The essay aims at providing an insight into strategy and international management through critical evaluation of a multinational company and its entry into the international economy. Learning of strategy is important since it helps in determining the future direction of the business and help in understanding the position of the company in the market.
On the hand, learning international management helps in providing an insight into global business and economic climate. Besides, it also helps a study in developing plenty of managerial and leadership skills. Strategy represents an action plan designed for achieving an overall or long-term aim. International management involves the understanding of international economics, leading to the change in the international corporations thereby creating global business.
The company chosen here is Sony and it adopts strategies in entering the Indian market (sony.co.jp 2018). Sony represents a Japanese multinational organization headquartered in Minato, Tokyo. The company was found by a defense contractor named Marasu Ibuka and an ex naval lieutenant Akio Morita. Sony raised itself in the home market through local outsourcing. The firm has a diversified business that includes the professional and consumer electronics, entertainment, gaming and the financial services.
It is not only one of the largest music entertainment businesses but also owns the largest video game console and publishing business (sony.jp 2018). Besides, it is also one of the key manufacturers of electronic products for professional and consumer market and a key player in the television and film industry. The company holds the ninety-seventh rank in the list of Fortune Global 500 as per the records of 2018.
Discussion:
According to Deresky (2014), internationalization helps in expanding the market opportunities of Sony. One of the founders of Sony decided that the company would not remain restricted to Japan but would also explore the international market of India. This opened up opportunities for Sony to expand in other ventures like financial services, music entertainment and motion pictures. Internationalization will also help Sony in risk diversification (Ietto-Gillies 2005). Firms like Sony become increasingly immune to the changing trends of consumption in each market that also makes them less affected by the external factors that influences the consumer behavior and the purchasing of the products.
Internationalization also helps in the economies of scale thereby allowing the firm in economizing the distribution and the transport network (Hsu, Chen and Cheng 2013). It also helps firms like Sony to produce the products at a cheaper rate due to factors such as flexibility, component cost, wages, super availability and legislations.
Ghemawat (2007) stated that internationalization through foreign direct investment refers to an investment made by individual or firm in a country into the business interest of another country. It is differentiated from the foreign portfolio investment through the notion of the direct control. Foreign direct investment (FDI) is advantageous as it proves to be beneficial to the company. It provides localized economic benefits and makes the international trade much easier for completion. FDI also increases the foreign income and human resources. In the end, FDI helps in providing a positive spillover impact. Although things like the training of the workers or building of the infrastructure may benefit the company at the first go but ultimately in proves equally beneficial to the economy.
In terms of foreign direct investment, private limited firms remains more benefited compared to the public limited firms since it allows 100 percent foreign direct investment. Moreover, foreign direct investment in private limited firms in India takes place through varied equity investments. Private limited firms in India can issue preference shares, equity shares and convertible debentures subjected to guidelines and norms (Cottrell 2013). Besides the private limited firms are regulated strictly by the law for publishing the annual financial statements for ensuring the true position to the owners and the potential investors compared to the public limited firms. This also helps in determining market value of the shares.
According to Banker, Mashruwala and Tripathy (2014), Sony focuses on the generic strategy of differentiation for gaining competitive advantage. Differentiation includes putting forward unique products in comparison to the other products available in the market (Baker 2016). In applying the strategy, Sony ensures the integration of features that makes the product profitable and attractive. This strategy enables Sony in taking pride in innovation and imagination within the industry. After the World War II, Sony represented the company that took up the transistor technology and made the transistor radio. Sony, under Akio Morita, made advances in the technology and adopted means by which they could improve the lives of the people in an innovative manner.
Sony possessed the passion for creating newer markets. In other words, Sony represented an early leader and creator in the sector presently known as the consumer electronics. The generic competitive strategy of differentiation helps in highlighting the uniqueness of the product in ensuring a profitable business. The application of differentiation strategy requires a strategic objective for increasing the rate of the innovation for boosting the competitive advantage of Sony(Rosenberg and Ferlie 2016).
