On September 17th, SONY, the Japanese leading electronics company, announced their downward revision for the third-quarter in 2014 and apologized that the company will not pay a dividend this year for the first time ever.
The Financial Times / The president of SONY, Kazuo Hirai
SONY has been leading Japanese economy as well as Toyota since the WWII. Like Toyota built the foundations of the automobile industry, SONY built the foundations of the electronics industry not only in Japan but in the worldwide. The most well-known innovation was Walkman which was one of the icons for the Japanese postwar success. SONY also succeeded in entertainment sector such as PlayStations and TV sector. However, the company has been struggling to get out of the deficit for a few years. Why SONY suddenly fell into the red and cannot recover its business even though other rival Japanese companies like Panasonic returned to profitability this year?
Some reasons can be considered. The primary reason is the failure in the smartphone sector. The company is far behind in smartphone sector from the other international competitors like Samsung and Apple. In 2012, when the president Hirai took his place, his goal was becoming the third largest smartphone company following Samsung and Apple. While Samsung has 24% of the world share and Apple has 11%, SONY has only 3% and it is not even in the fifth largest. In addition to the smartphone sector, SONY lags behind other companies in terms of the business in the emerging countries such as India. SONY tried to construct a new model for the developing countries which has a huge demand but requires low cost. Nevertheless, as developing the new business, SONY lost its originality and resulted in the stagnation. This backward in the emerging market allowed other major companies to dominate the smartphone business in the world.
In addition to these factors, SONY might be facing the time to change the company’s mission. SONY has been trying to create the innovative electronic devices like Walkman. However, as the technology has developed, it gets more difficult to create the completely new product. Like Panasonic, many of the Japanese electronics companies have shifted their strategy from creating one big innovative product to focusing on different growing sectors. Some people still believe that electronics companies should make something that is new and people want to buy but the others also argue that they need to play a roll suited to the times. SONY needs to find out and decide the specific plans for the reconstruction and that is the only key to recover its business.
Last year, Japan finally started the economic reform called Abenomics and the country is trying to recover from the longtime economic recession. Because of the depreciation of yen, this is a good chance for SONY as a big export company in Japan. In addition, it is also true that SONY still has the high technology and keeps investing the research and people still believe the recovery of the “SONY brand”. The company is facing a crucial point.
You can also check the following articles.