Sony Group Corporate Strategy for Fiscal Year 2003 (April 2003 - March 2004) Confirming Sony's Position as a Leading Global Bran
May 28 2003 - 12:13PM
UK Regulatory
BW20030528002068 20030528T151315Z UTC
( BW)(SONY-CORP.)(SON) Sony Group Corporate Strategy for Fiscal Year
2003 (April 2003 - March 2004) Confirming Sony's Position as a Leading
Global Brand
Business Editors
UK REGULATORY NEWS
TOKYO--(BUSINESS WIRE)--May 28, 2003--
Sony Corporation will celebrate its 60th anniversary in FY2006. As the
company moves toward this milestone, it will renew its efforts to
enhance group competitiveness and will aim to achieve a business
structure securing a consolidated operating profit margin of at least
10% (excluding financial business). Reaching this target will firmly
establish Sony's position as a global media and technology company
with one of the strongest brands in the world. To achieve these goals
Sony will pursue a strategy founded on the following:
- Implementation of a second phase of structural reforms (first phase
implemented April 1999-March 2003).
- Strengthened product development and growth strategy for electronics
and game
In addition to the measures above, corporate governance will be
strengthened and the personnel and recruitment system reformed as Sony
strives to transform itself into a company which can meet the needs of
the 21st century.
Measures for FY03
1. New Business and Operation Management Structure
1) On April 1 2003, Sony announced changes in its business structure
designed to maximize the effectiveness of investment in each core
business category and to realize sustained profitability. With the
Group HQ Global Hub at the center, eight key business units were
defined, comprising 4 network companies (NCs), 3 business groups and
Sony Ericsson Mobile Communications. Further authority will be
delegated to each business unit allowing them to manage autonomously
on the basis of mid to long-term strategy.
2) In addition to the Group CFO, a CFO position has been established
in each NC, responsible for closely monitoring its business operation.
NC CFOs will ensure that NCs operate with a considerable degree of
autonomy while maintaining strategic linkages to the Global Hub. The
result should be an establishment of an overall monitoring system
which allows Sony Group top management to swiftly and accurately
analyze the Group's entire business situation.
3) In order to allow top management to make timely strategic
decisions, group operational performance will be monitored and
evaluated on a weekly basis.
2. Strengthening Product Development for the Electronics Business in
FY03
Sony will introduce a series of attractive new products in the
following categories, whose strength will be based on the company's
unique technology assets and key devices. The aim is for these
products to regain and maintain market leadership.
1) Flat Panel Displays/Televisions
Sony's lineup in PDP and LCD televisions will be strengthened in the
runup to the end-of-year holiday shopping season. We aim for the
number 1 position in this market based on the superb image quality
created by the "Wega Engine" system.
2) DVD+/-RW
We aim for a leadership position in the rapidly growing Japanese
market for DVD and Hard Disk Recorders. Our line up in DVD+/-RW
Recorders and CoCoon will be enhanced as we move into the end-of-year
holiday shopping season.
3) Camcorders and Digital Still Cameras
A series of models will be introduced aiming at number 1 position in
the market. The product range will develop to meet the rapidly
diversifying tastes of customers.
4) VAIO
Building on the AV/IT concept, attractive new models, all equipped
with DVD drives, will be introduced. With an enhanced supply chain
management system, profit recovery is targeted.
5) PSX
Sony plans to introduce a new product "PSX" within this year in the
domestic market. This will integrate elements from game and
electronics, uniting advanced semiconductor process technology and
real time OS from the game sector with extremely fast DVD/HDD
recorders.
6) Mobile Phones
Sony Ericsson Mobile Communications will continue to introduce a
variety of attractive new models to the market. The business base of
the company will be reinforced through strengthened supply chain
management and concentration of resources into GSM/CDMA.
Mid-term Strategy toward FY06
Sony's current operating profit margin stands at about 4% (excluding
structural reform costs). Sony plans to implement a second phase of
structural reform which will increase the operating profit margin by
3%. Furthermore we project that the growth strategy envisioned for
electronics and game will contribute a 3% increase. This should allow
Sony to reach its target of 10% consolidated operating profit by
Fiscal Year 2006 (excluding finance.)
