Analysing Structure Changes due to Sony in Restructuring Mode

Analysing mental synthesis Changes eitherwhere collectable to Sony in Restructuring ModeAs directed by the Board of Directors of Sony, this report testament analyse the social organisation of Sony union from 1999-2005, the problems approach together with its responses and vestigial rationales and recommendations for the benefit of the future directions of Sony. Being a transnational confederation in the electronics vexation, the company typefaces prodigious macroeco zero(prenominal)ic challenges. The decreasing course in profits could be seen since 1998, possibly the of import reason that prompted the lack for an transcriptional restructuring. Whether the organisations schema molds its building or vice versa, the grammatical construction of Sony has to be evaluated first. In 1999, after the restructuring, the company became a tall hierachical structure with three main furrow aras electronic, entertainment and insurance and finance. Alongside with the unified dot feigning to face the constant trade demands, the company became a divisionalized form with decentalisation of dispersion of power to ease decision-making. The divisional structure of the electronics transmission line is divisionalised due to its low interdependency level, adhocracy in entertainment business and professional bureaucratism in the insurance and finance business. In 2003, innovation 60 see a much(prenominal) than than centralised structure of Sony counsel-wise and financial-wise . It was found that switch 60 relieve had the company in a divisionalised form but a stronger pull to formalize in its technostructure. One of the problems faced include quick evolution of engineering causing cover charge counseling to respond by investing heavily and restructuring of the organisation using a tax mental home Model and shifting 60. Stiff foodstuff aspirations toped to partnership and coups for off-shoring purposes and to benefit the AV industry. The e lection of Howard Stringer as CEO ordain cause the problem in trouble style due to the differences in national kitchen-gardening. It can be cogitate that Sonys management and business strategies equal its organisational structure as it was the hurtle in profits that had the sh arholders to pressurised the change of top management. Recommendations include the need to accede both Western and Eastern cultures under Stringer and comprehensive considerations in investment strategies.ContentsPages1.0 Introduction32.0 fear Description and flock dodge2.1 Key Figures2.2 correlational statistics mingled with Organisation Strategy and Organisation Structure4-63.0 Organisational Structure3.1 Structure of Sony in 19993.1.1 familiar Structure of Sony as a Whole3.1.2 divisional Structures of Sony3.2 Structure of Sony in 20033.2.1 Divisional Structure of Transformation 603.2.2 pecuniary Structure of Transformation 607-124.0 Problems and Responses4.1 Rapid organic evolution of enginee ring4.2 go badket Competition4.3 Differences in National Culture13-165.0 finishing176.0 Recommendations18Appendices19Bibliographies20-221.0 IntroductionAs directed by the Board of Directors of Sony Corporation, this report will analyse the companys agency from 1999-2005. Sony, a founding class consumer electronics tell onrs, was facing serious concerns since the late of 1990s, such as Asian financial crisis in 1997, the tech bubble and the terrorist attacks in America in 2001. Besides, the ever increasing contest from rivalrys and speedy market changes are gnaw the market shares of Sony. The top management confront their difficulties bravely and executed a series of actions to respond to those difficulties.This report focuses on the structure of Sony in 1999 and the restructuring in 2003, as puff up as the analysis of difficulties faced by Sony and how the management responded to those issues. The structure of the report starts with the business description and the corporat ion schema which has significant relationship with the arriveing sections. Then, the focus will move to structure 1999 follow with the restructuring of Sony in 2003 called Transformation 60. After the discussions about the business structure, the report will concentrate on analysing the issues associated with Sony and state the responses interpreted by the management and its underlying principle originally concluding and with appropriate recommendations.2.0 disdain Description and Corporation StrategySony is nonpareil of the worlds top consumer electronics makers and employs over 167900 workers (Sony, 2010). The business operates in over 200 countries and covers the games, electronics, financial services, entertainment markets and others (ibid.). After 65 years of growth, today, the host has established a world class trade name and the strong disgrace image can benefit its bargaining power and make the business move into new markets easily.2.1 Key FiguresSome key figures of Sony from 1997 to 2010 are listed at a lower place (Graph12). The Sales figure remained in the reasonably floating level in the lead 2007. Unfortunately, the management and shareholders are unsatisfied with the profits, since 1998 the profits reduced nearly every year, this might have been the trigger to ignite the restructuring of Sony.Graph 1 come Sony yearbook circulate 2001, 2006, 2010- Five-Year Summary of Selected Financial DataGraph 2 blood Sony Annual Report 2001, 2006, 2010- Five-Year Summary of Selected Financial Data2.2 Correlation between Organisation Strategy and Organisation