Sony Ericsson is a joint venture of Sony and Ericsson which take place in October 1st, 2001. They starts work together because they wants to become the communication entertainment brand, by inspiring people to do more than just communicate, and enabling everyone to create and participate in entertainment experiences. Experiences that blur the lines between communication and entertainment. Sony Ericsson’s main head office is in London.
In this report we cover topics like main objective behind this joint venture, main strategies behind this joint venture, what motivates them to make this joint venture, why this joint venture was not as much successful, what problems they faced in the start of this joint venture and how they could make this successful by considering strategies which we describe.
Sony Ericsson got in to alliance on 1st October 2001 and the main objective of this alliance was to be the world’s leading position in mobile phones.
In 1946 Sony Corporation were founded by Masaru Ibuka and Akio Morita. G-TYPE recorder (Tape player or recorder) was the first hardware device created by Ibuka and Morita in 1950. From Western Electric they earned licensing rights to transistor. Sony released first pocket transistor radio in 1957. There engineer’s completed cathode-ray tube in October 15, 1967 that helps them in video innovation. They introduced Trinitron television for picture quality and for the penetration in the global market they design this in 1968.
Its Japanese multinational company, and it’s one of the leading manufacturers of electronics, products for the consumer and professional markets. Basically it is a leading manufacturer of audio, video, game, communications and information technology products for the consumer and professional markets. Sony is uniquely positioned to be a leading personal broadband entertainment company in the world.
Ericsson was founded in 1876 by Lars Magnus. He started making phones with the potential of improvements in technology. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership, like they are providing innovative solutions in more than 140 countries. Ericsson is the only company in the world offering systems for all major mobile communication standards, actively promoting standardization and open systems.
REASONS FOR JOINT VENTURE
The main reason for the venture was to integrate Sony’s consumer electronics expertise with Ericsson’s technological knowledge in the communications sector. Ericsson was the buying chips from single source that was Philips. A fire erupted causing a huge loose at Philips, due to which Philips was unable to provide the chips to Ericsson. Ericsson faced a huge loss due to this incident. There were rumors that Ericsson might sale its handset division but it found a way to join hands with Sony which could help it to recover. The Vision of the Company is:
“To become the communication entertainment brand, by inspiring people to do more than just communicate, and enabling everyone to create and participate in entertainment experiences. Experiences that blur the lines between communication and entertainment.”
* They have developed innovative phones to bridge out communication not just locally but also worldwide.
* They enhanced their phones into a multifunctional one that offers applications like Radio, Music player, Video player, Camera, Web browser, etc. to meet customers’ satisfaction.
* Inspiring people
* They inspire people by enabling other applications that people will enjoy * Create
* By these applications, people can create master pieces of their own. * Participate
* By creating from these applications, they participate with improving and enhancing entertainment by giving their feedbacks about the phones capabilities.
HISTORY OF SONY ERICSSON AS A COMPANY
Joint Venture of Sony Ericsson starts from October 1st, 2001. The basic ambition behind this joint venture is to provide their expertise for the establishment of Sony Ericsson products in the mobile phone manufacturing industry. Sony was the marginal player in the mobile phone market with the share of less than one percent, but Ericsson was at 3rd position and was successful in mobile phone manufacturing industry. Due to fire at the Philips factory who were the single source supplier of Ericsson, this incident creates a huge impact at the performance of Ericsson. Company couldn’t fulfill the dead lines of orders completion and due to this Ericsson’s market share fell down, because they were relining on only one supplier.
MOTIVATION BEHIND THIS JOINT VENTURE
Joint venture often taken place because of Transaction Cost Economics, because in this cost of sole ownership of an organization is greater than the joint ownership of an organization. This is also the main reason of this joint venture because Sony wanted some edge in mobile phone industry and Ericsson wanted to save its mobile phone manufacturing business.
Resource-based view is another factor that motivates Sony and Ericsson to make a joint venture. According to this point of view firm make alliance because of tangible and intangible valuable resources this creates a unique competitive edge in the industry that couldn’t be imitable by any other competitor; this could also help for the improvement of performance. Like Sony wanted technical knowhow of communication technology from Ericsson and Ericsson’s wanted new technology of Sony that will help them in the market competition, that’s why they start’s work together and make combination of both company technologies.
Another motivational factor is organizational learning or knowledge because this also motivates Sony and Ericsson for making this alliance. With the help of this company’s could easily acquire each other’s skills and capabilities that could also help organizations to make a new and innovative product with low cost that is also Sony Ericsson’s objective of alliance. Strategic Management is also the motivational factor of this alliance, which were used by both Sony and Ericsson companies. Both companies make this alliance because they wanted to make a competitive edge in the mobile phone manufacturing industry and also to maximize profits. That’s why they design symmetrical strategy for the attainment of final goal.
Sony were interested in this joint venture because they wanted to entre in mobile phone manufacturing industry and Ericsson entered in this joint venture because they were world’s number three mobile phone maker and they were facing huge loss due to fire at Philips plant who was the sole supplier of Ericsson, so they wanted to become a successful in mobile phone manufacturing industry. Sony knows that Ericsson have access knowledge about technology in communication sector and this could help them in entrance of this industry.
Sony Ericsson after making this joint venture stopped making their separate mobile products and starts working together. Sony form alliance with LM Ericsson. Before formal announcement of this joint venture, many news papers published that this joint venture will cover the wide range of areas such as development, manufacturing and marketing of mobile phones. They sets target of expansion of Sony Ericsson products to the major markets of Europe, Japan, other parts of Asia and United States.
