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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.
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; 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).
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).
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.
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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 Documents6 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 functionhungry 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.
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).
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.
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.
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.
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 systems and flexible media integration. Otherwise, it will continue to produce features years behind its rivals and sales will decline.
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.
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
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
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.
4.4.1.1 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.
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:
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.
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.
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).