The aim of this report is to deeply understand the importance of applying marketing essential strategies in order for the company to thrive in a dynamic changing environment. Sony Ericsson, the joint venture established in 2001, is an example to be thoroughly examined in this report. Its mobile T68i was revolutionary; it was the first GSM/GPRS color screen handset. Its Bluetooth technology was introduced for the first time. Nevertheless, Sony Ericsson’s market share is only 13.65% in 2010 compared to Nokia, 51.40%! Why? (GetJar 2009)
The report will focus on revealing the key issues that affect Sony Ericsson’s current and future situation in the market. After the great success of Sony Ericsson in selling its Walkman phones that were launched in 2005 (Smith 2006:77), it started to face new challenges in the market. The report will critically evaluate Sony Ericsson’s implemented strategies compared to the surrounding environment and highlight the challenges that face the company for such implementation.
It’s an important report because it will provide a better insight on how marketing strategies are put into practice in a company. It will also help in answering a very important question: what are the challenges the company should handle to maintain its competitive advantage now and in the future.
1.2 Report Structure and Approach
This report will be structured as the following:
Section Two: An introduction to the company’s behaviour and the way it responds to changes in the market in order to understand the broader system it works in.
Section Three: A deep analysis of the competitive advantage of the company to have a better understanding of its potentials in order to decide what’s better for it.
Section Four: Identifying the internal and external factors that determines the company’s success or failure by evaluating its strengths and weaknesses and opportunities and threats using PESTEL and SWOT theories.
Section five: Personal thoughts and conclusion.
2.0 Sony Ericsson Orientation
2.1 Orientation of Sony Ericsson
Sony Ericsson being in the mobile telephone industry faces a lot of competition and it has always strived to be a leader in this industry. It has adopted a four dimensional organizational orientation strategy which includes product, marketing, production and sales orientation.
2.2 Product Orientation
Sony Ericsson has always maintained quality and differentiation in its products while expanding into new markets and making its brand known worldwide. It invests in research and development so as to develop new products that will satisfy its customers. For instance it was the first in 2005 (Sony Ericsson 2008) to develop the walkman feature in cell phones. It also developed phones with digital cameras and cyber shot cameras which added value to its products. This company actually invests a lot of money in research and development; it has an office in Sweden which focuses only on researching into new product features and quality.
Sony Ericsson has equally differentiated products with the aim of targeting different segments of the market since it is difficult for a single product to satisfy the needs of different consumer. For instance it started by developing phones which were large with few options like text messages, later on it improved such phones by producing very small size phones with camera options. Today it has phones with video recording, mp3 and cyber shot.
Sony Ericsson has expanded the market for its products operating today in over eighty one countries of the globe. It has diversified from the production of electrical appliances like electric irons, televisions and mp3 DVD players. It is a market leader in the mobile phone industry with a strong brand name.
2.3 Marketing Orientation
Sony Ericsson is a market oriented organization. Market orientation, according to Jobber, is when a firm gives priority to consumers’ preference at all levels of their activities. Sony Ericsson sees its customer to be king and develops all its phones based on customers’ specification. It wants to satisfy its customers at all levels; always researching on what consumer desires and investing in such areas as it sees them as profitable investments. This can be seen when they came with the walkman phones with mp3 in 2005 which paid it off and helped recover the losses it incurred in 2007, which attracted a large market share. Sony Ericsson has displayed the following characteristics of market orientation efficiency and effectiveness, segmentation and targeting, customer value and satisfaction, and competitive advantage.
Sony Ericsson is an efficient and effective mobile phone company. Efficiency is seen by its ability to minimise its production cost while maximizing outputs and profit. Sony Ericsson has kept at all stages in production low cost of production while maintaining quality and variety with sophisticated features (camera, video recording, and web browser). Investing in new products and modern technology has been the spirit behind the success of Sony Ericsson. Effectiveness, on the other hand, is seen by its ability to produce phones that people want to buy. The continuous increase in the profits of Sony Ericsson has being due to increase demands for its phones which has resulted in more sales compared with other years.
Sony Ericsson has divided its market into different groups of buyers and sellers. Some of the main segments are those who seek phones for value and those seeking sophisticated features like video recording, internet and mp3.
Sony Ericsson has always sought to create pleasure and fun in its phones with the aim of providing customer satisfaction and value to its users. This is why it keeps developing new features like the touch screen, slides and internet facilities in its phones.
