Keeping this in view, the management of the company reorganised the overall structure of the company by changing and regrouping the product group of the company into eight divisional companies. In addition to this, each division of the company has its own goals and was also responsible for all of its operations including production sales and finance.
In addition to this, the decision making layers in the company was also reduced from six to a maximum of four in order to expedite the overall decision making process as well as in order to make the company more responsive to changing market conditions.
In spite of successful implementation of the restricting process, the financial results of the company in the financial year 1995, was unsatisfactory. In addition to this, the company reported an unexpected net loss of 293.69 billion yens.
In 1996, keeping in view the devastating financial performance in 1995, the management of the company identified that Sony’s consumer electronics electronic products lacked in new and innovative product.
Keeping in front the fact, the company decided to restructure the existing eight company structure as well as a to integrate the company’s various global and domestic functions. Thus, the company reorganised the existing structure to create a new ten company structure.
Under the new structure, the previous consumer audio and video company was split into three new companies as well as a new company was also created which focuses on the Sony’s business interests in the PC and IT industry.
In addition to this, the company also separated the marketing department of Japan from its global marketing department in order to separate Sony’s Japanese marketing operations from its worldwide operations, so that the company could operate in a focused manner.
This restructuring led to the positive and favourable financial results as the company has recorded a 15% increase in its revenue as well as there is also a considerable increase in the overall profits of the company in the financial year 1995-96.
In 1998 and 1999, the management of the company identified a massive potential in the online internet entertainment industry. In order tap successfully in the internet industry, the company once again re-hauled its organisational structure in such a way that it could be able to sell its electronic products and content through internet.
In addition to this, the company transformed its 10 company structure to 3 company structure which were extensively focused towards exploiting the opportunities present in the internet industry. However, this restructuring doesn’t proved out to be fruitful as the company recorded a significant drop of 19.4% in its net income in the financial year 1998-1999.
Furthermore, the financial performance in the year 1999-2000, the financial performance of the company boosted up and the stock prices of the company nearly tripled. However, due to some inconsistency in penetrating in the internet industry, the stock prices of the company again fell by approximately 40% in May 2000.
In April 2003, the company announced a significant restructuring exercise which would be exercised in the three years as well as the financial performance of the company in the financial year 2003 has stunned the entire corporate world as the company has recorded a significant decline of 98% in the net profit of the company. In addition to this, the analysts of the company is off the view that spending massively on restructuring the company poses various financial threats to the company in future.
1) During the period 1990-1995, the financial performance of Sony was bad. In 1994, in order to improve Sony’s Financial performance, Ohga decided to restructure the electronic department at Sony. Discuss in detail the restructuring done by Ohga. Do you think that the restructuring has produced the expected results?
In addition, explain the reasons of the restructuring of 1996 and it impact on Sony In 1994, under the leadership of Norio Ohga, the top management of the company identified a decline or stagnant sales during 1990 to 1994. The top management of the company identified that the group structure which has been made in the 1980’s, is unable to cope up with the dynamic business environment in 1990’s...........................
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