Sony Ericsson from Joint Venture to Wholly Owned Subsidiary
The Sony Ericsson joint venture is a case study that can be used to explore key international business strategies and concepts.
1. Sony & Ericsson’s motivations behind the joint venture (JV)
The Swedish telecommunications company Ericsson, one of the “Big Three” mobile handset manufacturers in the 1990s, started to reach difficulty as it entered the new millennium. In 2001, Ericsson’s sales dropped by 52%, recording a $1.39 billion loss which preceded an announcement that would lay off 20% of their workforce. Ericsson found itself losing market share to “Big Three” rivals Nokia and Motorola and eventually even to Siemens. Analysts attributed this downfall to Ericsson’s stagnant phone designs, slow time to market and their inability to foresee market movement. Kurt Hellstrom, Ericsson’s CEO at the time, also stated that Ericsson needed a deeper understanding of consumer electronics, entertainment, audio, video and design.
The personal consumer technology giant Sony saw immense opportunities in the early mobile phone industry. Sony predicted the industry’s movement towards multi-media broadband and foresaw the future consumers’ needs of mobile handsets with multi-media content such as movies, pictures and games. It was a perfect market for Sony to venture into with its expertise in consumer technology. Previously, Sony had missed entering the mobile phone market with the introduction of the GSM network in the early 1990s and held a mere 2% share of the worldwide mobile market. However, they identified an opportunity with the arrival of the 2000s also came a new mobile network called 3G, and Sony was determined to not make the same mistake as it did with GSM. Sony’s previous successful products, such as the Walkman, had all been independent ventures. However, the mobile phone industry required close co-operation with mobile carriers, which presented a challenge for Sony, known to be historically independent. Hence, in order for Sony to break into the mobile
1. Sony & Ericsson’s motivations behind the joint venture (JV)
The Swedish telecommunications company Ericsson, one of the “Big Three” mobile handset manufacturers in the 1990s, started to reach difficulty as it entered the new millennium. In 2001, Ericsson’s sales dropped by 52%, recording a $1.39 billion loss which preceded an announcement that would lay off 20% of their workforce. Ericsson found itself losing market share to “Big Three” rivals Nokia and Motorola and eventually even to Siemens. Analysts attributed this downfall to Ericsson’s stagnant phone designs, slow time to market and their inability to foresee market movement. Kurt Hellstrom, Ericsson’s CEO at the time, also stated that Ericsson needed a deeper understanding of consumer electronics, entertainment, audio, video and design.
The personal consumer technology giant Sony saw immense opportunities in the early mobile phone industry. Sony predicted the industry’s movement towards multi-media broadband and foresaw the future consumers’ needs of mobile handsets with multi-media content such as movies, pictures and games. It was a perfect market for Sony to venture into with its expertise in consumer technology. Previously, Sony had missed entering the mobile phone market with the introduction of the GSM network in the early 1990s and held a mere 2% share of the worldwide mobile market. However, they identified an opportunity with the arrival of the 2000s also came a new mobile network called 3G, and Sony was determined to not make the same mistake as it did with GSM. Sony’s previous successful products, such as the Walkman, had all been independent ventures. However, the mobile phone industry required close co-operation with mobile carriers, which presented a challenge for Sony, known to be historically independent. Hence, in order for Sony to break into the mobile