StructureStrategy and organisation structure are correlated to each other, even the debate of whether strategy or structure comes first is still in existence (Lynch, 2006). Therefore, to image Sonys corporation strategy (Graph34) is significantly important before discussing the structure and restructuring of Sony. Besides, an demand portion of the study of Sonys actions is an understanding of the nature of business strategy for the Sony corporation as a whole (Mullins, 2010).Graph 3 arising Sony Annual Report 1998 pp6, 7 Sony Annual Report 1999 pp26Graph 4 semen Sony Annual Report 2003 pp5-management discusses key issues3.0 Organisational StructureThis section is classified into twain parts, 3.1 focuses on the structure of Sony in 1999 while section 3.2 concentrates on the restructuring in 2003.3.1 Structure of Sony in 1999Sony as a world class histrion in a diversified high-tech market was challenged with the fierce competition during the late 1990s (Sony, 1999). Therefore, the restructuring was necessary for Sony to experience in the competitive market. The classify announced the organisations restructure plan in bunt 1999 to bewitch still growth opportunities in the new century and the Internet era (Sony, 1999). The structure of the organisation is catchd by its age and size, technical frame, power and surroundings (Mintzberg, 1979). Furthermore, in r elation to the environment, the diversity of the environment will largely determine the structure of organization and directly affects the organisation functions into goal-seeking activities through the formal structure to achieve aims and objectives (Mullins, 2007 Mintzberg, 1979). In this diverse environment, antithetic structures will be taken in specific department to meet different aspects of situation for Sony.3.1.1 Internal Structure of Sony as a WholeThe internal structure of Sony is a tall hierarchical structure as Sony consists of three main business areas which are electronic business, entertainment business and insurance and finance business (Graph 5). Besides, the setting up of the unified dispersed management model is to face the fast change in market in the aforementioned pillars of Sony (Ravi, 2005). As a result, the overall structure of Sony in 1999 was divisionalized form. Schwartz and Thompson (1986) suggested that the divisionalization form can palliate the v arious divisions to compete fiercely among them, with effective operations to face rapid changes in external environment.Graph 5 Source www.Sony.net, squelch Archive, March 29, 1999Besides, centralization and decentralisation depends on how organisational power is dispersed and is determined by the organization structure for decision-making and problem-solving (Schmidt, 2006). The structure of Sony in 1999 displayed Sonys trend to be decentralization to distribute the power yield. For example, Sony set up a unified dispersed management model which facilitates more functional and operational autonomy (Ravi, 2005).3.1.2 Divisional Structures of SonyAfter the discussion above, the focus now moves to the structure of different divisions. The electronic business consists of various subsidiaries (Graph 6). Each subsidiary is responsible for its own different products and makes business decisions in different markets. There is little interdependence that exists between each other. Thus, the structure of electronic business was divisionalized form. Entertainment business displayed adhocracy due to its little formalisation of behaviour. Insurance Finance business displayed a master key Bureaucracy structure due to its complex environment with highly adept skills and knowledge to offer standardisation of products and services (Mintzberg, 1979).Graph 6 Source www.Sony.net, Press Archive, March 29, 1999Each business division has the autonomous to make decisions in its daily operation. The company headquarters concentrated on organise these business divisions to make a long-term business strategy. Nevertheless, under the complex, diverse and dynamic environment, perhaps the more organic and decentralized structure is more suitable for Sony.3.2 Structure of Sony in 2003Indeed, Sony restructured its organisation in 1999 into a more divisionalized and decentralised form using the unified dispersed model as a means of a Value unveiling Model. Transformation 60 axiom s ome changes in the architectural structure of the organisation with it suitable more centralised, management-wise and financial-wise. It was aimed to refining the organisational responsibilities in carrying out the operating strategies and restructuring the marketing strategies in profitable niches. The goals are to achieve more profit margins, reducing one-year cost, and component outsourcing (Sony, 2003).3.2.1 Divisional Structure of Transformation 60Transformation 60 saw the convergence of the three pillars of Sony electronics, entertainment and financial as unlike to the unified dispersed model. The following are the divisional changesIn the electronics business, the management combined the Semiconductor Nedeucerk conjunction, Home Electronics, Mobile Electronics and Information Technology (Sony, 2003).The entertainment business saw the joint of assets of pictures, medication, game, electronics and services to enhance its localise as a worldwide media company.The constr ucted financial holding company imprisoned Sony Life Insurance Company Ltd, Sony Assurance Inc. and Sony Bank Inc.By these convergences, Sony beautiful the operational structure and concentrated on the engineering, innovation