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The ability to set trends is the most important measure in determining a company's success in the smartphone industry. Technological skills, product performance, distribution network, relative cost position, brand image and finally customer service capabilities are also taken into account. The chart below also shows the scores of each of the main competitor, namely Samsung, apple, Nokia and LG, for all measures.
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Assignment 03 - Evaluating a Company's Recourses Cost Position and Competitiveness
The ability to set trends is the most important measure in determining a company's success in the smartphone industry. Technological skills, product performance, distribution network, relative cost position, brand image and finally customer service capabilities are also taken into account. The chart below also shows the scores of each of the main competitor, namely Samsung, apple, Nokia and LG, for all measures.
The ability to set trends is the most important measure in determining a company's success in the smartphone industry. Technological skills, product performance, distribution network, relative cost position, brand image and finally customer service capabilities are also taken into account. The chart below also shows the scores of each of the main competitor, namely Samsung, apple, Nokia and LG, for all measures.
Assignment 03: Evaluating a company's Re-courses Cost Position And Competitiveness 1. Sonys Competitive Strength Relative to its Key Rivals When determining a firms overall competitive position it is important to first of all define the industrys key success factors. In the precedent analysis we have already identified the main key success factors in the smartphone/consumers electronics industry to be speed, the ability to put processes in place to avoid the business risk of major write off, to fully meet regulatory compliance, such as the requirements for removal of potentially hazardous materials, and finally to be able to set trends. In the context of this competitive strength assessment however these factors are not sufficient, so that we have to consider some additional measurements that also determine a companys success in the smartphone industry. For this purpose we will therefore also take technological skills, product performance, distribution network, relative cost position, brand image and finally customer service capabilities. The next step in the Competitive Strength Assessment is to assign a weight to each measure based on its importance in shaping competitive success. As the illustration of the competitive strength assessment below shows, we consider the ability to set trends as the most important factor, which is why it accounts for the highest weight (0,2). Business Risk, Regulatory Compliance and Distribution however are considered as less important and therefore only weight with 0.05. All remaining factors account for 0,1. The chart below also shows the scores of each of the main competitor, namely Samsung, Apple, Nokia and LG, for all measures. For this purpose a scale where 1 is weak and 10 is strong has been used. Moreover the chart also shows the overall weighted strength ratings taking all factors in total into consideration. It is obvious that Apple has a net comparative advantage over all other competitors. However, it is closely followed by Samsung, which is also having a superior lead over Sony and especially Nokia and LG. Focusing on Sony it is evident, that they are still too far behind Apple and Samsung. However, Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 1 |Page Key Success Factor/ Strength Measure Imprtance Weight Strength Rating Score Strength Rating Score Strength Rating Score Strength Rating Score Strength Rating Score Speed 0,15 5 0,75 9 1,35 8 1,2 3 0,45 3 0,45 Business Risk 0,05 7 0,35 8 0,4 9 0,45 6 0,3 6 0,3 Regulatory Compliance 0,05 7 0,35 8 0,4 8 0,4 9 0,45 7 0,35 Trends 0,2 6 1,2 8 1,6 10 2 3 0,6 4 0,8 Technological Skills 0,1 8 0,8 10 1 9 0,9 6 0,6 4 0,4 Quality/ Product performance 0,1 7 0,7 7 0,7 10 1 8 0,8 5 0,5 Distribution 0,05 5 0,25 5 0,25 10 0,5 5 0,25 5 0,25 Relative Cost Position 0,1 7 0,7 10 1 3 0,3 6 0,6 7 0,7 Brand Image/ Style 0,1 6 0,6 7 0,7 10 1 2 0,2 4 0,4 Customer Service Capabilities 0,1 7 0,7 7 0,7 9 0,9 7 0,7 5 0,5 Sum 1 Weighted Overall Rating 6,4 8,1 8,65 4,95 4,65 Sony Samsung Apple Nokia LG T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 they have a clear competitive advantage over Nokia and LG. So if Sony wants to go on offensive to win additional sales and market share, they should rather aim directly at winning customers away from LG and Nokia than Samsung or Apple. As Sony has a got at least the same score as LG or even has a competitive advantage in all areas, LG should be viewed as Sonys primary targets, whereas Nokia should only be considered a secondary target. The Competitive Strength Assessment also shows, that when Sony is trying to attack Nokia, first of all they should try to improve their quality/product performance, as Nokia still has a small competitive advantage over Sony in this area. Moreover, given this case, Sony should also improve its Regulatory Compliance. Attacking LG however will be a lot easier, as Sony could exploit its competitive advantage over LG in the area of Technological Skills. