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Case Study: The Collaboration Between Sony and Ericsson

Nowadays, it’s very common for companies from different countries and sector to work together. In 2001, a joint venture company – Sony Ericsson Mobile communication has been established by a Japanese electronics company Sony Corporation and Swedish telecommunications company Ericsson. The aim of this cooperation is to produce the mobile phone with multimedia communication solution to customers all over the world. The initial for this collaboration is to associate the Sony’s multimedia consumer electronics expertise and Ericsson’s technical knowledge in telecommunications. Once Sony Ericsson established, both of the companies stopped their individual mobile business. The Sony Ericsson Mobile Communications is a London-based 50:50 joint venture business. Before the collaboration, Ericsson ran its mobile business in the market for years and obtained 10.7% in the handset market in 2000. It has a great loss when faced the cheaper mobile phone producer as Nokia. Mobile phone is one of the core businesses in Ericsson. Thus they can’t abandon this part of business. Ericsson had the advantage of the leading infrastructure. Meanwhile, Sony had just 10% market share in Japanese handset market and 1% in all over the world. However, Sony obtained the multimedia technology enable to enter the global market. Sony Ericsson employed 2500 stuff from Ericsson and 1000 stuff from Sony. Sony and Ericsson both obtain 50% of the capital. And each of them obtains half of the board’s positions. This business had been expected to take over all the mobile phone technology from the parents and to be able to compete with Nokia and Motorola in the market.

How does the Collaboration between Sony and Ericsson Conducted

Ericsson obtained the core handset technology, however Sony at that moment don’t want any cash contribution. In that time, Ericsson played the major role in that deal according to its global market share and handset technology. Thus the Ericsson Mobile Platforms has been excluded in the joint venture deal. Thus EMP has to reduce the operating cost and sell technology to other company as LG.

The final agreement was finalized in the end of 2000 between the two companies. Then followed a group of discussion on how to conduct this collaboration in terms of management, manufacturing, Research and Development , and governance, etc. The board of the joint venture was formed 50-50 from two companies, and with a president to be named by Sony. 1,500 staff came from Sony and Ericsson brought its organization of products, sales and marketing. The new joint venture has been named Sony Ericsson Mobile Communications. There were many challenge issues for two big company’s collaboration. The intellectual property rights (IPR) is one of the critical issues. Since it was very difficult to identify how much the two companies should transfer IPR to the joint venture at the beginning. Sony built up a team called Functional Integration Team to tackle the joint venture issues. Sony decided to take over the management of manufacturing by controlling the Sony-Ericsson’s own production plant with Chinese partners. And Sony also is in charge of the supply chain management which Ericsson had long-term operational experience in. Thus Sony took many important positions in Sony-Ericsson management: Sony executives had been transferred to take over the business units and supply chain management. While Ericsson ex-executives took over HR and other departments. The operation of the joint venture started at Oct-1 2001.

The second issue in Sony-Ericsson is the supply chain management, which didn’t work well. Firstly, the manufacturing had been divided into three manufacturing facilities in Sony-Ericsson: Ericsson manufacturing contracts with EMS, Sony manufacturing company, Ericsson manufacturing plant in China. There was a huge challenge on managing the manufacturing since it’s very difficult to manufacture products ordered and meet the requirement of quality. Especially the outsource supplier – EMS, which met great challenge on delivering qualified products on time. The different type of manufacturing source brought Sony-Ericsson a critical problem. Secondly, Time to market is a very important criterion in mobile phone market due to the fierce competition. The management of platform in Sony-Ericsson is a weak point compare to the other competitors as Samsung and Nokia. Due to lack of management, in the platform, it was found the new orders were laid without organization. This became worse when the marketing strategy had been set to increase the market share. The issue occurred because Sony-Ericsson lack the knowledge on management of production process and supply chain management.

The third issue was technology transfer . Sony contributed the screen and camera technology to Sony-Ericsson. All the related technology was explored in Japan and transferred to Europe. It took a long time for the technology can be applied based on the telecom infrastructure in Europe. The core handset technology came from Ericsson. EMP combined the software and chip as product, which is a new business model . As above information indicated, EMP didn’t be included in the joint venture deal. And the cost of EMP was really high because of the exploration of 3G and GSM at the same time. Thus EMP served Sony-Ericsson as customer, as well as Siemens, LG, and Samsung.

