MGMT 3101 – Case study essay
The formation and evolution of Sony Ericsson alliance
Creativity and flexibility is required in order to succeed in the mobile-phone industry. No other industry changes faster, or experiences more sudden and rapid changes to fortunes (Bowman 2006, pg 1). The industry was shaken by the alliance of two consumer electronic giants in October 2001, Sony Corporations and Ericsson AB. Sony Ericsson mobile communications is a fifty-fifty joint venture between Japan’s Sony Corp. and Sweden’s Ericsson AB. Their mission is to establish Sony Ericsson as the most attractive and innovative global brand in the mobile handset industry (Sony Ericsson website) through combining Ericsson’s mobile technology alongside Sony’s expertise in consumer electronics (Kristine 2005). With headquarters located in London, Sony Ericsson became the sixth largest global mobile phone corporation in 2005 following closely behind competitor Nokia (Kristine 2005). Motivations for the joint venture alliance as well alternatives to a joint venture will be explored, concluding with an examination of the problems and strategies used throughout the alliance to aid Sony Ericsson to become a world renowned mobile supplier.
Complementary asset sharing and knowledge transfers were among several reasons motivating the alliance. Ericsson was heavily criticized in the past for poor manufacturing capabilities (Manuel 2002) as Ericsson previously outsourced its production procedures to Flextronics in order to reduce costs (Electronic Times, 2001). Alongside that, Ericsson was associated with poor designs in terms of aesthetics and was unable to attract a large pool of consumers especially teenagers and young adults. Furthermore, due to the ever changing industrial environment of the mobile-phone industry, Ericsson was forced behind due to its inability to keep up-to-date with the market and as a consequent, slowly loosing its already minimal market share (Manuel 2002). However, the joint venture with Sony expected it to assist Ericsson fill in the gaps (Lamar L, 2001).
Sony was the pioneer in the portable consumer electronics industry due to its ability to master design and marketing techniques (Electronic Times, 2001). Its expertise in digital camera and walkman made the 3G phone outstanding and provided Sony Ericsson with an initial competitive edge, as the features of digital camera and music functions were the basic requirements for the new generation of mobile phones (Alfred H, 2004). Sony also enjoyed Ericsson’s world-class knowledge of radio frequency technology and its existing distribution channels around the world. Exploiting Ericsson’s knowledge, Sony was able to build lasting relationships with wireless carriers across the world (Mark V, 2001) which aided Sony to re-enter the U.S and European market in response to its expansion project.
It was an extreme challenge and near impossible for Ericsson or Sony alone to compete with the worlds leading telecommunications corporation Nokia, due to their relatively small market share they both experience (Electronic Times, 2001). The joint venture in 2001 saw Sony and Ericsson combining key competence resources and capabilities such as capital, management and technological skills to enlarge their market share together in hope to compete with telecommunications giant, Nokia.
The pivotal reason behind the alliance by Sony Corp. and Ericsson was to combine Sony’s world-class technological skills in audio, video and communications with Ericsson’s technological leadership to challenge Finland’s Nokia and United State’s Motorola in gaining the markets leading position as the world’s most advanced global telecommunications corporation (Ericsson Annual Report, 2001). The alliance allowed both parties to enjoy the resources and technology of each party. Ericsson was at the leading edge in communication systems and protocols, whereas Sony enjoyed leading strengths in consumer...
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