In 2001, the joint venture, Sony Ericsson, was formed after a
series of tough negotiations between consumer electronics
conglomerate, Sony, and Swedish telecom company, Ericsson.
After failing to live up to expectations, the joint venture was
disbanded in 2012 when Sony paid Ericsson 1 billion for their
stake in the joint venture. The new entity would be solely
operated by Sony and would be renamed Sony
Mobile Communications or Sony Mobile in short. In this
case you will familiarize yourself with the history of Sony Mobile
and you will be asked to develop a strategic plan outlining how
Sony Mobile can weather competitive challenges by embarking
on the opportunities that the theories on Managing in
Contemporary Organizations avail.
Sony Ericsson: A History
Sony Ericsson started as a private company with both Sony and
Ericsson owning 50% of joint-venture. Sony Ericsson started out
being incorporated in Sweden but headquartered in London. One
of the last presidents was Miles Flint, who in a previous capacity
presided over Sony Europe as well as Sony BPE. Sony
Ericssons R&D facilities are located around the globe: Canada,
China, India, Japan, the Netherlands, Sweden, the United
Kingdom, and the United States.
At the pinnacle of their success, Sony-Ericsson was the worlds
fourth largest producer of handheld mobile phones, trailing
Nokia, Motorola and Samsung. According to IT Gartner, Sony
Ericsson had a global market share of 8% and booked the
biggest increase in sales compared to its direct competitors. In
2006 it posted a turnover of close to 11 billion with net profit
that approached 1 billion. As Sony Ericssons business was
expanding during these years, it employed close to 8000 people
worldwide, almost doubling its initial workforce in its first 6 years
of operations. Currently, Sony Ericsson carries well over 75
different products distributed over 11 product series. Their most
notable products were the K-series with Cybershot camera
functionality and the W- series with built-in Walkman digital
music technology.
Burning Bridges
Despite becoming successful in the mid-2000s, the start of the
joint venture was no bed of roses. The creation of Sony-Ericsson
was littered with pressing issues that needed speedy resolutions
(Els, 2007). Commenting on the precarious state of affairs in the
summer of 2003, the then CEO, Kurt Hellstrom, said that he
would consider pulling out of the joint venture if sales did not pick
up swiftly. And it was not until late 2003 that Sony Ericsson
booked its first profits substantially lagging behind initial
estimates (Sigurdson, 2004).
The joint-venture was built on the ashes of earlier operations in
the mobile phone market in which both Sony and Ericsson had
lost out to the competition. Though being a market leader for
years, Ericsson found itself quickly losing market share in the
new millennium. The trigger event was a fire in a Philips chip
factory in Mexico in early 2000 and the disaster that unfolded
was a grim reminder for Ericsson that technological superiority is
a fragile thing. Since Ericsson single-sourced chips from Philips
this fire led to substantial delays in production, essentially
eroding its competitive advantage (Sigurdson, 2004). Until then,
Ericsson could champion miniaturization as the main selling
point for its products by building on the technological prowess
that Ericsson
Mobile Platforms (EMP) provided (Sigurdson, 2004). But the fire
set in motion a slump in sales from which the mobile operations
of Ericsson never fully recovered. Sony on the other hand was a
late entrant in the global market for mobile phones and never
could make its mark in this lucrative industry. Although Sony had
a strong presence in Japan, it could only command a 2% global
market share (Sigurdson, 2004). For both it seemed a good
opportunity to enter into a strategic alliance to reinvigorate their
mobile phone competencies.
Building Bridges
Although both companies had been approached by other
interested parties, Sony and Ericsson both perceived the
greatest synergies in each others complementary competences.
Ericsson was an attractive partner for Sony since it had market
access combined with technological prowess. Sony on the other
hand could reciprocate by bringing its strength in developing
user interfaces and top-end applications to the table allowing the
integration of many functionalities into one mobile phone. But it
was no easy marriage at first; Ericsson demanded that Sony
would pay substantially for being able to tap into Ericssons
technology. But when Sony refused it was decided to leave EMP
out of the equation. Currently EMP is still a separate entity within
Ericsson, providing chipsets to Sony-Ericsson as well as to its
competitors LG, Samsung and Siemens (Sigurdson, 2004).
During the first years of operations, three key issues were
identified and which needed to be resolved if Sony Ericsson was
to be a key player on the market for mobile phones. These major
hurdles revolved around: 1) design, 2) supply chain
management, and 3) technology transfer (Sigurdson, 2004).
First, it proved very difficult to come up with appealing mobile
phones since the designers of both companies were differently
inclined and often did not understand each other. All design
codes were re-written to enhance the communications between
the designers. Second, unlike its main rival Nokia, Ericsson did
not develop a strong supply chain management capability which
was reflected in the new joint venture as well. Sony executives
stepped in to further streamline the production process and bring
supply chain management under control. Third, integrating new
technologies into Sony Ericsson products took a long time and
this was finally resolved by having the prototypes developed in
Japan first and then transferred to other R&D centers around the
On the Move; Mobile Communication in the 21st Century
Although it has successfully implemented these necessary
changes, new challenges are looming for Sony Ericsson,
amongst others:
As the company is quickly expanding its consumer base
by tapping into new and emerging markets (Sony Ericsson,
2005), the complexity of its supply chain is increasing. This
will make additional demands on how the organization is