The collaboration between the two big companies has been considered as one of the most complex one. It took long time to implement and consolidate. Compare to the previous soft alliances, Sony aimed to build a stable collaboration to expand the mobile business. In summary, the joint venture is able to combine the technical strength from both sides. As identified before, Sony is good at the multimedia customer electronics. The first series of products is walkman portfolio. Sony transferred their multimedia technology to Sony-Ericsson. While Ericsson contributed the core handset technology and telecom infrastructure which enable Sony-Ericsson to release series of mobile phone based on cooperation with telecom operators. But due to Sony don’t want to invest at the beginning. The core handset technology still has been kept in EMP. This is one of the mistakes of Sony in this collaboration. EMP was focusing on integration of software to system. And it became one of the advanced research center on GSM and 3G. However the operation cost of EMP kept on increasing. Sony-Ericsson purchased chip with software from EMP, which was a high-cost component. Even though, EMP couldn’t balance the cost and income. It had to supply other mobile companies for sustaining. Sony-Ericsson can’t involve the management of the EMP. This will become a weak point in the future.

The managers of Sony-Ericsson initially came from Sony and Ericsson, but the management was isolated from Sony and Ericsson. The challenge issue here is the different culture of the two companies. Globalization is a common phenomenon everywhere. Even difference of culture can be solved in personal level. It’s quite difficult to merge a big group of people with totally different culture. Sony is a big international company. However, it still holds a perspective of business strategy , marketing, design, and product development , etc different with other western companies. Compare to Sony, Ericsson is a low masculinity organization which has low work stress, high gender quality, equality between employees, and team work. In traditional Japanese company, staff can’t question the boss’s instruction which is observation in western company. Thus Sony-Ericsson created their own company value as ‘Passionate, Innovation and Responsive’.

Discussion on Outcome from Sony and Ericsson’s Point of Views in Terms of Success and Failure of this Collaboration

From both of Sony and Ericsson’s point of views, it is benefit to look for a partner to establish a joint venture. This alliance can bring advantage as risk reduction, international expansion , technology transfer, sharing capital facilities and equipment. Once the joint venture establishes, the tangible and intangible assets will be transferred from parents to the joint venture. The tangible assets include capital facilities and equipment, technology and patents. The intangible assets may include the brand name, explored market, reputation of company, etc.

Sony was in a reasonable good place in Japan before the collaboration. And they found the mobile business is a growing business. However, Sony was not a major player in GSM market in the global market. However, Sony is very excellent on product design. It wouldn’t be difficult for Sony to gain more market share from the initial 2%. But if Sony want to be a major player, it’s not enough to rely on product design and multimedia expertise only. According to the previous experience on soft alliance, Sony realized joint venture would be the best choice to work with partner in this business. The benefit to conduct this collaboration with Ericsson is Ericsson is experienced in European market; It obtains the infrastructure of telecom and it has handset technology; in 2000, Ericsson rank number 3 in mobile phone market. Sony can enter European market easily with this partner and also can built the brand name for other business of Sony as TV. Sony doesn’t have to invest on infrastructure and technology on this deal. However, the failure of this collaboration to Sony is the EMP. Sony didn’t want to invest in EMP initially in 2000. Consequently Sony is not able to learn from the Ericsson for the core handset technology. Furthermore, EMP is one of the most advanced research center for GSM and 3G technology. To sustain the operation, EMP sells products to Sony-Ericsson, Samsung, and Nokia. And Sony-Ericsson didn’t have any advantage from it. From Sony’s point of view, it’s able to enter the international mainstream market of mobile phone via the joint venture. In this collaboration, Sony can utilize the advantage of product design. Sony also learn a lot from western company on business management for example supply chain management, which contributes a lot on Sony’s global expansion. The experience of collaboration also has been considered as internal ‘good practice ‘. After collaborated with Ericsson, Sony also collaborates with companies as DoCoMo in other business. The performance of Sony-Ericsson compare to the initial purpose isn’t so good. Especially in 2008, Sony and Ericsson had to inject 1.8 million Euro to Sony-Ericsson again to overcome the economic crisis. And Sony showed disappoint on this collaboration in terms of disagreement on business strategy. Up to now, even Sony entered the mainstream market. It still can’t compete with other major competitors in the market.