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 2 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 The value chain of customer electronic products are typical to most of the company. From the equipment factory / material supplier the parts will be send the the panel makers where the parts will be assembled. The material supplier are outsorced all over the world. After the panel is done, it shipped to OEM. The shippments are differs based on what products will produces. After the products are ready the company will received it. The products will shipped to department store, distributors, re-seller and other distribution channel before it reach customers. So, what differs Sony value chain strategy with the competitors?Sony use Sustainable Supply Chain Management (SSCM) in IT. SSCM is a business issue affecting an organizations supply chain or logistics network in terms of environmental, risk, and waste costs. Sustainability in the supply chain is increasingly seen among high-level executives as essential to delivering long-term profitability and has replaced monetary cost, value, and speed as the dominant topic of discussion among purchasing and supply professionals. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 3 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 Supply chains are critical links that connect an organizations inputs to its outputs. Traditional challenges have included lowering costs, ensuring just-in-time delivery, and shrinking transportation times to allow better reaction to business challenges. However, the increasing environmental costs of these networks and growing consumer pressure for Eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management. This shift is reflected by an understanding that sustainable supply chains frequently mean profitable supply chains. Many companies are limited to measuring the sustainability of their own business operations and are unable to extend this evaluation to their suppliers and customers. This makes determining their true environmental costs highly challenging and reduces their ability to remove waste from the supply chains. However much progress has been made in defining supply chain sustainability and benchmarking tools are now available that enable sustainability action plans to be developed and implemented Drivers of SSCM: Stakeholder interest. Leadership. Risk and cost management. Regulatory pressure and compliance. Every supplier or customer within a supply chain will, at some point, be faced with the task of effectively addressing common challenges that arise from each of these four areas of concern. information collected in this study provides valuable insight into how emerging SSCM strategies are making it easier for businesses to address these issues and pursue successful SSCM. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 4 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 Result of applying SSCM: Reduce Costs: practical approaches to operational improvement Improve Efficiency: order-to-cash, optimum systems, process and organisation redesign Minimise Risks: a total Sustainability approach backed by unique benchmarking tools Competitive Advantage: structural improvements to deliver supply chains fit for the future 3. Benchmarking Sony with the competitors According to the Consumer Electronics Association (CEA), consumer confidence toward technology spending jumped to the highest level in October since 2007, while sentiment toward the overall economy slightly increased in October. The CEA Index of Consumer Technology Expectations (ICTE), which measures consumer expectations about technology spending, jumped 9.5 points in October to reach 90.2. Consumer increased interest in tech is likely due to the approaching holiday season. Furthermore, exciting product announcements coupled with early retailer promotions and advertisements are likely behind the jump in sentiment toward tech spending. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 5 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 According to the CEAs Holiday Purchase Patterns study, 74% of consumers planning to purchase gifts this holiday season intend to buy consumer electronics (CE). They plan on allocating 33% of their overall holiday gift budgets to CE. CE spending is expected to rise 2.6% this holiday seasondown from 4% growth in 2012.1 Global shipments of TVs are expected to decline to 226.7mn units in 2013, down from 238.2mn in the previous year. Every type of television will suffer a decline, including the major categories of liquid-crystal display (LCD), plasma, cathode-ray tube (CRT) and rear projection. This follows a 7% decline in 2012, when shipments fell from 255.2mn in 2011.2 For the first time ever, global factory revenue for smartphones and tablets will rise to become larger than revenue for the entire CE market. Worldwide original equipment manufacturer (OEM) factory revenue for media and PC tablets and for 3G/4G cellphonesa category dominated by smartphoneswill amount to US$354.3bn in 2013. This will be 3% higher than the US$344.4bn for CE market OEM factory revenue. The fact that these two product categories are on their own able to generate more OEM factory revenue than the entire CE market illustrates the overwhelming popularity of smartphones and tablets. The presence of mobile devices has single-handedly reduced the value of each product within the CE category. Smartphones and tablets now all carry a quality substitute for almost every product in the CE category: TV (mobile video, YouTube), audio equipment (iTunes, Pandora), cameras and camcorders (a standard on mobile device hardware) and video game consoles (mobile games and apps). 