Sony have successfully created an incredible brand name previously, however, its legend seem to be falling apart recently. In fact, Sony’s net profit for the July-September quarter for 2006 falling 94% to 1.7 billion Yen, compared to 28.5 billion Yen for the same period last year (Benson, 8th Nov 2006). The major reasons for the declining profit are affected by the critical strategic issues faced by Sony which became a main drawback for them.
The first strategic issue faced by Sony was the inefficient manufacturing structures which decrease Sony’s quality that badly affects their reputation and caused a decline in product competitiveness. DeWit & Meyer (2004: p192) argue that “the essence of most uniquely Japanese management practice will be they productivity improvement, TQC (Total Quality Control) activities, QC (Quality Control) circles, or labour relation – can be reduced to one word: Kaizen”. They also argue that “the implication of TQC or CWQC (Company Wide Quality Control) in Japan have been that these concepts have helped Japanese Companies generate a process-oriented way of thinking and develop strategies that assure continuous improvement” (p192). However, in the case of Sony, they did not make any improvement or perform well in Kaizen or implement an efficient manufacturing structure that ensure high product quality which affect their product quality and caused a massive damage to the company. For example, there is the recall of 9.6 million Sony Laptop batteries which were liable to overheat and potentially burst into flames where Sony even failed to fully study the problem (Forbes.com, 2nd October 2006) and there are complaints from Japan’s consumer about PS3’s new system (Wonova.com, 15th Nov 2006) which will affect the compatibility and status of Sony badly.
The failure of Sony in effectively implements Kaizen or sustain an effective manufacturing structure to ensure that they have high quality products had damage their strong brand name and reputation which caused them to lose their product competitiveness and competitive advantages in the market. As Johnson et al (2005: p125) argue, “it is important to emphasize that if an organization seeks to build competitive advantage it must meet the needs and expectations of its customer”. The fact that Sony’s product qualities are unable to meet the needs and expectations of their customer had completely decreases the confident of the market and swipes away its reputation. Finlay (2000: p295) also argue that “a good reputation is something that all business would like to have but in some cases a good reputation is much more valuable than in others”. Reputation is one of the significant intangible resources (Collis & Montgomery, 1999) for Sony that differentiates themselves from the competitors for them to charge a premium price for their excellent product and quality, as Kotler & Keller (2006) argue, good reputation can create a positive prejudice in the mind of the customer which make customer prefer the brand. Therefore, the diminishing of Sony’s reputation will create a negative prejudice and weaken their core competences which will directly affect their competitive advantages and become a major threat for Sony.
Besides than quality and reputation issues, Sony are insufficient in responding to the shift of market demand and losing of its competitive advantages. The delays for the European launch of PS3 due to manufacturing problems (BBC.co.uk, 6th September 2006) caused Sony to become incapable of fulfilling the increasing market demands which increase the stake for Sony as there are other strong competitors such as Microsoft and Nintendo to have a head start in gaining market share and enjoy first mover advantages. Besides, Sony also responds slower than others in the increasing demand of Plasma TVs and lost ground for key growing area. As Mintzberg et al (1999: p96) suggest, “first mover may gain...