From both of their view, this collaboration is not easy to be conducted. Due to many issues and conflicts, Sony-Ericsson can’t achieve a maximum profit and increase the market share as expected. Technically, Sony Ericsson combined the core technology from Ericsson mobile business and Sony’s multimedia technology. This form of collaboration worked well in the first 3 years. Walkman mobile phone was released very successful. However, today’s mobile phone has been expected a lot from customers. Sony-Ericsson didn’t cooperate well to work on the R&D on new technology. The two companies still have a lot of conflicts on the business concept, and the inefficacy management on that may lead to an end of the cooperation. From the point view of the profitability , this collaboration didn’t achieve the expectation in the first two years until the third quarter of 2003. During the economic crisis period, Sony-Ericsson experienced tough time. The parent companies have expected payback in the last 10 years.

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Creating Corporate Culture: a study of strategies employed to cultivate High Performance Mentality within Sony Ericsson

• Frendberg Elin
• Published 2007

2 Citations

Corporate culture in an international joint venture - a case study of sony ericsson, impact of trust on the performance of multi-national partnerships, joint venture, merger and acquisition, 30 references, enhancing the success of mergers and acquisitions: an organizational culture perspective, integration and creative experiences after a merger of two organizations within the social insurance service: a longitudinal group perspective, matching corporate culture and business strategy, match your merger integration strategy and leadership style to your merger type, why did the telia-telenor merger fail, mastering the dynamics of innovation: how companies can seize opportunities in the face of technological change, in search of sustained competitive advantage: the impact of organizational culture, competitive strategy and human resource management practices on firm performance, comparison of selected work factors in japan and the united states, the influence of corporate culture and organisational commitment on performance, hybrid arrangements as strategic alliances: theoretical issues in organizational combinations, related papers.

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Can Sony succeed where Sony-Ericsson partnership failed?

• Published 13 October 2011

Despite launching new products, Sony Ericsson has been losing its market share

Desperate times call for desperate measures. The phrase is a perfect way to describe Sony's reported interest in buying out Ericsson's stake in their joint venture.

At its peak in 2007, Sony Ericsson enjoyed a 9% share of the global mobile phone market and was the fourth largest phone manufacturer.

Things have changed drastically since. The mobile phone has been transformed from an ordinary gadget to a pocket computer.

The "smartphone" has gone from being a niche product to a mass market one but Sony Ericsson has not been able to keep pace with its competitors.

In the second quarter of 2011, its market share fell to 2% and it now ranks 11th on the list of phone manufacturers.

"They originally came together to incorporate the Ericsson technology and the Sony brand, but they haven't been able to achieve much with the combination," says Bryan Ma of IDC Asia-Pacific.

Feeling hampered?

While the 10-year long partnership between the two companies has more or less been a smooth one, analysts say the association may have run its course.

"When the joint venture was formed, mobile phone technology was simple and Ericsson's inputs in that area suited Sony's purposes," says Tim Charlton of Charlton Media.

"Now things have changed. Phones are much more advanced and Sony feels it is hampered by the fact that Ericsson doesn't bring much to the table with regard to the smartphone segment," he explains.

Mr Charlton adds that the inability of Sony Ericsson to come up with a product that can challenge its competitors is beginning to hurt.

"It is clear that the smartphone is at the heart of the consumer electronic experience," he says. "Sony must be feeling frustrated that they are locked out of this domain."

Analysts say the 50-50 partnership has played a role in hurting the company's product development.

"Whenever decisions are made at one end, they need approval from the other," says Melissa Chau of IDC Asia-Pacific.

"That has hindered their ability to bring new products to the market at a fast pace," she adds.

Ms Chau explains that this has been a big hurdle, given the speed with which technology is evolving in the mobile phone market.

