Sony's Financial Performance: Impact of Micro-Environment Factors - Essay Sample

Paper Type:  Essay
Pages:  6
Wordcount:  1412 Words
Date:  2023-02-20


Sony is a multinational corporation that trades in the manufacture of consumer electronic products. Over the last two decades, several micro-environment factors have influenced Sony's financial performance and position in the industry. Some of these factors are employees, competitors, customers, suppliers, and distribution channels.

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First, the company engaged in corporate restructuring strategies that had significant impacts on the organization's profitability. In 2012, for instance, the company acquired Sony Ericsson's 50 % shareholdings. Sony also sold its entire interests in Liquid Crystal Display and thus leading to the termination of the joint venture (Sony Corporation, 2012). These corporate restructuring plans were costly and thus have influenced the company's cash flows since 2012.

Secondly, Sony has experienced fluctuations in the supply of electronic components and thus affecting its operating results. Variations in the availability of these supplies in the international market have negatively impacted on sonny's operations. The company acknowledged in its 2012 annual reports that shortages of important components resulted in the suspension of production in some of the manufacturing sites (Sony Corporation, 2012).

Thirdly, the availability of alternatives and competing products has let to a shift in consumer acceptance in the international markets. However, the demand for Sony's products, especially in the music and picture segments, has been unpredictable over the last ten years. The company has incurred substantial resources in marketing and advertisement plans as a way to improve consumer acceptance besides to overcome competition in the industry. Also, Sony has implemented Employee Diversity Policy, which has enabled the company to recruit talented employees and thus the introduction of essential skills to the organization.

Macro-Environment Factors

The main macro-environment factors that have affected Sony's performance are economic forces, legal, political, demographic, and technological forces. These factors impact on the organization's capacity to implement its long-term strategies.

The political environment in countries where Sony operates has posed significant impacts on the implementation of the organization's strategic plans. A considerable proportion of Sony's supplies of electronic components originate from China among other Asian countries (Sony Corporation, 2012). Political instability in the Middle East has negatively impacted the organization's supply chain and distribution channels. Sony's managers acknowledged in 2012 that perennial political instability in some of the Asia countries had increased the cost of distributing products to some markets (Sony Corporation, 2012). Also, political forces have posed challenges in meeting customer demand in some parts of the world.

Changes in the legal environment have also impacted the company's operations. This situation has posed challenges in planning and managing operations in different international markets. Some of these components are changes in taxation laws, trade policies, and business regulations. Sonny has experienced these challenges in China, where it has partnered with local assembling plants to supply components. China, among other countries, has strict regulations on repatriation of returns from foreign investments. Besides political factors, economic forces such as inflation impact on the operations of Sony. However, demonetization of Indian banknotes in 2016 had significant effects since the country is one of Sony's largest markets.

Technological factors, however, have both negative and positive impacts. The technology incorporated into Sony's PlayStation enabled the company to increase its profitability by 346% in 2017 (Kharpal, 2017). Virtual reality (VR) games and high-performance chips are examples of technology products that used advanced technology and thus enhanced the competitiveness of Sony in the international markets.

Market Structure and Demand for Sony's Products

Sony Corporation operates in an oligopolistic market structure, which is characterized by the existence of a few firms dominating the market. The other characteristics of this market structure are the existence of significant entry barriers, and companies selling either identical or differentiated products (Rosenberg & O'Halloran, 2014).

Sony Corporation is considered an oligopolistic market structure, considering that it manufactures a significant proportion of consumer appliances than its competitors. In this regard, Sony's primary competitors in the consumer appliances segment are Samsung, Panasonic, Philips, and Life's Good (LG). In terms of electronic products and its peripherals, the main competitors are Apple, Dell, and Lenovo. The leading competitors in the photography segment are Canon, Nikon, Olympus, and Leica, while the main business rival in gaming is Nintendo.