The further move undertaken by Sony lies in market penetration, product development, and market development and diversification. Market penetration is one of the primary growth intensive strategies ( Hill 2011). This strategy aims at growing the business through increasing market sales of the present operation. For instance, Sony further aims at growing the business through intensifying the market campaigns for selling increasing units of play station with the objective of attracting increasing greater number of customers and obtaining larger share in the market. Product development is one of the intensive strategies that Sony plans to adopt for growing its business (Simpson et al. 2014).
The goal of this strategy lay in developing better products in comparison to the competitors and hence the company plans to continue innovating gaming products. Sony however looks at market development as supporting growth strategy that enables it in entering newer markets or market segments (Voss and Voss 2013). Further, the strategy allows Sony in introducing the products to the developing market where it still do not have its presence. Diversification holds least significance amongst all the intensive growth strategies (Callen et al. 2014).
This strategy possesses the goal of determining growth through newer development in business. The significance of diversification reduced because of Sony’s decision on focusing on the fewer products. The products ensure the focus of the company on three key businesses such as device game and the network service, pictures and music.
Nakao (2012) stated that Sony faces various challenges in the Indian market. This includes the price and value sensitivity of the Indian consumers, need for a vast and robust distribution network and the intense competition from the local players.
According to Schaltegger and Wagner (2017), the external factors influencing the business environment of Sony in the international market are evaluated with the help of Porter’s five forces analysis. It is vital for addressing the external factors and corresponding five forces for ensuring the long-term competitive advantage. The five forces includes competition or competitive rivalry, bargaining power of customers or buyers, bargaining power of suppliers, threat of substitutes and the threat of the newer entrants.
Competition or competitive rivalry represents a strong force that influences the revenue of the company (Grant 2016). The external factors responsible for stronger intensity of the competitive force against Sony includes higher aggressiveness of the firms, lower switching cost and the moderate number of the firms. The aggressiveness of the firms in the international market acts as the key external factor responsible for stronger competitive forces experienced by Sony. The lower cost of switching on the other hand acts as major contributor for the company as the customers are able to transfer easily from one of the providers to another. For instance, customers can make a switch from Sony Xperia to the Galaxy phones of Samsung.
Bargaining power of customers or buyers acts as strong force. This aspect of the Porters five forces covers the influence of the customers who determines the profitability and the market share of the products(Wang, Zhao and Li 2013). The external factor that creates stronger intensity bargaining power of the customers includes higher quality of information, lower switching cost and the moderate frequencies of the purchases. Quality of information available in Indian international market empowers the customers of Sony in evaluating the products available in market.
For example, the customers remain increasingly effective in deciding whether to make a switch between brands or products. This makes Sony in effectively implementing the aggressive marketing for attracting customers. On the other hand, the lower cost of switching enables the customers in easily transferring from one company to the other thereby intensifying the bargaining power of the buyers. However, the moderate purchase frequency has limited influence on the business of Sony.
Bargaining Power of the suppliers in the international market of India acts as a moderate force (Schleper, Blome and Wuttke 2017). The company depends on the suppliers in supporting the business. This aspect of the Porter’s five forces focuses on how the suppliers are influencing the availability of the materials. The external factors determining the moderate intensity bargaining power of Sony includes moderate size of the individual supplier, moderation in the overall supply and the forward integration at the moderate level.
The moderate size of the suppliers determines the moderate and the limited influence within the industry environment. For instance, strategic change in one of the suppliers would result in limited and moderate impact on the company. The moderate overall supply has limited and moderate impact on the material availability required by Sony. The forward integration on the other hand refers to the degree through which the suppliers directly control or own the sale and the distribution of the goods and services.