1. Phase 2 of Structural Reform (April 2003-March 2006)
Sony will implement a second phase of structural reform designed to
secure an appropriate level of profitability for a leading company in
the global business field. In the next three years Sony will spend
approximately YEN300 billion for restructuring measures centered on the
Electronics business. For FY03, expenditures will be YEN140 billion
(YEN130 billion in Electronics) and this is projected to result in
annual cost savings of about YEN75 billion from FY04.
1) Sony will further integrate its engineering and development
resources to create a more efficient manufacturing platform for
horizontal support (enhancing engineering base, reducing fixed and
variable costs).
2) Increased selection and focus mainly in the electronics business in
order to convert to a high-profit structure (exiting from unprofitable
business lines, disposal and sale of non-strategic assets).
3) Further rationalization of production facilities, expansion of
"multi-category" production, strengthening of module (key device
block) production and conversion to "multi-functional" operation
(design, call center, service center etc.)
4) Cutting fixed costs (including Sony Corp.) to rectify the current
unbalanced group revenue/cost structure where yen-denominated revenue
totals about 30%, while yen-denominated costs total about 50%.
5) Reforming Sony's domestic (Japanese) personnel system through
stringent implementation of performance-based compensation and a
renewed employment structure including further deployment of human
resources from overseas.
2. Growth Strategy for Electronics and Game
In four key areas detailed below, the business base will be
strengthened and a growth strategy promoted.
1) Solidifying No. 1 Position in Audio-Visual Categories
Audio-Visual is a core business category, and here we will create a
vertically integrated structure through the application of
mechatronics and Sony key devices which will result in high added
value and product differentiation. This will in turn realize high and
sustained profitability. The shift of resources to growth areas like
Flat Panel Displays, Optical Disk/HDD Recorders and digital imaging
equipment will be accelerated. At the same time added value will be
promoted through the application of broadband capability and key
devices will increasingly be produced within Sony.
2) Creating New Product Categories through Integration of Game and
Electronics Technology
PSX and PSP (due to debut at the end of Calendar 2004) will mark the
beginning of a new series of products that will unite the most
advanced Electronics devices with the leading-edge semiconductor
technology associated with the Game sector. These products will create
a new market based on a massive integrated platform where customers
can enjoy the latest content (game, pictures,music etc.)
3) Eliciting the Growth Potential in IT/Telecommunications Sectors
In its role as a home network gateway, VAIO's functions will be
strengthened and its links to peripherals and network services
promoted in order to create a total business model that increases
profit. Sony Ericsson Mobile Communications will strengthen product
development in the mobile phone business, while reconfiguring their
USA and China operations and focusing resources in strategic areas.
4) Enhancing Semiconductor Business
Semiconductors are key devices for adding value in order to
differentiate products. Sony will continue to apply its unique and
leading-edge technologies in this field to enhance the competitiveness
of its products. R&D for system LSIs and imaging devices key to
electronics products will be energetically promoted. Advanced
semiconductor process technology and DRAM-embedding technology will be
pursued and the development and investment in processors will
continue. In CCDs, where Sony maintains a high market share, efforts
will be made to balance external and internal sales, thus reinforcing
competitiveness and securing profitability.
To support a growth strategy for electronics, R&D efforts will focus
on the following:
1) Development of competitive key devices to maximize added value in
products
* Imaging devices and peripheral devices
* Devices for next-generation Flat Panel Displays (OEL and FED) and
projectors
2) Development of next-generation processors, centering on CELL.
Potential applications include:
* Home Server
* Broadband-capable Television
3) Core technology and components (architecture, OS, middleware,
chipsets) to be standardized to create a strengthened, speedier
development and engineering environment.
4) Develop IT technology related to content distribution
Note:
The Sony group plans to spend a total of YEN1 trillion on
semiconductor investment and R&D in the three years starting from
FY03. Approximately YEN500 billion will be spent on capital investment
for semiconductors like CELL and imaging devices where major growth
prospects are envisaged (YEN175 billion in FY03). Approximately YEN500
billion will be spent on R&D* for key devices for product enhancement
(YEN150 billion in FY03).