Sony, as an oligopolistic firm, has superior technologies, among other factors that increase barriers to new entrants. The company, in this case, has established itself as the leading manufacturer of high-performance chips and games such as Virtual reality. Sony has achieved this state in the industry through patents, copyrights, and exclusive ownership of some resources. International laws protect these products from any form of infringement and thus an indication that there are significant barriers to market entry. This situation also implies that Sonny has denied small corporations the possibility of reproducing its services and products across international markets. As a result, Sony has emerged as a competitive firm in the electronics, and video gaming industry. This oligopolistic position has enabled Sony Corporation to attain and retain significant international markets for its technology products.

Sony has focused on the manufacture and development of differentiated products for personal consumption. As such, the company is an example of a differentiated product oligopoly that focuses on the production of unique consumer appliances. This approach is based on the belief and the idea that consumers have different desires, tastes, and preferences for electronic products. In this way, Sony has emerged as one of the leading producers of storage media, play stations, Discman, and other forms of wares for personal use.

Firms in oligopolistic market structures have a high degree of mutual dependency. In this regard, Sony has partnered with Ericson's and many electronic assembling plants in China. This approach enables oligopolistic corporations to produce components that are differentiated from those of other few rival firms in the industry. In oligopolistic markets, firms are experienced in their industries because of their long existence in the market. Sony was founded in 1946 and thus has established itself as an oligopolistic market structure by investing in state-of-the-art infrastructure. This situation implies that new firms venturing into the industry will face numerous challenges competing with Sony, among other few well-established corporations.

Sony products have high demand in the global market because the company has differentiating strategies applied during production. The organization's photography products, in particular, have a higher demand than that of competitors such as Nikon, Canon, and Olympus. In the world market, Sony is considered the primary producer and supplier of high-end digital photography products. Also, the company has applied the technology leveraged in photography products to mobile and thus making its products competitive in the international markets.

The recent reports indicate that the demand for Sony products is high and will likely not weaken in the future since the company is focused on technological innovation (Griffin Consulting Group, 2012). This strategy promotes product differentiation and hence enables the company to stand apart from its rivals. Sony's primary competitors are American corporations such as Microsoft and Apple. However, companies such as Huawei pose threats since it has demonstrated that they can assemble and sell quality products at reasonable prices.

SWOT Analysis Diagram

Strengths Weaknesses

  • Sony produces unique and high-quality products Weak presence in the smartphone market
  • Sony has built a differentiated brand Sony has high price tags
  • Sony is perfectly placed in a growing industry The high cost of media production
  • Sony has a history of innovation and technological expertise Business diversification is shifting Sony's core competency
  • Success with the PlayStation Imitability of some products
  • Sony has popular, profitable products The company has a diversified business.

Threats Opportunities

  • Presence of low-cost electronic manufacturers Invest in emerging markets in Africa
  • Fluctuations in foreign exchange rates Further diversification of technology products
  • The company's online network faces threats from hackers Benefits of joint ventures with companies like Sony Ericson's
  • Political instability in core markets Take advantage of growing music and movie business

Software Piracy Rapid Innovation

Aggressive competition in the industry Development of new products


Griffin Consulting Group. (2012, April). Report of Griffin Consulting Group on the

Competitiveness of Sony Corporation. Available from: <> [Accessed 4 October 2019].

Kharpal, A. (2017, October 31). Sony profits rise 346% thanks to strong performance from

PlayStation gaming unit. Available from: <> [Accessed 4 October 2019].

Rosenberg, S., & O'Halloran, P. (2014). Firm Behavior in Oligopolistic Markets: Evidence From

A Business Simulation Game. Journal of Business Case Studies (JBCS), 10(3), 239-254. DOI: 10.19030/jbcs.v10i3.8714

Sony Corporation. (2012, March 31). Sony Corporation Performance Reports for the Year

Ended March 31, 2012. Available from: <> [Accessed 4 October 2019].

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