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Rstructuring Sony

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Submitted By progolv
Words 1923
Pages 8
Core Issue

Sony’s frequent restructuring without a long term vision carries its focus away from its core competencies and thus incurring losses, losing market shares in various categories and facing threats from both local and global competitors.
Supporting issues

Huge expenditure on restructuring and increasing competition in the electronic industry were affecting Sony’s profitability

1. In 1989, Sony shifted its focus from product innovation to process innovations to improve efficiency and controlled product costs.
Symptoms: Sony’s businesses were organised into three broad divisions – Electronics, Entertainment and Insurance and Finance to earn efficiency
Consequence: operating revenues improved by only 2 percent during that period. However, the net income and operating income registered a drastic fall of 87 per cent and 67 per cent respectively.
Causes: Analysts felt that the stagnation in the electronics industry coupled with factors such as the recession in the Japanese economy and the appreciation of the yen against the dollar led to the deterioration in the company’s performance.

2. In order to focus on the high growth businesses, Sony announced major changes in the structure of its electronics business in April 1994. Sony’s management felt that the ‘Group’ structure, which had fuelled the company’s growth in the 1980s, was proving to be redundant in the dynamic business environment of the 1990s. In the new structure, the product groups of the electronics businesses were regrouped into eight divisional companies.

Symptoms: in the electronics business, the revenues of the video and audio equipment businesses were coming down or were at best stagnant, while the television and ‘Others’ group were showing signs of improvement.

Causes: In order to simplify the structure to clarify responsibilities and transfer authority, thus ensuring

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