Case Study Sony

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RESTRUCTURING SONY
The electronics and media giant Sony was struggling through the late 1990s and early part of the 21st century. With each disappointment, it seemed that Sony’s management launched another restructuring of the company. By 2003, commentators were beginning to ask whether restructuring was part of the solution or part of the problem. How should Sony be managing its strategic renewal? Introduction For the first quarter ending 30 June 2003, Japan based Sony Corporation (Sony)2 stunned the corporate world by reporting a decline in net profit of 98 per cent. Sony reported a net profit of ¥9.3 million compared to ¥1.1 billion for the same quarter in 2002. Sony’s revenues fell by 6.9 per cent to ¥1.6 trillion for the corresponding period. Analysts were of the opinion that Sony’s expenditure on its restructuring initiatives had caused a significant dent in its profitability. In the financial year 2002–03, Sony had spent a massive ¥100bn on restructuring (≈£500m; ≈a750m). Moreover, the company had already announced in April 2003 about its plans to spend another ¥1 trillion on a major restructuring initiative in the next three years. Analysts criticized Sony’s management for spending a huge amount on frequent restructuring of its consumer electronics business, which accounted for nearly two-thirds of Sony’s revenues. In 2003, the sales of the consumer electronics division fell by 6.5 per cent. Notably, Sony’s business operations were restructured five times in the past nine years. Analysts opined that Sony’s excessive focus on the maturing consumer electronics business (profit margin below 1 per cent in2002–03), coupled with increasing competition in the consumer electronics industry was severely affecting its profitability. However, Sony’s officials felt that the restructuring measures were delivering the desired results. According to them, the company had shown a significant jump in its profitability in the financial year 2002–03. Sony reported a net

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