Recognizing that environmental protection is one of the
most pressing issues facing mankind today, Sony incorporates a sound respect
for nature in all of its business activities. With this philosophy, Sony has
defined environmental conservation as an important part of its management
strategy. The Sony Group has created a global action plan and conducts
environmental preservation programs. This program has five core components:
reducing the environmental impact of business activities and production
processes; designing environmentally sensitive products and promoting
recycling; developing environmental technologies; promoting the environmental
education and full participation of Sony employees; and disclosing
environmental information to the public.
History
of Sony Corporation
Sony Corporation is one of the best-known names in
consumer electronics and ranks second worldwide in electronics behind
Matsushita Electric Corporation. Since it was established shortly after World
War II, Sony has introduced a stream of revolutionary products, including the
transistor radio, the Trinitron television, the Betamax VCR, the CD player, the
Walkman portable cassette player, and the PlayStation game console. The
company's electronics segment--which includes audio and video products,
televisions, personal computers, monitors, computer peripherals, telecommunications
devices, and electronic components (such as semiconductors)--generates about
two-thirds of the overall revenues. Sales of game consoles and software account
for about 9 percent of revenues. Another 10 percent of revenues are derived
from Sony's music businesses, which include the Columbia and Epic record
labels. About 7 percent of revenues come from Sony's motion picture and
television business, which includes the Columbia TriStar studio. Sony's other
major business segment is insurance, from which about 6 percent of revenues
originate.
Early History: From Tape Recorders to
Transistor Radios to the Trinitron
Sony was founded by a former naval lieutenant named
Akio Morita and a defense contractor named Masaru Ibuka. Morita, a weapons
researcher, first met Ibuka during World War II while developing a heat-seeking
missile-guidance system and a night-vision gun scope. After the war Ibuka
worked as a radio repairman for a bomb-damaged Tokyo department store. Morita
found him again when he read in a newspaper that Ibuka had invented a shortwave
converter. In May 1946 the two men established a partnership with $500 in
borrowed capital, and registered their company as the Tokyo Tsushin Kogyo
Kabushiki Kaisha (Tokyo Telecommunications Engineering Corporation, or TTK).
Morita and Ibuka moved their company to a crude facility on a hill in southern
Tokyo where they developed their first consumer product: a rice cooker, which
failed commercially. In its first year TTK registered a profit of $300 on sales
of less than $7,000.
But as the Japanese economy grew stronger, demand for
consumer goods increased. Morita and Ibuka abandoned the home-appliance market
and, with injections of capital from Morita's father, concentrated on
developing new electronic goods. Ibuka developed a tape recorder fashioned
after an American model he had seen at the Japan Broadcasting Corporation.
Demand for the machine, which was introduced in 1950 and was the first Japanese
tape recorder, remained low until Ibuka accidentally discovered a U.S. military
booklet titled Nine Hundred and Ninety-Nine Uses of the Tape Recorder. Translated
into Japanese, the booklet became an effective marketing tool. Once acquainted
with its many uses, customers such as the Academy of Art in Tokyo purchased so
many tape recorders that TTK was soon forced to move to a larger building in
Shinagawa.
Norio Ohga, an opera student at the academy, wrote several letters to TTK criticizing the sound quality of its recorder. Impressed by the detail and constructive tone of the criticisms, Morita invited Ohga to participate in the development of a new recorder as a consultant. Ohga accepted, and subsequent models were vastly improved.
Constantly searching for new technological advances, Masaru Ibuka heard of a tiny new capacitor called a transistor in 1952. The transistor, developed by Bell Laboratories, could be used in place of larger, less-durable vacuum tubes. Western Electric purchased the technology in order to manufacture transistorized hearing aids. Ibuka acquired a patent license from Western Electric for $25,000 with the intention of developing a small tubeless radio.TTK began mass production of transistor radios in 1955,
only a few months after they were introduced by a small American firm called
Regency Electronics. The TTK radio was named Sony, from sonus, Latin
for 'sound.' The Sony radio had tremendous sales potential, not only in the
limited Japanese market but also in the United States, where the economy was
much stronger.
1970s: Betamax and the Walkman
After a decade of experience in videotape technology,
Sony introduced the U-matic three-quarter-inch videocassette recorder (VCR) in
1971. Intended for institutions such as television stations, the U-matic
received an Emmy Award for engineering excellence from the National Academy of
Television Arts and Sciences. In 1973, the year Sony Overseas created a French
subsidiary, the academy honored the Trinitron series with another Emmy.
