Sony Ericsson, Facts and Challenges
Marketing Assignment
Sony Ericsson, Facts and Challenges
1.0 Report Overview
1.1 Introduction
The aim of this report is to deeply understand the importance of applying marketing essential strategies in order for the company to thrive in a dynamic changing environment. Sony Ericsson, the joint venture established in 2001, is an example to be thoroughly examined in this report. Its mobile T68i was revolutionary; it was the first GSM/GPRS color screen handset. Its Bluetooth technology was introduced for the first time in the market. Nevertheless, Sony Ericsson's market share is only 13.65% in 2010 compared to Nokia, 51.40%! Why? (GetJar 2009)
The report will focus on revealing the key issues that affect Sony Ericsson's current and future situation in the market. After the great success of Sony Ericsson in selling its Walkman phones that were launched in 2005 (Smith 2006:77), it started to face new challenges in the market. The report will critically evaluate Sony Ericsson's implemented strategies compared to the surrounding environment and highlight the challenges that face the company for this implementation.
It is an important report because it will provide a better insight on how marketing strategies are put into practice in a company. It will also help in answering a very important question: what are the challenges the company should handle to maintain its competitive advantage now and in the future.
1.2 Report Structure and Approach
This report will be structured as the following:
Section Two: An introduction to the company's behaviour and the way it responds to changes in the market in order to understand the broader system it works in.
Section Three: A deep analysis of the competitive advantage of the company to have a better understanding of its potentials in order to decide what is better for it.
Section Four: Identifying the internal and external factors that determines the company's success or failure by evaluating its strengths and weaknesses and opportunities and threats using PESTEL and SWOT theories.
Section Five: A conclusion.
2.0 Sony Ericsson Orientation
Sony Ericsson, being in the mobile telephone industry, faces a lot of fierce competition and it has always strived to be a leader in this industry. To achieve this goal, It has adopted a four dimensional organizational orientation strategy which includes product, marketing, production and sales orientation (Schenker 2007).
2.1 Product Orientation
Sony Ericsson has always maintained quality and differentiation in its products while expanding into new markets and making its brand known worldwide. It invests in research and development to develop new products that will satisfy its customers. For instance it was the first in 2005 (Sony Ericsson: 2008) to develop the walkman feature in cell phones. It also developed phones with digital cameras and cyber shot cameras which added value to its products. This company actually invests a lot of money in research and development; it has an office in Sweden which focuses only on researching into new product features and quality (Consumer Reports 2005).
A key factor in the product orientation strategy of Sony has been its branding. According to Colton, '' It is wide recognised that brands are one of the most valuable assets that firms own''. This explains why Sony Ericsson always wants to improve on its product design so as to maintain its brand name and image which customers hold about its products. Sony Ericsson's brand strength has helped in innovation and creation of value - creation strategies that its competitors cannot implement or follow as the brand name Sony Ericsson has greater awareness and recognition. Thus a strong brand name can result in a greater profit margin and the more an organisation achieves its objectives. Sony's brand names with their sophisticated features like the recently launched green heart cell phone has had a positive image in the minds of their consumers who has a high recognition for it as an environmentally friendly industry (Colton et al. 2010).
Sony Ericsson has smartly differentiated products with the aim of targeting different segments of the market, since it is difficult for a single product to satisfy the needs of different consumers. For instance, it started by developing phones which were large in size with few options like text messages only. Later on it improved mobiles by producing very small size phones with camera options. Today it has phones with video recording, mp3 and cyber shot.
Today, Sony Ericsson has expanded the market for its products operating in over eighty one countries of the globe; it no longer produces electrical appliances like electric irons, televisions and mp3 DVD players. It aims to gain leadership in the mobile phone industry using a strong brand name.
2.2 Marketing Orientation
Sony Ericsson is a market oriented organization. Market orientation, according to Jobber, is when a firm gives priority to consumers’ preferences at all levels of their activities. Sony Ericsson highly values its customers so it develops all its phones based on customers' specifications and preferences. It wants to satisfy its customers at all levels; always researching on what consumers desire and it greatly invests in this area as it sees them profitable investments. This can be clearly noticed when Sony Ericsson came with the walkman phones with mp3 in 2005 which paid it off and helped recover the losses it incurred before and resulted in a larger market share. Sony Ericsson has displayed number of market orientation characteristics; for instance, efficiency and effectiveness, segmentation and targeting, customer value and satisfaction and competitive advantage.
Moreover, Sony Ericsson is an efficient and effective mobile phone company. Efficiency is seen through its ability to minimise its production cost while maximizing outputs and profit. Sony Ericsson has kept at all stages in production at low cost while maintaining quality and variety with sophisticated features (camera, video recording, and web browser). Also investing in new products and modern technology has been the spirit behind the success of Sony Ericsson in many occasions. Effectiveness, on the other hand, is seen by its ability to produce phones that people want to buy. At one point, the continuous increase in the profits of Sony Ericsson has been due to increase in demand on its phones which has resulted in more sales compared to other years.
Sony Ericsson has divided its market into different groups of buyers and sellers. Some of the main segments are those who seek phones for value and those seeking sophisticated features like video recording, internet and mp3.
Sony Ericsson has always sought to create pleasure and fun in its phones with the aim of providing customers' satisfaction and value to its products. This is why it keeps developing new features like the touch screen, slides and internet facilities.
Sony Ericsson has always strived to remain the market leader in the phone industry and to have a competitive edge over its competitors like Nokia and Samsung. This is why after making huge losses of over $10 000 it came up with the new walkman and cyber-shot phones in 2005 and maintained low prices which generated revenues of $31 687.2 million with a net income of $1 769.5 million. It has always put its customers in first position in all its marketing strategies. A typical model to show its marketing orientation can be shown below; Figure 1: Market Orientation (Jobber 2006:6)
Marketing orientation entails creating goods and services that will satisfy the needs of your customers and continuously researching into better ways of doing so and making sure this process has a positive impact on the goals of the company (Uncles 2000: 1).
The growing importance of marketing orientation today is seen as firms try to build long lasting relationships with their customer. Firms now produce what the market demands not just producing with the hope that whatever they manufacture consumers will buy. Firms now use customer strategic marketing which is a process whereby they try to optimise revenue and profits while satisfying their needs (Dean et al. 2009).
2.3 Production Orientation
Sony Ericsson produces mobile phones and most of the production is centered in China, India and Britain. Third of the production is in China and India as the cost of production in these countries is lower than in the United Kingdom and Sweden where its research and development office is found.
The company is efficient in production and so tries to minimise production cost. In 2008, it reduced its work force by 2000 employees and consultants in and remains competitive in this industry which is very dynamic. Sony Ericsson produces phones (talk and text, camera, web and email, touch phones, music and games) and mobile accessories (head phones, battery charger, music transmitters and cables, car holders, Bluetooth headset, phone cases). These phones are designed in different sizes, styles and shapes.
Besides, the company focuses its production of mobile phones based on the current market needs. Last year due to the global cry for climate change, it has launched the "Go Green Heart" Sony Ericsson phone. This shows that the company invests in the production of products that match with current needs of the population. (Sony Ericsson 2009).
2.4 Sales Orientation Sony Ericsson has witnessed rapid increases in revenue due to increased sales. It initially started operations in Britain, China, India and Sweden, but today it has expanded its market to over eighty one countries. Despite the recent recession that lead to reduction in profits, Sony Ericsson has embarked on sales promotions, aggressive and persuasive TV and Internet advertisement and sales promotion and reasonable prices of its products. Most of its adverts have had positive impacts. For example, when it launched the Walkman in 2005, there was a rapid increase in demand and high sales were recorded. Their major buyers are mobile communication firms and independent retailers. Over the years they have experienced increases in their sales and net revenue, yet lost market share. This can be seen below:
Years 2005 2006 2007 2008
Net Sales (SEK Million) 7,268 10,959 99,129 12,916
Net Profit (EK Million) 350 997 1,114 1 769.5
Source: Sony Ericsson Company Research
2.5 Sony Ericsson Group Operation
Sony Ericsson has different telecommunication through firms like other companies such as Orange, T-Mobile and MTN which carry out sales promotions and this strategy has off. With it launching of online sales it has increased sales as retailers can place their commands online and receive their goods wherever they are located. The coming up of the pricing strategy in 2007 was Sony Ericsson introduced reasonably priced phones with fewer functions equally lead to rapid penetration of the markets especially in Africa.
2.6 Evaluation and Recommendation
Sony Ericsson has a positive product and production orientation. This has given it a competitive edge in the market as it always finds new ways and methods of innovation in the mobile phone industry. Its effort in this line has placed it in a supreme position most of time.
However it still has to work more on the area of developing phone and accessories. Most of its accessories are not strong as a lot of customers have made negative complaints regarding their durability. The industry has however reacted to this by offering guarantees to customers who purchase its walkman and cyber shot phones. This step nevertheless seems unfair to other consumers who do not get any warranty when purchasing the company other low quality phones (Strategic Direction 2004).
As regarding marketing and sales, a lot has to be improved .This is because despite its recent downsizing in labour force with the aim of cutting down cost and maximising profits, the company has still recorded recent losses in the fourth quarter of 2009 (BBC: 2010) of 167 million Euro from 187million Euro in the previous year. Sales in this same period fell by 40%. Sony Ericsson has been suffering from lower sales due to failures in their marketing team. A lot of improvements should be carried out to bust sales and profits. The company overall is doing well needs an extra force o rekindle its sales and profit margins.
3.0 Competitive Advantage
An advantage over competitors gained by offering greater customer value, either through lower process or by providing more benefits more benefits that justify higher prices (Armstrong and Kotler 2009:218).
Sony Ericsson can be accredited for its innovation. Whether by T68i, the First GSM/GPRS enabled colour screen Handset, Bluetooth technology for file transfer or hand free and later with Music and Loud Speakers or High Mega Pixel Mobile Camera.
At one time, Sony Ericsson Held the second largest market as a phone manufacturer in Europe. Below graph shows its market share of 20% which is quite dominant (Mintel 2010). Handset Market Share in Europe, November 2009
One of the main strengths of Sony Ericsson is diversity (Sony Ericsson 2010) and mapping this to the Poter's "Three Generic Strategies" theory we reach the following "Stuck In the Middle" situation for Sony Ericsson. Competitive Advantage (Porter 1985)
Turning this problem into opportunity, it is an advantage for Sony Ericsson to be in that situation, as it enables it to serve the vast mobile consumer market over competitors and the serve the three competitive advantages of Cost, differentiation and focus.
