go by the differentiated strategy in tackling them. Additionally, the company should use the shower or sprinkle approach when engaging these segments. The sprinkle of shower approach where the company goes for all the segments it chooses at a go unlike the waterfall approach where the company approaches he segments one by one. These approaches are better explained in the appendices diagrams.
Baranova P., Knight T., Milligan J. 2011. Strategy Concepts and Applications, Customized Text. Pearson Education.
Cavusgil, S. Knight, G & Riesenberger, J. 2008. International Business, Strategy, Management, and new Realities. Pearson Prentice Hall.
Cherunilam, F, 2010, International Business: Text and Cases, New Delhi, Delhi PHI Learning Pvt. Ltd.
Hill, C., 2010, International Business, Competing in the Global Marketplace, (9th Edition), Ney York, N.Y, McGraw-Hill.
Johnson, Whittington and Scholes 2011, Exploring Strategy: Text and Cases, 9th Edition, Prentice Hall, Essex, UK.
Daniels, J. Radebaugh, L & Sullivan, D. 2009. International Business, Environments and Operations, 12th Edition, Prentice Hall.
mapsofindia.com, 2010, About Indian Market, available at http://business.mapsofindia.com/india-market/entry.html
Mintzberg, Ahlstrand and Lampel. 2009. Strategy Safari – Your complete guide through the wilds of strategic management. , 2nd Edition, FT Prentice Hall.
reuters.com, 2012, Sony Corp (SNE.N), available at http://in.reuters.com/finance/stocks/companyProfile?symbol=SNE.NAppendices Appendix A