May 12, 2012 | In: Technology

Will Sony Go Out of Business?

If you’re constantly reading about Sony, as a company, you will know that it has been losing billions every year for the past four years. In fact, Sony lost a record $6.4 billion in their fiscal year that ended on March 31st, 2012. But why is that?

I can think of several reasons of why Sony is losing money:

Sony has become a dysfunctional company: One of the big problems with Sony that it’s a huge company and fragmented company, and it takes an incredibly smart person to manage it properly. In a not so distant future, Howard Stringer will certainly be named as one of the worst CEOs and executives in the history of Sony. Howard became Sony’s CEO back in 2005, and in 2 years, he turned Sony from a profitable company into a money bleeding, dysfunctional company. Thankfully, he is now replaced by Kazuo Hirai, who will hopefully re-align Sony with its previous mission, and ensure that Sony gets back to the helm when it comes to technological advancements in the electronics industry.

Sony’s business model does not work: Sony loses money on its TV business, while Samsung makes a lot of money on this business. Why is that? Is it because Sony buys some important parts from Samsung at more than reasonable prices? If that’s the case, then maybe Sony should rethink its alliance with Samsung or invent a new technology where it doesn’t have to buy parts/pay royalty from/to Samsung. I’m sure that if Sony focuses on inventing a new technology then people will adopt it. The blu-ray media format is a great example on how Sony can still force the market to adopt its technology.

Sony stopped being innovative: For some reason, I feel that time stopped for Sony in 2006, they have stopped being innovative ever since. I’m talking about everything, from their smartphone business to their TV business. The last real innovation that Sony had was the blu-ray media format, preceded by their gaming console, the playstation. All the innovations they had in their products every since were not theirs.

Sony has huge competition from Samsung: For some reason, Bloomberg mistakenly mentions Apple as one of Sony’s main competitors. That’s not true. While Apple is one of Sony’s competitors, it is far from being the main one. Samsung is Sony’s main competitor. Samsung, a company that used to produce very ugly phones a few years ago, and was unheard of in the TV business, is now the dominating brand in the TV business, and second only to Apple in the Smartphone and the tablet business. Samsung is competing with Sony at every level now: TVs, laptops, tablets, smartphones, blu-ray players, etc… Sony’s biggest nightmare is Samsung.

The gaming business is not as before: One of Sony’s most important product is the playstation, and the economy built around the playstation (games sold, subscriptions sold, etc…). However, that business is experiencing a major slowdown because many people are electing to play games on their smartphones or their tablets, and not on a dedicated console, which substantially changes the rules of the game for Sony and other companies in the gaming industry, such as doomed Nintendo.

Now the question is will Sony go out of business?

The straight answer is No, not for the foreseeable future, Sony is too strong to fail, too big to fail, and it still has many cards under its sleeve. I do believe though that Sony should experience heavy restructuring in order to get back on track.

Here’s what I think should be done:

Sony should re-haul its customer service and review its pricing in Sony shops: In case anyone from Sony reading this, you guys have probably the most arrogant staff on this planet and that’s the number one reason that most people do not like to buy from your shops. The number two reason is that your prices for your products are more expensive than the rest of the market. The number three reason is that your after sales service sucks. For example, try to return anything to a Sony store, and for some reason they try to con you into paying a 10% restocking fee. Buy a Sony product from Best Buy, for example, and they won’t charge you anything if you return it.

Sony should get rid of most Sony shops: Most Sony shops are unnecessary and do not bring added value to Sony. In fact, most Sony shops generate losses for Sony. Sony should get rid of these shops that have lost money consistently.

Sony should review its smartphone products: The Sony Xperia S was a very promising product, and I thought that it would be a worthy competitor to the Samsung Galaxy SII and the Apple iPhone, but it wasn’t… Here’s why according to my personal experience:

I have bought a Sony Xperia S phone the other day from the Sony store. I returned it for three reasons:

  • It uses a micro sim and I just don’t want to be locked into this standard. Why not have a place that accepts the two types of SIMs (I’m sure that’s not hard to develop).
  • It was locked with a certain carrier network, although they hadn’t any plan to offer with that carrier. It’s not that I had to pay extra money to unlock it, it’s because that unlocking is not a good idea. I’ve done it before and it tends to make your phone do odd things.
  • Its interface was very similar to the Sony Ericsson that I currently have since 2010.

Why can’t Sony learn from Samsung when it comes to smartphones?

Sony should review its tablet business: The local electronics store has too many “open boxes” of Sony tablets. It seems that people are buying these tablets and then returning them, which means that Sony is not satisfying the public with its tablet. I think because this tablet overheats, has a huge battery consumption even when on standby, is smaller than the main Samsung tablet, and has an ugly interface. Oh, and the tablet seems to be made out of plastic.

Sony should become innovative again: I’m talking about Sony’s products across the board… TVs, smartphones, laptops, etc… Sony’s products are all nice but none of them is innovative. Even their latest PS Vita will soon prove to be a flop (Sony’s wise marketing has chosen to create a gaming product that competes with smartphones). Here are some ideas: 1) Drop the PS Vita idea – it’s expensively priced and it doesn’t make sense as people who want to play games on portable devices will most likely use their smartphones, 2) Make your laptops thinner and faster – the laptop market doesn’t have a winner and you can clearly become one if you have winning products, 3) Think about holograms as a TV replacement. If not, make your TVs lighter and with a better picture. Also, how about inventing a 3D TV where you don’t have to wear glasses to watch 3D movies?

Sony should shakeup its upper management: Sony did the right thing by replacing Howard Stringer, but I’m sure he wasn’t the only person responsible for Sony’s misfortunes over the past years. Others in top management must’ve been making the wrong decisions too (especially those in marketing). Get rid of them.

Again, Sony will not go out of business, at least in the foreseeable future. But it has two options at the moment, either regain its former glory by becoming more competitive and innovative (as well as cutting unnecessary costs), or continue weakening every day… I hope they go with the former option. I love Sony products, and I’m sure that there are many others who love them as well.

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