3.1 Cost Leadership
To achieve cost Leadership Sony Ericsson has become low cost producers in mobile industry as compared to others offering the same mobile features and quality. Sony Ericsson prices are quite competitive and are available for big as well as small pockets.
Brand £0-20 £21-40 £41-100 £100 Total
Nokia 4 4 6 7 21
Sony Ericsson 1 3 8 7 19
Samsung 1 2 6 4 13
LG - - 3 5 8
Availability of pay as you go phones, by brand and price, December 2009 Source: Mintel
Analyzing the above data it clearly specifies that Sony Ericsson have competitive numbers of handsets in all ranges. This helps Sony Ericsson customer base to be 20% and growing continuously.
3.2 Differentiation
From day one Sony Ericsson’s focus has been on Music functionality or camera. At early times when camera phones were just launched, the brand gave the feature to take, send and receive pictures quickly as cameras. Same for the Music Player, its Walkman Series had a dedicated button to allow switching between mobile and music functionality.
Mixing the competitive price and leads in terms of multimedia usage across the handset brands (listed in the below table) makes Sony Ericsson so popular among youth (Mintel: 2010).
Total% Nokia % Sony Ericsson % Samsung % Motorolla %
Bluetooth 46 42 62 53 35
Camera – less than 5 megapixel 43 36 55 46 50
Music player 37 29 58 46 16
Games 36 32 49 41 33
Video recorder 34 27 51 41 22
Video player 30 24 45 37 20
Web browser 28 25 38 33 20
Radio 25 25 41 27 6
Camera – 5 megapixels or more 21 20 25 29 14
Fast web browsing eg 3G 17 19 21 14 6
Email 16 16 17 15 8
Touchscreen 11 5 11 17 3
IM chat eg Instant messenger 10 11 11 8 3
Wi-Fi 9 11 11 6 2
GPS/Sat-Nav 7 10 4 4 1
QWERTY keyboard 6 4 5 4 2
Ability to open Word Documents 6 6 5 3 2
Ability to open PDF documents 6 6 4 3 1
Ability to open Excel documents 5 5 4 2 2
Source: (Mintel Oxygen, 2010), Based on 2,000 Internet users aged 16+. Sony Ericsson had product of handset (included pay as you go and contract) owned by facilities on mobile used, October 2008.
3.3 Focus
Focus strategy is to be successful; the organization must understand segments thoroughly; how their needs are changing and what range to offer. If Sony Ericsson doesn’t serve the segment more effectively than competitors, then it will be in a poor position (Brassington and Pettitt, 2006: 972).
Sony Ericsson obviously is the under-25s’ preferred handset (Mintel: 2010). The features such as High Mega Pixel Camera and music Players are symptomatic of entertainment and function-hungry younger market and these features are highly substitutable. Also Sony-Ericsson younger users perceive its interface as easier to use in connection to the features of their key interest.
Although, the risk of operating in this segment is that this segment might fluctuate widely on the short run depending on fashion trends, Sony Ericsson market share may fairly remain same, Other possible threat is that this might be undetermined by competition (Brassington and Pettitt, 2006: 973).
For Complete understanding of the Sony Ericsson competitive advantages, Poter’s five Forces of competitive advantages have further been used. According to the Porter, the state of competition in an industry depends on five basics competitive forces; the collective strengths of these forces determining the ultimate profile potential of the industry and the ability of firm in an industry to earn rates of return on investment in access of the cost of capital (Poter 1985).
The five forces are as Follows:
• Existing Competitive rivalry between players.
• Barging power of buyers.
• Threat of new market entrance.
• Bargaining powers of suppliers.
• Threat of Substitute products.
These five forces for Sony Ericsson is shown in the below figure. Porter’s 5 Force Model for Sony Ericsson.
3.3.1 Existing Competitive Rivalry among Players
Sony Ericsson sustains the competition amount Nokia, Motorola, LG, Samsung, etc because of its Innovation strengths. This enables it to enjoy the total market share of 20%. To reach this figure, Sony Ericsson defiantly needs to maintain its technology as well and its competitive cost base to attract more customers.
Also, the increase in social networking should be maintained, Sony Ericsson have already targeted most of them such as Facebook, Twiter and Myspace, as they are the current attracters and give a competitive edge.
In current market trends, there is a big increase in the smart phone users and to cope up with the trend. In 2009, Sony Ericsson largely focused on the high-end segment of the market with the launch of Satio, Aino, W995 and Yari ranges. The Satio is a touch-screen with a 12MP camera and a Walkman; the Aino provides access to media content from a PlayStation3 console while on the move; and the Yari has a Nintendo Wii-like sensor for gaming (Mintel 2010).
3.3.2 Bargaining Powers of Buyers
The degree which consumers can influence the demand is referred as bargaining power (Jobbar 2010). Sony Ericsson offers its customers a big range of handsets at competitive price to satisfy the vast mobile consumer market which are from basic phone users to top end latest technology buyers. This expands the market base for them not just within Europe but also enables them to serve this vast range in various economies.
3.3.3 Threat of new market Entrance
New Entry means new rival that in turn means increased competition. Sony Ericsson need to be aware of all the big and small companies entering in various global locations into the mobile phone industry as the Sony Ericsson deals with all rang of handsets. Certain barriers should be put to inhibit new entrants. As Mobile market is very competitive the new entry and its survival is quite dull until as unless it’s a well know brand and good technology as what Apple’s iPhone did to the market share of smart phone of Sony Ericsson and other brands (Schenker 2007). The threat of new entrants to Sony Ericsson is quite low because of its established brand value and quality.
3.3.4 Threat of Substitute Products
This is the ability of your customers to find an alternative way of doing what you do. As far as near future is concerned, an substitute of mobile handsets can’t be think of, so Sony Ericson need not to worry about this threat but it needs to be open for viewing the new technologies coming in for communication so that it can incorporate in new models.
3.3.5 Bargaining Power of Suppliers
The bargaining power of suppliers can also be described as the market of inputs. Suppliers of raw materials, components, labor, and services can become power over the firm if there are few substitutes.
Since the starting of Sony Ericsson in 2001, it operates under a corporate social responsibility code. Sony Ericsson insists to only works with suppliers who meet required stringent. This helps employees to make ethically correct decisions. Influencing product development and improvement from a CSR and environmental perspectives in the supply chain, which is a key reason in reaching industry leadership as well as compliance with those requirements. Also, All Sony Ericsson suppliers go under assessment to meet compliance with CSR and environmental requirements. These assessments prove that suppliers have procedures within place to control their supply chain (Sony Ericsson 2010).
In this ways Sony Ericsson has developed loyalty from its suppliers and being a main market player, it has the power of looking at different suppliers in tough times.
3.4 Value Chain
It’s a method for locating superior skills and resources. All firms consist of set of activities that are conducted during product lifecycle, they are design, manufacture, market, distribute and after sales service for its products. The value chain categorizes them into support and primary activities (Jobber 2010: 787). The value chain (Jobber 2006: 788)
Product differentiation defiantly provides competitive advantage, but on the other hand it also tends to increase the complexity, which increases supply chain risk. The challenge manufacturers face is making the correct tradeoff decision among the two. Sony Ericsson deals with this by deeply analyzing the total supply chain effect at various stages of design strategies (AMRresearch 2010) this might be internal or external to the organisation.
Sony Ericsson has a tie up with ATCLE in US for packaging and final manufacturing touch until the products arrive in Texas with ATCLE’s distribution Center. This gives Sony Ericsson two advantages:
It gave them positive trade-off of cost benefit in transporting packed product from Asia compared to ATCLE’s charges for assembling. This also gave them the opportunity of finally customizing the product in Dallas closer to the customer as per their desire. (SupplyChainBrain 2010). Similarly, the tie up of Sony Ericsson with Ingram for its nationwide sales and distribution in India brought a value addition to the company. (Kanter J 2009)
Building up of the high quality of value chain makes Sony Ericsson more probable by customers because they get better service quality across the globe and it also concentrate more on the product and quality it is developing.
Sony Ericsson certainly has a competitive advantage over its rivals because of its strong Value chain within the various operations without the organization and outside across the globe.
4.0 Marketing Mix
Diffusion of a product depends on its positioning. It includes complexity, differential advantage, divisibility, compatibility with customers' values, i.e. life style, experiences and behaviours, and communicability (Jobber 2010:384-409). Companies should be careful in choosing the target market and showing the differential advantage the product has. This could be achieved by a combination of successful brand naming, image, service, design, guarantees, packaging and delivery. All of those mentioned are included in the four marketing mix framework which will be discussed in this section (Jobber 2010:311).
4.1 Product
Product is a crucial part of the marketing mix; it's the element that the company starts to build and shape its identity and most importantly generates profit. All companies have products, whether tangible or intangible, but what differentiates their products from each other is the branding itself. Branding includes choosing a name, creating a design, insuring quality and the line of products. Positioning is created out of those elements, bearing in mind that they, together, should be clear in the message they deliver, credible, consistent and competitive.
These elements augment the perceived value and performance of customers. It is also a barrier to rivals, gain for high profits and base for brand extension, quality certification and trust (Jobber 2010:305). We are going to discuss those important elements with reference to Sony Ericsson Company.
4.1.1 Brand Name
Developing a distinctive name for the brand differentiates and distinguishes it from other products in the market. Brand naming should evoke positive emotions, be easy to remember and pronounce and suggest the benefit of the product (Jobber 2010: 319-320). Sony Ericsson always uses prestigious names for its brands that suggest sophistication and smoothness, like its newest mobiles Xperia, Xperia X10 and Vivaz. They are easy to remember and they provoke a kind of excitement for the customer to be introduced to those products. Also the company uses alphanumeric when naming its brands to emphasize technology which expand its targeted customers. Sony Ericsson choice of names is very successful when compared to other mobile names like Nokia 7230, Motorola Dext; the former combines the two essential elements of simplicity and technology.
Another important aspect of brand naming is the brand heritage (Jobber 2010:315); it adds value to the positioning of the brand in the market. When looking at Sony Ericsson, the name of the company itself evokes positive association of two big huge companies; the Japanese company, Sony, and the Swedish telecommunication company, Ericsson. So the name of the mobile company itself guarantees high quality for the targeted customers; they can trust the brand just by knowing its name.
Sony Ericsson Company's name and its brands name have a very positive impact on the targeted market due to the combination of good quality associated with technology.