Sony Ericsson has always strived to remain the market leader in the phone industry and to have a competitive edge over its competitors like Nokia and Samsung. This is why after making huge losses of over $10 000 it came up with the new walkman and cyber-shot phones in 2005 and maintained low prices which generated revenues of $31 687.2 million with a net income of $1 769.5 million. It has always put its customers in first position in all its marketing strategies. A typical model to show its marketing orientation can be shown below;
Marketing orientation entails creating goods and services that will satisfy the needs of your customers and continuously researching into better ways of doing so and making sure this process has a positive impact on the goals of the company (Uncles 2000: 1)
2.4 Production Orientation
Sony Ericsson produces mobile phones and most of the production is done in China, India and Britain. A third of the production is done in China and India as the cost of production in these countries is lower than in the United Kingdom and Sweden where its research and development office is found.
The company is efficient in production and so tries to minimise production cost. In 2008, it reduced its work force by 2000 employees and consultants in and remains competitive in this industry which is very dynamic. Sony Ericsson produces phones (talk and text, camera, web and email, touch phones, music and games), Mobile accessories (head phones, battery charger, music transmitters and cables, car holders, Bluetooth headset, phone cases). These phones are designed in different sizes, styles and shapes. The company focuses its production of mobile phones based on the current market needs. Last year due to the global cry for climate change, it has launched the go green heart Sony Ericsson phone. This shows that the company invests in the production of products that match with current needs of the population. (Sony Ericsson 2009)
2.5 Sales Orientation
Sony Ericsson has witnessed rapid increases in revenue due to increased sales. It initially started operations in Britain, China, India and Sweden, but today it has expanded its market to over eighty one countries. Despite the recent recession that lead to reduction in profits, Sony Ericsson has embarked on sales promotions, aggressive and persuasive TV and Internet advertisement and sales promotion and lower prices of its products. Most of its adverts have had positive impacts. For example, when it launched the Walkman, Sony Ericsson phones in 2005 there was a rapid increase in demand and high sales were recorded. Their major buyers are mobile communication firms and independent retailers. Over the years they have experienced increases in their sales and net revenue, yet lost market share. This can be seen below:
Net Sales (SEK Million)
Net Profit (EK Million)
Source: Company Research
2.6 Sony Ericsson Group Operational Indicator
Sony Ericsson has through different telecommunication firms like Orange, T-Mobile and MTN carried out sales promotions and this strategy has off. With its launching of online sales it has equally been increase sales as retailers can place their commands online and receive their goods wherever they are located. The coming up of the low pricing strategy in 2007 was they introduced low priced phones with fewer functions equally lead to rapid penetration of the markets especially in Africa.
2.7 Evaluation and Recommendation
Sony Ericsson has a positive product and production orientation. This has given it a competitive edge in the market as it is always finding new ways of coming up with something new in the mobile phone industry. Its effort in this line has placed it in an unbeatable position.
However it still has a lot to do in the area of developing phone and accessories. Most of its accessories are not strong as a lot of customers have made negative complaints as to their durability. The industry has however reacted to this by offering guarantees to customers who purchase their walkman and cyber shot phones. This step however seems unfair to consumers who do not get any warranty to purchasing their other low quality phones.
As regarding marketing and sales a lot has to be done .This is because despite their recent downsizing in labour force with the aim of cutting down cost and maximising profits, the company has still recorded recent losses in the fourth quarter of 2009 (BBC News 2010) OF 167 million Euro from 187million Euro in the previous year. Sales in this same period fell by 40%. Sony Ericsson has been suffering from lower sales due to failures in their marketing team. A lot of improvements should be carried out to bust sales and profits. The company overall is doing well needs an extra force o rekindle its sales and profit margins.
3.0 Competitive Advantage
“An Advantage over Competitors gained by Offering greater customer value, either through lower process or by providing more benefits more benefits that justifying higher prices” (Armstong and Kotler, 2009)
Sony Ericsson can be defined as for INOVATION. Whether it might by T68i the First GSM/GPRS enabled colour screen Handset. Bluetooth technology for file transfer or hand free, later with Music and Loud Speakers or High Mega Pixel Mobile Camera. Clearly the T610 and P800 set new standards.
Sony Ericsson Hold the Second Largest market as a Phone Manufacture and below graph shows its market share of 20% which is quite dominant.
