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Sony Case Study #4 Team PSP

Tutor: Gunes

Sony’s global expansion strategy Regarding to Sony’s Computer Entertainment Division, Sony Computer Entertainment Europe (SCEE) is pursuing an international strategy. International strategy supports that the core competences are being centralized at home and the rest of the creation functions are being decentralized to different regions (Jones, 2012, p. 252-253). SCEE’s organizational structure illustrates the point above. Within the organizational structure of SCEE, the main competences (i.e the major supporting functions including marketing, sales, public relation) are centralized at the headquarters in London (Mol & Quintane, 2007, p.3). On the other hand, the other functions such as software development, product development, finance and business development and technology development are decentralizing to different countries (Mol & Quintane, 2007, p.3). The evidence for this is the development of Eye toy. After Phil Harrison, the executive vice president of the product development discovered the prototype of the Eye toy. As the

marketing and sales are being centralized at the headquarters in Europe, European countries was the first regional area that had been advertised with the Eye toy. After that, the Eye toy had introduced to North American market and the Japan. It reveals the fact that, by centralizing the marketing and sales aspects, SCEE can make the decision to introduce the Eye toy in Europe prior to Japan. It violates the norm that Japan is the first test market for much of the Sony’s product (Mol & Quintane, 2007, p.4).

Moreover, the decentralization of non-core competences (i.e software development, product development etc.) to the national units can be showed in the product details in the official website for US PlayStation and AU PlayStation. There are many differences in the most majority of the play station games between these two countries. Power is given by the headquarters to the nation units to decide which type of games should be introduced to their targeted customers within their countries respectively. Logically, National units have a

more understanding to their customers within their regions than SCEE. Multidomestic strategy and global strategy are not suitable, since SCEE did not decide to put all value-creation activities downward to the countries units and it did not centralize all its functions to the low cost countries.

Four design challenges associated with Sony’s global expansion strategy

The international strategy used by Sony does have an influence on its decisions on the four design challenges. To start with, Sony Computer Entertainment Europe chooses a relatively high management hierarchy under the influence of the international strategy. As the SCEE organizational chart shows, the

geographic areas are reporting to Central Marketing via SCEE Territories and also reporting to other functions, for example, Business Development Group. In the meantime, international strategy suggests that core competences are centralized while other functions are decentralized (Jones,2007). Sony’s decision to this point of view is that the SCEE headquarter in London centralizes all major support functions such as marketing, sales and public relations (Mol & Quintane, 2007). What’s more, international strategy requires relatively high need for electronic integration and management networks. By locating headquarter outside Japan, SCEE is responsible for R&D, Marketing and distribution for the whole Europe market as well as all other territories using the PAL television format. This certain focus enables people to specialize and be familiar with its corresponding market they have been working on and increase productivity. When it comes to the centralization of authority, the creation of Eye Toy can explain the use of international strategy. Eye Toy was firstly invented by an engineer working in SCE US R&D laboratory and firstly introduced to the European market instead of Japan (Mol & Quintane,

2007). The great sales number which is over 10 times of estimate sales shows that the success of both decentralization of production (lower production cost) and centralization of R&D and market functions (increased innovation for new products). Last but not least, Sony shows very limited standardization, in other words, mutual adjustment is more consistent with the international strategy. The whole Eye Toy development including the first show of prototype at the internal innovation conference and the attempt of introducing Eye Toy firstly into European market shows the ways employees work in Sony is beyond the standardized rules. Thus international strategy plays an overall important and positive role on Sony’s decision towards

these four dimensions.

Sony’s vision of ‘global localization’ A company’s strategy refers to the specific decisions and actions that manager’s take in order to use core competences to achieve a competitive advantage and outperform competitors (Jones, 2010). Attempts to improve Sony’s international competitive position occurred when Morita visualised change in the company’s global expansion policy and introduced the concept of global localization in 1988. This involved attaining sustained competitive advantage through the decentralisation of authority, adaptation of product lines, research and development (R&D) and regional working arrangements while maintaining a consistent global strategy (Mol & Quintane, 2007). This policy aimed to strengthen Sony’s position as a global leader within the electronics industry and reflected on global expansion on a transnational scale, as cost lowering efforts were made by relocating production to low-cost countries, not to mention the diversification their product portfolio by differentiating

themselves globally (Mol & Quintane, 2007). In a general sense, transnational strategies involve either centralising or decentralising authority dependent on which is best suited to achieving the company’s objectives (Jones, 2010), and in this case the strategy facilitated the achievement of this sustained competitive advantage with a combination of both structures. The multi-domestic strategy handed regional headquarters the ability to control all activities necessary to do business in the industry, and by better catering to each region’s needs, Sony could anticipate increased customer loyalty and subsequent long-term profitability (Heskett et al. 2008). Each region also controlled its own R&D, increasing opportunities for each region (and thus, Sony) to diversify its product portfolio. This decentralization also helped maintain Sony’s position as an innovative organisation and essentially improved regional responsiveness to its environment, critical in retaining a leader status in the volatile electronics industry. Management also outsourced production so tasks could be performed at lower costs, with a global product group structure

(Jones, 2010) implemented that distributed products globally (Elberse & Moon, 2007). This meant that Sony could still achieve economies of scale in production, a core competency for regions (Roth 1992). Moreover Sony maintained centralization of operations in London, functions such as marketing, sales not to mention brand management and public relations (Elberse & Moon, 2007), allowing Sony to be presented as an unified entity to the world. Human resources were also centralized to ensure a high level of rapport with employees another of the company’s core competencies (Quintaine & Mol 2007). Essentially Morita’s vision of global localization well utilised the overarching transnational strategy’s mixture of centralization and decentralization. As by drawing upon advantages presented by both strategies, management held control whilst allowing for regional autonomy, creating value for the organization’s stakeholders, with products (Sony Eye Toy) reflecting the underlying characteristics of a global production base with an effective regional group (Mol & Quintane, 2007).

References Elberse, A., & Moon, Y. (2007). Sony EyeToy (Case 9-505-024). Cambridge, MA: Hravard Business School Press. Heskett, J., Sasser, W. and Schlesinger, L. (1997). The service profit chain. 1st ed. New York: Free Press. Jones, G. (2010). Organizational Theory, Design and Change (2nd ed.). New Jersey, USA: Pearson Education Inc. Mol, J., & Quintane, E., (2007). More Room to Play: ‘Globalisation Localisation’ and Sony’s Eye Toy. Parkville, Victoria, Australia: The University of Melbourne Roth, K., Schweiger, D.M., & Morrison, A.J. (1991). Global Strategy Implementation at the Business Unit Level: Operational Capabilities and Administrative Mechanisms. Journal of International Business Studies, Vol. 22, No3. pp. 369-402.

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