4.1.2 Product Design
Positioning is defined by Kotler as the 'act of designing the company's offering and image to occupy a distinct place in the target market's mind' (Kotler 2000). So design has a great emphasis on the positioning of the product. Brands should not focus on functional values only; those values should be combined with emotional excitement to compete effectively in the market. Did Sony Ericsson achieve this distinction in its designs?
Sony Ericsson invests in colour and design to augment nowadays what is considered a basic product to create appeal for its target market. Its new slogan is meant to make people smile, so it tried to design mobiles, like Xperia and Vivaz to deliver this purpose (Sony Ericsson 2009). Vivaz Mobile
It also found new market to target by observing that QWERTY device usage has grown (Reinstaller 2009). Sony Ericsson was losing the market for iphones, so it created a slide out keyboard mobile Xperia X10 mini which will be introduced to the market soon. Usually QWERTY mobiles are comparatively big, so Sony Ericsson wanted to create a competitive advantage by being better than mobile companies and apple iphones. (Two mobiles in one; small and QWERTY). It wanted its mobiles to be more appealing. It created a mobile smaller than a credit card and with all features that any normal mobile will have. Xperia X10 mini
Sony Ericsson keeps looking into the market searching for a change in customer's trends; it keeps in contact with customers and encourages them through its website to develop and design mobiles that appeal to its customers. The company has "Theme Creator" blog, for instance, to be the first to respond to the market inevitable change. Now it is designing its products to emphasise its new slogan "make people smile!" Sony Ericsson is trying to make its designs appeal to the human senses; beauty is all around.
4.1.3 Quality
The product should at least achieve the basic function it is expected to do; higher quality brands mean higher market share and higher profitability (Jobber 2010:303).
As mentioned before, having the co-branding of Sony and Ericsson gives a guarantee for the customers that their products are of high quality. The name encourages customers to buy the product. Unfortunately, the co-branding insures only short-term quality insurance; the experience of the customers is far more crucial. Did Sony Ericsson insure quality for all of its products?
Few years back, Sony Ericsson had a great success in selling high quality Walkman mobiles; it was the first in market to bring mobiles with music added features. Unfortunately, trends of the market changed after a while. With the fast explosion of technology, customers started to look for more technologically sophisticated mobiles. The appearance of smart phones made the handset phones less appealing to customers (Chang, Chen and Zhou 2009:6).
Sony Ericsson responded slowly to the change; it kept producing Walkman series till recently. This made it lose market share to competitors such as Nokia and Motorola who responded to the change by developing their mobiles' designs and functions to match with the market needs and desires.
Lately, Sony Ericsson understood this change and developed new mobile series, Satio, Xperia and Vivaz which highly appealed to customers. They are technologically advanced, have brilliant designs that combine tiny size, without compensation of any features, different colours and ease of usage to connect with the internet and upload any number of pictures on social networks like Facebook, YouTube or Twitter. By finding this new growing communicative community markets, Sony Ericsson now is gaining profits and growing its market share.
Sony Ericsson major quality lies in its technological advantage emerging from the integration of telecommunications technology and Sony's powerful image and technological lead in the market. This is the advantage which most phone companies do not have. And with the development of technology, relying on the expertise of Sony's company and the powerful channel relations of Ericsson Telecommunication, new innovations will be created and demand will further increase.
If Sony Ericsson wants to avoid additional losses, it needs to focus on continually improving not only its designs, but also on improved open systems¹ and flexible media integration. Otherwise, it will continue to produce features years behind its rivals and sales will decline.
4.1.4 Line of Products
One significant aspect of mobile production is its short-term life cycle. Mobile companies are required to always invent, create and develop mobile phones to keep or increase their market share and respond to the continuous changes in market environment related to customers' tastes, behaviours, lifestyles and benefits sought out of the mobiles.
When looking back to 2006, for instance, we find that Sony Ericsson always faced the challenge of competing with Nokia and Motorola. And since it can't compete using the same strategy of targeting all segments of the market with competitive products, it tried to address a niche segment where it can market its differentiated products like Walkman and Cybershot phones. This made their profits higher by 43% (ABIresearch 2006). For a quiet time, Sony Ericsson followed the strategy of manufacturing and marketing many of handsets accompanied with accessories which made it the second most profitable mobile company in the handset market in 2007 (ABIresearch 2007). It proved to gain a respectable market share in Europe (12.40%) and India (10 %) (ContentNext Media 2009). But since the market changed and customers started to look for more prestigious attractive with high technology mobiles, Sony Ericsson's strategy did not work for long time.
This trend change urged Sony Ericsson to create new products and target new markets. It developed Xperia series, Vivaz and Satio aimed to make communication fun by making people smile. This created a new market to it that wasn't explored before. It also designed a mobile created particularly for women who have interest in fashion; Jalou™ by Dolce & Gabbana. It is meant to be the 'ultimate fashion accessory' ( Sony Ericsson 2010). Sony Ericsson found a new niche market. Moreover, Sony Ericsson created eco-friendly mobiles, for both business and individuals, made of recycled plastics and waterborne paint to reduce the negative impact on the environment, like Aspen mobile for example. Customers who care about the sake of nature and environment would find Sony Ericsson's "Green Heart" product very appealing. Sony Ericsson successfully identified its targeted audience through its new products. Now it needs to penetrate the market by aggressive advertisements, and huge capital to invest in those products to insure that they diffuse faster to reach it ultimate goal; higher market share and more profits.
When examining Sony Ericsson company products' position in February, 2010, as a whole, using BCG matrix (we could not examine all its products individually for two reasons; firstly the average of mobile phones' life cycle is only 14 months (National Geographic 2006). Secondly mobile companies tend to produce many mobiles in short term), we would find that most of their products are "dogs". Sony Ericsson's market share grew from 6% in 2009 (Sony Ericsson 2009) to 13.65% in 2010(GetJar 2010), compared to Nokia which market share grew from 37% (Nokia 2009) to 51.40% (GetJar 2010) respectively. (Appendix 1) The above chart shows only where most of Sony Ericsson's mobiles lie (approximately 62%, Appendix 2). Sony Ericsson should start aggressively investing in the few star products to become cows and generate profits. The "dog" products should be either eliminated or extended by finding new niche market where they could be sold.
Sony Ericsson identified its problematic situation when it incurred huge losses in profits and market share in 2008. As a result, it introduced new series of sophisticated smart phones with unique designs and high quality. Its market share grew in the first quarter of 2010. Will Sony Ericsson keep aggressively investing in developing its products to meet the market's continuous fluctuations?
It is true that it often guaranteed short term profit and success, but Sony Ericsson needed sustainable efforts to keep it strong and differentiated from other products which it failed to do so far (Finchannel 2010).
4.2 Price
Price is the most crucial element from a company's perspective; it determines the profit margin that the company will get. Deciding the price should go along with the marketing strategy and the marketing mix of the company; it should not be isolated. A large part of deciding the price depends on the positioning of the product in the target market (DataMonitor 2003); does the product provide high value for the targeted customers, are the customers willing to pay? Is there any competition in the market? Does the demand exceed the supply for the same product?
When looking into the pricing strategy of Sony Ericsson, like any other mobile company, once it launches its product in the market it starts with the rapid skimming strategy (Jobber 2010:429) by using aggressive promotion and placing high pricing to gain high profits from extravagant buyers and introduce the product to customers.
Prices of Sony Ericsson's mobiles are justified; reasonably priced compared to other mobile companies. Besides, the co-branding of Sony and Ericsson gives a strong positioning for the product by placing it as a high quality product. This also helps the product diffusion in the market. Moreover it is a possibility that Sony Ericsson reconsider its pricing since there are many competitors in the market, but this could jeopardize the image of the company being high quality. Besides, the cost of creating and developing a mobile with sophisticated technology is comparatively high, so lowering prices for Sony to achieve higher market share or profits may not be the optimal solution.
Strategy of changing the price will be difficult for Sony Ericsson. Depending on its advancement in technology, expanding its market segments, and always improving its designs and accessories, Sony Ericsson could easily offset the threats of the strong competition around it and the pressure of re-pricing its products (DataMonitor 2003).
4.3 Place
The ultimate target of any business is to earn profits which cannot be earned if the product does not reach the customer. Therefore the product needs to be carried away from the place of production to the actual consumer.
4.3.1 Distribution strategy
The number of intermediates in a business decides the type of distribution it carries.
A company can opt for one of the following distribution Strategies: 4.3.1.1 Intensive Distribution Strategy A company following this strategy tries to stock its products in the maximum number of outlets or stores. These are available as per the consumer demand. Sony Ericsson follows Intensive Distribution Strategy. The Mobile Phones of Sony Ericsson are available at number of outlets in different countries. Company tries to make its phones available in almost every market in rural and urban areas to target all kinds of customers. Sony Ericsson Mobile Phones are available on gift shops, Mobile shops, accessory shops etc. which depicts intensive distribution.
4.3.2 Marketing Channels
There are number of channels to transfer goods from the manufacturer to the product will reach the customers. Sony Ericsson uses the indirect marketing channel.
4.3.2.1 Indirect Marketing Channels Sony Ericsson distributes its products with the help of distribution channels. Different companies use different distribution channels. A channel may be suitable for a particular company whereas the same channel may be totally ineffective or lead to increase in the cost for another company.
Each intermediary level affects the cost of the product. Sony Ericsson Company follows this Marketing Distribution Channel as they do not sell their products directly, company sells to agents who further supply mobile phones to wholesalers in bulk and the wholesalers further supply to retailers and then the mobile phone is sold to the customer. Often customers make purchases through internet which is directly supplied by Wholesalers and skipping the retailer, this reduces the cost.
Sometimes a company’s final product is used as a raw material by some other company. A distribution channel differs where the manufacturer has to supply goods to the industry instead of consumers.
Distribution Channels for Consumer Goods
CHANNEL DECISIONS: Channel Decisions include:
• selection of channel members
• motivation of individual channel members
• evaluation of performance of individual channel members.
• Controlling channel members
INDIRECT CHANNELS
4.3.2.2 Channel Selection Channel selection is influenced by factors like distribution strategy adopted by a company (intensive, exclusive or selective), Channel Integrity, type of market which includes knowledge of consumers and distributors, buyer behaviour, type of product etc.
4.3.2.3 Motivation of Channel Members Intermediates in the channel should be motivated from time to time. The main challenge for any company lies in their ability to motivate intermediates to achieve maximum sales and customer satisfaction.
4.3.2.4 Evaluation of Performance Manufacturer should regularly monitor the performance of channel members in terms of sales target, sales achievement, inventory maintenance, customer satisfaction, complaints, employee training etc.
