362 Part 3: Strategic Actions: Strategy Implementation
Sony Corporation’s New Organizational Structure: Greater Financial
Accountability and Focused Allocations of Resources
Launched in 1946 in Japan, Sony gained a reputation for
producing innovative products that were sold throughout
the world. In fact, the firm’s success was instrumental to
Japan’s development as a powerful exporter during the
1960s, 1970s, and 1980s. Sony was sometimes “first to
market” with an innovative product, while sometimes
being able to rapidly enhance a product’s capabilities
by innovating. Introduced in 1979, the Sony Walkman,
which was a personal stereo tape deck, is an example of a
“first to market” product from Sony. The transistor radio is a
product that Sony innovated in a way that made the
product, which was initially developed through a joint
venture between Regency Electronics and Texas
Instruments, commercially viable. Regardless of the type,
innovation has been critical to how Sony competes in
multiple product areas.
Realizing the value that could be gained by sharing
resources, capabilities, and core competencies across
types of businesses, Sony’s success for many decades was a
product of its commitment to “convergence,” which the firm
operationalized by linking its activities across businesses
such as film, music, and digital electronics. In essence,
Sony was successful for many years as a result of being able
to effectively implement the related constrained strategy.
But as we mentioned earlier when discussing the related
constrained strategy and the structure needed to imple-
ment it, an inability to efficiently process information and
coordinate an array of integrated activities between units
are problems that may surface when using the cooperative
form of the multidivisional structure. This appears to be the
case for Sony. In response to performance problems that
have plagued the firm for over a decade, Sony’s CEO recently
announced significant changes to the company’s organi-
zational structure. Put into place in October 2015, these
structural changes are thought to be the foundation for
improvements to Sony’s ability to create value for customers
and enhance wealth for shareholders.
At the core of the structural changes are efforts to
group the firm’s businesses in ways that allow Sony’s
upper-level leaders to more effectively allocate financial
capital. A key objective is to allocate capital to the busi-
nesses with the strongest potential not just to grow, but to
grow profitably.
Sony is now structured into three core sectors or business
units—growth drivers, stable profit generators, and volatility
management. In essence, the new structure is an example of
the SBU form of the multidivisional structure. According to
the CEO, these units have been formed to “emphasize prof-
itability over volume, secure business unit autonomy with a
focus on shareholder value, and provide a clearer definition
of each business unit’s position within Sony’s overall busi-
ness.” Devices, Game & Network Services, Pictures, and Music
comprise the growth drivers unit. Viewed as potentially prof-
itable areas of growth, Sony intends to invest aggressively to
support these businesses. Imaging Products & Solutions and
Video and Sound are the business areas forming the stable
profit generators unit. These businesses are expected to yield
steady profits and positive cash flows. Finally, TV and Mobile
Communications formed the volatility management unit.
Operating in markets with high volatility and challenging
competitive conditions, the intention with this unit is to find
ways to generate stable profits. For all three units, Return on
Equity (ROE) is the performance criterion being used to
judge the success of each business that is included in one
of the units. Each business is expected to achieve an annual
ROE of 10 percent.Three goals are being sought by using the SBU form of the
multidivisional structure. First, Sony’s CEO wants the organiza-
tional structure to be one that clearly promotes accountability
and responsibility for each unit. The second goal “is to fosterBarone Firenze/Shutterstock.com
Pictured here is Sony’s PS Vita as it was introduced during
a shown in San Francisco, CA.Strategic Focus