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fall 2013

tomorrow’s leaders today the top 5 graduates in the industry

IN THIS ISSUE

the video format war: “betamax vs VHS” to CD or not to CD? socio-political legitimacy explained

who are these faces?


SONY company magazine

The Video Format War: “Betamax VS VHS:

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To CD or not to CD? A joint venture with Philips

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Cognitive and Socio-political legitimacy explained

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Feature: Top 5 graduates in today’s industry

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Sony CSR: Introducing Malawi Folktales Project

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PSP Sony Company Magazine, Fall 2013

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The Video Format War: “Betamax VS VHS” Based on the Resource Dependence Theory, identify the relevant types of interdependencies in the ‘Video Format War’. Did Sony adequately anticipate and manage them?

Different organisations are affected by each other’s actions and must strategically manage their relations to succeed, this creates what are described as interdependencies (Pfeffer & Nowak, 1976). A symbiotic interdependence occurs between unlike organisations (Hawley, 1950) and competitive interdependence between organisations in the same industry. In the early market for video cassette recorders (VCRs), manufacturers were dependant on film and television producers for the rights to content. Sony did not adequately anticipate its dependence on the motion picture industry and due to heavy resistance they experienced litigations and a lack of content (Quintane and Mol, 2007). In contrast, JVC’s strategy to broker a deal with Hollywood granted them access to sufficient content and supported their success in the VCR industry. Their strategy fits Selznick’s (1949) definition of ‘cooptation’. In this strategy, outsiders are given some form of control or power due to their status, specialist knowledge or potential ability to threaten organisational commitments or goals (Scott & Marshall, 2009). JVC and the other VCR producers were dependent on film producers who could threaten their sales.

Kale & Singh (2009) define a strategic alliance as a “purposive relationship between two or more independent firms that involves the exchange, sharing, or co-development of resources or capabilities to achieve mutually relevant benefits.” (p. 46). Philips, Grundig, ITT and Bang & Olufson’s attempted to reap these benefits with their collaboration, although the lack of buy-in from content creators and inferior content availability made them an inadequate competitor to JVC in the ‘Video Format War’. In this ‘war’, there was a contingency that money and resources would be wasted by organisations which fail to become the standard. Ranganathan and Lertpittayapoom (2002) identified risk and uncertainty reduction as a motive for developing a strategic alliance. Sony may have experienced more favourable outcomes if they entered into a strategic alliance with JVC in the early stages of the war. JVC may have been motivated to undertake this alliance in order to reduce uncertainty and threatening competition from Sony

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to cd or not to cd? a joint venture with Philips Based on the Resource Dependence Theory, identify the relevant types of interdependencies in the creation of the Compact Disc. Did Sony adequately anticipate and manage them?

As the permanent and unfixable downsides of the then industry standard vinyl came to be known, Sony and Philips saw an opportunity to develop a completely new product to record sound. According to Pfeiffer & Salancik (1976), strategic alliances are implemented to solidify the movement of resources and decrease the environmental risk faced by a company. On their own the resources of Sony and Philips were incapable of creating such a product and subsequently formed a strategic alliance (Quintane and Mol, 2007). Each respective company had their own strengths. Philips had made further developments in areas such as EFM allowing for extended playing time and a higher resistance to damage (Quintane and Mol, 2007). Sony had made advancements in other areas such as CIRC which improved the overall precision of laser reading technology (Quintane and Mol, 2007). The Kale & Singh (2009) definition of a strategic alliance in the previous question highlights “mutually relevant benefits” for both parties to partake in the venture (p. 46). However Sony and Philips did not absolve themselves of risk by entering a strategic alliance. Research conducted by Vaidya (2011) shows such alliances are “unstable” and “prone to failure” (p. 90). This is due to a focus solely on the expected rewards and not taking into consideration the

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associated costs of forming and maintaining the venture (Vaidya, 2011). This was not the case for Sony and Philips who successfully combined their technological expertise and created the compact disc which eventually become the industry standard (Quintane and Mol, 2007). The “postformation phase� hypothesised by Schreiner, Kale & Corsten (2009) is the final integral aspect of a strategic alliance which dictates its ongoing goal to provide a sustainable value proposition into the future. The Sony Philips alliance proved this was their focus as the alliance brought in millions of dollars over a number of years. In the ways analysed it is clear Sony adequately anticipated and managed the associated risks and costs of their strategic alliance with Philips in order to make it successful.

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Cognitive and Socio-Political legitimacy - explained. Explain the importance of cognitive and socio-political legitimacy for new products in relation to the Resource Dependence Theory. Explain for both cases – the video format war and the CD - whether or not Sony Sony is expected to have minimal reliance on other suppli-

At the between population level, Sony had to face competi-

ers of scarce resources to produce new technology in a dy-

tion from both JVC and Philips, which has produced Video

namic environment in relation to the Resource Dependence

2000. VHS format was however considered as the industry

Theory. Thus it is crucial for Sony to develop legitimacy

standard rather than Betamax and Video 2000.

with resources using cognitive strategies where perception towards an organisation is understood and socio-political

Within-Population and Community Level

strategies where acceptance from relevant stakeholders is

The strategic alliance between Sony and Philips to create CD

received. The link between resource dependence theory

is an indication of symbiotic interdependency where Sony

and organizational legitimacy can be analysed through four

had to depend on Philips. This is a form of formal collabora-

different levels of legitimacy where Sony has effectively

tion at the within population level.

dealt with garnering legitimacy for CD but has failed to do

In general, different types of technology being invented

so for Betamax.

brings convenience towards the general public. Sony will have to collaborate with different industries to achieve cer-

Organisational and Between Population Level

tain outcomes, specifically in generating resources for the

The innovation of VCR by Sony was considered as a first

public which is integral for the electrical industry.

mover advantage, but the creation of VHS by JVC is a competitive interdependency. This has created uncertainties for Sony as it is experiencing tough competition with an enhanced version of VCR.

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Case Three Test