Sony developed its first VCR for the consumer market,
the Betamax, in 1975. The following year the Walt Disney Company and Universal
Pictures filed a lawsuit against Sony, complaining that the new machine would
enable widespread copyright infringement of television programs. A judgment in
favor of Sony in 1979 was reversed two years later. Litigation continued, but
by the time the matter reached the U.S. Supreme Court the plaintiffs' original
case had been severely undermined by the proliferation of VCRs, making any
legal restriction on copying television programs for private use nearly
impossible to enforce.
During the mid-1970s, competitors such as U.S.-based
RCA and Zenith and Japanese-based Toshiba and Victor Company of Japan (JVC)
effectively adopted and improved upon technologies developed by Sony. For the
first time, Sony began to lose significant market share, often in lines that it
had pioneered. Strong competition, however, was only one factor that caused
Sony's sales growth to fall (after growing 166 percent between 1970 and 1974,
it grew only 35 percent between 1974 and 1978).
Like many Sony officials, Akio Morita lacked formal
management training. Instead, he relied on his personal persuasive skills and
his unusual ability to anticipate or create markets for new products. In
typical fashion, Sony introduced the Betamax VCR well before its competitors,
in effect creating a market in which it would enjoy a short-term monopoly. At
this stage, however, Morita failed to establish the Betamax format as the
industry standard by inviting the participation of other companies.
Matsushita Electric (which owned half of JVC) developed
a separate VCR format called VHS (video home system), which permitted as many
as three additional hours of playing time on a tape, but which was incompatible
with Sony's Betamax. When the VHS was introduced in 1977, Morita was reported
to have felt betrayed that Sony's competitors did not adopt the Betamax format.
He appealed to 81-year-old Konosuke Matsushita, in many ways a patriarch of
Japanese industry, to discontinue the VHS format in favor of Betamax. When
Matsushita refused, many believed it was because he felt insulted by Morita's
failure to offer earlier collaboration.
Matsushita launched a vigorous marketing campaign to convince
customers and other manufacturers not only that VHS was superior, but that
Betamax would soon be obsolete. The marketing war between Matsushita and Sony
was neither constructive nor profitable; both companies were forced to lower
prices so much that profits were greatly depressed. Although Betamax was
generally considered a technically superior product, the VHS format grew in
popularity and gradually displaced Betamax as a standard format. Despite its
falling market share (from 13 percent in 1982 to 5 percent in 1987), Sony
refused to introduce a VHS line until the late 1980s.
1980s: CD Player, Video Cameras, CBS
Records, Columbia Pictures
During the 1970s, Masaru Ibuka, 12 years Morita's senior, gradually relinquished many of his duties to younger managers such as Norio Ohga, who was named president of Sony in 1982. Ohga became president shortly after a corporate reorganization that split Sony into five operating groups (marketing and sales, manufacturing, service, engineering, and diversified operations). While not formally trained in business, Ohga nonetheless understood that Sony was too dependent on an unstable consumer electronics market. In one of his first acts, he inaugurated the 50-50 program to increase sales in institutional markets from 15 to 50 percent by 1990.
During this time, Sony's research and development budget consumed approximately 9 percent of sales (Matsushita budgeted only 4 percent). Another groundbreaking result of Sony's commitment to research and development was a machine that used a laser to reproduce music recorded digitally on a small plastic disk. The compact disk (or CD) player, introduced by Sony in 1982, eliminated much of the noise common to conventional, analog phonograph records. Sony developed the CD in association with the Dutch electronics firm Philips, partly in an effort to ensure broad format standardization. Philips, which had developed the most advanced laser technology, was an ideal partner for Sony, which led in the pulse-code technology that made digital sound reproduction possible. Soon the CD format was adopted by competing manufacturers; by the mid-1990s it had virtually replaced phonograph systems as the recording medium of choice.Early in the 1980s, Morita began ceding some of his
duties to Sony's president, Norio Ohga, the young opera student hired 30 years
earlier to improve Sony's tape recorders. Under Ohga, Sony entered into a new
acquisitions phase with the intent of protecting itself from the costly mistake
it had made with Betamax. One example of the changes Ohga brought about was
Sony's video camera, introduced in 1985. Lighter, less expensive, and more
portable than VHS cameras, the camera used 8mm videotape, and was incompatible
with both Betamax and VHS machines. The key difference between this and earlier
Sony products was that Sony developed the new 8mm video format in conjunction
with over 100 competitors. While the camera may have been incompatible with the
older Betamax and VHS technologies, Sony ensured that it would be compatible
with the next generation of video cameras. Within three years of its
introduction, the camera captured over 50 percent of the European, 30 percent
of the Japanese, and 20 percent of the North American markets.
