Strategic Management Assignment Case Analysis

Submitted to: Submitted by:

Prof. Ray Titus

Group 7 (OLS Section) Ankita Kushwaha Aswini Konda Devdutta Nandi Pankhuri Singh M S Pratap Reddy

CASE 1:

CORPORATION

SANYOS THINK GAIA VISION AND TURNAROUND EFFECTS

BACKGROUND OF THE COMPANY

Sanyo began its operations as Sanyo Electric Works in 1947 in Moriguchi, Osaka. Earlier it manufactured bicycle generator lamps. Later in the year 1950 it changed its name to Sanyo Electric Co. Ltd. From the very beginning they were quality conscious. Sanyo was the first company to launch plastic radios in Japan and then the company started manufacturing televisions. Later they get listed on the Tokyo and Osaka stock exchanges. In 1969 it established two subsidiaries Sanyo Electric Credits Co. Ltd. and Sanyo BC. A year later it established a product development Centre. In 1975 Sanyo acquired Fisher, a European consumer electronics company and later it became the first company to develop manganesedioxide-lithium batteries and they were the first to launch Amorton, the worlds first amorphous silicon solar battery, and Eneloop in 2005 that showed promising chances of revival of the company as these were environment-friendly batteries that also costed less than the others. In mid-1990s Sanyo entered the mobile phone and digital camera businesses. Sanyo developed the worlds first HIT Solar cell and introduced first cordless telephone with answering machine. Starting from mid-1990s the profits began to fall because of its failure to compete effectively in its major business areas. They restructured their group into five major business groups (later reorganized to form eight business groups). Sanyo had a 30% global market share (2002) in digital cameras. They spent almost US$ 1 billion annually on R&D related to various products including fuel cells and OLEDs. Sanyo was able to bounce back with solid results for fiscal 2000: net income of 21.7 billion (US$204.6 million) on net sales of 1.94 trillion (US$18.31 billion). During the early 21st century, Sanyo planned to continue to focus on multimedia and clean energy. The company had identified three areas that it felt had great potential for growth: products related to a home-based information society (such as'smart' appliances); products related to healthcare, food hygiene control, and an aging society; and environmentally friendly products (such as rechargeable batteries for hybrid vehicles). Sanyo was placing itself on the cutting edge of several potentially explosive areas of 21st-century growth, setting the stage for an exciting if somewhat an uncertain future.

GROWTH OVER TIME

1947: Several operations of Matsushita Electric are turned over to Toshio Iue, who forms Sanyo Electric Works. 1950: Company is incorporated as SANYO Electric Company, Ltd. 1952: Production of radios begins. 1954: Company goes public. 1955: Production of televisions begins. 1959: An affiliate called Tokyo Sanyo Electric is created. 1961: First overseas factory is established in Hong Kong. 1962: The Cadnica rechargeable battery is introduced. 1973: Sanyo begins working with U.S. firm Emerson Electric on reviving Fisher Corporation. 1977: Sanyo takes full control of Fisher. 1986: Sanyo Electric and Tokyo Sanyo merge. 1987: Sanyo's U.S. affiliate merges with Fisher to form Sanyo Fisher (U.S.A.) Corporation. 1988: Sanyo North America Corporation is created as Sanyo's U.S. headquarters. 1990: Nickel-metal hydride batteries are introduced; company develops CFC-free absorptiontype chiller/heaters and refrigeration systems. 1992: Company introduces a solar air conditioner. 1994: Lithium ion rechargeable batteries are marketed for the first time. 1995: Company's first digital still camera is introduced. 1999: Major reorganization rearranges operations into five newly created 'truly independent' companies

SWOT ANALYSIS
STRENGTHS:
1. Sanyos World First: Sanyo was the first company in many areas. In 1952 it launched plastic radios in Japan. The year 1975 witnessed the production of manganese-dioxide lithium batteries. Worlds first amorphous silicon solar battery Amaron was launched in 1979. Sanyos R&D team were developing many environmentally friendly product which could have high commercial value when launched 2. Strong Research and Development : Sanyo had a strong R & D team that meticulously focused on building environment friendly products. It spent close in US$ 1Billion on R&D.

3. Diverse product ranges: Sanyo prided itself as being the manufacturer of a wide range of products. The diversification ranged from radio, Tv, washing machines, air conditioners, LCD to energy solutions. 4. A Cost Leader: Sanyo strived to cut down the cost of production to gain cost leadership. It entered into Joint Venture with companies like Samsung and Seiko in order to cut down costs. 5. Good market coverage: As of 2002, Sanyo had 30% market share in digital cameras. It manufactured 35% of all optical scanners used in DVDs. 50% of rechargeable batteries for notebook PCs and mobile phones were by Sanyo.

WEAKNESS:
1. Incompetent: In mid 1990 Sanyos profits began to fall because of its failure to compete effectively in major business areas and it struggled to manage a varied business. 2. Failed to make a name for itself: Although Sanyo had a 30% of global market share in digital cameras but it sold only 5% of its output under the Sanyo brand. 3. Management: Sanyo struggled to strengthen its global management so as to efficiently coordinate its operations. The accounting system followed by the company also had become outdated. 4. Area of Focus: The focus of Sanyo shifted from profitability to market share. 5. Product Differentiation: Sanyo faced difficulty in leaving an impact due to lack of differentiating elements in its products like digital cameras, mobile phones and home appliances which resulted in heavy losses.