2 Apple launched a series of new products this quarter including the iPhone 5c and 5s, iOS 7, the new iPad mini with Retina Display, the iPad Air, the new MacBook Pros, the new Mac Pro, OS X Mavericks and the iWork and iLife apps for OS X and iOS. With the new iPhone 5c and 5s leading the way for quarterly revenue, Apple should report huge profits when it announces its December quarter. Just as sales of the more expensive iPhone 5s are outweighing the cheaper iPhone 5c, the cheaper iPad models will likely be less popular than the newer, more Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 6 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 expensive models, which should again result in strong profits. Sony cannot reach the top position of consumer electronic product. From the chart it shows that Apple still dominate the market followed by Canon with their cameras and Phillips. It can be conluded that even Sony already shift the strategy to SSCM the company performance is not better than the competitors. Sony need to find new strategy and find a way to improve income of the company if Sony wants to keep up with other competitors. 4. Strategic Management: Sonys Internal Analysis How well is the Companys Strategy Working? Indicators of how well a companys strategy is working are its financial strength and profitability, and its competitive strength and market standing. In this paper we will examine some of Sonys financial indicators throughout recent years, and compare how Sonys have been performing against its competitors. One good indicator of a companys financial performance is its market capitalization value, which is the share price multiplied by the number of shares in issue; it is the total value of a companys shares outstanding. The following is a graph showing changes in Sonys market capitalization (market cap) value in the last five years. (Sources: Bloomberg, Wall Street Journal, ycharts.com) Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 7 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 As seen in the graph, although Sony reached a high point in early 2010 when its market cap was valued at over $40 billion, it has been going through a steady decline throughout 2011. It reached its lowest point near the end of 2012, when Sonys market cap value dropped to $10 billion, which is about 75% drop in value in the span of two years. Throughout 2013 Sonys market cap value gradually increased but took another dip in early 2014, and currently it is valued at $17.8 billion, nearly half of what it was compared to its highest point. Another important indicator to a companys financial performance is their debt to assets ratio. The debt to assets ratio is a measure of the leverage used in a business and its financial strength. We will compare Sonys total assets and liabilities in June 2012 to that of other companies in the industry in the following table. Compan y Total Debt Total Assets Debt to Assets Ratio Sony $135.61 Billion $166.2 Billion 0.8 : 1 Google $21.33 Billion $86.05 Billion 0.2 : 1 Apple $52.15 Billion $162.90 Billion 0.3 : 1 Microsof t $54.91 Billion $121.27 Billion 0.5 : 1 (Source: ycharts.com) From the table, Googles debt to assets ratio is 0.2 to 1; this can be interpreted as Google only having to sell 20% of its total assets to pay off its liabilities. On the other hand, Sonys debt to assets ratio is 0.8 to 1, four times that of Google. Additionally, Sonys total debt is still larger than the combined total debt of Google, Apple, and Microsoft. It is apparent from these financial indicators and from comparing with others in the industry that Sonys strategies have not been working well. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 8 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 What are the Companys Competitively Important Resources and Capabilities? A companys competitive approach requires a tight fit with the companys internal situation, and it is strengthened when it exploits resources that are competitively valuable, rare, hard to copy, and not easily replaced by competitors substitute resources. Furthermore, sustainable competitive advantage requires ongoing development and expansion of resources and capabilities. First of all we will examine the competitive approach of Sonys smartphone, Xperia. It boasts camera features, and image editing and sharing, as distinguishing factors. Competitively it is valuable however it is not rare or difficult to copy, since Nokia has similar features on their smartphones. At the moment Sony has competitive parity when it comes to competitiveness in the smartphone product category. 