and financial resources. tally to the converging strategy, the new operation structure of Sony seems like a rudimentary Machine Bureaucracy structure (Mintzberg, 1983). Although it is less dispersed than the structure in 1999, the pull to formalize by the technostructure of Sony could be seen in Transformation 60 (Mintzberg, 1981). The restructuring of Sony in 2003 was more centralised than before as a result of the serious convergences of several businesses. The tactical and strategic plans were permitted to each sectors, which points that the divisionalized form still existed. However, the power on personnel issues was controlled by the top management, as well as the supportive finance and the ultimate goal were allocated and formulated by the headquarter s (Ravi, 2005). Moreover, the restructured Sony in 2003 did not belong to any specific structure of Mintzbergs pentagon theory but the combined one (Graph 7).Graph 7 Sony organisational chart electronics-related business (as of 1 April 2001) Source www.sony.net, Press Release, 29th March 2001(a)3.2.2 Financial Structure of Transformation 60In the light of improving its monetary position, the consolidation of fixed costs and the combining of assets reflected the change of a more centralized structure in Sony. The company aims to achieve an annualized cost reduction of approximately 300 billion (Ravi, 2005). The cut in employees due to the off-shore strategy to China establish the Contribution equal to Compensation principal of compensable for achievements, as Schein (2004) stated that employees have worked well enough to be considered valid. Deactivating employees from Sony had cost the company financially and it might have explained the poor financial performance of Sony after the transformation was done.4.0 Problems and ResponsesThis section will discuss the problems associated with Sony alongside with the responses taken and its rationale. The difficulties faced by Sony have been separated into different categories mainly the rapid evolution of engineering science, competition in the market and the differences of national culture.4.1 Rapid organic evolution of TechnologyThe rapid evolution of technology as pointed out by Idei (Ravi, 2005) has affected the electronics, entertainment and insurance and finance sectors of Sony. The constant improvements in technology have caused the company to respond to the demand of the market. The following are the responses make by the company alongside with its underlying rationaleInvestments Sony invested heavily in RD, capital equipment and facilities in order to meet demands and improve profitability. Technology for earnestness and Shared Experience and Creating New Value are Sonys RD missions (Sony, 2011). The c ompany believes that technology is capable of linking inspiration and shared experiences on top of creating new set and capturing emotions of customers (ibid.). Investment strategies link to the capability of top management of Sony.Organisation restructuring The Company believes that the new group architecture can help gain market share besides increasing shareholders value (Sony, 1999). In this Value population Model, the unified dispersed management method saw changes in the electronics operations, organization of Digital interlock Solutions (DNS), changes in composition of work armament which could at long last affect the morale of employees, implementation of new value-based performance measurement system and the withdrawal of headquarters into two distinct functions (Ravi, 2005 Sony, 1999). Indeed, the model brings competitive advantage to Sony (Jayaranam Luo, 2007). In such a stiff market, it is understandable as to the measures taken to seize every opportunity. Unfortu nately, in 2001, the September 11 attacks caused the consolidated drop in sales, affecting the monetary position of the company (Sony, 2001b). This has proven that the Value Creation Model had loopholes, hence Transformation 60 took course. Severe cost saving measures were taken but by 2005, as a result of bosom from shareholder, a top management reshuffling with Howard Stringer as CEO (Ravi, 2005). This proves that investors of Sony began to brook confidence of the previous management team at that placefore it was necessary for the company to overhaul its board.4.2 Market CompetitionAmong Sonys competitors are LG, Samsung, Sharp, Dell and Canon. Each competitor seemed to have an advantage over Sony in different products. Below are among the steps taken by Sony to beat the competition in the marketPartnership with Solectron Corporation in year 2000 and off-shoring to China were to aid the outsourcing fulfill of production of electronics was a step to help the company meet fluc tuations in demands, cost reduction, quality improvisation and customer satisfaction (Sony, 2003 Sony, 2000). Outsourcing whitethorn be beneficial to the company as a whole but it could ultimately decrease the motivational level of employees, as there is a design of decrease of power of managers, and failure rate is between 40%-70% (Purse, 2009). This may explain the Sony Shock (Ravi, 2005) incident that happened in 2003 despite the laborious mold of organisation restructuring. The cost-benefit consideration was not given much thought before the outsourcing was done.The coup detat of Aiwa Co. Ltd. as a wholly owned subsidiary in 2002 was for the benefit of the electronics business of the company, particularly the audio and visual (AV) industry (Sony, 2002). The takeover became part of Transformation 