Leveraging Sony

So the big question is: can Sony succeed alone where the Sony-Ericsson partnership has failed?

Analysts say though it is difficult to predict, the key to its success lies in how well it can leverage its other businesses to support the smartphone segment.

"They already make games, own music rights and know what a consumer wants," says Mr Charlton.

At the same time, Sony's already established network of marketing, distribution and retail channels may help it push through the products much better.

However, analysts say that for all of this to work, the single most important factor will be coming up with the right product.

"They have the pieces in place but are missing the right kind of device to bring it all together," Mr Charlton explains.

"Currently they have an A-grade team playing on a C-grade infrastructure," he adds.

Value for money

According to some estimates, it may cost Sony as much as $1.3bn (£830m) to buy Ericsson's stake in the joint venture.

Analysts say whether that is a fair value will depend on a variety of factors, not least the patent ownership.

"How the patents held by the company are shared, will determine the final value of the deal," says Gerhard Fasol of Eurotechnology Japan KK, a company that helps firms with merger and acquisitions.

"Patents are an important component of success in the smartphone arena. They can give you the right to block sales of the competitors and vice-versa," he explains.

Mr Fasol cites the example of the ongoing legal battle between Apple and Samsung as a prime example of this.

Sony will also have to convince its shareholders that any such move is in the best interests of the company and will contribute towards its growth.

This may be a tricky affair as Sony's stock price has plunged 50% in the last eight months on the Tokyo Stock Exchange amid falling profits.

It reported a loss of $3.1bn for the year to 31 March, the third successive year that it has lost money.

However, it has forecast a profit of 80bn yen ($976m; £600m) for the current financial year.

Analysts say that as demand for its traditional products such as TVs slows down, Sony needs to succeed in fast-growing segments like smartphones and tablet PCs to achieve that target.

Whether buying out Ericsson's stake in their joint venture can help it turn the tables will only become clear if the deal does eventually happen.

After all, the proof of the pudding is in the eating.

More on this story

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• CORPORATE CULTURE IN AN INTERNATIONAL JOINT VENTURE - A case study ...
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Ahmed, Arslan

Pang, zhaohua, abstract [en].

Research Problem: To what extent the corporate culture of an international joint venture resembles the organizational and national culture of its parent firms?

Purpose: The purpose of this research is to study and explain the organizational and national culture of the partner companies that are involved in the international joint venture and finds out the extent to which the corporate culture that is embedded in the joint venture possess a resemblance with its parent's culture.

Method: Our research is qualitative in nature and is based upon the case study and the secondary information gathered during the research. We have also taken into account some primary information through conducting three semi-structured interviews from each of the company involved in the joint venture. All the information collected during the course of our research has been analyzed in such a manner that has eventually led us to a formidable conclusion.

Conclusion: After the analysis of results, both from the interviews and the secondary information, we came to a conclusion that the corporate culture at the joint venture possess some similarities with the national and organizational cultures of its parent firms and this likeness depends upon the location of origin of the joint venture and the employees working in it.   

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Sony and Ericsson Case Study

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Introduction

Motivation for the formation of a joint venture between sony and ericsson, problems of the joint venture, strategies deployed to address the problems, factors influencing the decision to split, works cited.

Organizations develop mechanisms of enhancing their competitive advantage through various ways. One of such ways is to form mergers and joint ventures in the effort to gain economies of scale. A good example of such an effort is provided by Ericsson, a Swedish phone maker, and Sony Corporation, which is a Japanese phone maker, which pulled together its resources to form Sony Ericsson communications (SEMC) in October 2001 in the form of a joint venture.

However, 10 years down the line, Ericsson and Sony announced their intentions to split. This paper discusses the motivations behind the formation of SEMC, the problems encountered in the joint venture, the strategies used by both organization to address the problems, and the factors, which led to the decision to split SEMC.

The alliance of Sony and Ericsson was formed by organizations that were established in different nations. Thus, SEMC was an international joint venture.