Threat of the substitutes acts as a moderate force for Sony in the international market. Substitutes represent threats that hamper the development and growth of the company (Baack, Harris and Baack 2013). This aspect represents the degree to which the substitutes are able to attract the customers. The external forces that leads to moderate intensity of threat to substitution includes the low switching cost, moderate range of the substitutes and the lower availability of the substitutes. The lower switching cost helps in facilitating movement of the customers towards the available substitutes of Sony. However, the moderate variety of the substitutes limits this force. For example, availability of increasing number of gaming options through Sony Play Station in comparison to the traditional games.
Threat of the new entrants also represents a weak force for Sony in the international market. This aspect of five forces analysis examine the way the new entrants compete and reduces the market share of the company in the gaming, electronics, financial service and entertainment. The external factors responsible for weaker intensity of threat for newer substitutes include lower cost of switching, higher cost of the brand development and the higher cost of doing the business.
The lower cost of switching in the international market empowers the newer entrants in easily attracting the customers far away from the established firms. However, the higher cost of the brand development acts as major barrier for the new entry. Besides, the higher cost of doing the business prevented the newer firms from competing head to head against the established companies.
To analyze and scan the external macro environment it is necessary to undertake the political, socio cultural, economic, technological, legal and environmental analysis of Sony in the Indian market. Concerning the political factors, India represents the largest democracies of the world and runs on federal form of the government.
The political environment remains influenced by the government policies, interest of the politician and ideologies of the several political parties. Therefore, business environment of Sony in India remains influenced by the multivariate factors related to politics. The taxation system including service, sales and income tax remains controlled by the government. India also influences privatization and the government encourages free business through varied programs.
The Indian economy has been quite stable since the initiation of industrial reform policies in the year 1991. According to the policy, there has been liberalization of the foreign capital, reductions in the industrial licensing, formation of the Foreign Investment Promotion Board (FIBP) lead to constant improvement of Sony’s economic environment of India. The country had a GDP registration of close to $5.07 trillion in the year 2013 followed by an improved GDP growth of 5 percent in the year 2014.
The social factors refers to the change in the trends that impacts the business environment of Sony. The rise of the ageing population of resulted in a rise of the pension cost and the rise in employment of the older workers. India is comprised of a population that has over 1.2 billion people with 70 percent of them falling within the age category of 15 to 65 years. There are structures with percentage as per the age and they contain varying degrees of education, flexibility, income distribution and attitudes towards work.
. In India, technology influences not only the development of the product but also the introduced fresh process of cost cutting. India has both 3G and 4G technology that helped in facilitating several technological projects for Sony. Besides, the country also possess the strongest IT sectors of the world that promoted constant IT development, presence of upgrade related to software and other advancement in technology .
The legal and the environmental factors have led to the implementation of several changes in India including minimum wage, recycling and the disability discrimination that directly affects the business of Sony. About the environment, it can be said that the urbanization and industrialization adversely affect the air quality thereby giving rise to various health related issues. The country has therefore set up various establishment related to the environmental pressure groups and implemented regulations of the disposal and the waste control and noise control
Conclusion:
On a concluding note, it can be said that the present state of Sony at the home country is quite flourishing as it resumed its manufacturing operations at various manufacturing site where operations has remained suspended due to tsunami, earthquake and power outrages. In other words, all manufacturing sites in the home country tried to maintain normal operations while the company tries in monitoring the availability of the raw materials and the components of the operations. However, the Indian business of Sony includes sales, marketing, after sales service of the electronic software and products.
Besides, Sony has its footprint across all the major cities and town via distribution network of over 10,400 distributors and dealers along with 270 Sony outlets and close to 23 branch locations. The analysis focuses on the aspect of internationalization and the strategies adopted by the company in gaining a competitive advantage. The essay focuses on not only the generic strategies but also the intensive strategies.
The essay also puts forward the challenges faced by the company in the Indian market. The essay also discusses about the micro and macro strategies adopted by Sony in the International market keeping it aligned with the strategy of the company. There are also discussions about the Porter’s five forces with a focus on the external factors that influences the company in the international market. The essay also focuses on PESTEL framework of the international market that poses an influence on Sony.
References:
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