4.3.2.5 Controlling Channel Member If there is a difference in the expected behaviour of channel members and actual behaviour then manufacturer should take timely action. Delay or lack of proper control on channel members can put company into legal problems (Kanter J 2009). Sony Ericsson selects its distribution channel based on high selection criteria to guarantee efficiency.
4.3.3 Distribution Analysis
4.3.3.1 PESTLE
As Sony Ericsson is an international company so the distribution of their product to different parts of world is affected by PESTLE.
P: Political (Like the Political parties may affect the distribution of mobile phones with their favourable or unfavourable policies for Sony Ericsson)
E: Economical (Like change of currency rates may affect the price in the distribution)
S: Social (Demographic factors like age, gender etc of a particular country may affect the sales, like age group between 20-30 prefers to have new features and flashy hand set, whereas above 50 most of the times prefer simple to use handsets)
T: Technological (If the people in a particular region are technology friendly they will welcome a new innovation otherwise a superb technology if rejected by customers may become a failure)
L: Legal (Different countries have different laws for trade which may affect the trade of Sony Ericsson’s mobile phones)
E: Environmental (Environmental obligations like rules of disposal of dead batteries etc may affect the distribution
4.3.3.1 SWOT Analysis
It is a thorough analysis of the Strengths, Weaknesses, Opportunities and Threats of a Business. Strengths and weaknesses of a company are considered as internal and controllable factors whereas opportunities and threats and external and uncontrollable factors. According to SWOT Analysis:
Strengths:
• Worldwide operations, it operates in above 80 countries in the world.
• Research and Development department in Japan, India, China and North America.
• Company has Agents in different countries which are well aware of the political, legal, social, economical and environmental factors of their country which facilitates the distribution.
• Producers in India and China; Sony Ericsson helps the company to decrease its cost of production as the labour is cheap in these countries.
• Wide ranges of products are available for all segments of customers.
• The wholesalers of this company supply mobile phones to the retailers available in their countries to ensure uninterrupted supply of phones.
• As the company is operating on an international level it cannot have direct links with the customers and employees. With this distribution channel the retailers can have direct link with their employees and the commission on sales set by wholesaler or retailer motivates them to sell and hence increases the total sales of the company.
Weaknesses:
• The distribution channel is too long and with each additional intermediate like agent, wholesaler and retailer the cost of distribution increases consequently price of each mobile phone increases.
• The channel is too long and failure to properly coordinate with all the channels result in delay in supply or overstock.
• Lack of interaction between customer and company. Company knows its customers' needs, demands and preferences through the middlemen only. These middlemen could be the intermediates or research houses.
Opportunities:
• Growth in Internet Shopping will help company to increase its sale and reduce the levels of intermediates from the distribution channel.
• With their Go green theme it has opportunity to sell more in the countries which are more environments conscious.
Threats:
• Decrease in Profit margin with increasing distribution costs.
• Government trade policies in different countries.
• Increase in competition in different countries.
4.4 Promotion
Even if a company manufactures high quality products with lots of innovation and research but if it is not able to influence the buying behaviour of the consumer it cannot maximize its sales and profit. Buying behaviour of a consumer can be influenced only if the benefits and uses of a product is updated to him in a perfect manner to stimulate the purchase. In marketing this is called Promotion. Promotional activities could be classified on the basis of target audience.
Sony Ericsson is marketing in different parts of world like Asia Pacific, Central East Europe, Middle East Africa, China, India, Japan, Latin America, North America and Western Europe.
4.4.1 Promotional Mix of Sony Ericsson
Sony Ericsson uses Mass Communication Techniques in different countries to target different customers to promote its products. Some of its techniques are:
4.4.1.1 Advertisement
It is defined as any paid form of non personal promotion transmitted through mass medium (Brassington, Pettitt 2006: 669). Sony Ericsson uses different advertisements in different countries with different language. It focuses largely on advertising through TV, newspaper and Internet. A good advertisement helps in creating awareness of the product with a clear message or objective. It should also focus on a particular set of audience and should be in the budget set by the company. An advertisement can be successful only if takes care of PESTLE i.e. the political, economical, social, technological and environmental factors. Pictures of Sony Ericsson’s Advertisement Selecting an advertisement should be selected carefully; an advertisement should be informative and not misleading. Also a good Advertisement informs the customers about the benefits of the product to target customers and influence their buying behaviour. A company can choose number of advertising media like Radio, TV, Newspaper, hoardings and leaflets.
Sony Ericsson applies Aida Model in its advertisements. For example with the launch of an environment friendly models like "Aspen", it is changing its advertisement with green heart symbol and green colour to gain the attention of the target audience and then its creating interest with advertisement like "I love nature", which creates a desire amongst the audience which affects their buying behaviour.
4.4.1.2 Sales Promotion
A simple way to increase profits is to increase sales. A company can promote its sales through promotion activities for customers, channel members or sales staff. Sony Ericsson performs various sales promotion activities for customers like offering discounts, extended warranty, and additional accessories like joy stick and memory card on selected models or in festive seasons to increase their sales. Along with that it promotes its sales by activities like sales commission for the sales staff and channel members.
4.4.1.3 Publicity
Publicity is the communication of a product by placing information about it in the media without paying for the cost of media. Sony Ericsson holds number of events which are shown in the newspapers and news channels which acts as a publicity for the company.
4.4.1.4 Sponsorship
Sponsorship is an activity in which a company associates itself with individuals or events with an objective of brand recognition. Sony Ericsson sponsors various events like Sony Ericsson’s Fanwalk on M TV and Doha 2008 Tennis event. These events indirectly help in the promotion of its brand and product. Pictures of events sponsored by Sony Ericsson.
A company can sponsor various events like Sports, Arts, Social Causes, and Environmental Programmes etc. The main objectives of publicity are:
• To gain exposure,
• Create entertainment opportunities for their clients or prospects,
• Associate its brand with that event,
• To improve community relations,
• Promote its sales with the name of the event.
Nevertheless, Sponsorship may leave negative impact on the customers when it is associated with a celebrity or sports car. For example a company sponsors a Fashion show and it becomes mired in any controversy then it will leave negative effect on the target audience. Therefore a company should be cautious while spending huge amount on sponsorship.
4.4.1.5 Direct Marketing
It is the distribution of products, information and promotional benefits to customers through interactive communication in a way that allows response to be measured.
Sony Ericsson uses direct marketing to promote their mobile phones and accessories with Direct Marketing technique through their interactive sales staff. The main characteristic of direct marketing is to personalize the communication and activities can therefore be less visible to competitors. The two main components of direct marketing are:
• Direct interaction with the customers.
• Direct Response of the customers
Sony Ericsson follows Direct Marketing as there is a direct interaction among the sales staff and customers and customers respond directly with the sales staff about the product.
A Company could follow any of the following measures for direct marketing of their products.
4.4.1.5.1 Face to Face Selling
Face to face Selling is important when a face to face communication between the customer and the sales person is required. Sony Ericsson Company focuses on face to face communication between its sales staff in the stores in different parts of countries and the customers.
4.4.1.5.2 Retailer's Catalogue
This is a direct marketing technique through the catalogues. Retailers in this case send the brochures of their products to customers to enhance sales. Sony Ericsson Company does not send brochures directly to the customers, but the brochures are available at the retail stores for the customer's reference.
4.4.1.5.3 Marketing through Mails
In this case company sends various promotional mails, fax mails and voice mails to the customers to increase their sales. But Sony Ericsson does not follow this technique of marketing.
4.4.1.5.4 Internet Marketing
Here company uses Internet as a tool to update customers about the available products and services to impact the purchase. Videos of Sony Ericsson’s mobile phones are available on social networks on internet like, YouTube, Facebook, Twitter and Picasa. This way Sony Ericsson has a global reach to its customers at low cost. This marketing technique helps Sony Ericsson to reduce its marketing cost.
5.0 Conclusion
It is true that Sony Ericsson has a late start in joining mobile world in 2002; it faced vicious competition, endured frequent losses and market fluctuations, whether economically or psychologically. Nevertheless it always proved to be capable of defending its market and fighting back to retrieve its position.
In order for Sony Ericsson to maintain a sustainable growth, its strategy should be a combination of interrelated activities related to market positioning, position on the distribution channel and length of market presence. It is important that Sony Ericsson makes the customer easily understand its positioning in the market and this could be achieved only by linking all strategic activities to achieve this goal ( Hassan and Craft 2005:81-89).
Glossary
1. Open System: A system that allows third parties to make products that plug into or interoperate with it.
Appendix
1. Calculating market share change and growth according to Jobber, we reach to the following data:
• Market share= Nokia : Sony Ericsson= 51.40% : 13.65%= 1 : 4= 0.25
• Market growth= (This year market share- Last year market share)/ Last year market share= ( 13.65-6)/ 6= 1.28
2010 market share market growth
Sony Ericsson 0.25 1.28
2. When describing the position of Sony Ericsson, it was a personal judgment depending on the market share of Sony Ericsson, its products' market share and the date those mobiles where introduced to the market ( see table below). Only mobiles 14 months old and less were taken into consideration:
Model Production date Market Share
Sony-Ericsson C510
2009 Q1 0.29%
Sony-Ericsson W995
2009 Q1 0.27%
Sony-Ericsson U1 Satio
2009 Q4 0.22%
Sony-Ericsson J105 Naite
2009 Q2 0.21%
Sony-Ericsson W395
2009 Q1 0.21%
Sony-Ericsson C905
2008, 4Q 0.19%
Sony-Ericsson W705
2008 Q4 0.19%
Sony-Ericsson U10 Aino
2009 Q4 0.11%
Sony-Ericsson S312
2009 Q2 0.09%
Sony-Ericsson S302
2008, 4Q 0.08%
Sony-Ericsson G705
2008 Q4 0.08%
Sony-Ericsson W205
2009 Q1 0.06%
Sony-Ericsson W715
2009 Q1 0.06%
Sony-Ericsson T715
2009 Q3 0.05%
Sony-Ericsson C903
2009 Q1 0.04%
Sony-Ericsson U100 Yari
2009 Q4 0.03%
Sony-Ericsson TM717 Equinox
2009 Q4 0.01%
Sony-Ericsson T707
2009 Q2 0.01%
Sony-Ericsson W508
2009 Q2 0.01%
Sony-Ericsson W518a
2009 Q2 0.01%
Sony-Ericsson C901
2009 Q1 0.01%
Sony-Ericsson M1 Aspen
2010 Q1
Sony Ericsson, Facts and Challenges
1.0 Report Overview
1.1 Introduction
The aim of this report is to deeply understand the importance of applying marketing essential strategies in order for the company to thrive in a dynamic changing environment. Sony Ericsson, the joint venture established in 2001, is an example to be thoroughly examined in this report. Its mobile T68i was revolutionary; it was the first GSM/GPRS color screen handset. Its Bluetooth technology was introduced for the first time in the market. Nevertheless, Sony Ericsson's market share is only 13.65% in 2010 compared to Nokia, 51.40%! Why? (GetJar 2009)
The report will focus on revealing the key issues that affect Sony Ericsson's current and future situation in the market. After the great success of Sony Ericsson in selling its Walkman phones that were launched in 2005 (Smith 2006:77), it started to face new challenges in the market. The report will critically evaluate Sony Ericsson's implemented strategies compared to the surrounding environment and highlight the challenges that face the company for this implementation.