Scholarly research identifies different motives for the formation of international joint ventures. For instance, Hill argues that firms engage in joint ventures internationally to gain competiveness in the global market, enhance technological sharing, share operational risks, and to develop the capacity to fund strategic mechanisms of success, which are beyond the financial capability of a single firm (27).

SEMC reflects this motivation. According to Harris, strategic factors led to the formation of SEMC alliance (1). For Sony, such factors included the need to gain market excellence to overcome the competitive force of Nokia Corp through increasing the market share for the two organizations.

This goal was to be realized through the development of a knowledge base for wireless technology expertise in the telecommunication industry deployed by Ericsson. Ericsson shared a similar aim. It wanted to enhance its capacity to produce consumer-oriented electronics that would pose a mega threat to the market leader-Nokia Corp (Harris 3). This shared motivation meant that SEMC would be able to develop products, which were technologically innovative, hence enabling the joint venture to become more competitive in the market.

Sony held only a quarter of the market share that was possessed by Ericsson. However, the presence of Sony in the European markets implied that Erickson would gain new markets in other regions apart from Japan. Sony would also acquire market in Japan that was essentially closed by dominance of Ericsson in the Japanese mobile market together with entertainment technology that was in-built within the Ericsson’s products (Dunn 12).

Ericson wanted to have access to the production process deployed by Sony together with video and audio entertainment technology, which led to the production of mobile handsets with the capacity to revolutionalize the mobile entertainment industry innovatively. This would make it possible for the joint venture to penetrate a new market, which was not yet explored.

From the above discussion, it is inferable that both Sony and Ericsson had common interests while indulging in an international business partnership in the form of international joint venture. The two firms sought to gain synergy effects, which produced significant complementary effects (Harris 3).

This meant that engaging in alliance would make each of the organization leap benefits from the other, thus translating into increased sale volume through opening virgin markets. Apart from developing the capacity to cover up the weakness of either of the organizations, SEMC was motivated by the need to overcome and withstand both international and local competition from rivals. Although SEMC was this incredibly beneficial, various problems were experienced.

International joint ventures present a variety of problems ranging from management structure to the process of arriving at common agreeable strategic initiatives for success. This makes international joint ventures have a high failure rate (Hill 17).

Consistent with this argument, Ericsson and Sony required high levels of integration together with cooperation, hence increasing the number of problems to which the alliance was exposed. Since the establishment of SEMC, some of the problems that SE was subjected to included the loss of market share, rising costs of operation, and negative effects of various economic factors. Even after the formation of SEMC, the two organizations continued to make losses due to the loss of market share.

This loss was attributable to a myriad of problematic aspects inherent in the common joint venture strategy for conducting business. One of such problems was that the products portfolio was limited. It focused on expensive phones while negating the importance of cheap phones to boost sale volumes. Lester supports this assertion by adding that the joint venture only produced music products in the high end of prices such as phones with cameras and music enhancements (24).

This strategic focus of the venture posed a mega problem since the demand of handset consumption was shifting towards cheap and less advanced phone models. The repercussion was a decrease in the growth of the venture as anticipated while increasing rivals’ competition especially from apple whose products were more superior in meeting the demand requirements such as iphones (Lester 24).

Consequently, the efforts of SEMC to gain competitive advantage in the market through the development of a brand that was considered lucrative and expensive by consumers became problematic. This challenge was particularly severe in the Indian market where cheap and simple phones took up the largest market share. Motorola and Nokia were able to respond to this demand, thus securing the biggest Indian market share.

For a joint venture to succeed, it is necessary for coordination and integration of the core decision-making processes to be enhanced. Unfortunately, for the Sony Ericsson’s joint venture, these facets became problematic. Lack of adequate integration and coordination between the operations of the two organizations hindered the exchanged of information.

This had the overall impact of making it impossible for SEMC to read the requirements of markets precisely, accurately, and at a higher pace in comparison with competitors. Hence, market growth of SEMC was massively impaired.

Economic down turns influenced the joint venture’s capacity of success. The credit crunch resulted in the decline of demand together with credit availability. This challenge posed immense problems to SEMC especially in the realm of increasing operation costs. Choosing to engage in an international joint venture implies rising the costs of organizations’ operations (Hill 47).