In May 1984 Sony purchased Apple Computer's hard-disk-technology operations. As a result of this acquisition, Sony was able to control about 20 percent of the Japanese market for workstations, personal computers used in business offices, thus helping to increase the proportion of its sales derived from institutional customers. Ohga also broke a decades-old tradition in 1984 when he established a division to manufacture and market electronics components for other companies. By 1988, fueled by strong sales of semiconductors (once manufactured only for Sony products), the components division had grown to represent about 11 percent of Sony's total sales.
Sony also sought to gain control of the software end of the electronics/entertainment industry. On November 29, 1985 the Sony Corporation of America, which operated several assembly plants in the United States, purchased the Digital Audio Disk Corporation from its affiliate CBS/Sony. Two years later, Sony purchased CBS Records for $2 billion. CBS Records, whose labels included Epic and Columbia, was during this time the largest producer of records and tapes in the world.Sony had learned through its Betamax experience that a
superior product alone would not ensure market dominance; had Sony been able to
flood the market with exclusively Beta-formatted movies, the VCR battle might
have turned out differently. Looking toward the future development of audio
equipment, including digital audio tape (DAT), Sony bought the record
manufacturer with an eye toward guaranteeing that the products it manufactured
to play music would remain compatible with the medium used to record music. The
acquisition marked less of a diversification for Sony than an evolution toward
dominance in a specific market.
Sony sought further diversification in U.S.
entertainment companies. In 1988, the company considered an acquisition of
MGM/UA Communications Company, but decided the price was too high. Then in 1989
Sony made headlines around the world when it bought Columbia Pictures
Entertainment, Inc. from Coca-Cola for $3.4 billion. Columbia provided Sony
with an extensive film library and a strong U.S. distribution system. It also
carried $1 billion in debt, which almost tripled Sony's short-term debt to
around ¥8 billion. Industry analysts applauded the move; when a recession hit
the film industry shortly after Sony's purchase, however, some began to
question Sony's ability to deliver its traditionally strong profits.
1990s and Beyond: PlayStation,
VAIO, and the Networked Future
Sony did deliver, however, posting record earnings in
1990 of ¥58.2 billion ($384 million), a 38.5 percent increase over 1989. In
1992, Columbia Pictures and its subsidiary TriStar jointly captured 20 percent
of the U.S. market share, far above the shares held by competing studios. By
this time the entertainment operation had been renamed Sony Pictures
Entertainment, Inc.
The complexities of operating a truly multinational corporation, however, began taking their toll on Sony. Most of the world's largest economies (Europe, Japan, and the United States) were experiencing a slowdown in the early 1990s. This factor created what Sony called 'an unprecedentedly challenging operating environment.' Although sales in most of Sony's businesses increased in 1992, operating income dropped 44 percent to ¥166 billion ($1.2 billion). Net income increased slightly to ¥120 billion.
During that year, Ohga assumed the duties of chief
executive in addition to his role as president. He and Morita responded to
Sony's tough economic situation by bolstering marketing, reducing inventory
levels, streamlining operations, and keeping a watchful control of capital
investments. The company also embarked on an extensive reorganization effort
with the goal of decentralizing operations and reducing unnecessary management.
Despite these measures, Sony was unable to stem the slide. Net income plummeted
another 50 percent in 1994 to ¥15 billion, on sales of ¥3.73 trillion.
By this time Morita had relinquished virtually all his
duties in the company, having suffered a stroke in late 1993. In Sony's 1994
annual report, his picture and signature were conspicuously absent from the
letter to shareholders, implicitly announcing Ohga's new leadership position.
Under Morita's leadership, Sony's rise to preeminence in the world consumer
electronics market was almost entirely self-achieved; Sony outperformed not
only its Japanese rivals, among them associates of the former zaibatsu (conglomerate)
companies, but also larger American firms, which by 1995 had all but abandoned
the consumer electronics market.
Sony's success had been a direct result of the wisdom
of its founders, who had the talent to anticipate the demands of consumers and
to develop products to meet those demands; Idei's presidency, some suggested,
signaled a new era for the company.
Meanwhile, Sony unexpectedly entered the video game
market in the mid-1990s, making an immediate splash. The development of the
Sony PlayStation had actually begun in the late 1980s as a joint project with
game giant Nintendo Co., Ltd. Nintendo had agreed to help develop a new game
console that would combine the graphic capabilities of a computer workstation
with Sony's CD-ROM drive, but then pulled out of the project in 1992. Sony
decided to develop the new machine solo, introducing the 32-bit PlayStation to
the Japanese market in 1994 and the U.S. market one year later. It was an
immediate and huge success, in part because of the hundreds of software titles
that were quickly available for the console thanks to Sony's ability to entice
top Japanese and U.S. developers to create games for the PlayStation. By 1998,
the PlayStation had grabbed about 40 percent of the worldwide game market, and
Sony's game unit, Sony Computer Entertainment, accounted for 10 percent of the
company's worldwide revenue and a whopping 22.5 percent of its operating
income.