5. Sony's Worries There are a few points which Sony's CEO Kazuo Hirai is worried about and thats why he started a few counter actions. The biggest worry is the monetary status, which caused the management to change their strategies. For example the The New York Times wrote: "In the company's financial year that ended in March 2012, it projected a record net loss of Y455 billionthe equivalent of $5.7 billion. It was Sony's worst loss ever, as an additional tax expense hurt a company already battered by heavy losses in its television business, a strong yen and natural disasters in Japan and overseas." Another algorithm programm (Macroaxis) predicts that Sony has a 78% change to become bankrupt in 2 years. First Sony sold already their personal computer unit, which caused great financial loss. Now Kazuo Hirai is thinking about selling the TV unit, too. On Sony's website, Hirai wrote in his annual report that he want to change their strategy (like we also recommended): Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 9 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 My management team and I made key decisions aimed at creating new businesses while strengthening core businesses.[...] At the same time, we realigned our business and asset portfolio and strengthened our financial position.[...] Furthermore, in order to increase efficiency and reinforce our business infrastructure, we implemented structural reforms including optimizing resources and streamlining our marketing organization in developed markets, consolidating certain manufacturing operations in Japan, and expediting measures to reduce headquarters headcount. We also executed various initiatives to turn around the electronics business by working to strengthen our mobile, imaging and game businesses (our three core electronics businesses), turning around the television business, and expanding our business in emerging markets. One example for a new business which Sony created is the Sony Olympus Medical Solutions Inc., a joint venture with Olympus Corporation that plans to deliver new innovative medical products, such as surgical endoscopes, and a new medical and imaging systems solutions business. Because Sony experienced a huge monetary loss, some of the decisions made included the sale of the chemical products-related business, the PC unit, as well as the sale of assets including the U.S. headquarters building in New York City. Sony already fired a lot of people in the past few years, and the CEO predicted that Sony will cut 5,000 more jobs in the next time, too. The second worry of the Sony company is a lack of competitiveness against the cheaper oversea products and the changing Japanese market. Especially in the home country of Sony, Japan, the buying behavior of the People changed. A few years ago, Sony produced high-quality, but also high-priced products. And the Japanese People bought those products, also because they wanted made in Japan products. Nowadays people are more aware of the price and the Korean competitor Samsung is able to produce technical devices to a much Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 10 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 lower price. This caused Sony to went down with their prices as well, to stay competitive. But this leaded to a loss of quality. Sony already reacted and outsourced their TV production to where it is cheaper. The Homepage Kotaku.com reports: A Japanese salesman in a big retailer shop outside Tokyo, (38) said that twenty years ago, he remember Sony TVs "had such a good quality, the images were so beautiful. But nowadays the quality has gone down, that's for sure." But in the past, they were expensive too. However, he explained that nowadays, no one would pay that much to get a new TV. His large shop sells Japanese electronic products only. "Three years ago the prices were higher. You found TVs at 400,000 yen. It is true that the price went down because of the cheaper Korean products," he adds. The last worry is that Sony is not able to fix their key problems like slowing down of sales and revenues, cost cuttings, moving factories in Asia, cooperation between divisions and efficient management, which are related to the upper two points. If Sony's Management fails with their newest implemented strategy, the company can't exist anymore. Here is a summary of the companies key strategies (source: annual report 2013) Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 11 |Page T.Hani Handoko, Ph.D Strategic Management Even Semester, 2013/2014 6. Short Summary As our analysis shows, Sony's market position and competitiveness is unstable. The Sony Corporation faces a lot of problems/issues nowadays. As company is facing multi faced problems, its solution should also be multi faced. It requires a major over haul. With such a large multinational corporation, greater planning and more use of strategies should be pursued. Sony already started with the implementation of a new strategy, with profit and benefits of the company tied more closely to everyday operations. Internally, the companys forces, such as the management, the designers, the production and the marketing should achieve better communication and cooperation. Alliance and cooperation between competitors should also be actively sought in order to create standards in new fields. Sony should aim at being the leader in its fields, thats why they cut jobs, sold their PC unit and outsourced their TV unit. If they are able to manage and hold the new strategy of specializing on core fields, Sony can probably turn their bad performance again into a good one. Group 2: Ajeng Ghina Farhani, Amelie Haid, Gita Astari, Martin Wurzer 12 |Page