For the joint venture between Sony and Ericsson (SE), it also implied increasing the costs associated with the identification of profitable and viable markets. SEMC also operated in an environment that was characterized by competitors who were using low-cost manufacturing technologies such as Nokia. The models manufactured by rivals were also of a low cost. Hence, SEMC was forced to reduce the selling price of its products to compete with the low-cost brands. This had a direct impact on the profitability of SEMC.

Problems faced by SEMC made it clear that the joint venture would collapse at some point. As Harris argues, the companies forming the SEMC had different organizational culture. In fact, many scholars lamented that complex integration and collaborations were required for the alliance to remain intact for a long time (2). Hill argues that differences in organizational culture have the possibility of creating inefficient management and work conflicts (107).

Nevertheless, Sony deployed transaction analysis approaches to prove that the joint venture with Ericsson was vital for reasons previously discussed in the section on motivation for the formation of SEMC. To deal with the problems of diminishing market share and sales level for optimal profitability, the two organizations had franchising, OEM (original equipment manufacturing), and licensing as viable options instead of going through the problems experienced in an international joint venture.

Through franchising, Sony and Ericsson would have given independent operators the authority to distribute products in the European market. A careful selection of the franchises would have provided Sony and Ericsson with an opportunity to tap into local technological knowhow together with the development of the capacity to gain links with various local network operators in the new market. Unfortunately, the franchising model works well when an organization has a significant market share (Hill 129).

Sony had only 1percent global market share (Dunn 13). Hence, it would not be able to compete in an aggressive way with market leaders such as Nokia Corp. Although licensing would have made it possible for Sony to gain the advantages it intended to get by forming SEMC, it was problematic. For instance, it could have encountered the challenge of internalizing Ericsson’s tacit technological knowhow. This would have created low and slowed capabilities of learning.

Considering the speed of advertisement and change of technology in the technological industry, licensing was not a viable option. There was also the fear of one organization engaging in learning processes, which are opportunistic. In the case of Ericsson, OEM’s contract strategy also proved problematic. Despite the fact that Ericsson could have developed the capability to enter the Japanese market (Sullivan 19), Sony could have utilized this opportunity optimally to learn and then directly compete with Ericsson.

Joint ventures possess high probabilities of failure. For Sony and Ericsson, failure occurred after10 years of its formation. The joint venture was ideal considering that the two companies would contribute what the other was lacking to gain competitive advantage in the mobile phone market.

Sony was to contribute expertise in the marketing of consumer electronics while Ericsson was to contribute cellular technological expertise (Kantrow 17). However, the joint venture underwent intense challenges related to cultural deviation, logistical issues, market saturation, and brand portfolio, which prompted the decision to split.

When a joint venture such as SE is formed, organizations forming it wish to gain certain earning levels, which are otherwise impossible to gain while operating solely in the global market. Due to the above factors, SE went through a period of reduced profits, often operating at losses. When organizations forming a joint venture fail to achieve their goal, they often consider splitting as an alternative to saving the companies from collapsing (Sullivan 178).

Therefore, for SE, the decision to split was unavoidable. In 2002 and 2008, the CEOs for Sony and Ericsson clearly stated that they would end the joint venture in case it was unable to attain the preset earnings. With the decision to split coming head on in 2011, the single most important contributing factor for both organizations to arrive at the decision was akin to poor earning due to the unexpected problems in SEMC.

Dunn, Douglas. “Sony may take Ericsson’s call- Nokia’s success points to consolidation.” EBN 1.1(2001): 12-13. Print.

Harris, Ellison. “Sony, Ericsson Mix Technology, Marketing Savvy — New Mobile-Phone Brand Aims to Topple Nokia; Just the Logo Is Ready.” The Wall Street Journal 1.1(2001): 1-3. Print.

Hill, Charles. International Business (6th ed.) . New York: McGraw Hill, 2007. Print.

Kantrow, Benson. “The Bottom Line: Sony Ericsson Fails To Live Up To Hopes.” Dow Jones International News 1.1(2003): 17-18. Print.

