On October 27, 2005, Japan-based Sony Corporation (Sony) announced the financial results for the second quarter ending September 30, 2005. The results showed that the trend of dismal financial performance at Sony was continuing. As compared to the second quarter of fiscal 2004, Sony's net income fell by 46.5%. However, the performance during the second quarter of fiscal 2005 was better than the first quarter of fiscal 2005, when Sony had reported a net loss of ¥7.3 billion These results were announced after the declaration of the new restructuring plan in September 2005, under the new CEO Howard Stringer (Stringer). Sony had been subjected to a spate of restructuring programs beginning from 1994, all of which had failed to revive its dwindling fortunes. Analysts attributed Sony's problems to the company's bloated cost structure, investments in non-core businesses and lack of new age products. Stringer's predecessor Nobuyuki Idei (Idei) became the CEO of Sony in June 1999. Idei stepped down from this position due to the failure of 'Transformation 60,' a three year restructuring plan through which he had proposed to significantly improve the financial performance of Sony. In March 2005, Idei named Stringer, who was running Sony's US operations as his successor. While stepping down, Idei said, "It's funny, 100% of the people around here agree we need to change, but 90% of them don't really want to change themselves, so I finally concluded that we needed our top management to quite literally speak another language." In September 2005, Stringer announced a restructuring plan for Sony. As a part of the plan, Sony announced reduction of its global work force by 6.6% and sale of non-core assets valued at ¥120 billion. Without identifying the products, Sony announced that 15 unprofitable business categories in electronics would be spun off into joint ventures or would be sold off. Sony's management was of the view that the plan would help revive the dwindling fortunes of the company's electronics business. Analysts were not too impressed with the new plan, commenting that the plan did not present any formula for growth and it did not differ much from Sony's earlier restructuring plans. As Carlos Dimas of CLSA Asia-Pacific Markets commented, "His (Stringer's) business model is just a continuation of Idei's formula for growth, which meant he doesn't have a new business model. It's a business model that has been made obsolete by the digital era, and if the company is not able to change this model there is no way they will survive."
A strategy is a master plan that helps an organization to deal with its environmental forces both from within and outside.
❖ Explain the role of an effective strategy to the above organization.
1. Framework For Operational Planning.
Strategies provide the framework for plans by channeling operating decisions and often pre-deciding them. If strategies are developed carefully and understood properly by managers, they provide more consistent framework for operational planning. If this consistency exists and applied, there would be deployment of organizational resources in those areas where they find better use. Strategies define the business area both in terms of customers and geographical areas served. Better the definition of these areas, better will be the deployment of resources. For example, if an organization has set that it will intro-duce new products in the market, it will allocate more resources to research and development activities, which is reflected in budget preparation. 2. Clarity in Direction of Activities.
Strategies focus on direction of activities by specifying what activities are to be undertaken for achieving organizational objectives. They make the organizational objectives more clear and specific. For...