Your full February 26, Reworded Paper The deployment of vertical integration of the products’ ever changing content and hardware has maintained Sony as one of the most successful companies in the world. Vertical integration refers to a company’s possession of required inputs or of output channels, according to Rothaermel (209). Sony has always been able to offer products with high quality, due to which it has enjoyed superb reputation in the electronic industry. The creation of innovative products like PlayStation and Walkman are the result of Sony’s amazing strategic business units that include electronics, software, music and computer divisions.
Such creative products made Sony one of the leading electronic companies of the world. Sony has been able to prove and improve its efficiencies through maintenance of its economic factor, as it has diversified hardware divisions that enabled it to experiment with the products, which were not only differentiated but also cost-efficient. Soft alliance and hard alliance are two strategic alliances being discussed in the case here. Sony merged CBS records into Sony Music Entertainment to implement its strategy of vertically integrating content and hardware.
This is what is described as hard alliance by Mr. Idei. Sony had to leave its position of leading company for Apple because this merger compromised the quality of its products, according to Mr. Idei. Sony had to face the consequences, and had to admit that acquiring manifold companies in the merger does not guarantee high quality products. Location is one such problem, as the hardware and content divisions lay far apart making communication a big issue. Unlike P&G, for example, which can produce high quality goods under the same plant through shared knowhow and processes, Sony’s SBUs failed to cooperate and communicate, and this gave rise to cultural differences and synergy issues.
In contrast to hard alliance, soft alliance provides a flexible accessibility platform to merger parties that are willing to become partners and cooperate with each other. For example, Apple implemented soft alliance and captured the lead position in the market. Apple was able to lead the music industry because it had successfully synergized its strategic business units. Apple captured market share from Sony through outsourcing its components and implementing an effective integration strategy.
This also led to an understanding of the overall organizational culture. Sony lagged behind in digital portable music industry because it failed to cooperate with its content division despite being efficient in the hardware division. The two divisions had different visions, which harmed Sony’s overall competitive advantage. Sony’s vertical integration strategy was cost-efficient, but risk was also there. Apple’s outsourcing, like FoxConn Plant in China, has reduced costs, which has enabled the company to focus on value creating goods. Size and complexity of goods are also not an issue with Apple.
iPod is one example of Apple’s innovative products which came through the efforts of a small but powerful, cross-functional team. iPad was the next step in the smooth integration strategy. Such innovative goods made Apple the leading tech company of the world. Sony, on the other hand, lost its market. Soft alliance would also have proved to be the best strategy for Sony, because this company had the potential of diversifying by acquiring other firms. Sony’s M&A strategy was also unsuccessful.
Its content and hardware divisions failed to cooperate in vision and function. They resulted in value reducing diversification. Cost structure increased despite vertical integration. Hence, Sony lost its competitive advantage to Apple. Contrarily, Sony would have survived its competition through outsourcing, forming partnerships through soft alliance, or implementing taper integration by forming long-term partnerships. This would have enabled Sony to focus on its value creating products and maintain its market share. Hence, an important recommendation for Sony is to function and innovate like Apple does. Sony is capable to innovate and differentiate, and has potential to regain its market share.
First of all, Sony must revise the ways its content and hardware divisions collaborate with each other. The vision, goals and objectives of the two divisions must coincide. Successful collaboration between these two divisions can enable Sony to produce such value creating goods that can be better than Apple’s product line. Sony should ponder upon differentiating its product line when Apple is still standardizing its own. If the two divisions fail to cooperate, then Sony must opt for soft alliance approach.
Through soft alliance, Sony will be able to make partnerships with other companies of the same vision. This will not only improve Sony’s integration strategy but will open up new possibilities. Sony’s SBUs lost collaboration because of increase in size, different locations, poor management and increased cultural diversification. Sony must downsize its strategic management team to be able to focus on outsourcing and collaboration. Sony must also revise its vision and cultural dilution, and must consider providing incentives. These strategies will help Sony regain its market share and competitive advantage.
Works Cited Rothaermel, Frank T. Strategic Management Concepts. New York: McGraw Hill Companies, 2013. Print.