The main objective of this joint venture is “to develop an alliance that would allow Ericsson to reduce spending on the costly development of next generation mobile phones at a time when many European telecom companies see their inventories piling up as the world’s cell phone market is growing much more slowly.”
Sony Ericsson’s strategy was to release new models capable of digital photography as well as other multimedia capabilities such as downloading and viewing video clips and personal information management capabilities. When they start as a Sony Ericsson company they released many models which were new and innovative mobiles, main features of those mobiles were digital photography, downloading facilities etc.
There key innovations are cheap camera phones, cross platform technology, operating system experimentation and there milestone handsets are Sony Ericsson T610 in 2003, Sony Ericsson P900 in 2003, Sony Ericsson W800i in 2005, Sony Ericsson K800i Cyber-shot in 2007, Sony Ericsson W910i in 2007.
Up till 2008 Sony Ericsson’s numbers of employees are approximately 9,400 worldwide and their employees on contract bases are 2,500. Since October 2009, president of company is Bert Nordberg and CEO and President is Sir Howard Stringer. Chairman of the board is Sony Corporation.
PROBLEMS THE JOINT VENTURE HAS ENCOUNTERED SINCE THE FORMATION The joint venture faces losses in the start, their targeted date of making profit were shifted from 2002 to 2003. They couldn’t fight the main competitors of mobile phone manufacturing industry and came at fifth position in the market.
The main problem behind this loss was there misrepresentation of their product in the market. It’s necessary that companies go for innovations and provide satisfied product to customers but it’s also important that we should also know that customers always want something new and different. So to provide them new and different mobiles company should always go for best Research and Development tools and techniques. Because if your R & D department is not up-to-date, it means that you are not providing products to customers which they really want.
The second main problem which they were facing that they could not catered different markets effectively, because after making joint venture they starts working without get to know that what really customer needs and wants are. So due to this lack of information their products starts facing losses and then they had to remove their product line from the markets. Like in 2002 they stop manufacturing Code Division Multiple Access (CDMA) mobile phones for the market of United States and starts focusing on GSM as a dominant technology, due to this change in US and Germany number of jobs cut in research and development department.
The third problem they were facing was they invest a lot without get to know that what market situations now-a-days are. Like in 2003 mobile phone prices starts declining but still Sony Ericsson were making expensive mobiles, due to this they couldn’t make as much profits as they were expected.
They are facing problems because they are focusing at cost-cutting programs and job losses. In June 2008, they were having 12,000 employees and after launched this cost-cutting program it had slashed its global workforce by around 5,000 people. R & D is an important department for any organization and it play an important role for mobile phone manufacturing companies, but Sony Ericsson take this as a cost and closed R & D departments which were working globally like Chadwick House, Birchwood (Warrington) in UK; Miami, Seattle, San Diego and RTP (Raleigh, NC) in the USA; the Chennai Unit (Tamil Nadu) in India; Hassleholm and Kista in Sweden and operations in the Netherland, UIQ centers in London and Budapest were also closed. Due to this change they couldn’t manufacture innovative products for customers and this is the main reason behind the failure of this joint venture.
WHY JOINT VENTURE IS NOT SUCCESSFUL?
Joint ventures often failed because company not build customer base products, due to which customers switched to other competitive products that provides them more reliable and innovative products. This is also the main reason of failure of joint venture of Sony Ericsson. They were providing innovative products but marketing strategy was not as much effective that they could attract customers. They were not providing the advanced versions of mobiles as much early as other competitors of mobile phone manufacturing were providing. There R & D was slow as compared to other mobile phone manufacturers.
They were not focusing at proactive approach, they were also not productive reactive. So due to this they were facing problems.
Joint venture always successful if company set a target because it shows that in which direction they are moving. Sony Ericsson also faces the problem of not meeting the set date profit, due to which they face loss. So it’s necessary that target should already be explained and company works together for the achievement of target.
This joint venture is also not as much successful because Sony wants results as early as possible and Ericsson’s were not making profits as per expectations, so due to this they starts cut number of jobs and also remove Research and Development departments which were working globally, due to this they couldn’t make innovative products according to customer needs. And when any technical business don’t have R & D department that helps organization in the development then how they could move in the industry successfully.
Sony Ericsson’ s joint venture was not as much successful because they were not working for the attainment of goals which were designed after the joint venture, both were worried for their individual goals like Sony was worried because they wanted market share in mobile phone manufacturing industry and Ericsson was worried because they wanted their industry reputation back. So that’s why they were facing problems.
STRATEGIES USED TO ADDRESS THE JOINT VENTURE PROBLEMS
According to our analysis Sony Ericsson must follow these strategies that will help them to gain a long term market share and it will also help them to make a successful joint venture in future: First step they should have to take place that they conduct the depth analysis of different markets according to different countries, that will help them to get to know that what particular region related customers are expected from them and what they could provide them according to customer expectations.
Sony Ericsson must make a connection to customers that will help them to get market share in the mobile phone manufacturing industry. They should have to conduct regular meetings to their customers, with the help of this they could get to know that what their customers really think about their business, what type of products they really want and how they could provide them products according to their perceptions that satisfies them.
By listening process they could find that what potential needs are of customers and how they could provide them effective solutions. By using feedback technique they could also remain in connection to their potential customers, this could be more effective if it could be done periodically.
There must be a coordination among all business units this will help them to bring a product that will satisfy needs of customers and that will be unique.
They must have a strong marketing campaign that will create a positive impact on overall business, because good representation of product attracts customer.
They should also have to use social marketing outlets like Facebook, Google etc for the promotion of their products; this will enhance its public exposure.