1. Sony Corporation: A new strategy for 2015
Seattle
April 2012

2. Outline Sony Today Problem Statement Context Analysis
The B SONY strategy
Financial Impact
Risk Management
SONY| April OUTLINE

3. SONY TODAY
SONY| April SONY TODAY

4. Sony Today Financial Status Stock price continuously decreasing
SONY| April SONY TODAY

5. Sony Today Financial Status Profit Margin Earning Power
Profit margin starts decreasing
Profit Margin
Earning Power
Earning power is negative in 2009
SONY| April SONY TODAY

6. Sony Today Reorganization efforts
Two cross company units were created: Common Software and Technology and Manufacturing/Logistics/Procurement
Reshuffle of some of the top executives in the company
Closure of eight manufacturing sites and a reduction of the workforce by
SONY| April SONY TODAY

7. Sony Today Essential Tenets Being a piooner – not following others
INNOVATION
Being a piooner – not following others
Doing the impossible
Sony helps dreamers dream
2. CREATIVITY
SONY| April SONY TODAY

8. PROBLEM STATEMENT
SONY| April PROBLEM STATEMENT

9. How can SONY be number one again?
SONY| April PROBLEM STATEMENT

10. Business Segments Silo Culture Production place Key issues
SONY| April PROBLEM STATEMENT

11. CONTEXT ANALYSIS
SONY| April CONTEXT ANALYSIS

12. Business Segments SONY Electronics Audio Video Televisions I &C
Semiconductors
Components
Games
Games console
Software business
Music
Pictures
SONY| April CONTEXT ANALYSIS

13. Silo Culture
“when several departments or groups do not want to share information or knowledge with other individuals in the same company”
Advantages
Creates competitiveness
Problems
Lack of communication between departments
No synergies
Delays in products’ launch
SONY| April CONTEXT ANALYSIS

14. High manufacturing costs
Production place
Japan
High manufacturing costs
Appreciating Yen
SONY| April CONTEXT ANALYSIS

15. Sony Today – summing up weaknesses strenghts opportunities threats
Innovation
Know-how
Brand value
Global diversification
weaknesses
Silo culture
Too big
Production place
opportunities
Innovative market
threats
Extremely competitive markets
Appreciating Yen
SONY| April CONTEXT ANALYSIS

16. FIX IT
Sony Corporation | April RECOMMENDATION

17. The bSony strategy Second step
2. Fix It
Defining values
What does it mean to bSony?
How can I bSony?
How to make others bSony?
How?
Changing Silo Culture
How can Sony improve silo teams?
How to avoid silo culture weaknesses?
How to make stakeholders bSony?
Sony Corporation | April RECOMMENDATION

18. Fix it How to bSony? What does it mean?
CLIENT FOCUS
Sony Quality
Sony Innovation
INTERNAL FOCUS
Sony Alliance
Sony Flexibility
Sony Corporation | April RECOMMENDATION

19. Fix it How to bSony? What does it mean?
Sony Quality
To produce high quality products.
Reinforce brand quality recognition
Sony Corporation | April RECOMMENDATION

20. Fix it How to bSony? What does it mean?
Deliver, through our wide range of appealing products, the most compelling and exciting content and entertainment experiences to our customers around the world.
Cutting-edge, differenciated products and services.
Sony Innovation
Sony Corporation | April RECOMMENDATION

21. Fix it How to bSony? What does it mean?
Sony Alliance
Network Sony products and services to achieve maximum performance.
Develop team spirit.
Focus on a global strategy.
Sony Corporation | April RECOMMENDATION

22. Fix it How to bSony? What does it mean?
Be open-minded, embrace change when it means a greatter good.
Adapt business to new market needs.
Sony Flexibility
Sony Corporation | April RECOMMENDATION

23. Fix it How to make you bSony?
Workshops with Administration, Managers and CMOs on Leadership and Collective Ambition. (Harvard)
Team building activities focused on bSony values.
Promote and Reward internal initiatives inspired by bSony values.
Young blood open mind and free spirit.
Incoporate bSony values in official reports, internal documents and stakeholders messages.
Affix bSony values inside office spaces and production stations.
Discuss bSony values with Managers and CMOs, insuring their understanding and focus.
Communicate
Embrace
Sony Corporation | April RECOMMENDATION

24. The bSony strategy Second step
2. Fix It
Defining values
What does it mean to bSony?
How can I bSony?
How to make others bSony?
How?
Changing Silo Culture
How can Sony improve silo teams?
How to avoid silo culture weaknesses?
How to make stakeholders bSony?
Sony Corporation | April RECOMMENDATION