Diversity is one of the core strengths of the Sony Ericsson (Sonyericssion.com) and mapping this to the Poters Three Generic Strategies theory we come to the following Stuck In the Middle for Sony Ericsson.
Turning this problem into opportunity, It is an Advantage for Sony Ericsson to be hers as it enables them to server the vast Mobile consumer market over competitors and the server the three Competitive Advantage’s of Cost, Differentiation and Focus.
3.1 Cost Leadership
To Achieve cost Leadership Sony Ericsson have become low cost producers in mobile industry as compared to others offering the same mobile features and quality.
Sony Ericsson prices are quite competitive and are available for big as well as small pockets.
Availability of pay as you go phones, by brand and price, December 2009 Source: Mintel
Analyzing the above data it clearly specifies that Sony Ericsson have competitive no of handsets in all ranges. This helps Sony Ericsson customer base to be 20% and growing continuously.
From day one Sony Ericsson’s focus has been on Music functionality or camera. Early when camera phones were just launched, the brand gave the feature to take, send and receive pictures quickly as cameras. Same for the Music Player, its Walkman Series had an dedicated button to allow switching between mobile and music functionality.
Mixing the low price and leads in terms of multimedia usage across the handset brands (listed in the below table) makes Sony Ericsson so popular with youth. (Mintel)
Sony Ericsson %
Camera – less than 5 megapixel
Camera – 5 megapixels or more
Fast web browsing eg 3G
IM chat eg Instant messenger
Ability to open Word documents
Ability to open PDF documents
Ability to open Excel documents
Base: 2,000 Internet users aged 16+
Brand of handset owned (includes pay as you go and contract) by facilities on mobile used, October 2008
For focus strategy to is to be succeeded, the organization must understand segments thoroughly, how their needs are changing and what range to offer. If we don’t server the segment more effectively then competitors, then you are in a poor position. (Brassington & pettitt, 2006: pg 972)
Sony Ericsson obviously is the under-25s’ preferred handset. The features such as High Mega Pixel Camera and music Players are symptomatic of entertainment and function-hungry younger market and these features are highly substitutable.
Sony-Ericsson younger users perceive its interface as easier to use in connection to the features of their key interest.
Although, the risk of operating in this segment is that this segment might fluctuate widely with time depending on fashion trends as they come of age, so this market share maybe fairly remain same, Other possible threat is that this might be undetermined locally by competition. ( Brassington & pettitt, 2006: pg 973)
For Complete understanding of the Sony Ericsson competitive advantages, Poter’s 5 Forces of competitive advantage has further been used.
According to the Porter, the state of competition in an industry depends on five basics competitive forces, the collective strengths of these forces determining the ultimate profile potential of the industry and the ability of firm in an industry to earn rates of return on investment in access of the cost of Capital (Poter, 1985).
The five Forces are as Follows:
· Existing Competitive rivalry between players.
· Barging power of buyers.
· Threat of new market entrance.
· Bargaining powers of suppliers.
· Threat of Substitute products.
These 5 forces for Sony Ericsson have been shown in the below .
Porter’s 5 Force Model for Sony Ericsson.
3.4 Existing Competitive Rivalry Between Players
Sony Ericsson sustains the competition amount Nokia, Motorola, LG, Samsung, etc because of its Innovation strength. This enables them to enjoy the total market share of 20%. To come up with this , Sony Ericsson defiantly needs to maintain its technology as well and its competitive cost base to attract more customers.
Also, the increase in Social networking should be maintained, Sony Ericsson have already targeted most of them such as Facebook, Twiter, myspace, etc as they are the upcoming attracters and gives an competitive edge.
In current market trends, there is a big increase in the Smart Phone users and to cope up with the trend. In 2009, Sony Ericsson largely focused on the high-end segment of the market with the launch of the Satio, Aino, W995 and Yari ranges. The Satio is a touch-screen with a 12MP camera and a Walkman; the Aino provides access to media content from a PlayStation3 console while on the move; and the Yari has a Nintendo Wii-like sensor for gaming. (Mintel)
3.4.1 Bargaining Powers of Buyers
The degree to which consumers influence demand is referred to as bargaining power (Jobba 2010). Sony Ericsson Offers its customers a big range of handsets at competitive price to satisfy the vast mobile consumer market which are from a basic phone users to top end latest technology buyers. This expands the market base for them not just within Europe but also enables them to serve this vast range in various economies.