Unfortunately, the mid-1990s were also marked by
continued problems at Sony Pictures Entertainment. Top management at the motion
picture arm spent hundreds of millions of dollars on a string of flops, such as Last
Action Hero and Geronimo, in
addition to spending lavishly on hiring, studio renovations, and other
expenses. Sony ended up taking a $3.2 billion write-off--one of the largest
ever by a Japanese company--related to the entertainment unit during the fiscal
year ending in March 1995; consequently, the company posted a net loss for the
year of $2.8 billion (on sales of $44.76 billion). A major management shakeup
occurred as well.
As Sony attempted to turn around its motion picture
unit, in electronics the company surprised many observers by entering the
crowded and low-margin personal computer business in 1997. That year, through a
partnership with Intel, Sony began selling its VAIO line of PCs. Including both
desktop and notebook models, the line received plaudits for its quality but got
off to a slow start in the United States thanks to its above-average price tags.
Sony designed the VAIO computers specifically for the home market, and they
sported unique features that made them particularly well-suited to consumers
who owned other Sony products. For example, software and ports were included to
allow owners of Sony camcorders to transfer their home videos to the VAIO PC
and to edit and manipulate the videos in a variety of ways. Sony also continued
to stay on the cutting edge in the venerable television field, introducing its
first flat-screen TV in 1996 and its first digital, high-definition model two
years later. Also in 1998 came the launch of AIBO, a robot dog, which was
touted as having the capability of expressing emotions and learning.
During 1999, a year that saw the passing of company
cofounder Morita (the other founder, Ibuka, died in 1997), Idei launched a
sweeping reorganization to position the company for the future--in Sony's
vision, 'the network era of the 21st century.' In March 1999 Sony announced
that it planned to cut its workforce by 10 percent and its manufacturing
capacity by one-third before 2003. The cutbacks were slated for areas where
growth had been slowing: analog televisions, VCRs, and Walkmans. The company
planned to increase the amount of resources committed to such hot areas as
digital products and the PlayStation, as well as placing increased emphasis on
developing software, hardware, and services for the new networks that were
beginning to emerge at the end of the 20th century--home networks, broadband
networks, wireless networks. For Idei, the key for Sony was a historic shift in
focus: hardware had traditionally driven product development, but Idei instead
wanted software development and services to drive hardware design.
Perhaps the first example of such an approach came with the 2000 introduction of the Sony PlayStation 2. Although it was a technical marvel featuring high-end 3-D graphics and more processing power than most desktop PCs, the 128-bit PlayStation 2 was much more than a souped-up version of the original. It was of course designed for game software but it was not just a game console, having been conceived as a home entertainment center. Its DVD drive not only played game software but also audio CDs and DVD movies. It had the capability of connecting to the Internet and as such could be used as a broadband device controlling an Internet-connected home network. Despite manufacturing difficulties that limited production during the first year, the PlayStation 2 had a stellar debut, with about nine million units sold in the first 12 months. The high costs associated with developing and manufacturing the machines, however, depressed profits at Sony for the 2001 fiscal year. Also in the wake of its debut came rival Sega's exit from the game console business in favor of concentrating on developing game titles for other companies' machines, including the PlayStation 2. Sony continued to face competition in the game field from Nintendo, which planned to release a new machine in the fall of 2001, and faced the prospect of a new competitor, Microsoft Corporation, which was also planning a fall 2001 release of its Xbox machine.
In June 2000 Idei was named chairman and CEO of Sony, while Kunitake Ando, who had headed the VAIO unit, was named president and COO. Rounding out the new management team was Teruhisa Tokunaka, a former head of the PlayStation unit, who was named deputy president and CFO. The new team faced a myriad of challenges in the rapidly changing high-tech world of the early 21st century. One example was in Sony's music business, which was being rocked by the industry-wide threat of the rampant and unauthorized downloading of digital music files over the Internet. Sony joined other music giants in suing Napster, the most obvious threat to their hegemony. The company also entered into a joint venture with Vivendi Universal S.A. to develop an online subscription service that would allow music downloads through what was called a 'virtual jukebox.' Such a service was part of a new push by Sony into broadband delivery of the audio and video material owned by its content arms. With its aggressive moves in the areas of games, networking, and delivery of digital content, Sony was almost certain to remain a frontrunner in the ever broadening field of consumer electronics and related platforms and services.
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