Sony has had great historical success in implementing its strategy worldwide in consumer electronics. Its Sony Walkman and Sony PlayStation products have been exemplary in this regard. Recently, however, Sony has experienced difficulty in pursuing its competitive strategy in the online music business. In part, its problems have been due to the same organizational structure that helped to create its past successes. Sony’s decentralized product divisions have fostered innovation through an entrepreneurial spirit within its separate divisions. The organizational structure encourages competition, so that, for example, engineers in separate divisions are encouraged to outdo each other. This approach created “monster hits” that turned Sony into one of the most successful global brands in consumer products over the past few decades. However, Sony’s reputation as an innovator has suffered recently because it has been beaten by the competition with products such as iPod and TiVo digital video recorders. These products require the integration of hardware, software, and online services—but Sony’s structure has worked against it, causing the divisions to be competitive at product efforts that require more coordination. Sony has used an SBU multidivisional structure, which allows strong decentralization to each product group or division. These groups compete for resources with each other but are highly autonomous business units focused on a particular set of related businesses. Using this structure has made it difficult to “communicate with everybody when you have that many silos.” This is exemplified by the Connect service, Sony’s attempt to revamp the Walkman line of products in competition with the iPod digital music players and iTunes online music distribution service by Apple Computer Company. To develop a competing product, the Connect service was created, which coordinates all the various Sony businesses. Sony’s U.S.music group, which was purchased from CBS Records in 1988, however, was concerned that it would lose power to control its copyrighted music through free music downloads that might be initiated through Connect service. To make matters worse, the PC and Walkman groups had each developed competing digital music players that they wished to promote. Theoretically, given Sony’s market presence and prowess in these separate areas, it could outcompete Apple iPod and iTunes.However, the Connect service required coordination with the PC and Walkman groups as well as with the music-business group, which was reluctant to participate. This significant coordination problem took center stage in 2005, ultimately causing significant product delays. As a result of this organizational debacle the then CEO, Nobuyuki Idei, was forced to retire and was replaced by Howard Stringer. Question: a. Do you think structure and strategy are in a reciprocal relationship? Why or why not? b. Discuss the current structure of Sony and its major weakness.
Sony has had great historical success in implementing its strategy worldwide in consumer electronics. Its Sony Walkman and Sony PlayStation products have been exemplary in this regard. Recently, however, Sony has experienced difficulty in pursuing its competitive strategy in the online music business. In part, its problems have been due to the same organizational structure that helped to create its past successes.
Sony’s decentralized product divisions have fostered innovation through an entrepreneurial spirit within its separate divisions. The organizational structure encourages competition, so that, for example, engineers in separate divisions are encouraged to outdo each other. This approach created “monster hits” that turned Sony into one of the most successful global brands in consumer products over the past few decades.
However, Sony’s reputation as an innovator has suffered recently because it has been beaten by the competition with products such as iPod and TiVo digital video recorders. These products require the integration of hardware, software, and online services—but Sony’s structure has worked against it, causing the divisions to be competitive at product efforts that require more coordination.
Sony has used an SBU multidivisional structure, which allows strong decentralization to each product group or division. These groups compete for resources with each other but are highly autonomous business units focused on a particular set of related businesses. Using this structure has made it difficult to “communicate with everybody when you have that many silos.” This is exemplified by the Connect service, Sony’s attempt to revamp the Walkman line of products in competition with the iPod digital music players and iTunes online music distribution service by Apple Computer Company.
To develop a competing product, the Connect service was created, which coordinates all the various Sony businesses. Sony’s U.S.music group, which was purchased from CBS Records in 1988, however, was concerned that it would lose power to control its copyrighted music through free music downloads that might be initiated through Connect service. To make matters worse, the PC and Walkman groups had each developed competing digital music players that they wished to promote. Theoretically, given Sony’s market presence and prowess in these separate areas, it could outcompete Apple iPod and iTunes.However, the Connect service required coordination with the PC and Walkman groups as well as with the music-business group, which was reluctant to participate.
This significant coordination problem took center stage in 2005, ultimately causing significant product delays. As a result of this organizational debacle the then CEO, Nobuyuki Idei, was forced to retire and was replaced by Howard Stringer.
Question:
a. Do you think structure and strategy are in a reciprocal relationship? Why or why not?
b. Discuss the current structure of Sony and its major weakness.
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