It is an important report because it will provide a better insight on how marketing strategies are put into practice in a company. It will also help in answering a very important question: what are the challenges the company should handle to maintain its competitive advantage now and in the future.
1.2 Report Structure and Approach
This report will be structured as the following:
Section Two: An introduction to the company's behaviour and the way it responds to changes in the market in order to understand the broader system it works in.
Section Three: A deep analysis of the competitive advantage of the company to have a better understanding of its potentials in order to decide what is better for it.
Section Four: Identifying the internal and external factors that determines the company's success or failure by evaluating its strengths and weaknesses and opportunities and threats using PESTEL and SWOT theories.
Section Five: A conclusion.
2.0 Sony Ericsson Orientation
Sony Ericsson, being in the mobile telephone industry, faces a lot of fierce competition and it has always strived to be a leader in this industry. To achieve this goal, It has adopted a four dimensional organizational orientation strategy which includes product, marketing, production and sales orientation (Schenker 2007).
2.1 Product Orientation
Sony Ericsson has always maintained quality and differentiation in its products while expanding into new markets and making its brand known worldwide. It invests in research and development to develop new products that will satisfy its customers. For instance it was the first in 2005 (Sony Ericsson: 2008) to develop the walkman feature in cell phones. It also developed phones with digital cameras and cyber shot cameras which added value to its products. This company actually invests a lot of money in research and development; it has an office in Sweden which focuses only on researching into new product features and quality (Consumer Reports 2005).
A key factor in the product orientation strategy of Sony has been its branding. According to Colton, '' It is wide recognised that brands are one of the most valuable assets that firms own''. This explains why Sony Ericsson always wants to improve on its product design so as to maintain its brand name and image which customers hold about its products. Sony Ericsson's brand strength has helped in innovation and creation of value - creation strategies that its competitors cannot implement or follow as the brand name Sony Ericsson has greater awareness and recognition. Thus a strong brand name can result in a greater profit margin and the more an organisation achieves its objectives. Sony's brand names with their sophisticated features like the recently launched green heart cell phone has had a positive image in the minds of their consumers who has a high recognition for it as an environmentally friendly industry (Colton et al. 2010).
Sony Ericsson has smartly differentiated products with the aim of targeting different segments of the market, since it is difficult for a single product to satisfy the needs of different consumers. For instance, it started by developing phones which were large in size with few options like text messages only. Later on it improved mobiles by producing very small size phones with camera options. Today it has phones with video recording, mp3 and cyber shot.
Today, Sony Ericsson has expanded the market for its products operating in over eighty one countries of the globe; it no longer produces electrical appliances like electric irons, televisions and mp3 DVD players. It aims to gain leadership in the mobile phone industry using a strong brand name.
2.2 Marketing Orientation
Sony Ericsson is a market oriented organization. Market orientation, according to Jobber, is when a firm gives priority to consumers’ preferences at all levels of their activities. Sony Ericsson highly values its customers so it develops all its phones based on customers' specifications and preferences. It wants to satisfy its customers at all levels; always researching on what consumers desire and it greatly invests in this area as it sees them profitable investments. This can be clearly noticed when Sony Ericsson came with the walkman phones with mp3 in 2005 which paid it off and helped recover the losses it incurred before and resulted in a larger market share. Sony Ericsson has displayed number of market orientation characteristics; for instance, efficiency and effectiveness, segmentation and targeting, customer value and satisfaction and competitive advantage.
Moreover, Sony Ericsson is an efficient and effective mobile phone company. Efficiency is seen through its ability to minimise its production cost while maximizing outputs and profit. Sony Ericsson has kept at all stages in production at low cost while maintaining quality and variety with sophisticated features (camera, video recording, and web browser). Also investing in new products and modern technology has been the spirit behind the success of Sony Ericsson in many occasions. Effectiveness, on the other hand, is seen by its ability to produce phones that people want to buy. At one point, the continuous increase in the profits of Sony Ericsson has been due to increase in demand on its phones which has resulted in more sales compared to other years.
Sony Ericsson has divided its market into different groups of buyers and sellers. Some of the main segments are those who seek phones for value and those seeking sophisticated features like video recording, internet and mp3.
Sony Ericsson has always sought to create pleasure and fun in its phones with the aim of providing customers' satisfaction and value to its products. This is why it keeps developing new features like the touch screen, slides and internet facilities.
Sony Ericsson has always strived to remain the market leader in the phone industry and to have a competitive edge over its competitors like Nokia and Samsung. This is why after making huge losses of over $10 000 it came up with the new walkman and cyber-shot phones in 2005 and maintained low prices which generated revenues of $31 687.2 million with a net income of $1 769.5 million. It has always put its customers in first position in all its marketing strategies. A typical model to show its marketing orientation can be shown below; Figure 1: Market Orientation (Jobber 2006:6)
Marketing orientation entails creating goods and services that will satisfy the needs of your customers and continuously researching into better ways of doing so and making sure this process has a positive impact on the goals of the company (Uncles 2000: 1).
The growing importance of marketing orientation today is seen as firms try to build long lasting relationships with their customer. Firms now produce what the market demands not just producing with the hope that whatever they manufacture consumers will buy. Firms now use customer strategic marketing which is a process whereby they try to optimise revenue and profits while satisfying their needs (Dean et al. 2009).
2.3 Production Orientation
Sony Ericsson produces mobile phones and most of the production is centered in China, India and Britain. Third of the production is in China and India as the cost of production in these countries is lower than in the United Kingdom and Sweden where its research and development office is found.
The company is efficient in production and so tries to minimise production cost. In 2008, it reduced its work force by 2000 employees and consultants in and remains competitive in this industry which is very dynamic. Sony Ericsson produces phones (talk and text, camera, web and email, touch phones, music and games) and mobile accessories (head phones, battery charger, music transmitters and cables, car holders, Bluetooth headset, phone cases). These phones are designed in different sizes, styles and shapes.
Besides, the company focuses its production of mobile phones based on the current market needs. Last year due to the global cry for climate change, it has launched the "Go Green Heart" Sony Ericsson phone. This shows that the company invests in the production of products that match with current needs of the population. (Sony Ericsson 2009).
2.4 Sales Orientation Sony Ericsson has witnessed rapid increases in revenue due to increased sales. It initially started operations in Britain, China, India and Sweden, but today it has expanded its market to over eighty one countries. Despite the recent recession that lead to reduction in profits, Sony Ericsson has embarked on sales promotions, aggressive and persuasive TV and Internet advertisement and sales promotion and reasonable prices of its products. Most of its adverts have had positive impacts. For example, when it launched the Walkman in 2005, there was a rapid increase in demand and high sales were recorded. Their major buyers are mobile communication firms and independent retailers. Over the years they have experienced increases in their sales and net revenue, yet lost market share. This can be seen below:
Years 2005 2006 2007 2008
Net Sales (SEK Million) 7,268 10,959 99,129 12,916
Net Profit (EK Million) 350 997 1,114 1 769.5
Source: Sony Ericsson Company Research
2.5 Sony Ericsson Group Operation
Sony Ericsson has different telecommunication through firms like other companies such as Orange, T-Mobile and MTN which carry out sales promotions and this strategy has off. With it launching of online sales it has increased sales as retailers can place their commands online and receive their goods wherever they are located. The coming up of the pricing strategy in 2007 was Sony Ericsson introduced reasonably priced phones with fewer functions equally lead to rapid penetration of the markets especially in Africa.
2.6 Evaluation and Recommendation
Sony Ericsson has a positive product and production orientation. This has given it a competitive edge in the market as it always finds new ways and methods of innovation in the mobile phone industry. Its effort in this line has placed it in a supreme position most of time.
However it still has to work more on the area of developing phone and accessories. Most of its accessories are not strong as a lot of customers have made negative complaints regarding their durability. The industry has however reacted to this by offering guarantees to customers who purchase its walkman and cyber shot phones. This step nevertheless seems unfair to other consumers who do not get any warranty when purchasing the company other low quality phones (Strategic Direction 2004).
As regarding marketing and sales, a lot has to be improved .This is because despite its recent downsizing in labour force with the aim of cutting down cost and maximising profits, the company has still recorded recent losses in the fourth quarter of 2009 (BBC: 2010) of 167 million Euro from 187million Euro in the previous year. Sales in this same period fell by 40%. Sony Ericsson has been suffering from lower sales due to failures in their marketing team. A lot of improvements should be carried out to bust sales and profits. The company overall is doing well needs an extra force o rekindle its sales and profit margins.
3.0 Competitive Advantage
An advantage over competitors gained by offering greater customer value, either through lower process or by providing more benefits more benefits that justify higher prices (Armstrong and Kotler 2009:218).
Sony Ericsson can be accredited for its innovation. Whether by T68i, the First GSM/GPRS enabled colour screen Handset, Bluetooth technology for file transfer or hand free and later with Music and Loud Speakers or High Mega Pixel Mobile Camera.
At one time, Sony Ericsson Held the second largest market as a phone manufacturer in Europe. Below graph shows its market share of 20% which is quite dominant (Mintel 2010). Handset Market Share in Europe, November 2009
One of the main strengths of Sony Ericsson is diversity (Sony Ericsson 2010) and mapping this to the Poter's "Three Generic Strategies" theory we reach the following "Stuck In the Middle" situation for Sony Ericsson. Competitive Advantage (Porter 1985)
Turning this problem into opportunity, it is an advantage for Sony Ericsson to be in that situation, as it enables it to serve the vast mobile consumer market over competitors and the serve the three competitive advantages of Cost, differentiation and focus.
