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Sony Corporation: A new strategy for 2015

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Presentation on theme: "Sony Corporation: A new strategy for 2015"— Presentation transcript:

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


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