3.4.2 Threat of new market Entrance
New Entry means new Rival which in turn means increased competition. Sony Ericsson need to be aware of all the big and small companies entering in various global locations into the mobile phone industry as the Sony Ericsson deals with all rang of handsets. Certain barriers should be put to inhibit new entrants. As Mobile market is very competitive the new entry and its survival is quite dull until as unless it’s a well know brand and good technology as what Apple’s iPhone did to the market share of smart phone of Sony Ericsson and other brands. The threat of new entrants to Sony Ericsson is quite low because of its established brand value and quality.
3.4.3 Threat of Substitute Products:
This is the ability of your customers to find an alternative way of doing what you do. As far as near future is concerned, an substitute of mobile handsets can’t be think of, so Sony Ericson need not to worry about this threat but it needs to be open for viewing the new technologies coming in for communication so that it can incorporate in new models.
3.4.4 Bargaining Power of Suppliers:
The bargaining power of suppliers can also be described as the market of inputs. Suppliers of raw materials, components, labor, and services can become power over the firm if there are few substitutes.
Since the start of our company in 2001, Sony Ericsson has operated under a corporate social responsibility code. This code helps employees make the ethically correct decisions necessary to perform their job duties on a daily basis. Sony Ericsson insists that it only works with suppliers who meet our stringent requirements. Influencing product improvement and development from an environmental and CSR point of view in the full supply chain is a key factor in achieving industry leadership as well as compliance with our requirements. All Sony Ericsson suppliers must undergo assessment to ensure compliance with our environmental and CSR requirements. The assessments verify that suppliers have procedures within place to control their own supply chain. (www.sonyericsson.com)
In this ways Sony Ericsson have developed loyalty from its suppliers and being a global market player, it does has the power of looking at different suppliers in tough times.
3.5 Value Chain
A useful method for locating superior skills and resources is the value chain. All firms consist of a set of activities that are conducted to design, manufacture, market, distribute and service its products. The value chain categorizes these into primary and support activities (Jobber, David. Principles and Practice of Marketing, 5th Edition. McGraw-Hill International (UK) Ltd, 12/2006. 220.127.116.11).
The value chain
Product differentiation can provide competitive advantage, but it also leads to complexity that increases supply chain risk. The challenge many manufacturers face is making the right tradeoff decisions between the two. Sony Ericsson addresses this by analyzing the total supply chain effect of various design strategies (amrresearch.com) this might be internal to the organization or external.
Sony Ericsson it has a tie up with ATCLE in US for packaging and final manufacturing touch until they arrive in Texas with ATCLE’s distribution Center. This gives Sony Ericsson two advantages:
“We saw it as a positive trade-off between what ATCLE would charge us compared to the cost of bringing this blister pack product from Asia,” Correal says. “We also saw an opportunity not only to save on transportation but also as a way to bring final customization of the product closer to our customer in Dallas. That gave our customer more flexibility with respect to the customization they wanted to make right up until delivery.” (supplychainbrain.com)
Similarly, the tie up of Sony Ericsson with Ingram for its nationwide sales and distribution in India.
Building up of the High Quality of Value Chain makes Sony Ericsson more probable by customers because they get better service quality across the globe and it also gives organization more by letting them concentrate more on the product and quality they are developing.
Sony Ericsson defiantly have a competitive advantage over its competitors because of its Strong Value chain within the various operations without the organization and outside across the globe.
4.0 Marketing Mix
Diffusion of a product depends on its positioning. It includes complexity, differential advantage, divisibility, compatibility with customers’ values, i.e. life style, experiences and behaviours, and communicability (Jobber 2010:384-409). Companies should be careful in choosing the target market and showing the differential advantage the product has. This could be achieved by a combination of successful brand naming, image, service, design, guarantees, packaging and delivery. All of those mentioned are included in the four marketing mix framework which will be discussed in this section (Jobber 2010:311).
Product is a crucial part of the marketing mix; it’s the element that the company starts to build and shape its identity and most importantly generates profit. All companies have products, whether tangible or intangible, but what differentiates their products from each other is the branding itself. Branding includes choosing a name, creating a design, insuring quality and the line of products. Positioning is created out of those elements, bearing in mind that they, together, should be clear in the message they deliver, credible, consistent and competitive.
These elements augment the perceived value and performance of customers. It’s also a barrier to rivals, gain for high profits and base for brand extension, quality certification and trust (Jobber 2010:305). We are going to discuss each one of them with reference to Sony Ericsson Company.