3.1 Cost Leadership
To achieve cost Leadership Sony Ericsson has become low cost producers in mobile industry as compared to others offering the same mobile features and quality. Sony Ericsson prices are quite competitive and are available for big as well as small pockets.
Brand £0-20 £21-40 £41-100 £100 Total
Nokia 4 4 6 7 21
Sony Ericsson 1 3 8 7 19
Samsung 1 2 6 4 13
LG - - 3 5 8
Availability of pay as you go phones, by brand and price, December 2009 Source: Mintel
Analyzing the above data it clearly specifies that Sony Ericsson have competitive numbers of handsets in all ranges. This helps Sony Ericsson customer base to be 20% and growing continuously.
3.2 Differentiation
From day one Sony Ericsson’s focus has been on Music functionality or camera. At early times when camera phones were just launched, the brand gave the feature to take, send and receive pictures quickly as cameras. Same for the Music Player, its Walkman Series had a dedicated button to allow switching between mobile and music functionality.
Mixing the competitive price and leads in terms of multimedia usage across the handset brands (listed in the below table) makes Sony Ericsson so popular among youth (Mintel: 2010).
Total% Nokia % Sony Ericsson % Samsung % Motorolla %
Bluetooth 46 42 62 53 35
Camera – less than 5 megapixel 43 36 55 46 50
Music player 37 29 58 46 16
Games 36 32 49 41 33
Video recorder 34 27 51 41 22
Video player 30 24 45 37 20
Web browser 28 25 38 33 20
Radio 25 25 41 27 6
Camera – 5 megapixels or more 21 20 25 29 14
Fast web browsing eg 3G 17 19 21 14 6
Email 16 16 17 15 8
Touchscreen 11 5 11 17 3
IM chat eg Instant messenger 10 11 11 8 3
Wi-Fi 9 11 11 6 2
GPS/Sat-Nav 7 10 4 4 1
QWERTY keyboard 6 4 5 4 2
Ability to open Word Documents 6 6 5 3 2
Ability to open PDF documents 6 6 4 3 1
Ability to open Excel documents 5 5 4 2 2
Source: (Mintel Oxygen, 2010), Based on 2,000 Internet users aged 16+. Sony Ericsson had product of handset (included pay as you go and contract) owned by facilities on mobile used, October 2008.
3.3 Focus
Focus strategy is to be successful; the organization must understand segments thoroughly; how their needs are changing and what range to offer. If Sony Ericsson doesn’t serve the segment more effectively than competitors, then it will be in a poor position (Brassington and Pettitt, 2006: 972).
Sony Ericsson obviously is the under-25s’ preferred handset (Mintel: 2010). The features such as High Mega Pixel Camera and music Players are symptomatic of entertainment and function-hungry younger market and these features are highly substitutable. Also Sony-Ericsson younger users perceive its interface as easier to use in connection to the features of their key interest.
Although, the risk of operating in this segment is that this segment might fluctuate widely on the short run depending on fashion trends, Sony Ericsson market share may fairly remain same, Other possible threat is that this might be undetermined by competition (Brassington and Pettitt, 2006: 973).
For Complete understanding of the Sony Ericsson competitive advantages, Poter’s five Forces of competitive advantages have further been used. According to the Porter, the state of competition in an industry depends on five basics competitive forces; the collective strengths of these forces determining the ultimate profile potential of the industry and the ability of firm in an industry to earn rates of return on investment in access of the cost of capital (Poter 1985).
The five forces are as Follows:
• Existing Competitive rivalry between players.
• Barging power of buyers.
• Threat of new market entrance.
• Bargaining powers of suppliers.
• Threat of Substitute products.
These five forces for Sony Ericsson is shown in the below figure. Porter’s 5 Force Model for Sony Ericsson.
3.3.1 Existing Competitive Rivalry among Players
Sony Ericsson sustains the competition amount Nokia, Motorola, LG, Samsung, etc because of its Innovation strengths. This enables it to enjoy the total market share of 20%. To reach this figure, Sony Ericsson defiantly needs to maintain its technology as well and its competitive cost base to attract more customers.
Also, the increase in social networking should be maintained, Sony Ericsson have already targeted most of them such as Facebook, Twiter and Myspace, as they are the current attracters and give a competitive edge.
In current market trends, there is a big increase in the smart phone users and to cope up with the trend. In 2009, Sony Ericsson largely focused on the high-end segment of the market with the launch of Satio, Aino, W995 and Yari ranges. The Satio is a touch-screen with a 12MP camera and a Walkman; the Aino provides access to media content from a PlayStation3 console while on the move; and the Yari has a Nintendo Wii-like sensor for gaming (Mintel 2010).
3.3.2 Bargaining Powers of Buyers
The degree which consumers can influence the demand is referred as bargaining power (Jobbar 2010). Sony Ericsson offers its customers a big range of handsets at competitive price to satisfy the vast mobile consumer market which are from basic phone users to top end latest technology buyers. This expands the market base for them not just within Europe but also enables them to serve this vast range in various economies.
3.3.3 Threat of new market Entrance
New Entry means new rival that in turn means increased competition. Sony Ericsson need to be aware of all the big and small companies entering in various global locations into the mobile phone industry as the Sony Ericsson deals with all rang of handsets. Certain barriers should be put to inhibit new entrants. As Mobile market is very competitive the new entry and its survival is quite dull until as unless it’s a well know brand and good technology as what Apple’s iPhone did to the market share of smart phone of Sony Ericsson and other brands (Schenker 2007). The threat of new entrants to Sony Ericsson is quite low because of its established brand value and quality.
3.3.4 Threat of Substitute Products
This is the ability of your customers to find an alternative way of doing what you do. As far as near future is concerned, an substitute of mobile handsets can’t be think of, so Sony Ericson need not to worry about this threat but it needs to be open for viewing the new technologies coming in for communication so that it can incorporate in new models.
3.3.5 Bargaining Power of Suppliers
The bargaining power of suppliers can also be described as the market of inputs. Suppliers of raw materials, components, labor, and services can become power over the firm if there are few substitutes.
Since the starting of Sony Ericsson in 2001, it operates under a corporate social responsibility code. Sony Ericsson insists to only works with suppliers who meet required stringent. This helps employees to make ethically correct decisions. Influencing product development and improvement from a CSR and environmental perspectives in the supply chain, which is a key reason in reaching industry leadership as well as compliance with those requirements. Also, All Sony Ericsson suppliers go under assessment to meet compliance with CSR and environmental requirements. These assessments prove that suppliers have procedures within place to control their supply chain (Sony Ericsson 2010).
In this ways Sony Ericsson has developed loyalty from its suppliers and being a main market player, it has the power of looking at different suppliers in tough times.
3.4 Value Chain
It’s a method for locating superior skills and resources. All firms consist of set of activities that are conducted during product lifecycle, they are design, manufacture, market, distribute and after sales service for its products. The value chain categorizes them into support and primary activities (Jobber 2010: 787). The value chain (Jobber 2006: 788)
Product differentiation defiantly provides competitive advantage, but on the other hand it also tends to increase the complexity, which increases supply chain risk. The challenge manufacturers face is making the correct tradeoff decision among the two. Sony Ericsson deals with this by deeply analyzing the total supply chain effect at various stages of design strategies (AMRresearch 2010) this might be internal or external to the organisation.
Sony Ericsson has a tie up with ATCLE in US for packaging and final manufacturing touch until the products arrive in Texas with ATCLE’s distribution Center. This gives Sony Ericsson two advantages:
It gave them positive trade-off of cost benefit in transporting packed product from Asia compared to ATCLE’s charges for assembling. This also gave them the opportunity of finally customizing the product in Dallas closer to the customer as per their desire. (SupplyChainBrain 2010). Similarly, the tie up of Sony Ericsson with Ingram for its nationwide sales and distribution in India brought a value addition to the company. (Kanter J 2009)
Building up of the high quality of value chain makes Sony Ericsson more probable by customers because they get better service quality across the globe and it also concentrate more on the product and quality it is developing.
Sony Ericsson certainly has a competitive advantage over its rivals because of its strong Value chain within the various operations without the organization and outside across the globe.
4.0 Marketing Mix
Diffusion of a product depends on its positioning. It includes complexity, differential advantage, divisibility, compatibility with customers' values, i.e. life style, experiences and behaviours, and communicability (Jobber 2010:384-409). Companies should be careful in choosing the target market and showing the differential advantage the product has. This could be achieved by a combination of successful brand naming, image, service, design, guarantees, packaging and delivery. All of those mentioned are included in the four marketing mix framework which will be discussed in this section (Jobber 2010:311).
4.1 Product
Product is a crucial part of the marketing mix; it's the element that the company starts to build and shape its identity and most importantly generates profit. All companies have products, whether tangible or intangible, but what differentiates their products from each other is the branding itself. Branding includes choosing a name, creating a design, insuring quality and the line of products. Positioning is created out of those elements, bearing in mind that they, together, should be clear in the message they deliver, credible, consistent and competitive.
These elements augment the perceived value and performance of customers. It is also a barrier to rivals, gain for high profits and base for brand extension, quality certification and trust (Jobber 2010:305). We are going to discuss those important elements with reference to Sony Ericsson Company.
4.1.1 Brand Name
Developing a distinctive name for the brand differentiates and distinguishes it from other products in the market. Brand naming should evoke positive emotions, be easy to remember and pronounce and suggest the benefit of the product (Jobber 2010: 319-320). Sony Ericsson always uses prestigious names for its brands that suggest sophistication and smoothness, like its newest mobiles Xperia, Xperia X10 and Vivaz. They are easy to remember and they provoke a kind of excitement for the customer to be introduced to those products. Also the company uses alphanumeric when naming its brands to emphasize technology which expand its targeted customers. Sony Ericsson choice of names is very successful when compared to other mobile names like Nokia 7230, Motorola Dext; the former combines the two essential elements of simplicity and technology.
Another important aspect of brand naming is the brand heritage (Jobber 2010:315); it adds value to the positioning of the brand in the market. When looking at Sony Ericsson, the name of the company itself evokes positive association of two big huge companies; the Japanese company, Sony, and the Swedish telecommunication company, Ericsson. So the name of the mobile company itself guarantees high quality for the targeted customers; they can trust the brand just by knowing its name.
Sony Ericsson Company's name and its brands name have a very positive impact on the targeted market due to the combination of good quality associated with technology.