Lester, Robert. Case Studies on Failures of International Joint Ventures . London: London University Press, 2008. Print.

Sullivan, Daniels. International Business: Environments and Operations . New Jersey, NJ: Prentice Hall, 2007. Print.

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Sony Ericsson Failure Case Study: 6 Reasons Why

• June 28, 2023
• Blog , Company's failure stories

Table Of Contents:

Sony Ericsson was a joint venture between Sony Corporation and Ericsson, established in 2001, with the aim of combining Sony’s consumer electronics expertise with Ericsson’s telecommunications technology. However, the joint venture faced various challenges and ultimately struggled to compete in the rapidly evolving mobile phone market.

Let’s dive into the various reasons that contributed to the Sony Ericsson failure case study. There are several lessons business leaders can learn from business failures.

Unveiling the case study of Sony Ericsson’s failure

Sony Ericsson was considered a pioneer in the mobile phone industry due to its innovative designs and features, such as high-quality camera capabilities and music playback.

As a result, Sony Ericsson was able to establish a strong brand presence in 2001.

But soon the Sony-Ericsson joint venture confronted challenges, and their target profit deadline was moved from 2002 to 2003.

Here are some key factors contributing to Sony Ericsson’s failure.

1. They failed to innovate

There are countless companies that went out of business because of their lack of innovation. And the ones that top the list do not understand the changing customer’s preferences.

The primary reason why Sony phones failed was the market misrepresentation of their product.

Sony Ericsson failed to keep pace with rapid technological advancements and innovations in the mobile industry. The company struggled to introduce groundbreaking features and attractive smartphones that could compete with rivals like Apple’s iPhone and Samsung’s Galaxy series.

You might be interested in: Ways to capture innovation in business.

2. Industry shifts and economic downturn

New innovations keep emerging in the world. Once, shifting from a dial keypad to digital seemed a farfetched idea, and look at the mobile industry now!

Business leaders must be well aware of the constant industry shifts and act accordingly.

For example: In 2003, mobile phone prices began to decline, but Sony Ericsson continued to produce expensive cell phones, resulting in lower-than-expected profits. Additionally, Sony Ericsson made significant investments without an in-depth knowledge of present market conditions.

The mobile industry experienced significant shifts during the time Sony Ericsson was in operation. The rise of smartphones and the decline of traditional feature phones caught Sony Ericsson off guard, and the company struggled to adapt quickly to these market changes.

3. Misjudging R&D’s importance

Bad leadership can ruin even the best teams. Sony, at that time, prioritized cost-cutting initiatives and job losses.

The company had 12,000 employees in June 2008, and after launching this cost-cutting initiative, it reduced its global workforce by approximately 5,000 people.

R&D is like the oil of an innovation engine and people its enablers.

Still, Sony Ericsson perceived them as a financial burden and closed R&D departments across regions.

As a result of this change, Sony Ericsson was unable to produce innovative products for customers, which was the primary reason for the joint venture’s failure.

Maybe it’s time to give those R&D people applause for the work they do!

Companies must employ effective R&D tools and techniques to provide consumers with novel and individual mobiles.

However, Sony Ericsson’s research and development were out of date.

4. Poor marketing and product positioning

Another major issue that Sony Ericsson faced was their inability to cater successfully to different markets.

After forming a joint venture, the business began operations without a comprehensive understanding of its customers’ requirements.

As a result of this lack of knowledge, their products begin to suffer losses, and they are forced to withdraw their product line from the market.

For instance, in 2002, Sony Ericsson discontinued production of Code Division Multiple Access (CDMA) mobile phones for the US market and began concentrating on GSM as the dominant technology.

The company’s product lineup was often criticized for being too diverse and lacking a clear focus. Sony Ericsson released numerous models, but the lack of a cohesive product strategy led to confusion among consumers and made it difficult for the brand to establish a strong identity in the market.

5. They were slow at changing

Sony’s Walkman series and Ericsson phones had numerous innovations, such as a colored screen and a digital camera.

However, their innovation began to slow down when they started manufacturing Android phones.

The Xperia X10, for example, received positive reviews for its design. The disadvantage was that it used Android 1.6 during a period when competitors were using 1.