6. Intense Competition: Sanyo was facing intense competition from the competitors like LG and Samsung. They were eating up its market share in several mature and emerging markets. This worsened the financial position of the company. 7. Marketing Strategy: To manage the tumbling financial resources Sanyo had to limit its marketing expenses. This resulted in limited number of TV commercials aired in Tokyo. It planned to rely on word of mouth and publicity generated by launch and sales of its new environmental friendly products.

OPPORTUNITY:
1. Various organisations like the UN and others across the globe were focusing on environmental protection and sustainable development. This can be easily leveraged by Sanyo due to its experience in manufacturing such products. 2. Sanyo has an image of being an environment friendly company. 3. Sanyo relies more on renewable energy sources like Solar power rather than on exhaustive resources like Coal, petroleum etc. 4. Growing Demand and importance of alternative fuels. 5. To widen product range 6. Being environment friendly gives Sanyo the competitive edge 7. Sanyo had developed products which could be used for treatment of water and products which could prevent airborne diseases these products could have high demand in countries facing air quality problem like China, Indonesia and Vietnam.

THREAT:
1. Reduced Profit Margin: The consumer electronic industry had become commoditized, the prices of the products were falling rapidly and at the same time the cost of production was also increasing. 2. Dilution of Ownership: Sanyo had to sell preferred stock to Banks in order to finance its restructuring plan which led to dilution of ownership and less control in the hands of Nonaka. 3. Competition Sanyo faced intense competition from LG and Samsung. They were eating up its market share in several mature and emerging markets

CORPORATE LEVEL STRATEGY:

Mission:
To promote a harmonious balance between technology and the environment through all its future products.

Vision:
Think GAIA vision recognized to rebuild and establish Sanyo as a leading supplier of environmentally-friendly products pertaining to its core technologies of water air purification, energy conservation, alternative power sources, and production of high-efficiency HVAC equipment. Following are the corporate level strategy which were followed by the Sanyo Ltd. 1) The Sanyo evolution project comprised of 3 components Business Portfolio Reforms, Corporate Evolution Plan, and Financial Evolution Plan.Through these, Sanyo tried revamping and evaluating its business portfolio by prioritizing its R&D efforts, reducing the number of projects, increasing focus on areas of greater strategic interests, centralized headquarters system, etc. 2) They transformed corporate culture, organisational structure and management process in order to reinforce corporate identity and create a strong centralize global head quarter to improve co-ordination among the management of the companies business unit across the world. 3) They made Three years plan by changing from a company that emphasised sales growth into one that focussed on business values and profitability. They include: Business Selection and Focus Improvement of profitability Redemptions of Debts. Improvements in operating profit margins. 4) Think GAIA was introduced, which was intended to be a holistic way of steering Sanyo into a path of sustainable growth and prosperity. 5) Diversification into various sectors also played a role. 6) Various acquisitions and joint ventures gave Sanyo the edge over its competitors.

BUSINESS LEVEL STRATEGY:

Sanyo was a highly diversified company with a wide range of different products. The new initiatives were expected to strengthen the ongoing efforts and also the company to differentiate itself in the crowed market. The strategy was not to fight with other company by cutting prices for bit more volume but to be technology-wise a differentiator. Based on the Business Portfolio Reforms Sanyo reorganized its business. It brought out a Medium Term Management Plan with the reforms that had to be carried out. The plan called for dividing Sanyos business into core business and business needing structural reforms. Core business such as Power Solutions, HVAC products & Commercial Equipment and Personal Mobile Devices were the areas Sanyos had an edge over its competitors and these were to receive increased investments and managerial resources whereas semiconductors, AV equipment, home appliances and financial services business were those areas that required structural reforms. Sanyo cut the number of research projects in half and regrouped its R&D staffers into three groups. These groups were: Blue Planet Team, Genesis III Team, Harmonious Society Team The Business Portfolio Reforms helped the company to allocate more resources to the projects and thereby speed up the time to market. A high range of different products has been produced after these reforms, these were: 2005: Eneloop Battery. It was the biggest hit in the market, and efficient and the costeffective alternative to traditional batteries 2006: Car Navigation System. Information on eco-driving helping drivers reduces CO2 Emission. 2006: Joint development agreement with Volkswagen AG, Ford and Honda to capture half of the worldwide market for hybrid batteries. 2006: Aqua. A washing machine that used ozone technology thus saving water. 2006: Disinfectant Element system and Disinfectant Electrolyzed Mist system was capable of suppressing the airborne avian influenza virus to an extent of 99.5%. 2006: Joint venture with Quanta Computers to develop, manufacture and sell flat screen TVs. Working with Quanta which has a panel-making units, cost has been reduced drastically and competitiveness can be strengthened. Sanyos production, marketing, research and development strategy differed with each of their different product lines. On some product lines, they were lost-cost and efficient product makers and on other product lines, they were a differentiator.

Recommendations:
Core Competency- Sanyo should concentrate more on their core competencies that were not doing well because other businesses generating profits were not enough to cover losses incurred from the major business. Identify the opportunity- When a company is running in loss, then they should concentrate more on the profit generating areas. For example- The demand for Eneloop batteries was so much that they were unable to meet it. Hence they were not able to capitalize on the opportunity. Dis-investment- If managing the business is becoming difficult then the company should opt for dis investment. Reducing costs- They should adopt cost reduction strategies like improving the Supply chain, setting up businesses in the SEZs etc. New technologies for promotion and advertising should be adopted. Management- They should bring in more competent managers into the management team who can bring in valuable insight as to how to steer out of the current situation. They should think more about conserving the environment and also take adequate steps that will ensure quick recovery from any losses due to natural calamities. This will help to steer clear of the earthquake destruction of 2004. B2C sales should be emphasized.

CASE 2:

CORPORATION
OMRON: SENSING SOCIETY