25. Fix it Silo culture & bSony
Misallocated resources
Inconsistant messages to the marketplace
Fail to leverage scale economies and sucesses
Hazardous autonomy and competitiviness
Problems
Use cross-functional teams.
Foster communication across silos.
Promote internal cooperation and bSony pride.
Develop common planning processes.
Develop silo-spanning marketing programs.
Solutions
Mobility Programs between Sony Groups.
bSony Solutions contest.
10% working time dedicated to bSony.
Balanced Scorecard discussions with silos.
How?
Sony Corporation | April RECOMMENDATION

26. The bSony strategy Second step
2. Fix It
Defining values
What does it mean to bSony?
How can I bSony?
How to make others bSony?
How?
Changing Silo Culture
How can Sony improve silo teams?
How to avoid silo culture weaknesses?
How to make stakeholders bSony?
Sony Corporation | April RECOMMENDATION

27. Implementation Plan The bSony strategy 2010 2011 2012 2013 Restructure
Prepare Music and Pictures sales
Join efforts of Audio, Video and I&C with Sony Ericsson into Sony Mobile.
Fix It
Defining Values
Communicate
Embrace
Changing Silo Culture
Cross-functional teams
Internal communication and cooperation
Silo-spanning marketing
Sony Corporation | April RECOMMENDATION

28. FINANCIAL IMPACT
SONY| April Financial Analysis

29. S.Pictures Entretainment
Financial Analysis – Valutation
S.Pictures Entretainment
Item
Million Yens
Average Sales
760,000
Average Profit Margin
7.5%
Average Net Profits
57000
WACC
8.00%
Final Value
712,500
S.Music Entretainment
Item
Million Yens
Average Sales
511,090
Average Profit Margin
1.5%
Average Net Profits
7666
WACC
8.00%
Final Value
95,829
Cash intake: 808 Billion Yens
SONY| April Financial Analysis

30. Financial Analysis – Assumptions and Calculations
Assumptions Calc.
2010
2011
2012
2013
Tax Rate
30%
WACC
5.7%
Growth of Sales
-1% 3% 5% 9%
Cost of Sales / Sales
75%
74%
72%
Op./Net Profits 7%
10%
12%
Investment Total
Million Yen
Mobility Programme
2,800
Internal Reorganization
20,600
New Products Development
225,200
B.U.Selling Efforts
300
Legal Costs
820
Marketing
9,700
Project Contests
1,210
Management Culture
130
Changes in Graph.Material
700
Total
261,460
SONY| April Financial Analysis

31. Conservative Scenario Project IncrementalProfits
Financial Analysis – Impact
Cenario
2010
2011
2012
2013
Conservative Scenario
Project Profits
-666,539
896,553
183,320
264,546
Project IncrementalProfits
-623,985
938,256
107,594
136,114
Without Project
Profits
-42,554
-41,703
75,727
128,432
NPV
Billion Yens
CAGR
59%
A.P.Time
1,5 Years
SONY| April Financial Analysis

32. RISK MANAGEMENT
SONY | April Risk Management

33. Risk Management 1 2 MAIN RISKS: Employees’ demotivation
Severity
Probability
MAIN RISKS:
Employees’ demotivation
Lack of Interested buyers 1 2
SONY | April Risk Management

34. Risk Management 1. Employee Demotivation 2. Lack of interested buyers
1. Flebility on the agreed price 2
2. Large Pool of Possible Buyers
1. Develop intranet menu with updated info on the restructure process
2. Offer outplacement solution
3. Incorporate some employees into current Sony stucture 1
SONY | April Risk Management

35. 450 Yens - Billion Summing up How can SONY be number one again?
Silo Culture
Production Place
Business Segments
To big to be fixed:
BSony
Selling Audio Music
Sony mobile recreation
Improved Silo Culture
450 Yens - Billion
(NPV)
SONY | April SUM UP

36. Q&A
BACK-UP
Financials - WACC
Financials - Valutation
Relocation
Financials - Product. Dev.
Financials - Balance Sheet
Financials - Income Stat. – Prevision
Financials – Cash Flow Impact
INDEX
CONTEXT ANALYSIS
FIX IT
VALUES
SILO
IMPLEMENTATION PLAN
FINANCIALS - Valutation
FINANCIALS – Calc.
FINANCIALS - Impact
RISK MANAGEMENT

37. Urban Water Partners | April 2012 Financial Analysis

38. IESE Business School Study
WACC
WACC Components
Value (Million USD) E
20,880,000 D
96,000,000 V
116,880,000
Cost of E 9%
Cost of D 7%
Taxe Rate
30%
E\V
17.86%
D\V
82.14%
WACC
5.61%
Indicator
Proxy
Rate
Risk Free Return
Japanese Gov. Bond
1.5%
Market Risk Premium
IESE Business School Study
5.0%
Market Return
Calculation
6.5%
Beta -
1.47
SONY| April Financial Analysis