4.1.2 Product Design
Positioning is defined by Kotler as the 'act of designing the company's offering and image to occupy a distinct place in the target market's mind' (Kotler 2000). So design has a great emphasis on the positioning of the product. Brands should not focus on functional values only; those values should be combined with emotional excitement to compete effectively in the market. Did Sony Ericsson achieve this distinction in its designs?
Sony Ericsson invests in colour and design to augment nowadays what is considered a basic product to create appeal for its target market. Its new slogan is meant to make people smile, so it tried to design mobiles, like Xperia and Vivaz to deliver this purpose (Sony Ericsson 2009). Vivaz Mobile
It also found new market to target by observing that QWERTY device usage has grown (Reinstaller 2009). Sony Ericsson was losing the market for iphones, so it created a slide out keyboard mobile Xperia X10 mini which will be introduced to the market soon. Usually QWERTY mobiles are comparatively big, so Sony Ericsson wanted to create a competitive advantage by being better than mobile companies and apple iphones. (Two mobiles in one; small and QWERTY). It wanted its mobiles to be more appealing. It created a mobile smaller than a credit card and with all features that any normal mobile will have. Xperia X10 mini
Sony Ericsson keeps looking into the market searching for a change in customer's trends; it keeps in contact with customers and encourages them through its website to develop and design mobiles that appeal to its customers. The company has "Theme Creator" blog, for instance, to be the first to respond to the market inevitable change. Now it is designing its products to emphasise its new slogan "make people smile!" Sony Ericsson is trying to make its designs appeal to the human senses; beauty is all around.
4.1.3 Quality
The product should at least achieve the basic function it is expected to do; higher quality brands mean higher market share and higher profitability (Jobber 2010:303).
As mentioned before, having the co-branding of Sony and Ericsson gives a guarantee for the customers that their products are of high quality. The name encourages customers to buy the product. Unfortunately, the co-branding insures only short-term quality insurance; the experience of the customers is far more crucial. Did Sony Ericsson insure quality for all of its products?
Few years back, Sony Ericsson had a great success in selling high quality Walkman mobiles; it was the first in market to bring mobiles with music added features. Unfortunately, trends of the market changed after a while. With the fast explosion of technology, customers started to look for more technologically sophisticated mobiles. The appearance of smart phones made the handset phones less appealing to customers (Chang, Chen and Zhou 2009:6).
Sony Ericsson responded slowly to the change; it kept producing Walkman series till recently. This made it lose market share to competitors such as Nokia and Motorola who responded to the change by developing their mobiles' designs and functions to match with the market needs and desires.
Lately, Sony Ericsson understood this change and developed new mobile series, Satio, Xperia and Vivaz which highly appealed to customers. They are technologically advanced, have brilliant designs that combine tiny size, without compensation of any features, different colours and ease of usage to connect with the internet and upload any number of pictures on social networks like Facebook, YouTube or Twitter. By finding this new growing communicative community markets, Sony Ericsson now is gaining profits and growing its market share.
Sony Ericsson major quality lies in its technological advantage emerging from the integration of telecommunications technology and Sony's powerful image and technological lead in the market. This is the advantage which most phone companies do not have. And with the development of technology, relying on the expertise of Sony's company and the powerful channel relations of Ericsson Telecommunication, new innovations will be created and demand will further increase.
If Sony Ericsson wants to avoid additional losses, it needs to focus on continually improving not only its designs, but also on improved open systems¹ and flexible media integration. Otherwise, it will continue to produce features years behind its rivals and sales will decline.
4.1.4 Line of Products
One significant aspect of mobile production is its short-term life cycle. Mobile companies are required to always invent, create and develop mobile phones to keep or increase their market share and respond to the continuous changes in market environment related to customers' tastes, behaviours, lifestyles and benefits sought out of the mobiles.
When looking back to 2006, for instance, we find that Sony Ericsson always faced the challenge of competing with Nokia and Motorola. And since it can't compete using the same strategy of targeting all segments of the market with competitive products, it tried to address a niche segment where it can market its differentiated products like Walkman and Cybershot phones. This made their profits higher by 43% (ABIresearch 2006). For a quiet time, Sony Ericsson followed the strategy of manufacturing and marketing many of handsets accompanied with accessories which made it the second most profitable mobile company in the handset market in 2007 (ABIresearch 2007). It proved to gain a respectable market share in Europe (12.40%) and India (10 %) (ContentNext Media 2009). But since the market changed and customers started to look for more prestigious attractive with high technology mobiles, Sony Ericsson's strategy did not work for long time.
This trend change urged Sony Ericsson to create new products and target new markets. It developed Xperia series, Vivaz and Satio aimed to make communication fun by making people smile. This created a new market to it that wasn't explored before. It also designed a mobile created particularly for women who have interest in fashion; Jalou™ by Dolce & Gabbana. It is meant to be the 'ultimate fashion accessory' ( Sony Ericsson 2010). Sony Ericsson found a new niche market. Moreover, Sony Ericsson created eco-friendly mobiles, for both business and individuals, made of recycled plastics and waterborne paint to reduce the negative impact on the environment, like Aspen mobile for example. Customers who care about the sake of nature and environment would find Sony Ericsson's "Green Heart" product very appealing. Sony Ericsson successfully identified its targeted audience through its new products. Now it needs to penetrate the market by aggressive advertisements, and huge capital to invest in those products to insure that they diffuse faster to reach it ultimate goal; higher market share and more profits.
When examining Sony Ericsson company products' position in February, 2010, as a whole, using BCG matrix (we could not examine all its products individually for two reasons; firstly the average of mobile phones' life cycle is only 14 months (National Geographic 2006). Secondly mobile companies tend to produce many mobiles in short term), we would find that most of their products are "dogs". Sony Ericsson's market share grew from 6% in 2009 (Sony Ericsson 2009) to 13.65% in 2010(GetJar 2010), compared to Nokia which market share grew from 37% (Nokia 2009) to 51.40% (GetJar 2010) respectively. (Appendix 1) The above chart shows only where most of Sony Ericsson's mobiles lie (approximately 62%, Appendix 2). Sony Ericsson should start aggressively investing in the few star products to become cows and generate profits. The "dog" products should be either eliminated or extended by finding new niche market where they could be sold.
Sony Ericsson identified its problematic situation when it incurred huge losses in profits and market share in 2008. As a result, it introduced new series of sophisticated smart phones with unique designs and high quality. Its market share grew in the first quarter of 2010. Will Sony Ericsson keep aggressively investing in developing its products to meet the market's continuous fluctuations?
It is true that it often guaranteed short term profit and success, but Sony Ericsson needed sustainable efforts to keep it strong and differentiated from other products which it failed to do so far (Finchannel 2010).
4.2 Price
Price is the most crucial element from a company's perspective; it determines the profit margin that the company will get. Deciding the price should go along with the marketing strategy and the marketing mix of the company; it should not be isolated. A large part of deciding the price depends on the positioning of the product in the target market (DataMonitor 2003); does the product provide high value for the targeted customers, are the customers willing to pay? Is there any competition in the market? Does the demand exceed the supply for the same product?
When looking into the pricing strategy of Sony Ericsson, like any other mobile company, once it launches its product in the market it starts with the rapid skimming strategy (Jobber 2010:429) by using aggressive promotion and placing high pricing to gain high profits from extravagant buyers and introduce the product to customers.
Prices of Sony Ericsson's mobiles are justified; reasonably priced compared to other mobile companies. Besides, the co-branding of Sony and Ericsson gives a strong positioning for the product by placing it as a high quality product. This also helps the product diffusion in the market. Moreover it is a possibility that Sony Ericsson reconsider its pricing since there are many competitors in the market, but this could jeopardize the image of the company being high quality. Besides, the cost of creating and developing a mobile with sophisticated technology is comparatively high, so lowering prices for Sony to achieve higher market share or profits may not be the optimal solution.
Strategy of changing the price will be difficult for Sony Ericsson. Depending on its advancement in technology, expanding its market segments, and always improving its designs and accessories, Sony Ericsson could easily offset the threats of the strong competition around it and the pressure of re-pricing its products (DataMonitor 2003).
4.3 Place
The ultimate target of any business is to earn profits which cannot be earned if the product does not reach the customer. Therefore the product needs to be carried away from the place of production to the actual consumer.
4.3.1 Distribution strategy
The number of intermediates in a business decides the type of distribution it carries.
A company can opt for one of the following distribution Strategies: 4.3.1.1 Intensive Distribution Strategy A company following this strategy tries to stock its products in the maximum number of outlets or stores. These are available as per the consumer demand. Sony Ericsson follows Intensive Distribution Strategy. The Mobile Phones of Sony Ericsson are available at number of outlets in different countries. Company tries to make its phones available in almost every market in rural and urban areas to target all kinds of customers. Sony Ericsson Mobile Phones are available on gift shops, Mobile shops, accessory shops etc. which depicts intensive distribution.
4.3.2 Marketing Channels
There are number of channels to transfer goods from the manufacturer to the product will reach the customers. Sony Ericsson uses the indirect marketing channel.
4.3.2.1 Indirect Marketing Channels Sony Ericsson distributes its products with the help of distribution channels. Different companies use different distribution channels. A channel may be suitable for a particular company whereas the same channel may be totally ineffective or lead to increase in the cost for another company.
Each intermediary level affects the cost of the product. Sony Ericsson Company follows this Marketing Distribution Channel as they do not sell their products directly, company sells to agents who further supply mobile phones to wholesalers in bulk and the wholesalers further supply to retailers and then the mobile phone is sold to the customer. Often customers make purchases through internet which is directly supplied by Wholesalers and skipping the retailer, this reduces the cost.
Sometimes a company’s final product is used as a raw material by some other company. A distribution channel differs where the manufacturer has to supply goods to the industry instead of consumers.
Distribution Channels for Consumer Goods
CHANNEL DECISIONS: Channel Decisions include:
• selection of channel members
• motivation of individual channel members
• evaluation of performance of individual channel members.
• Controlling channel members
INDIRECT CHANNELS
4.3.2.2 Channel Selection Channel selection is influenced by factors like distribution strategy adopted by a company (intensive, exclusive or selective), Channel Integrity, type of market which includes knowledge of consumers and distributors, buyer behaviour, type of product etc.
4.3.2.3 Motivation of Channel Members Intermediates in the channel should be motivated from time to time. The main challenge for any company lies in their ability to motivate intermediates to achieve maximum sales and customer satisfaction.
4.3.2.4 Evaluation of Performance Manufacturer should regularly monitor the performance of channel members in terms of sales target, sales achievement, inventory maintenance, customer satisfaction, complaints, employee training etc.