* excludes R&D for prototypes
Group Strategy
1. Entertainment
Music
Under the new management structure, Sony Music Entertainment (SME)
implemented a series of organizational changes designed to further
intensify its focus on artist development, streamline operations, and
position the organization for future growth. The company continues to
focus its energy and resources on identifying and developing talent,
as well as on developing new A&R sources in virtually every territory
across the globe. As part of these changes, SME has created Sony Urban
Music, a new division that is dedicated to identifying and developing
the best urban talent.
Pictures
Sony Pictures Entertainment (SPE) will energetically promote new
releases and develop its franchise strategy to reinforce its market
position. Core programming for television will be strengthened and the
rich library of assets leveraged to pursue new programming and
business opportunities. At the same time, digital initiatives will
help advance the broadband distribution of SPE content directly to
consumers. Initiatives to promote maximum efficiencies and ensure
sustained profitability will continue.
2. Personal Solutions Business Group (PSBG) and Network Application
and Content Service Sector (NACS)
PSBG: PSBG will focus on the development of new services centered on
individual customers. Cross-marketing opportunities with other Sony
divisions will be explored with the aim of creating new customer-bases
and business chances. In the longer-term, alliances may be created
both within and outside the Sony group, based on proximity to the
customer base, to provide integrated services to customers.
NACS: NACS is responsible for leading the Sony Group to the early
realization of its business model to integrate hardware and content.
Through this Sony will be able to provide network services which offer
customers new value for the broadband era. At the same time NACS
provides horizontal support to NCs and Business Groups through its
linkage with the Platform Technology Center.
Inquiries
Sony Corporate Communications
TEL 03-5448-2200 FAX 03-5448-3061
Sony 2003 Corporate Strategy Meeting Supplementary Material
Electronics Segment Operating Income for the Fiscal Year Ended March
31, 2003
Operating Income Forecast by Sony in January 2003: YEN 130.0 Billion
Actual Fiscal Year Operating Income: 41.4 Billion
Factors leading to the variance shown above were:
o Pro-active acceleration of inventory reductions due to uncertainty
regarding the market environment in the first quarter ending June 30,
2003 (approximately YEN26.0 billion negative impact).
o An increase in extraordinary items including patent related expenses
(approximately YEN26.0 billion negative impact).
o A decrease in operating income from a decrease in sales
(approximately YEN10.0 billion negative impact).
o Other factors including an increase in the amount of new product
prototype development expenses (approximately YEN26.6 billion negative
impact).
Cost and Benefit of the Three Year, 300 Billion Yen Restructuring Plan
Beginning in the Fiscal Year Ending March 31, 2004
Breakdown of theYEN300 Billion Cost: Approximately YEN280 Billion in Electronics
Breakdown of the Benefit of theYEN300 Billion Cost: Annualized Savings of Approximately YEN200 Billion
(Approximately YEN170 Billion in Electronics)
Cost and Benefit of the 140 Billion Yen Restructuring Plan for the Fiscal Year Ending March 31, 2004
Breakdown of the YEN140 Billion Cost: Approximately YEN130 Billion in Electronics
(Personnel Related Expenses:
Approximately YEN70 Billion)
(Facility Impairments: Approximately YEN60 Billion)
Breakdown of the Benefit of the YEN140 Billion: Annualized Savings of ApproximatelyYEN75 Billion
Approximately YEN60 Billion of the YEN75 Billion is
Expected to be in Electronics
(Personnel Expense Reduction:
Approximate YEN30 Billion)
(Cost Reduction including Facility Impairments:
Approximate YEN30 Billion)
Short Name: Sony Corp.
Category Code: MSC
Sequence Number: 00005212
Time of Receipt (offset from UTC): 20030528T152328+0100
--30--mh/uk*
CONTACT: Sony Corporation
KEYWORD: UNITED KINGDOM JAPAN INTERNATIONAL EUROPE ASIA PACFIC
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS
ELECTRONIC GAMES/MULTIMEDIA HARDWARE
SOURCE: Sony Corp.
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