39. Valutation SONY | April 2012 Financial Analysis Warner Item
Million Dolars - %
Revenues
3,510
Net Profits 60
Profit Margin
1.71%
Paramount - Viacom
Item
Million Dolars - %
Revenues
14,620
Net Profits
1,241
Profit Margin
8.49%
SONY | April Financial Analysis

40. Valutation SONY | April 2012 Financial Analysis SPE value to Sony
SME value to Sony
Item
Million Yens
Average Sales
760,000
511,090
Average Profit Margin
5.0%
2.0%
Average Net Profits
38000
10222
Discount Rate
8.00%
Final Value
475,000
127,773
SONY | April Financial Analysis

41. Relocation SONY| April 2012 Financial Analysis Samsung 2010 LG Sales
Cost of Sales
COS / Sales
69%
45%
SONY| April Financial Analysis

42. Historical Balance Sheet
Item / Year
2006
2007
2008
2009
Cash
703,098
450,368
787,764
660,789
% Growth
0.0%
-35.9%
74.9%
-16.1%
Total Assets
11.9%
7.8%
-6.1%
Total Liabilities
12,013,511
0.00
0.12
0.07
0.35
SH Equity
3,203,852
3,545,340
3,863,320
0.11
0.09
2.11
SONY| April Financial Analysis

43. Results Final Profits -666,539 896,553 183,320 264,546
Historical Income
Previsional Income
Item / Year
2006
2007
2008
2009
2010
2011
2012
2013
Sales
6,692,776
7,567,359
8,201,839
7,110,053
6,825,650.88
7,030,420.41
7,381,941.43
8,046,316.16
Lost Sales
0.0
1,271,090
Sales 2
5,554,561
5,759,330
6,110,851
6,775,226
% Growth
13.1%
8.4%
-13.3%
-4.0%
3.0%
5.0%
9.0%
Cost of Sales
5,151,397
5,889,601
6,290,022
5,660,504
5,119,238.16
5,202,511.10
5,462,636.66
5,793,347.63
COS / Sales
77.0%
77.8%
76.7%
79.6%
75.0%
74.0%
72.0%
Net Profits
123,616
126,328
363,656
-102,214
51,192
127,954
191,930
270,356
Op./Net Profit
8.0%
7.5%
19.0%
-7.1%
7.0%
10.0%
12.0%
Cash Flow Impact -
768599
-8610
-5810
Final Profits
-666,539
896,553
183,320
264,546
SONY| April Financial Analysis

44. Development Costs
Apple’s Ipad: 300 Million to 1 Billion USD according to AppleInsider.com
SONY| April Financial Analysis

45. Cash Flow Impact SONY| April 2012 Financial Analysis Capex 2010 2011
2013
Total (M.Yen)
Mobility Programme
700
2,800
Internal Reorganization
5,000
15,000
300
20,600
New Products Development
200,000
22,000
3,000
200
225,200
B.U.Selling Efforts
Legal Costs
500
320
820
Marketing
1,300
4,200
9,700
Project Contests 10
400
1,210
Management Culture
100
130
Changes in Graph.Material
207,310
39,730
8,610
5,810
261,460
Additional Cash Flow Impact
Sale of Busines Units
808,329
Loss of Residual Value
602,773
-207,310
768,599
-8,610
-608,583
-55,903
SONY| April Financial Analysis

46. Assumptions 2 Without With SONY| April 2012 Financial Analysis
Assumptions \ Calc.
2010
2011
2012
2013
Tax Rate
30%
WACC
5.7%
Growth of Sales
-5%
-2% 4% 6%
Cost of Sales / Sales
79%
78%
Op./Net Profits
-3% 5% 8%
Without
Assumptions \ Calc.
2010
2011
2012
2013
Tax Rate
30%
WACC
5.7%
Growth of Sales
-4% 3% 5% 9%
Cost of Sales / Sales
75%
74%
72%
Op./Net Profits 7%
10%
12%
With
SONY| April Financial Analysis

47. Strength your credibility with silo teams and your CEO Use cross-functional teams and other strategic linking devices Foster communication across silos Select the right CMO role-- from facilitator to strategic captain Develop common planning processes Adapt your brand strategy to silo units Allocate marketing dollars strategically across silos Develop silo-spanning marketing programs In this age of dynamic markets, new media, and globalization, getting the different parts of your organization to collaborate is more critical
silo teams guard their autonomy vigorously.
firms misallocate resources, send inconsistent messages to the marketplace, and fail to leverage scale economies and successes