4.3.2.5 Controlling Channel Member If there is a difference in the expected behaviour of channel members and actual behaviour then manufacturer should take timely action. Delay or lack of proper control on channel members can put company into legal problems (Kanter J 2009). Sony Ericsson selects its distribution channel based on high selection criteria to guarantee efficiency.
4.3.3 Distribution Analysis
4.3.3.1 PESTLE
As Sony Ericsson is an international company so the distribution of their product to different parts of world is affected by PESTLE.
P: Political (Like the Political parties may affect the distribution of mobile phones with their favourable or unfavourable policies for Sony Ericsson)
E: Economical (Like change of currency rates may affect the price in the distribution)
S: Social (Demographic factors like age, gender etc of a particular country may affect the sales, like age group between 20-30 prefers to have new features and flashy hand set, whereas above 50 most of the times prefer simple to use handsets)
T: Technological (If the people in a particular region are technology friendly they will welcome a new innovation otherwise a superb technology if rejected by customers may become a failure)
L: Legal (Different countries have different laws for trade which may affect the trade of Sony Ericsson’s mobile phones)
E: Environmental (Environmental obligations like rules of disposal of dead batteries etc may affect the distribution
4.3.3.1 SWOT Analysis
It is a thorough analysis of the Strengths, Weaknesses, Opportunities and Threats of a Business. Strengths and weaknesses of a company are considered as internal and controllable factors whereas opportunities and threats and external and uncontrollable factors. According to SWOT Analysis:
Strengths:
• Worldwide operations, it operates in above 80 countries in the world.
• Research and Development department in Japan, India, China and North America.
• Company has Agents in different countries which are well aware of the political, legal, social, economical and environmental factors of their country which facilitates the distribution.
• Producers in India and China; Sony Ericsson helps the company to decrease its cost of production as the labour is cheap in these countries.
• Wide ranges of products are available for all segments of customers.
• The wholesalers of this company supply mobile phones to the retailers available in their countries to ensure uninterrupted supply of phones.
• As the company is operating on an international level it cannot have direct links with the customers and employees. With this distribution channel the retailers can have direct link with their employees and the commission on sales set by wholesaler or retailer motivates them to sell and hence increases the total sales of the company.
Weaknesses:
• The distribution channel is too long and with each additional intermediate like agent, wholesaler and retailer the cost of distribution increases consequently price of each mobile phone increases.
• The channel is too long and failure to properly coordinate with all the channels result in delay in supply or overstock.
• Lack of interaction between customer and company. Company knows its customers' needs, demands and preferences through the middlemen only. These middlemen could be the intermediates or research houses.
Opportunities:
• Growth in Internet Shopping will help company to increase its sale and reduce the levels of intermediates from the distribution channel.
• With their Go green theme it has opportunity to sell more in the countries which are more environments conscious.
Threats:
• Decrease in Profit margin with increasing distribution costs.
• Government trade policies in different countries.
• Increase in competition in different countries.
4.4 Promotion
Even if a company manufactures high quality products with lots of innovation and research but if it is not able to influence the buying behaviour of the consumer it cannot maximize its sales and profit. Buying behaviour of a consumer can be influenced only if the benefits and uses of a product is updated to him in a perfect manner to stimulate the purchase. In marketing this is called Promotion. Promotional activities could be classified on the basis of target audience.
Sony Ericsson is marketing in different parts of world like Asia Pacific, Central East Europe, Middle East Africa, China, India, Japan, Latin America, North America and Western Europe.
4.4.1 Promotional Mix of Sony Ericsson
Sony Ericsson uses Mass Communication Techniques in different countries to target different customers to promote its products. Some of its techniques are:
4.4.1.1 Advertisement
It is defined as any paid form of non personal promotion transmitted through mass medium (Brassington, Pettitt 2006: 669). Sony Ericsson uses different advertisements in different countries with different language. It focuses largely on advertising through TV, newspaper and Internet. A good advertisement helps in creating awareness of the product with a clear message or objective. It should also focus on a particular set of audience and should be in the budget set by the company. An advertisement can be successful only if takes care of PESTLE i.e. the political, economical, social, technological and environmental factors. Pictures of Sony Ericsson’s Advertisement Selecting an advertisement should be selected carefully; an advertisement should be informative and not misleading. Also a good Advertisement informs the customers about the benefits of the product to target customers and influence their buying behaviour. A company can choose number of advertising media like Radio, TV, Newspaper, hoardings and leaflets.
Sony Ericsson applies Aida Model in its advertisements. For example with the launch of an environment friendly models like "Aspen", it is changing its advertisement with green heart symbol and green colour to gain the attention of the target audience and then its creating interest with advertisement like "I love nature", which creates a desire amongst the audience which affects their buying behaviour.
4.4.1.2 Sales Promotion
A simple way to increase profits is to increase sales. A company can promote its sales through promotion activities for customers, channel members or sales staff. Sony Ericsson performs various sales promotion activities for customers like offering discounts, extended warranty, and additional accessories like joy stick and memory card on selected models or in festive seasons to increase their sales. Along with that it promotes its sales by activities like sales commission for the sales staff and channel members.
4.4.1.3 Publicity
Publicity is the communication of a product by placing information about it in the media without paying for the cost of media. Sony Ericsson holds number of events which are shown in the newspapers and news channels which acts as a publicity for the company.
4.4.1.4 Sponsorship
Sponsorship is an activity in which a company associates itself with individuals or events with an objective of brand recognition. Sony Ericsson sponsors various events like Sony Ericsson’s Fanwalk on M TV and Doha 2008 Tennis event. These events indirectly help in the promotion of its brand and product. Pictures of events sponsored by Sony Ericsson.
A company can sponsor various events like Sports, Arts, Social Causes, and Environmental Programmes etc. The main objectives of publicity are:
• To gain exposure,
• Create entertainment opportunities for their clients or prospects,
• Associate its brand with that event,
• To improve community relations,
• Promote its sales with the name of the event.
Nevertheless, Sponsorship may leave negative impact on the customers when it is associated with a celebrity or sports car. For example a company sponsors a Fashion show and it becomes mired in any controversy then it will leave negative effect on the target audience. Therefore a company should be cautious while spending huge amount on sponsorship.
4.4.1.5 Direct Marketing
It is the distribution of products, information and promotional benefits to customers through interactive communication in a way that allows response to be measured.
Sony Ericsson uses direct marketing to promote their mobile phones and accessories with Direct Marketing technique through their interactive sales staff. The main characteristic of direct marketing is to personalize the communication and activities can therefore be less visible to competitors. The two main components of direct marketing are:
• Direct interaction with the customers.
• Direct Response of the customers
Sony Ericsson follows Direct Marketing as there is a direct interaction among the sales staff and customers and customers respond directly with the sales staff about the product.
A Company could follow any of the following measures for direct marketing of their products.
4.4.1.5.1 Face to Face Selling
Face to face Selling is important when a face to face communication between the customer and the sales person is required. Sony Ericsson Company focuses on face to face communication between its sales staff in the stores in different parts of countries and the customers.
4.4.1.5.2 Retailer's Catalogue
This is a direct marketing technique through the catalogues. Retailers in this case send the brochures of their products to customers to enhance sales. Sony Ericsson Company does not send brochures directly to the customers, but the brochures are available at the retail stores for the customer's reference.
4.4.1.5.3 Marketing through Mails
In this case company sends various promotional mails, fax mails and voice mails to the customers to increase their sales. But Sony Ericsson does not follow this technique of marketing.
4.4.1.5.4 Internet Marketing
Here company uses Internet as a tool to update customers about the available products and services to impact the purchase. Videos of Sony Ericsson’s mobile phones are available on social networks on internet like, YouTube, Facebook, Twitter and Picasa. This way Sony Ericsson has a global reach to its customers at low cost. This marketing technique helps Sony Ericsson to reduce its marketing cost.
5.0 Conclusion
It is true that Sony Ericsson has a late start in joining mobile world in 2002; it faced vicious competition, endured frequent losses and market fluctuations, whether economically or psychologically. Nevertheless it always proved to be capable of defending its market and fighting back to retrieve its position.
In order for Sony Ericsson to maintain a sustainable growth, its strategy should be a combination of interrelated activities related to market positioning, position on the distribution channel and length of market presence. It is important that Sony Ericsson makes the customer easily understand its positioning in the market and this could be achieved only by linking all strategic activities to achieve this goal ( Hassan and Craft 2005:81-89).
Glossary
1. Open System: A system that allows third parties to make products that plug into or interoperate with it.
Appendix
1. Calculating market share change and growth according to Jobber, we reach to the following data:
• Market share= Nokia : Sony Ericsson= 51.40% : 13.65%= 1 : 4= 0.25
• Market growth= (This year market share- Last year market share)/ Last year market share= ( 13.65-6)/ 6= 1.28
2010 market share market growth
Sony Ericsson 0.25 1.28
2. When describing the position of Sony Ericsson, it was a personal judgment depending on the market share of Sony Ericsson, its products' market share and the date those mobiles where introduced to the market ( see table below). Only mobiles 14 months old and less were taken into consideration:
Model Production date Market Share
Sony-Ericsson C510
2009 Q1 0.29%
Sony-Ericsson W995
2009 Q1 0.27%
Sony-Ericsson U1 Satio
2009 Q4 0.22%
Sony-Ericsson J105 Naite
2009 Q2 0.21%
Sony-Ericsson W395
2009 Q1 0.21%
Sony-Ericsson C905
2008, 4Q 0.19%
Sony-Ericsson W705
2008 Q4 0.19%
Sony-Ericsson U10 Aino
2009 Q4 0.11%
Sony-Ericsson S312
2009 Q2 0.09%
Sony-Ericsson S302
2008, 4Q 0.08%
Sony-Ericsson G705
2008 Q4 0.08%
Sony-Ericsson W205
2009 Q1 0.06%
Sony-Ericsson W715
2009 Q1 0.06%
Sony-Ericsson T715
2009 Q3 0.05%
Sony-Ericsson C903
2009 Q1 0.04%
Sony-Ericsson U100 Yari
2009 Q4 0.03%
Sony-Ericsson TM717 Equinox
2009 Q4 0.01%
Sony-Ericsson T707
2009 Q2 0.01%
Sony-Ericsson W508
2009 Q2 0.01%
Sony-Ericsson W518a
2009 Q2 0.01%
Sony-Ericsson C901
2009 Q1 0.01%
Sony-Ericsson M1 Aspen
2010 Q1
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