Please read below case study as mentioned below and answer following question in
ID: 465691 • Letter: P
Question
Please read below case study as mentioned below and answer following question in point form and remember to include your list of references.
Question11i) Do Market analysis of "Sony vs Ipod" case study.
Case Study: SONY VS iPOD, Barriers to Innovation
A vivid example of the silo problem, the failure of autonomous product and functional silos to cooperate, comes from Sony's incredible miss of the iPod. The iPod was a natural for Sony; it was theirs to lose. Sony has long been the leader in portable music from the Walkman to portable CD players to the mini-disc. And Sony, unlike Apple, had a big presence in music. More generally, Sony has excelled at transformational innovation from the Trinitron in 1968 to the BetaMax in 1975 to the camcorder in 1985 to the VAIO in 1997 to the Blu-ray Discs of 2003. Further, it has been the miniaturization company ever since the “transistor radios” of the 1950s, and no firm has been better at creating new categories than Sony.
There are several reasons why Sony missed the iPod opening. Their hope that the analogue world, where Sony had a significant investment and competitive edge, would hang on inhibited their commitment to digital. This despite the pronouncement by Nobuyuki Idei, the new Sony CEO in 1995, that Sony would be the company of Digital Dream Kids—aspirational, having fun, exciting products, and being part of the digital revolution. Another reason was their long-term tendency to avoid industry standards in favor of creating products they could own. This policy was risky—sometimes it did not work, as when Betamax lost the battle for VCR standard. But sometimes Sony won—Blu-ray did become the DVD standard. The main reason Sony missed out on the iPod was that silos paralyzed it at exactly the wrong time. It was not from lack of innovation.
At the huge Las Vegas Comdex trade show in the fall of 1999, Sony introduced two digital music players two years before Apple brought the iPod to the market. One, developed by the Sony Personal Audio Company, was the Memory Stick Walkman, which enabled users to store music files in Sony's memory stick, a device that resembled a large pack of gum. The other, developed by the VAIO Company, was the VAIO Music Clip, which also stored music in memory and resembled a stubby fountain pen. Both were flawed but provided the bases for a new product category. Each had 64 megabytes of memory, which stored only 20 or so songs, and was priced too high for the general market. Both also featured a Sony proprietary compression scheme called ATRAC3. Software to convert MP3 files to the Sony standard was not convenient and, worse, resulted in slow transfers. There is little question that, over time, Sony had the potential to improve the products to address these limitations. However, the fact that Sony promoted two different devices created by two fiercely independent silos confused the market as well as the Sony organization.
There was a third silo involved—Sony Music, an entity that owes its origin to the purchase of CBS records in 1988. Along with Sony Pictures, it is part of a Sony strategy to bring content to digital convergence, the effort to tie together all the digital components delivering entertainment. Firms representing computers, cable networks, telephone networks, electronic games, consumer electronics, and computers were all vying to be the captain of the digital home. Sony believed that having content would be an advantage in that race.
Sony Music in 1999 turned out to be a handicap instead of an advantage for the Sony digital music players because it was preoccupied with avoiding piracy and freeloading. The success of the new digital products was not a priority. As a result, it inhibited the products' ability to provide access to a broad array of music and led to the use of the cumbersome uploading process, which turned out to be a burden.
Sony's three silos thwarted the efforts by Sony to create a new category and preempt Apple's iPod, which sold around 200 million units in its first nine years. It is likely that a product that combined the energies, resources, and customer insights of the three silos and was improved over time would have been successful and that the iPod opening would not have materialized.
Sony has begun the process of changing the silo culture so that cooperation and communication replaces competition and isolation and Sony can return to its innovation heritage, avoid other iPod misses, and liberate synergy potential. Ironically, Mr. Idei in 1995 also called on all employees to “collaborate with team spirit.” The task is not easy, however, because silo issues are embedded in entrenched organizational structures and cultures. These are difficult but not impossible obstacles to overcome.
Explanation / Answer
Sony missed the innovation bandwagon in the 2000s due to the weight of its silos which prevented the company to move with the agility and speed that is required from a new age electronics company. The silo culture in the company prevented Sony's management system to operate and interact with any other systems. In fact the silo culture even prevented interaction of different sub units of Sony.
The main reason why Sony was not able to capitalize on its strength in the music industry and take it to the next level was due to the simple fact that its different divisions (of the company as a whole) had different priorities and there was little awareness about the priorities of other departments. This prevented Sony from functioning as a coherent single company. An example in the case is when two of its different divisions - Sony Personal Audio Company and the Vaio company - introduced the same type of digital music players. This created confusion not only in the market but also within Sony.
The silo culture prevented Sony to create synergies by synchronizing the work of different departments and business divisions. This resulted in the company being not able to function as a strong and united organization. The efforts put in by different departments could not be processed in a collective manner to deliver a common good for Sony.
The various divisions of Sony are consumer electronics, mobile, game, movie, music and network services. The company has already stopped making its Vaio brand of laptops.
In the mobile (telephone) market Sony lags behind big players and is facing stiff competition from emergent brands as well. The company's Xperia brand struggles to stand out in the mid range segment of the mobile market. The table below shows Sony's share in the global smart phone market:
In terms of amrket share of global android phones only, in 2014, Sony had a market share of around 5%, compard to Samsung's 63%, HTC's 7% and LG's 6%.
The table below shows the growth of Sony's music division:
Sony BMG had a market share of around 26% last year, compared to Universal group's 32% and Warner Music group's 15%.
Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Q1 2015 Q2 2015 Sony's market share (in %) 3.1 3.2 3.1 3.1 3.1 2.3 2.1Related Questions
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