Because of the highly skinned OS, the firmware update took a long time.

Sony Ericsson faced challenges with its software platform. The joint venture initially relied on its proprietary platform, but the market was moving towards more open and versatile operating systems like Android and iOS. The delay in adopting a popular and widely supported operating system hindered the competitiveness of Sony Ericsson’s smartphones.

6. The tough competition

Moreover, other businesses gradually began to offer similar features to Sony at a lower cost.

Sony Ericsson attempted to add new features, such as a 4K screen, but it was pointless since a 6-inch screen doesn’t need a 4K screen.

Sony continued to produce expensive phones but missed a significant differentiating component. As a result, they progressively faded from the market.

Additionally, the expensive price tag was a significant weakness in Sony’s phones. Sony attempted to compete directly against Apple.

However, since Apple was the market leader, it had a competitive edge over other manufacturers. No other phone provided a better user experience than Apple’s iPhones.

The mobile manufacturers at the time were focused on inexpensive phones.

Their strategy was to obtain as many customers as possible, even if it required sacrificing features. But Sony went in the reverse direction. They began producing high-end phones.

Intense competition from established players like Apple, Samsung, and later Chinese manufacturers like Huawei and Xiaomi put Sony Ericsson at a disadvantage. These competitors were able to offer more appealing and feature-rich smartphones that captured a larger market share.

Learn how open innovation can you a competitive advantage.

Sony Ericsson Failure: From the horse’s mouth

In 2012, Sony Mobile’s CEO said, “That is where the value is, that is where the money is,” referring to the top segment and explaining that the objective was to “play to our strengths – the premium brand that Sony stands for.”

Hideki Komiyama, the Chief Executive of Sony Ericsson, said in 2009, “We just happened to be number three in the third quarter. I’d like to be No. 3 by ourselves by 2011.”

“Right now it is not clear how the industry will be shaping up in 2009 or 2010. We know it is challenging.” he said, adding that the company was “preparing accordingly.”

He added, “We have to start analyzing products where we generate higher margins and eliminate the models where we have lower margins.” He also stated, “At this moment we’re under heavy rain. You have to look for shelter. But when you’re in the shelter you start preparing.”

In 2011, Sony acquired Ericsson’s stake in the joint venture. In the end, the result: Sony Ericsson Failure.

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Sony Ericsson splits after 10 years in Sony cash buyout

Sony and Ericsson are to go their separate ways after ten years of its Sony Ericsson joint venture into the mobile phone market.

Sony is to take full control of the mobile phone venture in a bid to catch up with the two-horse race between Android and iOS-powered phones, with Ericsson taking a consumer-facing backseat for the time being.

Ericsson will receive $1.5 billion in cash for its 50 percent share of the joint venture, which was  set up in 2001 to take on Nokia as the then crown prince of mobile manufacturers at the time.

In effect, it has been one of the most drawn out takeovers, in effect, the technology world has seen in recent times.

The breakup, which has been in review over the past few months, was expected, after a source told the Wall Street Journal and Reuters that the ten-year-old pact between the two companies would not be renewed .

It will also give Sony a handful of valuable mobile handset patents by Ericsson, enabling a new range of new products and online content, reports Reuters . Ericsson said that the transaction's output will give Sony the opportunity to integrate smartphone technology into its wider range of products, from televisions, tablets and computers.

The 50-50 partnership has been under scrutiny by Japan-based Sony, after the company saw smartphone demand surge. And, by buying out Ericsson would give Sony a foot in the door with Google , with the search giant already supplying the Android mobile operating system to existing Ericsson phones.

Ericsson will concentrate on sales of wireless communications equipment and services for business and enterprise, leaving the company on the most part without a consumer-focused face.

The deal is expected to close in January 2012, subject to regulatory approval.

• Sony to buy out Ericsson 'to catch up' with rivals (report)
• Samsung Q3 estimates beat forecast, but still disappoints
• Will the iPhone 4S's new camera replace your point-and-shoot?

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Sony Ericsson Joint Venture Analysis

Added on   2021-02-22

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