4.1.1 Brand Name
Developing a distinctive name for the brand differentiates and distinguishes it from other products in the market. Brand naming should evoke positive emotions, be easy to remember and pronounce and suggest the benefit of the product. Sony Ericsson always uses prestigious names for its brands that suggest sophistication and smoothness, like its newest mobiles Xperia, Xperia X10 and Vivaz. They are easy to remember and they provoke a kind of excitement for the customer to be introduced to those products. Also the company uses alphanumeric when naming its brands to emphasize technology which expand its targeted customers. Sony Ericsson choice of names is very successful when compared to other mobile names like Nokia 7230, Motorola Dext; the former combines the two essential elements of simplicity and technology (Jobber 2010: 319-320).
Another important aspect of brand naming is the brand heritage; it adds value to the positioning of the brand in the market. When looking at Sony Ericsson, the name of the company itself evokes positive association of two big huge companies; the Japanese company, Sony and the Swedish telecommunication company, Ericsson. So the name of the mobile company itself guarantees high quality for the targeted customers; they can trust the brand just by knowing its name.
Sony Ericsson Company’s name and its brands name have a very positive impact on the targeted market due to the combination of good quality associated with technology.
4.1.2 Product Design
Positioning is defined by Kotler as the act of designing the company’s offering and image to occupy a distinct place in the target market’s mind. (Kotler 2000). So design has a great emphasis on the positioning of the product. Brands should not focus on functional values only; those values should be combined with emotional excitement to compete effectively in the market. Did Sony Ericsson achieve this distinction in its designs?
Sony Ericsson invests in colour and design to augment nowadays what is considered a basic product to create appeal for its target market. Its new slogan is meant to make people smile, so it tried to design mobiles, like Xperia and Vivaz to deliver this purpose (Sony Ericsson 2009).
It also found new market to target by observing that QWERTY device usage has grown. Sony Ericsson was losing the market for iphones, so it created a slide out keyboard mobile Xperia X10 mini which will be introduced to the market soon. Usually QWERTY mobiles are comparatively big, so Sony Ericsson wanted to create a competitive advantage by being better than mobile companies and apple iphones. (Two mobiles in one; small and QWERTY). It wanted its mobiles to be more appealing. it created a mobile smaller than a credit card and with all features that any normal mobile will have.
Xperia X10 mini
Sony Ericsson keeps looking into the market searching for a change in customer’s trends; it keeps in contact with customers and encourages them through its website to develop and design mobiles that appeal to its customers. The company has “Theme Creator” blog, for instance, to be the first to respond to the market inevitable change. Now it is designing its products to emphasise its new slogan “make people smile!” Sony Ericsson is trying to make its designs appeal to the human senses; beauty is all around.
The product should at least achieve the basic function it’s expected to do; higher quality brands mean higher market share and higher profitability (Jobber 2010:303).
As mentioned before, having the co-branding of Sony and Ericsson gives a guarantee for the customers that their products are of high quality. The name encourages customers to buy the product. Unfortunately, the co-branding insures only short-term quality insurance; the experience of the customers is far more crucial. Did Sony Ericsson insure quality for all of its products?
Few years back, Sony Ericsson had a great success in selling high quality Walkman mobiles; it was the first in market to bring mobiles with music added features. Unfortunately, trends of the market changed after a while. With the fast explosion of technology, customers started to look for more technologically sophisticated mobiles. The appearance of smart phones made the handset phones less appealing to customers (Chang, Chen, Zhou 2009:6).
Sony Ericsson responded slowly to the change; it kept producing Walkman series till recently. This made it lose market share to competitors, like Nokia and Motorola who responded to the change by developing their mobiles’ designs and functions to match with the market needs and desires.
Lately, Sony Ericsson understood this change and developed new mobile series, Satio, Xperia and Vivaz which highly appealed to customers. They are technologically advanced, have brilliant designs that combine tiny size, without compensation of any features, different colours and ease of usage to connect with the internet and upload any number of pictures on social networks like Facebook, You tube or Twitter. By finding this new growing communicative community markets, Sony Ericsson now is gaining profits and growing its market share.
Sony Ericsson major quality lies in its technological advantage emerging from the integration of telecommunications technology and Sony’s powerful image and technological lead in the market. This is the advantage which most phone companies do not have. And with the development of technology, relying on the expertise of Sony’s company
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