60. It helped accelerate the structural reform of the electronics business of Sony on top of the creation of synergy as a result of the merger.4.3 Differences in National CultureAs Howard Stringer took over as the CEO of Sony in 2005, a major problem he would experience would be the differences in organisational culture. Culture refers to the way we do things around here (Sanchez, 2004). Being one of the few foreigners to be part of the top management in a Japanese company, Stringer has the responsibility of considering whether to impose the Western culture in a Japanese company. Azumi Mcmillan (1975) found that both the U.S. and Japanese culture are sort of highly centralized and companys rules and procedures are abided. In Sony, although divisionalization form can be seen, the Headquarter still plays its role as a coordinator, meaning that ultimately, the decision-making process will need approval from the top management.Also, in Japan, traditional values that emphasises on hard work and details are a common bore due to its religion influences but in the U.S., creativity and innovation are the common values (Webster White, 2009). Hence, in U.S., risk-tak ing is very much observed. The open management style of Stringer, his understanding towards Sonys tradition and his international viewpoints could be the key to influence the cultural organisation (Sony, 2005). This can explain Stringers successes in streamlining Sonys movie and music businesses.5.0 ConclusionDue to the external environment effect such as the Asian financial crisis, the ever increasing competition, as well as the internal business issues like the low efficiency, the profits of Sony has been reduced dramatically since 1998. Therefore the management had to execute some restructuring plan to respond to those concerns. agree to the restructuring plan announced in March 1999, the structure of the group was divisionalized and more decentralization, in order to seize further growth opportunities in the twenty-first century. Besides, the group launched a unified dispersed management model to arrest that the business operate more efficiently and to be able to survive the r apid change of environment. Sony did a mass of changes to adapt to the market changes unfortunately, the ill-use of the latter was overtaking the managements expectations. Consequently, Sony had to accelerate the reform plan and announced other restructuring plan called Transformation 60 in 2003. The change in 2003 saw a stronger pull to formalize in the technostructure although it can be seen that there is a mixture between the machine bureaucracy and divisionalized forms. Convergences in the three sectors saw power cosmos more focused at the top management. The change of technology, market competition and the differences in organisational culture, especially after the takeover of Stringer, were the main concerns of Sony. Organisational restructuring and investment strategies were among the solutions in coping with technological changes. Market competition forced Sony to deal with vast partnerships, joint ventures and mergers with other companies for outsourcing purposes. Finall y, the change to a foreigner to lead a Japanese company spark concerns on the future of Sonys organisational culture.Nevertheless, based on the analysis that has been done, it can be concluded that Sonys management and business strategies affects its organisational structure. It was the drop in profits that led investors to force the overhauling of top management, as a result, the unified dispersed model and Transformation 60. Unfortunately, both measures failed to bring positive impacts to the companys fiscal positions. In light of the situation above, the new team led by Stringer with the probable change in organisational culture could probably help turn things around.6.0 RecommendationsTwo main recommendations should be taken into accountFirstly, the future of the organisational culture of Sony has to be determined from two aspects based on the organization structure and the differences in national culture since the takeover of Stringer as CEO. Perhaps, Stringer could consider i ntegrating the Eastern and the Western cultures to vex the best of both worlds.Next, investment strategies of Sony may have to be re-evaluated again, as after the study of the company was done, there are hints of possibilities that failures in the companys fiscal position may have been caused by past investment decisions. Outsourcing may be beneficial but a thorough cost-benefit analysis has to be done. Investment decisions will reflect the capability of top management to stakeholders.AppendicesValue Creation Model refers to the combination of intangible assets and monetary items to create redundant value of the business for stakeholders, particularly shareholders (Qureshi, Briggs Hlupic, 2006 Haksever, Chaganti Cook, 2004).2 The performance measurement system is capable of reflecting the current cost of capital of Sony3 Before being elected as the CEO of Sony Corporation, he was the Chairman and CEO of Sony Corporation of America.BibliographiesAzumi, K Mcmillan, C (2004) Cultu re and organisation structure a similitude of Japanese and British organisation, International Studies of Management and Organization. Vol. 5, no. 1, pp. 35-47. getable from commercial enterprise Source Premier. Accessed 16 January 2011Datamonitor (2010), Sony Corporation-Company Profile, pp4, 5 and 21, Publication date 12 Mar 2010Elkington, J. Masaki, T. 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