ON THE MOVE: MOBILE COMMUNICATIONS IN THE 21ST CENTURY.

ON THE MOVE: MOBILE COMMUNICATIONS IN THE 21ST CENTURY. Introduction In 2001, the joint venture, Sony Ericsson, was formed after a series of tough negotiations between consumer electronics conglomerate, Sony, and Swedish telecom company, Ericsson. After failing to live up to expectations, the joint venture was disbanded in 2012 when Sony paid Ericsson €1 billion for their stake in the joint venture. The new entity would be solely operated by Sony and would be renamed ‘Sony Mobile Communications’ or ‘Sony Mobile’ in short. In this case you will familiarize yourself with the history of Sony Mobile and you will be asked to develop a strategic plan outlining how Sony Mobile can weather competitive challenges by embarking on the opportunities that the theories on Managing in Contemporary Organizations avail. Sony Ericsson: A History Sony Ericsson started as a private company with both Sony and Ericsson owning 50% of joint-venture. Sony Ericsson started out being incorporated in Sweden but headquartered in London. One of the last presidents was Miles Flint, who in a previous capacity presided over Sony Europe as well as Sony BPE. Sony Ericsson’s R&D facilities are located around the globe: Canada, China, India, Japan, the Netherlands, Sweden, the United Kingdom, and the United States. At the pinnacle of their success, Sony-Ericsson was the world’s fourth largest producer of handheld mobile phones, trailing Nokia, Motorola and Samsung. According to IT Gartner, Sony Ericsson had a global market share of 8% and booked the biggest increase in sales compared to its direct competitors. In 2006 it posted a turnover of close to €11 billion with net profit that approached €1 billion. As Sony Ericsson’s business was expanding during these years, it employed close to 8000 people worldwide, almost doubling its initial workforce in its first 6 years of operations. Currently, Sony Ericsson carries well over 75 different products distributed over 11 product series. Their most notable products were the K-series with Cybershot camera functionality and the W- series with built-in Walkman digital music technology. Burning Bridges Despite becoming successful in the mid-2000s, the start of the joint venture was no bed of roses. The creation of Sony-Ericsson was littered with pressing issues that needed speedy resolutions (Els, 2007). Commenting on the precarious state of affairs in the summer of 2003, the then CEO, Kurt Hellstrom, said that he would consider pulling out of the joint venture if sales did not pick up swiftly. And it was not until late 2003 that Sony Ericsson booked its first profits substantially lagging behind initial estimates (Sigurdson, 2004). The joint-venture was built on the ashes of earlier operations in the mobile phone market in which both Sony and Ericsson had lost out to the competition. Though being a market leader for years, Ericsson found itself quickly losing market share in the new millennium. The trigger event was a fire in a Philips chip factory in Mexico in early 2000 and the disaster that unfolded was a grim reminder for Ericsson that technological superiority is a fragile thing. Since Ericsson single-sourced chips from Philips this fire led to substantial delays in production, essentially eroding its competitive advantage (Sigurdson, 2004). Until then, Ericsson could champion miniaturization as the main selling point for its products by building on the technological prowess that Ericsson Mobile Platforms (EMP) provided (Sigurdson, 2004). But the fire set in motion a slump in sales from which the mobile operations of Ericsson never fully recovered. Sony on the other hand was a late entrant in the global market for mobile phones and never could make its mark in this lucrative industry. Although Sony had a strong presence in Japan, it could only command a 2% global market share (Sigurdson, 2004). For both it seemed a good opportunity to enter into a strategic alliance to reinvigorate their mobile phone competencies. Building Bridges Although both companies had been approached by other interested parties, Sony and Ericsson both perceived the greatest synergies in each other’s complementary competences. Ericsson was an attractive partner for Sony since it had market access combined with technological prowess. Sony on the other hand could reciprocate by bringing its strength in developing user interfaces and top-end applications to the table allowing the integration of many functionalities into one mobile phone. But it was no easy marriage at first; Ericsson demanded that Sony would pay substantially for being able to tap into Ericsson’s technology. But when Sony refused it was decided to leave EMP out of the equation. Currently EMP is still a separate entity within Ericsson, providing chipsets to Sony-Ericsson as well as to its competitors LG, Samsung and Siemens (Sigurdson, 2004). During the first years of operations, three key issues were identified and which needed to be resolved if Sony Ericsson was to be a key player on the market for mobile phones. These major hurdles revolved around: 1) design, 2) supply chain management, and 3) technology transfer (Sigurdson, 2004). First, it proved very difficult to come up with appealing mobile phones since the designers of both companies were differently inclined and often did not understand each other. All design codes were re-written to enhance the communications between the designers. Second, unlike its main rival Nokia, Ericsson did not develop a strong supply chain management capability which was reflected in the new joint venture as well. Sony executives stepped in to further streamline the production process and bring supply chain management under control. Third, integrating new technologies into Sony Ericsson products took a long time and this was finally resolved by having the prototypes developed in Japan first and then transferred to other R&D centers around the globe. On the Move; Mobile Communication in the 21st Century Although it has successfully implemented these necessary changes, new challenges are looming for Sony Ericsson, amongst others: - As the company is quickly expanding its consumer base by tapping into new and emerging markets (Sony Ericsson, 2005), the complexity of its supply chain is increasing. This will make additional demands on how the organization is designed.